Eindhoven University of Technology MASTER …Neways ElectronicsInternational NV offered by Neways. Analysis of the customer research consisted of two parts . In the first part the

Eindhoven University of Technology

MASTER

Strategic analysistowards competitive advantage

Spaan, P.

Award date:2003

Link to publication

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Abstract

Graduation report Peter SpaanIndustrial Engineering and ManagementNeways Electronics International NV NEWAYS

0

In this graduation project a strategic research was performed on achieving competitive advantage .The research included an internal research about production and service offerings, a customeranalysis about perception and value and a competitor analysis . After analysis a scenario of thefuture was presented as well as a roadmap for the organisation to adapt itself so it could achievecompetitive advantage in the future .

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Executive summary

Graduation report Peter SpaanIndustrial Engineering and ManagementNeways Electronics International NV NEWAY56

IntroductionThis summary describes the report, of the graduation project of Peter Spaan for his studiesIndustrial Engineering and Management Science at the Eindhoven University of Technology . Theproject was carried out at Neways Electronics International NV (Neways), located in Son during theperiod of March - November 2003. Neways develops and produces electronic equipment . It isorganised with several operational companies and a holding organisation . The project is carriedout for the holding organisation and six Dutch operational companies participated in this researchproject .In this summary the research design will be discussed followed by the research methodology perstep of the research project .

Research designThe research project was initiated by the following problem definition :

Neways faces a lot of competition in its marketplace. Neways is looking for new servicesthat enable it to develop competitive advantage over its competitors . These services shouldfit the market trends in both short term and long term and fit Neways' current business offer .

With this problem definition and research objective, the orientation phase started . Six operationalcompanies have been visited and several key persons of those companies have been interviewed .These interviews resulted in a list of over twenty different value adding services that are alreadyoffered to customers . Most of the sales-related people agreed that although Neways can offer allthose services, it was difficult to identify a competitive advantage for Neways. Even worse, it wasvery difficult to stand up to competition . After these interviews, the conclusion was straightforward :If all these different services don't create a competitive advantage, the solution for a competitiveadvantage will not be in another additional service . With all these services available, it ismeaningful to find out why Neways fails to develop a competitive advantage today and how acompetitive advantage can be created . So the initial problem definition and research objective hadto be adjusted based on the information found in the orientation phase.

Problem definitionNeways faces a lot of competition in its marketplace . Neways wants to achieve long-termrelationships with customers and to be less dependent of the economic climate andcapacity limitations ; the typical aspects of a technology jobber. The problem is that Newaysdoes not know how competitive advantage can be realised .

Research objectiveThe objective of this research is to find out how Neways can achieve competitiveadvantage. The ultimate design will provide an answer to the questions what is needed forNeways to create a competitive advantage and what steps have to be taken to achieve this .

MethodologyIn order to reach the research objective the following steps were taken :• A literature review on topics related to competitive advantage ;• An internal research on the offered services (including production services) and strategy of

Neways ;• A competitor research to see how competitors are trying to achieve competitive advantage ;• A customer research on the perception and the value of Neways offerings ;• An analysis of the previous results to identify possibilities to achieve competitive advantage ;• A design of a roadmap towards competitive advantage .These steps will be discussed in the next part of this summary .

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Graduation report Peter SpaanIndustrial Engineering and ManagementNeways Electronics International NV IrGrrAi ~7s

The literature reviewThe literature review reveals the following relevant topics for Neways :

Outsourcing : Since Neways is a supplier and exists because customers want to outsourceactivities to Neways it is important to understand the reason why a customer outsources, becauseseveral reasons exist .Strategy : A strategy is needed to realise competitive advantage . It shows how a distinction fromcompetitors will be realised . Strategy is an important concept in achieving competitive advantage.Customer value : Customer value is a prerequisite for competitive advantage . It can be defined asthe worth in monetary terms of the economic, technical, service and social benefits a customer firmreceives in exchange for the price it pays for a market offering. Companies must be focused oncustomers and recognise that competitive success depends on delivering superior customer value .Market focus : One aspect of customer value is the focus on specific markets . This market focusenables Neways to make offerings that can be adjusted to the specific requirements of a marketand leads to competitive advantage in the particular market segment .Services : The strategy of Neways is to become a one-stop shop, in other words offer a completesolution by augmenting their offerings with additional services. These services become under thecurrent market conditions (more intense and fierce competition, outsourcing, globalisation andproduction in low wage countries), a crucial factor in the process of creating superior customervalue .Supplier involvement: The final topic in this literature review will be supplier involvement in thedesign stages of a product . The services offered by Neways often include development orengineering in co-operation with the customer . This involvement is a special form of both servicesand customer value and therefore will be discussed separately . Supplier involvement can bringadvantages for the customer and thereby create a long-term relationship between Neways and thecustomer .

The internal research(n the internal research the participating operational companies were examined for two reasons.First to get a good understanding of the services offered per operational company and second toanalyse the future plans of the operational companies . The results were combined in a matrix thatshowed the capabilities and future plans per operational company . This matrix provided an easycomparison of the plans of the operational companies .

The competitor researchIn order to get a clear view of how Neways' competitors are trying to achieve competitiveadvantage, á competitor analysis was designed . The competitor analysis consisted of research ofinformation from the chamber of commerce combined with publications, websites and other publicinformation. The competitors were compared based on size, financial performance, capabilities,strategy and customer value . Analysing these results provided insight in the current situation of thecompetition of Neways and market trends .

