Reference no: EM133373017

Case Study:

During the past few years, a large number of highly publicized stories of product quality problems have appeared in the news. These quality problems are diverse and have occurred with regard to both tangible products and intangible services. In most of the stories, there is also an element of concern about consumer safety when products have quality problems.

SAMSUNG'S NOTE 7 PHONE

Samsung's Note 7 cell phone was recalled after multiple incidents where the phone burst into flames (see photo). An investigation revealed that two sets of bad batteries were the cause of the fires. After phones containing the first set of batteries experienced problems (there wasn't enough room in the phone for routine expansion of components), Samsung recalled those phones. It then re-introduced the Note 7 with different batteries. But then another problem occurred (this time there was a bad weld caused by a manufacturing defect). In both cases, the quality problem caused the phone to short out and catch fire. Samsung eventually abandoned production of Note 7 and recalled 2.5 million phones from the global market (22 000 were recalled in Canada) because of all the bad publicity.

MEDICAL MARIJUANA

In Canada, multiple individuals who were prescribed medical marijuana from a federally regulated drug company reported symptoms such as weight loss, skin blisters, muscle aches, and persistent coughing. An investigation determined that the medical marijuana these people were using was unfit for human consumption because it contained myclobutanil (which is used to kill mildew) and bifenazate (an insecticide whose use is prohibited for use on marijuana plants). Three other banned pesticides were also found. An investigation concluded that the insecticides had been purposely applied to reduce insect infestation on the marijuana plants.

CANADA REVENUE AGENCY

The 2017 Auditor General's report criticized the Canada Revenue Agency (CRA) for providing poor quality service to Canadians. Two major criticisms were evident. First, the report said that the CRA had blocked more than half of the 53 million incoming calls it received from people who were asking questions about their income tax returns. The blocking meant that many callers simply heard a busy signal and were told to call back at another time. The CRA had reported that 90 percent of callers were able to talk with a call-centre agent or CRA's automated self-serve system. This claim was actually technically correct, but what the CRA didn't say was that the average person had to call four times before even being admitted to the wait queue. Second, even when callers eventually did get through to an agent, they were given inaccurate answers to their questions about 30 percent of the time. This figure was much higher than the figure the CRA had reported (6.5 percent).

WOODEN RAILROAD TIES

In the United States, Norfolk Southern Corp. had to replace five million defective wooden railroad ties because the manufacturer of those ties- Boatright Railroad Products, Inc.-did not use the proper coating material (creosote), and the ties wore out prematurely. This created financial problems because the railroad incurred increased costs when it had to replace the ties. For passenger trains, there are both safety and service issues. Passengers may be killed or injured when a derailment occurs, and train schedules may be disrupted when ties have to be replaced unexpectedly. For freight trains, fires may occur when trains carrying flammable materials are derailed.

THE AUTOMOBILE INDUSTRY

Multiple instances of quality problems in the automobile industry have come to light recently. For example, in October 2017, an executive VP at Nissan expressed public remorse for widespread quality inspection failures at the company (final inspections were being done routinely by unauthorized staff). A few days later, the CEO of Subaru also apologized; he admitted that his company had been carrying out flawed inspections of cars for years. As a result of these admissions, millions of cars had to be recalled. In another instance, Mitsubishi was caught inflating fuel economy figures for its minicar models. Kobe Steel also admitted that it had falsified data on its products used by 500 companies worldwide. All of these situations with Japanese manufacturers are in addition to the infamous Takata Corp. airbag disaster of a few years ago when millions of vehicles had to be recalled because they were outfitted with airbags that sometimes exploded and killed or injured drivers and their passengers. Takata paid $1 billion in fines after admitting that it falsified data in airbag testing reports that were provided to automakers. These problems have tarnished Japan's legendary reputation for producing high-quality products. Problems are also evident with other automobile manufacturers in other countries. In 2017, the U.S. Supreme Court ruled that class action lawsuits against General Motors regarding a defective ignition switch could proceed. At least 124 people died after the defective switch disabled steering controls and caused fatal accidents.

THE AIRLINE INDUSTRY

Consumer unhappiness with the airline industry is often in the news. Com- plaints from passengers include reduced in-flight services, baggage fees, lost baggage, cramped seats, overbooked flights, and cancelled flights. All of this has led to a decline in customer satisfaction with commercial airlines. An extreme example of dissatisfaction occurred in 2017 when a United Airlines passenger was told he had to give up his seat because the flight was overbooked. When he refused, security personnel then violently removed the man from the plane. Unfortunately for United, the incident was filmed and then went viral. United settled with the passenger for an undisclosed amount of money (probably in the millions of dollars) and then publicized changes it was making to improve the quality of service that is provided to passengers. Social media has caused many airlines to staff social media departments that monitor Internet chatter for signs of public relations problems.

Questions: ANSWER THE FOLLOWING QUESTIONS

1. In the chapter, the term quality is defined as "fitness for use." Explain how that applies in each of the examples given in the case.

2. Most of the quality problems described in the case occurred in tangible physical products. Are quality problems different when intangible services are involved or are they the same? When answering this question, address the issues of intangibility, customization, and unstorability as key characteristics of services. Give examples to support your conclusions about the similarities and differences in quality problems for tangible physical products and intangible services.

3. Why do you think the various quality problems described in the case occurred? Analyze several possible reasons. Is there a different reason in each situation, or is there an underlying similarity across all of the situations?