CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

Total quality management practice is a firm-wide management philosophy of continuously improving the quality of the products/services/processes by focusing on the customers’ needs and expectations to enhance customer retention, satisfaction and firm performance. There are mixed results about the relationship between total quality management practices and customer retention, satisfaction and performance. However, this study will examine the impact of total quality management practices on customer retention and satisfaction.

A growing number of organizations use total quality management as a strategic foundation for generating a competitive advantage (Reed, Lemak, & Mero, 2000) and improving firm performance (Hendricks & Singhal, 1997; Lemak & Reed, 1997) and customer retention and satisfaction (Samson & Terziovski, 1999). Firms that have won quality awards generally outperform other firms with respect to both income measures (Hendricks & Singhal, 1997), customer loyalty and stock market value (Lemak & Reed, 1997). It is no surprise that the links among market orientation, total quality practices, and performance have attracted the attention of marketing and operations management researchers’ alike (Ettlie & Johnson, 1994; Flynn, Schroeder, & Sakakibara, 1994; Kohli & Jaworski, 1990; Narver & Slater, 1990; Samson & Terziovski, 1999).

Total quality management practices have been shown to enhance organizational performance for both product and service organizations (Powell, 1995). However, there is relatively little research on the differences between product and service offered by companies with respect to the impact of quality practices on customer retention and satisfaction. We know little about how these two different types of organizations view what they do, how well they do it, and its consequences. The concept of total quality management practice has been developed as a result of intense global competition. Organizations with international trade and global competition have paid considerable attention to philosophies of total quality management, procedures, tools and techniques.

According to Juran (2001), international competition requires higher levels of quality achievement by organizations. Total quality management is the popular area of research in management. Total Quality Management has been practiced in diverse manufacturing industries and now there is a growing interest in the service sector, even from non-profit organizations (Nwabueze, 1998). But the service industry differs from the manufacturing industry in a number of ways, such as service intangibility, simultaneity of production, delivery and consumption, perishability, variability of expectations of the customers and the participatory role of customers in the service delivery but the main aim by both sector is to achieve customer retention and satisfaction. Several authors have proposed models of total quality management. However, most of the models are based on theories and practices that are primarily derived from the manufacturing industry where this has been effectively practices in the recent decades.

Furthermore, total quality management has become the buzz word in the management practice. It has been defined in many different ways. The International Standard ISO 8402, Quality Management and Quality Assurance-Terminology has defined total quality management  as the ―management approach of an organization, centered on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction, and benefits to all members of the organization and to society (Ljungstrom & Klefsjo, 2002). Temtime and Solomon (2002) said that total quality management seeks continuous improvement in the quality of all processes, people, products, and services of an organization. Total quality management is also a systematic approach to management that aims to enhance value to customers by designing and continually improving organizational processes and systems (Kartha, 2004). The emphasis is on employee involvement and empowerment along with customers and customer satisfaction as the focal point.