There has been interest in the economics of quality for many years. A model that has stood the test of time is the traditional Prevention Appraisal Failure (PAF) model, which is optimised in terms of a total quality cost resulting from these three cost categories. This paper describes research carried out to explore a broader criterion for optimising quality spending on quality improvement programmes, by expanding the consideration of quality costs to the market condition. The implementation of different quality improvement strategies; Kaizen and Innovation, was studied and compared by using a system dynamics simulation approach. The simulation models were constructed using information from a case study company, a Thailand-based automobile manufacturer. An optimisation technique was used to identify optimal quality improvement spending for each improvement strategy. The results suggest that quality improvement should be considered not only in terms of traditional quality costs, but in terms of a more comprehensive measure, which takes account of the market-related quality benefits. A higher quality level does not only reduce costs, but also potentially increases demand, which can increase profit. Therefore a profit criterion is recommended instead of the total quality cost.