The customer researchThe literature review showed a direct relation between customer value and competitive advantage .Customer value can be characterised as a prerequisite for achieving competitive advantage . Tounderstand the-perception of the customer towards the activities and services offered by Neways,a customer value analysis was designed . This customer value analysis consisted of a series ofinterviews with either large or promising customers of Neways . The interviews consisted of ageneral part where the customers' outsourcing strategies and the perception of Neways wereanalysed. The second part was a customer value analysis . The customers were asked to indicatethe important characteristics, the advantages, the investments and the risks for each service

III

t?C}11liSCi1C Graduation report Peter Spaan~°~~~~ s~r~ r Industrial Engineering and Management

TWN~s

Neways Electronics International NV

offered by Neways. Analysis of the customer research consisted of two parts . In the first part thereasoning of customers in relation to outsourcing and the perception of Neways was visualised bythe use of a causal flowchart . Second, the customer value analysis resulted in a customer valuematrix that showed valuable information for Neways.how customers perceive the offered services .

The designPutting the results of the previous research steps together resulted in three prerequisites and threepossibilities for achieving competitive advantage . The three prerequisites first have to be metbefore Neways can start to work on achieving competitive advantage. The three possibilities werediscussed and the most relevant option was elaborated further. This elaboration took place by firstperforming a literature review on the subject . Based on this literature review and the previousinformation gathered in this research project a model was designed that showed how Neways canachieve competitive advantage and second, how it could sustain this advantage .

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Introduction

Graduation report Peter SpaanIndustrial Engineering and ManagementNeways Electronics International NV NLa/VAYS

0

This report is the result of the graduation project of Peter Spaan for his study Industrial Engineeringand Management Science at the Eindhoven University of Technology . This project took place atNeways Electronics International NV located in Son .

This research project is about achieving competitive advantage . Customer value and the role ofvalue adding services play an important part in this research project .

Hereby I would like to thank the university coaches Joop Halman and Nicolette Lakemond for theirsupport and comments as well as the company coach Nick Klein for sharing the customer visionwith me. Also would I like to express my gratitude towards Leo Haffmans for the fruitful discussionsand to two reviewers of this report for their useful comments .

Peter SpaanNovember 2003

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TU /e tPch lilti<nN Graduation report Peter Spaan JiW/~/ ~Q.. u ""'~' ~"°'r Industrial Engineering and ManagementTU/ NdAIA~/~°

Neways Electronics InternationalN G~: i~7V

Index

Abstract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IExecutive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1!Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VIndex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., . . . . . . . . . VIChapter 1 The research project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

1 .1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 .2 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 .3 Initial problem definition and research objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 .4 Results of the orientation phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 .5 Adjusted problem definition and research objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 .6 Research model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1 .6.1 Discussion of the available methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 .6.2 Structuring the research project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..3

1 .7 Limitations of the project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..4Chapter 2 Company description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.2 General description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52.3 Mission statement and strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52.4 Organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52.5 Financial overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.6 Business processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.7 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Chapter 3 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.2 Orientation phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.3 Analysis phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83.3.1 Analysis : Literature review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83 .3.2 Analysis : Internal research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83.3.3 Analysis : Competitor Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93.3.4 Analysis: Customer research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..9

3.4 Design Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..133.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Chapter 4 Literature review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .144.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .144.2 Outsourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .144 .3 Strategy and focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .154.4 Customer value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .164.4.1 Definitions of customer value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..164.4.2 Understanding customer value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .164.4.3 Creating customer value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .174.4.4 Delivering customer value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

4.5 Market focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .184.6 Industrial services as competitive advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .194.7 Supplier involvement in product development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .204.8 Concl Ltsions from the literature review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Chapter 5 Market, services and strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..235.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235.2 Market analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235 .3 Market trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235 .4 Services offered by Neways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .245.5 Strategy at Neways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

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5.6 Market focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265.7 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Chapter 6 Competitor analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .286.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286.2 Competitor analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286.2.1 Company size and financial properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .286.2.2 Capabilities and strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286.2.3 Discussion of the analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

6.3 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Chapter 7 Customer value analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .317.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 .2 Outsourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317.3 Co-operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327.4 Perception of Neways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .337.5 Value of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .347.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347.5.2 Specific results from the customer value matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347.5.3 The customer value matrix in general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

7.6 Discussion and conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37Chapter 8 Discussion and conclusions from the analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398.2 Prerequisites for competitive advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398.3 Possible opportunities for achieving competitive advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..408.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Chapter 9 Steps towards competitive advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..439 .1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439 .2 Steps towards a service centred organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..43

9.2.1 Meet prerequisites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439.2.2 Commitment of the management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .439.2.3 Change management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449.2.4 Evaluation of the current services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .449.2.5 Develop and market the updated services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .449.2.6 Implement the services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..449 .2.7 Evaluation of the process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

9.3 Staying ahead : The need for new service development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..459 .3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459.3.2 The loop of New Service Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..459.3.3 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

9.4 Benchmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469.4.2 The case study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .479.4.3 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

9.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Recommendations for further research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..49Personal reflection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..50References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51

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tN'hiiiS, h- Graduation report Peter Spaan~ !~ Industrial Engineering and Management

N~~/A\/~°cinov~n Neways Electronics International N G~~ I~7V

Chapter 1 The research project1.1 IntroductionIn this chapter the assignment and the project framework will be discussed . First in paragraph 1 .2the background for this research project is described then the initial problem definition and inparagraph 1 .4 the results of the orientation phase . Paragraph 1 .5 describes the adjusted problemdefinion and research objective . In paragraph 1 .6 the research model is discussed followed by thelimitations in paragraph 1 .7 .

