The Korean manufacturing industry has made a significant contribution to the spectacular economic growth in Korea during the last three decades. Recently, however, most Korean firms have suffered from declining competitiveness in global markets. Foreign manufacturers from the developed nations now provide high-quality products at reasonably low prices. Many Korean firms are being seriously challenged by these products of superior quality. Furthermore, Korean consumers are becoming more quality conscious. This new wave of quality awareness and emphasis has made a significant impact on business operations in Korea, forcing Korean firms to shift their strategy from being low-cost manufacturers to being high-quality producers. It is increasingly difficult for them to compete solely on the basis of price. They need a strategic shift.
To meet the challenge, Korean firms have significantly increased their investments in quality management during the last decade. They have introduced and implemented the total quality management (TQM) approach to improve their manufacturing competitiveness, and investment in quality management is expected to increase as quality becomes more critical to survival in global markets.
Although Lee and Crouch (1996) recently investigated TQM implementation in Korea, their study focused on large manufacturing firms. Currently, there are few reported studies about Korean small manufacturing firms that implemented TQM even though most Korean manufacturers are small or medium-sized firms. Recent statistics show that more than 70 percent of all Korean employees work in firms employing fewer than one hundred workers, and more than 90 percent work in firms employing fewer than five hundred workers (Rho and Whybark 1990). Small firms are still dominant in many areas, such as services, trade, construction, and textiles; other small firms serve as satellite suppliers to the larger firms in Korea. Hence, the evaluation of quality management in small manufacturing is very important for Korea.
Small firms are very different from large ones in many respects, including management style, production processes, available capital, purchasing practices, inventory systems, and negotiating power (Lee 1996). Although TQM implementation has been focused on large manufacturing firms, some TQM elements appear to be compatible with small manufacturers, and some TQM benefits may be relatively more significant for small manufacturing firms (Lee 1996; Lee and Crouch 1996; Yam and Tang 1993).
If small firms inherently possess many of the characteristics needed for TQM, can they parlay these traits into a successful TQM implementation? What differentiates them from their non-TQM counterparts? This study of seventy-two small machine tool manufacturing firms in Korea explores the differences that may exist between small TQM and non-TQM manufacturers.
Research Objectives and Methodology
This study investigates the characteristic differences between TQM firms and non-TQM firms in the Korean small machine tool manufacturing industry. It is based on the premise that business and manufacturing characteristics differ significantly between TQM firms and non-TQM firms and that these differences significantly impact a firm's manufacturing and financial performance. Many Korean firms have more than 50 percent of their sales in international markets. It is widely perceived in Korea that firms with more foreign sales tend to be more quality-conscious than firms with less foreign sales (Lee and Crouch 1996). This perception needs to be examined. Even though the machine tool manufacturing industry is relatively young, some facilities are older than others. It is interesting to examine whether there is any difference in facility age between the TQM and non-TQM groups. Also, it is widely perceived in Korea that foreign affiliates and joint ventures with foreign firms are more active than local firms in adopting new management concepts and techniques, such as TQM (Lee and Crouch 1996). …