Economic aspects of the concept of "quality management"

This article presents two economics models of general quality management. First, the concept of quality management is seen as a technological innovation that requires investment. The influence of market competition on investment in technology related to quality is studied. With new high-quality technologies, falling prices, improving quality and lowering average cost. Firms must anticipate competitor technology choices and market prices when justifying investments in quality technology. When all firms quickly implement high-quality technology, the return on such investments is normal, that is, it has zero net present value. The company invests more in technology related to quality and produces products of higher quality, sets a higher price and receives higher profits than competitors. The benefits of a firm in terms of quality, price and profit persist over time. In the second model, we show that the value of a company increases when customer satisfaction is used as a goal by matching incentives. This explains the general use of customer satisfaction measures in TQM programs.