1.2 BackgroundSeveral trends are taking place in the industry worldwide. Companies focus on their corecompetencies and outsource more and more activities to specialised suppliers . Production is beingoutsourced to low wage countries especially tobecome shorter and new products are introducedand Clark, 1992 and Hamel andPrahalad, 1990) . These trends are alsoapplicable to the development andproduction of electronics. An increasingnumber of companies is outsourcingthe production of electronics tospecialised companies, ElectronicManufacturing Services Providers orEMS providers. These EMS providersshould relieve the outsourcingcompanies from the burden ofproduction by managing the completeproduction . Currently two major trendscan be identified in the EMS market : Inthe first place the customers areoutsourcing on a higher level, forexample complete modules instead ofsingle printed circuit boards andsecond the EMS providers are offeringadditional services around theproduction, for example the design ofprinted'circuit boards and the repair .

At the moment, competition is fierceand especially now that the economy isin recession, the EMS-companies arestruggling . To survive this competition,Neways is searching for competitiveadvantage. By achieving competitiveadvantage Neways expects to addmore value to its customers so thefocus will be on added value instead oflow prices .

Asia and Eastern Europe, product life cyclesfaster and faster (See for example Wheelwright

About Jobbers and ConsultantsCompanies can be classified according to manymethods. Van Gunsteren (1992) bases hisclassification on two questions :Is the organisation offering a product or a capacity toits customers?Is the organisation in a business of making things or ina knowledge business?Answering these questions leads to four possibleclassifications, displayed in the matrix below .

Table 1 .1 Classification of business identitiesDoing/making Thinking/knowing

Product Licence Taker Licence GiverI Capacity Technology Jobber ConsultantSource: Van Gunsteren (1992)

It is meaningful to classify Neways, since it providesinsight in the current situation in relation to competitiveadvantage .To answer the first question for Neways, Neways doesnot offer own products . It offers production andengineering capacity to customers . The secondquestion is more difficult to answer, since Newaysoffers both production capacity, but also variousdesign and engineering services. However, the mainpart of Neways' turnover is realised within production .Therefore, Neways will be classified as a technologyjobber, although it also offers knowledge services .This combination of production and services is animportant topic in this research project .

This research project addresses the problem that Neways Electronics International NV (hereafterreferred to as Neways) does not know how competitive advantage can be realised . The currentcompetitive position and the forces around Neways will be mapped by a strategic analysis and toidentify possibilities for achieving competitive advantage . Finally the question will be answeredwhat has to be done by Neways to achieve competitive advantage .

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1.3 Initial problem definition and research objectiveThe initial problem definition as it has been defined at the beginning of the project is as follows :Problem definition

Neways faces a lot of competition in its marketplace. Neways is looking lor new servicesthat enable it to develop competitive advantage compared to its competitors. Theseservices should fit the market trends in both short term and long term and fit Neways'current business offer .

The initial problem definition leads to the following initial research objective :Research objective

The objective of this research is to make clear what services Neways can offer and whatconsequences this has for the organisation . The outcome of this research will provide ananswer to the question how the services Neways provides can be managed best .

This problem definition and research objective have been formulated based on conversations withthe company coach .

1.4 Results of the orientation phaseWith this problem definition and research objective, the orientation phase started . Six operationalcompanies have been visited and several key persons of those companies have been interviewed .The results of these interviews are elaborated in chapter 4 and appendix 1, but a short summary ofthe gathered information is given here : These interviews resulted in a list of over twenty differentvalue adding services (see appendix 2 for an overview) that are already offered to customers . Mostof the sales-related people agreed that although Neways can offer all those services, it was difficultto identify a competitive advantage for Neways . Even worse, it was very difficult to stand up tocompetition . After these interviews, the conclusion was straightforward : If all these differentservices don't create a competitive advantage, the solution for a competitive advantage will not bein another additional service. With all these services available, it is meaningful to find out whyNeways fails to develop a competitive advantage today and how a competitive advantage can becreated. So the initial problem definition and research objective had to be adjusted based on theinformation found in the orientation phase .

1.5 Adjusted problem definition and research objectiveBased on the information gathered in the orientation, an adjusted problem definition and researchobjective have been formulated in co-operation with the company and university coach . These aredisplayed below .Problem definition

Neways faces a lot of competition in its marketplace . Neways wants to achieve long-termrelationships with customers and to be less dependent of the economic climate andcapacity limitations ; the typical aspects of a technology jobber . The problem is that Newaysdoes not know how competitive advantage can be realised .

Research objectiveThe objective of this research is to find out how Neways can achieve competitiveadvantage. The ultimate design will provide an answer to the questions what is needed forNeways to create a competitive advantage and what steps have to be taken to achieve this .

