QUALITY INVESTMENT, A MAJOR FACTOR IN CONQUERING NEW MARKETS

The competition that characterizes the market economy, forces companies to use appropriate methods and techniques to maintain their position in the market, or to penetrate new ones. For this, an important investment is in the quality of the company's products, processes and staff. Applying the principles of total quality management and implementing appropriate quality strategies help companies achieve better results in their work. In this paper, the author aimed to exemplify how the implementation of a quality strategy correctly chosen and put into practice led to a considerable improvement in the results of the company studied. To accomplish the work, the author analysed the literature and documents of the company.

Regulating Quality in the Water Sector: A Theoretical Perspective

Regulating quality is challenging because in public utilities such as water and sanitation, quality is multidimensional, is not always objectively measurable, and can be hard to verify, both ex ante and ex post. It is therefore useful to review the main insights from the New Economics of Regulation theoretical literature on quality provision to guide public policy. Focusing on formal utilities, this normative approach emphasizes the asymmetry of information between a regulator and the regulated companies. The analysis shows that when quality is verifiable, it can be included in a contract exactly like a quantity variable. Its provision, however, will be distorted as a result of regulated quantities also being distorted due to asymmetric information. When quality and quantity are complements, service quality ends up being lower because in the optimal regulatory contract, quantities are distorted downward for rent extraction. If quality is not verifiable but is observable by the users, the operator freely chooses its quality investment. It tends to underprovide quality when an improvement in quality raises the gross consumer surplus more than it increases the gross profit of sales because it does not take into account the nonmonetary benefit generated by its investment. It tends to overprovide quality otherwise. In order to correct these distortions, the regulator has to use a production allocation rule to simultaneously lower the informational rent and boost quality. The regulator has a single instrument to achieve the conflicting goals of rent extraction and quality provision. Quantities can be higher or lower than the first-best optimal levels depending on the correction needed to control quality. Finally, when quality is neither verifiable nor observable by consumers, as is typically the case with credence attributes such as those concerning process of production impacting security or pollution, the optimal level of quality investment from the firm’s perspective is zero. In this case, the easiest solution is often to impose a minimum standard and either rely on certification agencies to ensure that this minimum target is met or directly audit the quality investments made by the regulator. Finally, when improving the quality of water and sanitation services requires the creation of new infrastructure or institution, the high opportunity cost of public funds in developing countries raises the question of whether it is optimal to commit public funds for such investments. The analysis illuminates the trade-off between financing those investments with private funds and protecting consumer surplus.

Supply chain encroachment with quality decision and different power structures

This paper studies a supply chain with manufacturer encroachment and different power structures where product quality is an endogenous decision. We investigate the effects of encroachment and power structure on quality and profits for chain members. Employing a game-theoretic approach, we find that, first, in a manufacturer-led supply chain, encroachment makes both manufacturer and retailer better off when the quality investment efficiency is relatively high. And, the manufacturer’s profit exhibits nonmonotonicity with respect to the extent of consumers acceptance on the direct channel in a retailer-led setting. Second, our result shows that the pure equilibrium outcomes are driven by the quality investment efficiency and the extent of consumers’ acceptance on the direct channel. An interesting result is that, for the manufacturer, establishing encroachment channel and occupying the leader position simultaneously are always not the optimal choice. Additionally, the options of encroaching and striving for leader position can lead to lose-win, win-win, and win-lose situations for the manufacturer and the retailer. Finally, a prisoner’s dilemma may occur with a low quality investment efficiency, a moderately fixed encroachment cost and a high extent of consumers’ acceptance on the direct channel when a fixed encroachment cost is considered.