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Quality as a competitive advantage is seen as one of the fundamental ways in which both individual businesses and national economies can successfully compete in the global marketplace. It contrasts with comparative advantage, which, until the the mid-1980s, was seen as a key method of facilitating trade and economic growth. Comparative advantage focuses on businesses or nations producing those goods and services at which they are most efficient, and trading these for products that can be made more efficiently in other nations. While considered mutually beneficial, comparative trade did not directly take into account quality as a competitive advantage and instead focused on the cost of producing goods instead of their final viability and durability once completed.
All competitive industry tries to distinguish itself through the manipulation of several key factors. These include the price charged for goods and services, convenient locations from which they can be provided, and by establishing a loyal customer base. Where quality as a competitive advantage comes into play is in a background or supporting role, as it has a direct impact on every other aspect of a business strategy. A premium price can be charged for goods that are based on perceived superior quality, and this creates a tendency for customers to be naturally loyal to a brand, facilitating more rapid expansion than competitors can attain in the same industry. Quality also adds an element of strategic advantage to businesses as it negates most negative feedback and returns from customers, and reduces both scrap and rework expenses in the manufacturing process.
In a 2011 survey, 70% of 3,400 small- and medium-sized businesses overall in 34 different national economies rated quality as a competitive advantage as their primary concern. Unique exceptions in India and China were noted, with Indian businesses also rating quality as very important, but placing more emphasis on brand recognition and price than elsewhere. In the Chinese firms surveyed, only 46% rated quality as being of top concern in being competitive, which may not be surprising as China has made a name for itself internationally for being more competitive on price than most products from other economies. China also remains an exception to the rule as it has continued to find success globally by focusing on comparative advantage for its goods and services. Nations where businesses rated quality as a competitive advantage more highly than elsewhere in the world included 84% of Latin American businesses surveyed considering it most important, and 92% in Vietnam as well as 85% in Taiwan considering quality as extremely important to business success.
A more complex look at quality as a competitive advantage in the business environment gets into what is known as Quality Function Deployment (QFD). QFD attempts to break down quality into both positive and negative aspects as a guide for businesses to focus their efforts on positive quality advantages over all else, as this is seen as a stronger driver for building up the company. An example of negative quality aspects that can be inordinately focused on by businesses includes dealing with disappointed customers to an excessive degree. Instead, if a business focuses on those customers who are the most pleased with its products or services and finds ways to improve upon this aspect of the business, it is more likely to drive the business forward.
Since quality is a subjective term which can be defined quite differently by business rivals, attempts have been made to break it down into several different objective categories, such as design quality and conformance quality. Design quality is concerned primarily with the functionality and durability of the product in terms of for what the customer actually wants to use it. Conformance quality, on the other hand, focuses on the original intent for which the product was made regardless of the various uses it is put to in the marketplace. Together, the complex aspects of both approaches to looking at products are incorporated into what is known as Total Quality Management (TQM), which must remain customer-centric in order to facilitate the survival and growth of all business endeavors.