1.6 Research model1.6.1 Discussion of the available methodsTo reach the research objective a research model has been created . This has been done by themethodology of Verschuren and Doorewaard (2000) . Verschuren and Doorewaard use a graphicaltechnique that provides an easy to understand overview of the design of the research project . Inaddition to Verschuren and Doorewaard, Kempen and Keizer (1996) add an orientation phase to

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the project and focus on the support of the stakeholders for the project . Also, they emphasise theimplementation of suggested improvements . These are valuable topics in a research project andthey will be addressed in the methodology of this project (chapter 3) . A critical comment onKempen and Keizer is about their sequential representation of a research project . In practise aresearch project is hardly sequential, because when one finds new results it is likely that previoussteps have to be modified . For this research project the model of Verschuren and Doorewaard willbe used, since it provides a more detailed insight in the structure of the analysis-phase .

1 .6.2 Structuring the research projectFigure 1 .1 shows the research model for this research project . The arrows represent aconfrontation of two (or more) topics that lead to a specific result .

Literature aboutthe EMS market

Literature aboutcustomer value

Literature aboutstrategic positioning

Current state inliterature

Current businessoffering of Neways

Results of theanalysis

Possibilities forNeways toachievecompetitiveadvantageincluding theconsequencesand the necessarysteps

Competitionresearch

Literature aboutservices

Literature aboutsupplier involvementin productdevelopment

Customerresearch



Figure 1 .1 Research model (after Verschuren and Doorewaard, 2000)

In order to reach the research objective the following research questions have been derived fromthe objective. This has been done by transforming each arrow in figure 1 .1 into a question . Thesequestions function as steps in the process that will lead to the answer of the main researchquestion :

How can Neways achieve competitive advantage?

From this main question the following sub-questions have been derived :1 . What concepts in literature are at the basis of this research project and how are they related?2. What is the current status of Neways with regard to the topics found in the literature?3. How do Neways' competitors try to achieve competitive advantage?4. How do customers perceive Neways and the services it offers?5. When combining the results of the internal strategic analysis, the customer analysis and the

competitor analysis, what are interesting possibilities for Neways to achieve competitiveadvantage?

6. What changes are needed in order to achieve a competitive advantage and what are theconsequences?

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This research project consists of three phases : orientation, analysis and design. In table 1 .1 thestructure of this report in relation to these research questions is presented .

Table 1 .2 The research proiectPhase Chapter Title Research

QuestionOrientation 1 . The research project

2. Company description3. Methodology

Analysis 4. Literature review5. Market, services and strategy6. Competitor analysis7. Customer value analysis

Design 8. Discussion and conclusions from the analysis9. Steps towards competitive advantage

1.7 Limitations of the projectDue to the size of the Neways organisation, the complexity of the problems and the correlationbetween them, it is necessary to narrow down the scope of the project . This makes it possible toachieve the determined results within the fixed time available for this project . This project is carriedout for the Neways group and not for an individual operational company. Therefore, this researchfocuses on six operational companies (Hoyte, Ripa, Evic, Neways Industrial Systems, NewaysHeerlen and Neways Leeuwarden), because they are a reflection of the overall Neways group .These six operational companies are selected because of their geographical location. For thatreason Q-Nova (Czech Republic), Neways Ximec, Neways Wuxi (both China), Neways Kassel andNeways Neunkirchen (both Germany) are not participating . Operational company Hymec is left out,because it operates in the area of microelectronics, which is fundamentally different from theassembly of printed circuit boards and the related activities .The consequences of these limitations for this research project seem to be limited . The Germanmarket is not taken into account, but no indications have been found that the situation in Germanyis different compared to the Netherlands . The Asian operational companies produce almost solelyfor the Western European operational companies, so omitting the Asian operational companieshas no effect on the research project . Hymec's offering of microelectronics is processed in thisresearch as a value adding service . So the operational company is not taken into account, but itsoffering is considered in this research . This decreases the effect of this limitation .

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Chapter 2 Company description2.1 IntroductionIn this chapter a description will be given of Neways, the company where this project took place .This company introduction starts with a general description, followed by its strategy, organisationand financial overview . The goal of this chapter is to provide a background of the company, itsorganisation and its activities . This background is necessary for the understanding of the furtherchapters .

2.2 General descriptionNeways is an internationally operating supplier of industrial and professional electronics . Neways'headquarters is located at the Science Park Eindhoven in Son (Netherlands) . Neways operates inthe market of Electronic Manufacturing Services (EMS) . Its core activities are assembly processesinvolving the placement of electronic components on printed circuit boards (Printed Circuit BoardAssembly, or PCBA). Component assembly is carried out both mechanically and manually .Mechanical placement enables electronic components to be mounted at high speed . Manualplacement is used for small series involving special components and sometimes for theconstruction of prototypes . Besides these activities Neways also develops and producesmicroelectronics, supplies cable assemblies, integrated devices and (sub)systems and providesservice & repair activities . Neways delivers its products and services to Original EquipmentManufacturers (OEM) and to industrial first tier suppliers (explained in paragraph 5 .2) . Theequipment Neways produces is used in sectors such as semiconductors, medical equipment andtelecommunications .

