Product Quality, Cost Position And Business Performance: A Test Of Some Key Hypotheses

Lynn W. Phillips, Dae R. Chang, Robert D. Buzzell

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This study uses a causal modelling methodology to examine competing methodological and theoretical hypotheses concerning the effects of product quality on direct costs and business unit return on investment (ROI). Results show that the PIMS’ measures under study exhibit high reliability across all samples. The findings fail to support the widely held view that a high relative quality position is incompatible with achieving a low relative cost position in an industry.