Application of TQM

Application of TQM Methodology in Enhancing Operation and Production Netflix

Executive Summary

A management strategy known as total quality management (TQM) focuses on achieving long-term success by satisfying the demands and expectations of the customer. Businesses all over the world strive to stay competitive in the extremely dynamic market. They must put fresh plans and techniques into action that will raise the caliber of the goods and services provided. The American firm Netflix is present in many different nations throughout the world. In order to improve the quality of its operations and goods, Netflix Company has used TQM approach, which is the main topic of this research study. Beginning with an introduction, the company's history, SWOT analysis of the company, TQM methodology used, continuous improvement, Implementation of TQM, six sigma methodology and the conclusion.

Introduction

Over the recent years, the global business market has become extremely competitive. Many business organizations are implementing new business strategies and operation methodologies that will enhance their competitive advantage in the global market. The productivity and profitability of an organization greatly depend on the methodology applied in enhancing its operation and production (Reed and Mero, 22). Total Quality Management (TQM) methodology has been recognized globally as an effective methodology in enhancing the operation and production of an organization. It is defined as a method through which the organizational management and employees are fully involved in the continuous improvement of the operations and production of goods and services (Hyung, 855). TQM approach of management started in 1950s and its application in business organizations has continued to increase to date. This research will focus on the application of TQM methodology in Netflix Company and its impact in the operation and productivity of the organization.

Netflix Company

Netflix is a global business organization in the Media and Entertainment industry. It was founded by Reed Hastings and Marc Randolph in 1997 in America. The company operates in North America, United States and many other countries globally. Since its launch in 1997, Netflix has grown tremendously to become the world’s leading internet television network provider with a vast member base of more than 93.8 million members in about 190 countries in the world. In America alone, the company has membership in 50 countries making it the largest in internet television network. Its headquarters are located in Los Gatos, California where it originally specialized in streaming media and the production of DVDs for renting and selling. However, the organization has expanded its products to include the film production and internet television services.

Implementation of the TQM methodology in Netflix Company

Implementation of the TQM methodology in Netflix Company has enabled the organization to improve on service delivery, ensure quality in all aspects as well as to analyze its cost consequences for different choices that they make while in operation. The main objectives of TQM are to improve on service delivery, involvement of all customers and ensuring customer satisfaction in the products of an organization (Hyung, 856). Netflix has invested a lot in processes that involve customers’ participation so that the management can understand the shows and movies that are on demand. Customer involvement helps an organization management to know the needs of the target group thereby increasing customer satisfaction (Reed and Mero, 22). In 2016, Netflix released more than 126 original films which was recorded as the highest recorded by any cable provider in the world. Therefore, it is evident that the application of TQM methodology has enabled Netflix to increase its productivity hence increasing the company’s competitiveness globally.

SWOT Analysis of Netflix Company

Strengths

• Leading in video streaming globally
• Presence in more than 190 countries in the world
• Highly focused on innovation in technology and development
• Has increasing membership which help the company to expand
• The company has a big brand name known all over the world
• Company produces local content and distributes it globally through its global content delivery network

Weaknesses

• Some of the suppliers of Netflix have become competitors
• Investment in original content has led to the shrinking of content library.
• Cost of licensing new content is more than the cost of streaming the contents
• Famous TV shows reducing user subscription to Netflix services

Threats

• Increasing cost of operation for domestic and international businesses
• Increased prices for subscription may lead to many customers shifting to the competitors
• Fast changing technology requiring more advanced equipment every time
• Increased expenses for development and administration
• Decreasing revenue from DVD sales

Opportunities

• Increased internet use globally presents a good opportunity for Netflix company
• The company has a huge potential of getting a lot of revenue from advertisement in their internet and television network
• Increasing international broadband users
• Venturing into the untapped market where English is used as the second language
• Company can tap into the market niche segments such as documentaries and cinema movies which can generate a lot of income

TQM Methodology Applied in Netflix

Total Quality Management refers to a companywide philosophy which focuses on ensuring customer satisfaction. It enables the company management to understand their customer’s needs hence ensuring customer satisfaction. Netflix utilizes various principles of TQM methodology to ensure effective management of the organization. The operation managers of Netflix have 100% commitment in meeting the customer needs and its operations are customer driven. The company has invested a lot of resources in a detailed production process, improvement of employee teams as well as the management and monitoring processes of production. The management is always focused on the long term plans with continuous improvement of the organization human resources and employee empowerment.