2.3 Mission statement and strategyNeways formulates its mission in the following statement :

In close co-operation with its customers, Neways is leading to develop and implementcustomised electronics solutions in telecommunications, medical, industrial, defence &aerospace and automotive.Source: Neways annual report (2002)

In addition to this mission Neways has the slogan "The one-stop shop for customised electronics" .This expresses the strategy to be able to fulfil customer wishes in every aspect : from conceptdevelopment to production to end-of-life services .Neways operates in niche markets characterised by small volumes, mainly in the professionalmarket, though also smaller volumes in the market for consumer products .From the annual report the following main points in the strategy of Neways can be derived :• Customer orientation and the creation of long-term relations with customers• Long-term partnerships with a number of carefully selected suppliers• Co-development of electronics. This means developing electronics with and on behalf of

customers. The outsourcing of development has been made possible by the availability ofpowerful, standardised software packages at Neways

• The creation of production capacity in Eastern Europe and China, where production costs areappreciably lower than in Western Europe . Larger and stable volumes involving a relativelylarge amount of manual work can be produced more cost-effectively in Eastern Europe andChina

2.4 OrganisationNeways Electronics International N .V. is a holding company and has 10 operating companies (alsoreferred to as OpComs) in the Netherlands, three in Germany, two in China and two in EasternEurope. Because the OpComs and their activities play a central part in this research, a shortdescription of the OpComs involved in this research is given below . For an overview of all theOpComs, see appendix 3.

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Table 2.1 Overview of the O Coms artici atin in this researchName . O . . Location .

ployees' 2002 in EUR000000

Hoyte Son 11 0,9 Design of PCB-layouts, prototypebuilding

Ri a Son 174 30,8 Production of PCB-assembliesNeways Industrial Son 85 25,3 Design and production of completeSystems systemsNeways Heerlen Heerlen 156 22,2 Design and production of cable and

wiringNeways Leeuwarden 90 14,8 Production of PCB-assembliesLeeuwardenEvic Electronics Echt 117 11,4 Design and production of PCB's,

Electro Mechanical Repair1 source: Neways Annual Report 2002

At the end of 2002 Neways had 1,578 employees, of whom 1,125 are located in the Netherlandsand Germany and 453 in Slovakia, Hungary and China .

2.5 Financial overviewThe company posted turnover of EUR 154,7 million in 2002. The net result for 2002 was a loss of

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EUR 4.0 million . Neways islisted on the EuronextAmsterdam. Figure 2.1 showsthe stock-exchange quotationof Neways for the last fiveyears. It clearly shows that thecompany's value has beengoing down . Since a quotationrepresents the current stateand expectation of the futureof a company's results, onecan see that Neways' positionhas deteriorated. Thisstresses the importance ofthis research .

2.6 Business processesAs a supplier of industrial electronics, the main operational process of the OpComs of Neways isthe assembly of electronic components on printed circuit boards (PCB's) . This can either be doneby hand or in an automated process, depending on the nature of the components . Newayspresents itself as a one-stop solution provider. Several services precede and follow this productionprocess. The activities of Neways can start when a customer approaches Neways with the idea todevelop a new product. Neways can take care of the design, production and repair of a product . Inthis research project a distinction will be made between production activities and value addingservices. The assembly of PCB's and the production of cable-systems for example will becategorised as a production activity or production service, while the design or repair of a productwill be considered as a value adding service .

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2.7 ConclusionIn this chapter a short description of Neways is given . Neways is the largest provider of electronicmanufacturing services (EMS-provider) in the Netherlands, but a middle-sized player worldwide(47th place in the world, ranked by sales according to Tuck, 2003) . It is organised in 17 operationalcompanies and a holding company. The current financial results are unhealthy . The company isstriving to be a one-stop shop for its customers and to develop long term relations with them .Neways offers both production related activities as well as value adding services . Achievingcompetitive advantage is essential for realising the strategy and improving the financial results .

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Chapter 3 Methodology3.1 IntroductionIn chapter one the research model was described and in chapter two the company. This chapterexplains how the research objective will be met and what choices have been made including themotivation for these choices . The research project consists of three phases : Orientation, analysisand design. The methodology of the orientation phase is described in paragraph 3 .2. The analysisphase consists of a market research, an internal research, a customer research and a competitorresearch. These subjects are discussed in paragraph 3 .3 . The design phase is discussed inparagraph 3 .4. The chapter ends with a summary in paragraph 3 .5. The sources of informationused for the various research phases are added to this report as appendix 4 .

3.2 Orientation phaseIn the initial phase the orientation on Neways was as broad as possible . Company documentation(annual reports, previous reports of graduation projects, intranet-site) and interviews provided goodbackground for the position of the project. The next step was the intake. In a few meetings with mycompany coach Nick Klein, Manager Sales and New Business Development of the holdingcompany, the initial problem formulation and research object were determined . Orientatinginterviews were held with various people of Neways, especially account managers and members ofthe management team . Account managers were interviewed because of their frequent contact withcustomers and their experience with the problem of little competitive advantage . Members of themanagement team were interviewed to provide information about the background of the problemand their approach and strategy to tackle this problem. Also a list of the services offered byNeways was created from these interviews . Next to these interviews company documents andprevious (graduation) projects within Neways were studied . With the forthcoming insight of thisorientation phase, the initial problem formulation and research objective had to be adjusted . Thisresulted in an updated project planning, all in consultation with the company coach .

3.3 Analysis phaseThe analysis phase consists of a literature review, an internal research, a customer research and acompetitor research . In the following text these topics are discussed .

3.3.1 Analysis: Literature reviewA literature study took place to see what central themes could be derived from the problemdescription. The goal was to provide scientific background for this project and to create anexploratory review of relevant topics for Neways in relation to competitive advantage .

