Quality management

‘A system of quality assurance will always lead to greater profits than a system of quality control.’

Do you agree?

Justify your view.

Read the information below and then answer the questions that follow.

Dodo

Dodo is a small, growing, low-cost airline offering flights between the UK and Europe. The airline is seeing high demand for its flights due to its competitive pricing. It is able to keep its prices low due to its low-cost business model. The business model includes:

• making effective use of its non-current assets by using quick turnaround times which allow its planes to fly more hours a day than traditional airlines

• flying to cheaper airports rather than larger, more expensive airports such as London Heathrow

• using its own website for customers to book directly, avoiding the need to pay commission to other businesses

• making food, baggage and choice of seat optional extras rather than including them in the basic product offering.

Dodo currently has around 5000 permanent staff and sees its staff as key to the quality of service that it offers. Airline staffing needs are complex with a variety of different roles required. Some roles such as pilots and aircraft engineers require significant training that can take many months to complete. In addition, many staff spend most of their working day away from the company offices. Dodo sets and regularly reviews HR objectives in relation to:

• number of employees

• employee engagement.

Measures of quality that Dodo focuses on are:

• punctuality, measured using percentage of flights on time

• customer complaints, measured by number of complaints per 1000 customers.

Analyse why Dodo sets HR objectives in relation to the number of employees and employee engagement.

Analyse how Dodo would benefit from being the best in its market for its chosen quality measures.

Using non-current assets as fully as possible is the best way to gain low-cost advantage.

To what extent is this true for all low-cost businesses?

Statement 1: ‘A business might improve the quality of its product in order to make its demand more price inelastic.’

Statement 2: ‘A business might improve the quality of its product in order to achieve a competitive advantage.’

Read statements 1 and 2 and select the correct option from the following:

Statement 1: ‘A business might improve the quality of its product in order to make its demand more price elastic.’

Statement 2: ‘A business might improve the quality of its product in order to increase added value.’

Read Statements 1 and 2 and select the correct option from the following options.

Read the information below and then answer the questions that follow.

Chillax Ltd

Chillax Ltd runs six luxury health spas in southern England. Health spas offer health and beauty treatments such as steam baths, exercise and massage. Chillax Ltd’s customers expect high levels of service.

The business focuses on quality. It emphasises the importance of getting the customer experience right. It feels this is more about how employees interact with customers than the facilities in each health spa. The quality of customer experience is monitored through frequent customer surveys using the Chillax App. The business regularly has positive reviews online.

Chillax Ltd invests heavily in training, consults regularly and provides frequent feedback to staff. It feels that its high level of employee engagement has many benefits and ultimately ensures happy customers.

Chillax Ltd is unusual in the Health and Beauty sector in that many businesses in that sector have very high rates of labour turnover averaging over 30%.

Table 2 Selected employee data for Chillax Ltd for 2020 (31 December 2020)

Using Table 2 calculate the employee retention rate for Chillax Ltd in 2020.

Analyse how Chillax Ltd benefits from its focus on quality.

Analyse why employee engagement at Chillax Ltd is high.

To what extent should all businesses be concerned if they have high rates of labour turnover?