Failure to enact quality-control lending practices at some U.S. financial institutions in 2008 had a resounding negative economic impact when borrowers quit paying their mortgages.
Economic impact measures expansions or contractions in the job market, spending and tax revenue for a region. Quality-control plans are put into place to ensure efficiency, product quality and reduce errors. The positive and negative economic impacts of a company's quality-control plan can be significant to the community and region in which the company is located. Analyzing the economic impact of a quality-control plan is an effort to estimate the financial effects that extend beyond a company's bottom line.
Instructions
1. Evaluate the reasons for ensuring quality control. Quality-control measures include safe disposal of waste, ensuring that products meet specifications and providing service that ensures high customer satisfaction. These reasons can also be considered the positive gains for successfully ensuring quality control.
2. Outline what positive impact the company will receive, should the quality-control plan be effective. Successful quality-control programs reap many benefits for companies because satisfied customers are usually repeat customers, thereby sustaining business; word-of-mouth referrals by satisfied customers will attract more customers to grow the company's revenue and care and concern for the environment will win the company positive recognition by government agencies and advocacy groups.
3. Jot down the positive effects that would result if the company were to prosper. Companies spend their increased profit revenue by hiring additional employees, building new office spaces or expanding existing spaces and investing in current employees by increasing salaries. Each of these actions injects money into the local economy, increasing income spending for local retailers, construction contractors and real-estate agencies, who in turn hire additional employees, build new office spaces and increase salaries of existing employees. New businesses will spring up to help workers spend their new salaries. All of this money will be taxed, which can lead to government improvements in roads, bridges, schools and traffic signals.
4. List all of the possible risks to the company for quality failures. Draw a box around each risk and draw a line down from the box for each possible negative consequence of the risk. For example, draw a box around "the product could fail after limited use by the customer." Create an economic-impact analysis tree by drawing a line down from the box to represent the causal relationship between the risk and its negative effect. Write out the negative effect; for instance, customers might stop buying the company's product and the company would go out of business.
5. Assess consequences that extend beyond the immediate risks to the company. Improperly disposed waste, for example, can seep into streams, ground water tables and lakes, making drinking water unsafe to drink for the local population. Evaluate potential consequences, such as unwitting citizens developing diseases. Continue to branch consequences off consequence in your economic-impact-analysis tree to gain as broad a picture as possible. If the local workers are unable to work due to their illnesses, the local economy will grind to a halt. If the local economy were to grind to a halt, think of how his would impact other regions.