3.3.2 Analysis: Internal researchThe main conclusion of the initial orientation phase was that the organisation consists of variedoperational companies with varied products, strategy and services . In order to get a clear overviewof the current activities, strategy and services of the operational companies it was decided toconduct an internal research . Since the topics were complex and required good explanation, in-depth interviews were selected as the reseeirch strategy of this internal exploration . The topic ofcompetitive advantage is at a higher abstraction level and therefore the members of themanagement teams of the operational companies seemed the right participants . Again, theinterviews were semi-structured with a questionnaire per function (general manager, salesmanager, technical manager) that focussed on the most relevant topic for their function . Theminutes were sent back to the interviewed people and their feedback was processed . The resultsof the interviews about activities and services were "stacked up"; a technique for analysingqualitative information where per question all answers are compared for similarity . This techniqueis described by Kempen and Keizer (1996) . For the results about the topic of strategy "mapping"(presenting the results in a graphical way so that the results can be interpreted more easily) wasthe preferred method of analysis . It provided insight at a glance and it made it easy to compare thestrategy of the different operational companies . Wheelwright and Clark (1992) functioned as a

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guide in this process. The results of the internal research were presented at a salesmeeting wherethe commercial manager or managing director for each operational company were present .

3.3.3 Analysis : Competitor AnalysisIn the text below the design of the competitor analysis will be described . The topics units ofanalysis, research topics and method of analysis will be addressed .

Units of analysisTo select the competitors for the competitor analysis in the customer research a question wasasked about competitors. This information was combined with the names of competitors suppliedby account managers of various Neways operational companies . This resulted in a list of 13companies. None of the interviewed customers named a foreign company as a competitor forNeways, nor did the account managers. Besides that, the Dutch operational companies focus onthe Dutch market. Therefore, this competitor analysis focuses on the Dutch market .

Research topicsThe goal of the analysis was to find out the current status of the competition .In relation to the research objective the status has been transformed into three main topics, ofwhich study questions were derived. These topics and questions are presented in table 3 .1 .

Table 3.1 Topics of the competitor researchMain Topic Study QuestionsGeneral information What is the size of the company?

What are the financial results?Capabilities What capabilities does the company offer?Competitive advantage What kind of strategy is the company pursuing?

Does the company have a market focus?What does the company see as customer value?What kind of services does the company offer?

Method of analysisTo answer these questions, various sources of information were used (see appendix 4) . Theinformation was written down in descriptions per company and an excel sheet to compare thecompanies with each other and with Neways .

3.3.4 Analysis: Customer researchThe literature review made clear that customer value is a prerequisite for competitive advantage . Inorder to understand the customers' perception of Neways and to get to know to what things theyattach importance in the relationship with Neways, a customer research has been designed . Thecustomer research should provide answer to two questions : "What is the customer's perception ofNeways?" and 'What activities of Neways do customers value?"

The first question to be answered when conducting this customer research was what researchstrategy should be used. The goal of the customer research was to gather in-depth informationabout the customers' perception of Neways and the relation between Neways and the customer .This kind of information can only be gathered with open questions and extra explanation . Thereforethe case study is the right research strategy for this research, as is displayed in table 3 .2, wherethe two most common research strategies are compared .

The choice for a case study research is confirmed by Yin (1994) who argues that a case study cancope with the situation in which there will be many more variables of interest than data points,which is the case here . He also points out that with a case study you can investigate aphenomenon within its real-life context, especially when the boundaries between the phenomenon

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and context are not clearly evident . This argument is very valuable for this customer research,because it does not only look at the customer, but also at the relation between Neways and thecustomer, other suppliers and customers . The boundaries between phenomenon and context areindeed very vague.

Table 3.2 Characteristics of a survey and case study, after Verschuren and Doorewaard (20 00)Characteristics SurveNumber of investigated objects LargeProcessFocusSampleResultsQuestionsPosition

Labour extensiveWideRandom sampleQuantitativeMultiple choice, ratingsAt a distance (internet, mail)

Case studSmallLabour intensiveIn-depthSelective sampleQualitativeOpen questionsOn site

Demand chain navigator not suitableIn 2002 Donders used NEVAT's Maturity assessment, also known as the demand chain navigator(see van der Spek, 2000) to investigate the relationship between Neways Industrial Systems andASML. This methodology, where customers are interviewed about their current and future wisheson several general topics, can be criticised as a suitable method to investigate customers'perception and the customer value of activities for three reasons . First, since the assessmentconsists of pre-defined competencies to be examined, no in-depth information about the real needsof customers was gathered Second, customers would never ask suppliers to developcompetencies that make the customer dependent of the supplier and give the supplier theopportunity to achieve competitive advantage . Third, asking customers for the desired level of priceand service always leads to lower prices and better service. This is known as the waiter effect("What would you like?") . The conclusions of the assessment were vague and only suggestedgeneral improvement on all the competencies suggested . Therefore the maturity assessment hasnot been used in this research .

Research topicsAs stated before, the goal of the customer research was to gather in-depth information about thecustomer's perception of Neways and the relation between Neways and the customer . Thecustomer's perception was split into the-general perception and the value analysis of the servicesNeways offers . The relation is investigated by focussing on the outsourcing strategy of thecompany and the way the two companies co-operate. In table 3.3 an overview is presented of thetopics and the derived study questions. The complete questionnaire (in Dutch) is added to thisreport as appendix 5 . In the text below, the study questions will be discussed .

