Literature Review

Total Quality Management (TQM)

According to IRCA (n.d.), a Japanese company, quality is about making organizations

perform for their stakeholders – from improving products, services, systems and processes, to
making sure that the whole organization is fit and effective. However, there is still an opposing
opinion in the definition of quality because there is no single universal definition of quality. It
depends on the person defining it. Some people view quality as a performance to standards,
other view quality as a product meeting the customer’s needs/ or satisfying the customer.

In order to measure quality, there is different approach presented by some quality gurus
such as Six Sigma, Servqual, Servperf and CWQM concept: Company-Wide Quality
Management. There are also many conceptual models, for example: technical and functional
quality model (Grönroos 1984), gap model (Parasuraman, Zeithaml, and Berry 1985), attribute
service quality model (Haywood-Farmer 1988). Among this frameworks TQM and Innovation
became core elements in founding and increasing competitive advantage (Abrunhosa & Moura
E Sá, 2008; Hurmelinna-Laukkanen, Sainio, & Jauhiainen, 2008; Mushtaq, Peng, & Lin, 2011).

TQM approach value customers by identifying their needs and responsiveness to

changing markets as well as continuous improvement in the process, product and services.
(Reed et al., 1996; Anderson et al., 1995; Bou-Llusar et al., 2008). According to Benedict and
Matsoso (2015) the quality of products is enhanced by the Total Quality Management (TQM)
integrative philosophy. Organizations choose TQM as a strategy to improve competitiveness
and attain higher level of effectiveness in all aspect of the operation. The relevance of quality in
strategic issue and comprehension regarding the focus in all levels of the company should also
be recognized to increase the senior executives’ awareness. To improve performance, profits
and organizational structure, innovative tools like total quality management should be utilize.
However, there is no universally accepted TQM framework (Yusof and Aspinwall, 2000), and
different approaches coexist in the literature, including consultants-based frameworks (e.g.
Deming, 1986; Crosby, 1980; Juran and Gryna, 1993), and standardized frameworks such as
the ISO 9000:2000 series (Askey and Dale, 1994; Tummala and Tang, 1996; Kartha, 2004 ;
Bou-Llusar et al., 2008).

According to Kumar et al. 2009 there is a positive impact of TQM on all investigated
dimensions of company performance, i.e. employee relations (improved employee participation
and morale), operating procedures (improved products and services quality, process and
productivity, and reduced errors/defects), customer satisfaction (reduced number of customer
complaints), and financial results (increased profitability).

On the other hand, other proposed that the concept of TQM is mainly divided into two,
the soft or social TQM and the hard or technical TQM. (Dotchin and Oakland, 1992; Yong and
Wilkinson, 2001; Prajogo and Sohal, 2004; Rahman, 2004; Rahman and Bullock, 2005; Lewis
et al., 2006 ; Bou-Llusar et al., 2008). The technical TQM focuses on the operation aspect of the
company such as improving methods in production as well as establishing concrete processes
and procedures to make possible constant improvement of goods and services to customers.
Second is the social TQM that revolves around the manpower management. It is centered on
human resource management and emphasizes leadership, training, and employee involvement.

Loyalty and Word of Mouth (WOM)

Customers often consider the perception and the consumption patterns of their fellow
customers (Berger and Schwartz, 2011; Hinz et al., 2011). They seldom make their decision
solely based on their own judgment. Even though they are not aware, other people can
influence their decision process and their final decision. (Blazevic et al. ,2013).

Trusov et al., (2008) suggest that Word of Mouth (WOM) communication strategies are
appealing because of two things. First, it significantly lowers the costs of marketing and at the
same time it can deliver the information quickly especially through technology. Second it
overcomes consumer resistance toward the product/service. Marketers have always known that
the impact can be relevant; they may be surprised to learn just how powerful it really is. Hence,
the main reason behind 20-50% purchasing decisions is the word of mouth (Bughin et al.,
2010).

On the other hand, study shows that loyalty, word of mouth and service quality are
interconnected with each other (Akbar et al., 2009). Pearson (1996) has defined customer
loyalty as the mindset of the customers who are in favor to a company, commit to repurchase
the company’s product/service, and recommend the product/service to others. The impact of
perceived service quality on preference loyalty is considerably strong leading to a more
favorable outlook towards the service provider and increased commitment to re-patronize
(Akbar et al.,2009).