Continuous improvement by TQM in Netflix

Netflix’s TQM methodology is mainly focused on the continuous improvement in all duties, from high level strategic planning and decision making to the execution of work at the shop floor level. It is based on the belief that mistakes at work can be avoided and defects prevented and this will lead to continuous improvement of results in all aspects of work. Netflix’s continuous improvement not only focuses on improving the result of production, but also the improvement of the capability of various workers in the organization to produce better results in the future.

Implementation of TQM and production Processes

Before an organization adopts and implements TQM in its operations, there is need for the management to conduct an audit to assess the current status of the organization and identify the areas that require change. Effective implementation of TQM in Netflix required that the operation managers appreciate production processes which emphasize on the mass production as a strategy to lower the cost of production and maximizing profits. The operation managers in Netflix also understand the analytical and synthetic process which enables the organization to break down the raw materials into different component parts that form the final product. The company has used this strategy to produce various products that meet the market demand.

Managing the transition

Managing a transition to the new system such as TQM is delicate process which requires step by step implementation. (Hyung, 851). The basic steps that Netflix Company used in implementing TQM include: identification of the tasks to be done, creating the required management structures, Building commitment among the stakeholders, communicating the required change and the assigning of resources necessary for the system implementation. During a successful transition, operation managers must ensure that employees and other stakeholders of the organization are motivated. Netflix production managers understand the application of technology in increasing the organization’s productivity and efficiency. They have employed the use of technology to reach out to many clients globally. Effective transition required that the production managers implement control processes that lower the cost of production and improve the quality of the product. Netflix production managers emphasize on the production of products that meet the customer needs and lead to customer satisfaction.

Netflix uses the Six Sigma methodology to ensure effective TQM in quality production of their products and services. Six Sigma Methodology refers to a set of techniques and tools that are applied by management to improve the quality of production. It improves the quality of product by identifying and eliminating the defects as well as minimizing variability of the product. Netflix Company uses the 6-Sigma methodology with specific value target of reducing the production process cycle time, reduce operation cost, increase customer satisfaction and increasing profits of the company. Implementation of Six-Sigma was aimed at improving the business processes in the company. It also creates efficiencies in the processes of production in the organization. Through the use of Six Sigma, Netflix continues to innovate new ways of providing entertainment to customers to ensure satisfaction from the products. Due to this, the company is now producing a series of product tailored to meet the specific needs of their clients.

In the late 2000’s, Netflix company recorded a decrease in the DVD rentals which forced the organization to adopt a new business model. Using the 6-Sigma methodology, Define, Measure, Analyze, Improve, Control (DMAIC) principle was applied to determine what the company needed to grow. The company introduced online streaming to their customers that gave them an option of either continuing to rent the DVDs or watching the selected programs online. Most competitors of Netflix who failed to determine the market needs and change to satisfy their customers’ needs went under. The diagram shown below represents a 15 step process using Six Sigma DMAIC principle.

Fig: Six- Sigma diagram for Netflix (Source, Lean Six Sigma Training Web).

Metrics used to measure success

Netflix uses various metrics to measure the success level of the six sigma methodology applied. Firstly, they use the sales revenue which refers to the income generated from the customer purchase of goods and services. It also uses customer loyalty and retention by ensuring that it is getting the right customers and feedback on customer satisfaction through surveys, direct feedback and purchase analysis. Lastly, it uses cost of customer acquisition metrics which is the measure of the total cost associated with getting a new customer.

Conclusion

Total quality management is an important aspect for any organization that is striving to achieve success and meet the customer’s needs. Netflix has embraced the total quality management in its operations which has improved service delivery and facilitated its expansion globally. The company uses six sigma methodology with the DMAIC principle which involves defining, measuring, analyzing, improving and controlling the production processes. This result to reduced cost of production and high profitability of the organization.

References

Wheeler, D.J. The Six Sigma Practitioner's Guide to Data Analysis. SPC Press. (2004). p. 307. ISBN 978-0-945320-62-3.

Lean Six Sigma: Cost Reduction Strategies, Ade Asefeso MCIPS MBA (2012)

Hyung M. “The Influence of Total Quality Management Practices on the Transformation of How Organizations Work. “Total Quality Management,” (2009), Vol. 20, Issue 8, pp. 847-861

Reed, R., D.J. Lemark & N.P. Mero. “Total Quality Management and Sustainable Competitive Advantage.” Journal of Quality Management, 2000, Vol. 5, pp. 5-26.