Topic 1 : Outsourcing strategyThe literature review provides several reasons why companies outsource (see paragraph 4 .2) . Tounderstand the reasons to outsource the first part of the customer research will cover this subject .Why do companies outsource and how is this done? The answer to this question provides insightand can be useful for improving the understanding of the customers' motivation of doing businesswith Neways .

Topic 2: Co-operationLiterature nárnès co-operation as a possible source of competitive advantage, especially in productdevelopment. What ways of co-operation between Neways and customers exist? How do theycommunicate and what kinds of consultation take place?

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Topic 3: PerceptionCustomers value their relationship with Neways. Although it is not possible to compare theopinions of the customers on this point since they all deal with different operational companies, it ismeaningful to see what causes satisfaction and dissatisfaction .Also the one stop shop strategy of Neways will be discussed to see if this is in line with thecustomer perception and desire .

Table 3.3 Topics of the customer researchMain Topic Study QuestionsOutsourcing strategy What is the company's outsourcing strategy

Co-operation

Perception

What is the role of Neways?In what way does co-operation take place?What does the communication between Neways and the customer looklike?What are the strengths and weaknesses of Neways?Is the one-stop-shop strategy recognised?

Value analysis of the Based on :services offered by - Acquaintance with the serviceNeways - Important characteristics

- Advantages- Investments- Risks

Topic 4: Customer Value analysisNeways offers various services . In line with the conclusions of the literature review, services canbe a competitive advantage. To investigate how customers value the services Neways offers, avalue analysis was designed . This analysis was based on a previous analysis performed byKemperman and Van Engelen (1999) . They decomposed customer value as a mix of customerbenefits (emotional and functional), sacrifices (financial and time) and risks (product risks andsystem risks). This model cannot be copied one on one, because Kemperman and Van Engelenused their model to gather data in an indirect way : they interviewed marketing managers of thesupplying party, instead of the purchasing party : the customer . Although they had good reasons todo this (research the possibility to use customer value as a steering variable for management),their data is not a reflection of the opinion of the customer, but the intention of the designers of theproduct. In order to be useful in this research the following modifications have been made :- The emotional benefits have been removed . In the first interviews it turned out that it was

impossible to get a useful answer . Either emotional benefits are very low or people do not wantto talk about it or the benefits are not clear to the interviewed person .

- To get more spontaneous answers, the further decomposition of sacrifices and risks wasremoved .

- The category "important properties" was added to find out what aspects of a service are valuedimportant, irrespective of this was valued as a benefit, sacrifice or risk . This category provideddifferent and useful answers

The value analysis is performed for the services offered by Neways . The list of services was firstreduced to the most important services by grouping almost similar services . This was done to fitthe value analysis in the time available .

Units of anáÍysis: The selection of the customersIt seemed feasible to interview two customers of each operational company under investigation .The customers have been selected by the following two criteria :1 . The largest customer for each operational company2. The most promising customer with regard to future profit

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Ad 1 . These customers were selected with the use of Neways' ERP-system . For each operationalcompany the customers were selected for the highest turnover in the period January 2002 - April2003 .Ad 2 . This criterion is more arbitrary . In co-operation with the commercial managers and accountmanagers the most promising customer was selected based on :

• Date of first order• Increase in turnover• Increase in number of purchased services

By interviewing the largest customer for each operational company, the opinion of the customersthat have the largest effect on Neways has been collected . This seems reasonable since the 80-20rule (80 percent of the turnover is realised with 20 percent of the customers) is applicable toNeways. This was proven with an analysis in Neways' ERP-system .With the use of the second criterion has been tried to select the customers of the future . Thesecustomers should be relatively new to the organisation compared to the customers selected withthe use of the first criterion and show signs of a promising future with Neways. For executing thissecond criterion on Neways' clientele, the ERP-system did not provide enough information .Therefore in co-operation with the responsible sales manager, the right customers were selectedby combining the turnover-figures with qualitative customer information . The selected customersare presented in table 3 .4.

Table 3.4 Selected customers per operational companOperational CompanyRipaEvicNeways HeerlenNeways LeeuwardenNeways Industrial SystemsHoyte

Largest customerNedapPrivaPhilips Medical SystemsASM EuropePhilips ETGOcé

Most promising customerPrins autogas systemenNyquistPANalyticalSparkFrenkenChess Embedded Technologies

Co-operationIn order to secure the co-operation of the involved commercial managers and customers, thefollowing steps were taken :1 . The commercial managers were included in the in-depth interviews of the internal research . In

these interviews they could share their vision about the problem definition, customer-approachand the strategy and future of Neways .

2. In a sales meeting in which the commercial managers participated, a presentation was givenabout the results of the orientation and analysis so far . The reason for the customer researchwas given and the proposed design for the case study explained .

3. The questions were sent to the commercial managers and their feedback was used to updatethe questions .

4. Together with the commercial managers the companies and the right person were selected .5. The commercial manager or account manager contacted the customer and explained the

reason for the research and introduced the author .6 . An appointment was made with the customer .7 . During the interview minutes were taken . Afterwards a report of the interview was sent to the

interviewee and the feedback was used to update the report .8. When appreciated, the customer was kept informed about the results of the project .

Method of analysisAs stated before the character of this customer analysis is exploratory . Although Yin (1994)provides good theoretical background for case studies, it falls short in providing actual analysismethods. Miles and Huberman (1994) advise causal flowcharts to visualise complex relations . Thisis used to display the perception of Neways in general and the idea customers have in relation to

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outsourcing (topic 1 and 3) . Co-operation (topic 2) is described in plain text and the customer valueanalysis (topic 4) is presented in a matrix after Kemperman and van Engelen (1999) .

3.4 Design PhaseThe design phase of this research project is covered by chapter 8 and 9 . In chapter 8 the resultsfrom the previous chapter are combined to identify prerequisites and possibilities for achievingcompetitive advantage. Based on arguments described in chapter 8 and in consultation with thecompany tutor one topic was selected to elaborate in chapter 9 . In this chapter a model isdeveloped to transform Neways. This model was developed by combining literature on the topicwith the results of this research project .

The benchmarkThe design was tested by a benchmark case study . For the benchmark method was chosen for abenchmark with a best-in-class company to see if the theoretical model matched the practise of abest-in-class company, as is advocated by Regino (2001) . The company was selected because itis a best-in-class service company. The case study took place in the form of an interview with amarketing manager of the selected company . The interview was semi-structured by a list of topics,based on the model that was build as described above. The minutes of the interview were sendback to the interviewee and his comments were processed before the results were used .

3.5 SummaryThis research project can be divided into three phases . In the initial phase the orientation on thecompany and the problem definition takes place . In the analysis phase the research consists of aninternal research, a customer research and a competitor research . In the design phase the resultsfrom the previous phases will be combined and a topic for the design will be chosen . This topic willbe elaborated as the final step meeting the research objective .Now that the setting and design of this research project have been explained, we can startanswering the research questions .

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Chapter 4 Literature review4.1 IntroductionThis literature review aims to answer research question 1 : "What concepts are at the basis of thisresearch project and how are they related?" To answer this question, first competitive advantagewill be defined . Porter (1985) describes competitive advantage as competencies with which acompany distinguishes itself in a positive way from its competitors . Kotler (1997) definescompetitive advantage as a company's ability to perform in one or more ways that competitorscannot or will not match. Both authors identify the elements of competitors and positive difference .There is little preference for one of the definitions for the use in this research, but Porter is morestraightforward and therefore his definition will be used . Kotler however, described clearly theimportance of competitive advantage: It leads to high repeat purchases and therefore highcompany profitability . This is in line with Neways' goal, as described in the problem definition inparagraph 1 .3 .

An exploratory literature review reveals the following topics that play a part in achieving competitiveadvantage for Neways :

The first topic to be discussed is outsourcing, since Neways is a supplier and exists becausecustomers want to outsource activities to Neways. It is important to understand the reason why acustomer outsources, since several reasons exist .In order to realise competitive advantage a strategy is needed that shows how a distinction fromcompetitors will be realised . Strategy is an important concept in achieving competitive advantage .Operational excellence, differentiation and focus strategy are presented as the only threestrategies that can lead to competitive advantage .Customer value is a prerequisite for competitive advantage . It can be defined as is the worth inmonetary terms of the economic, technical, service and social benefits a customer firm receives inexchange for the price it pays for a market offering. Companies must be focused on customers andrecognise that competitive success depends on delivering superior customer value . One aspect ofcustomer value is the focus on specific markets . This market focus enables Neways to makeofferings that can be adjusted to the specific requirements of a market and leads to competitiveadvantage in the particular market segmentThe strategy of Neways is to become a one-stop shop, in other words offer a complete solution byaugmenting their offerings with additional services . These services become under the currentmarket conditions (more intense and fierce competition, outsourcing, globalisation and productionin low wage countries), a crucial factor in the process of creating superior customer value .The final topic in this literature review will be supplier involvement in the design stages of aproduct. The services offered by Neways often include development or engineering in co-operationwith the customer. This involvement is a special form of both services and customer value andtherefore will be discussed separately. Supplier involvement can bring advantages for thecustomer and thereby create a long-term relationship between Neways and the customer.

The topic of outsourcing will be discussed in paragraph 4 .2, strategy in paragraph 4 .3. Customervalue will be discussed in paragraph 4.4 and market focus in 4 .5, services and supplierinvolvement in paragraph 4.6 and 4.7 respectively . The chapter ends with conclusions from thisliterature review in paragraph 4 .8 .

4.2 OutsourcingAccording to Axeisson and Wynstra (2002) firms forge strategies in order to create a sustainablecompetitive advantage, by defining and developing core competencies . These core competenciesare defined by Prahalad an Hamel (1990) as something unique and distinct to a specific company .Long and Vickers-Koch (1992) have a more detailed definition: Core capabilities are the mostcritical and most distinctive resources a company controls and which are the hardest for others tocopy when they are connected to the relevant strategic goals which the company pursues .

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Quinn, Doorley and Paquette (1990) describe a shift that took place in the eighties in corporatestrategy from a less integrated to a more focused organisation . This can be attributed to newtechnologies that minimise transaction costs and enable executives to divide up their companies'value chains. Successful companies build their strategies not around products but around deepknowledge of a few highly developed core skills. The company strips itself down to the essentialsnecessary to deliver to customers the greatest possible value from its core skills and outsources asmuch of the rest as possible . In other words, the company concentrates what it does best andoutsources those activities that others do better .Axelsson and Wynstra (2002) define outsourcing as the decision and subsequent transfer processby which activities that constitute a function, and that earlier have been carried out within thecompany, are instead purchased from an external supplier . "Activities" is a broad concept thatincludes everything from producing a component or producing a service such as quality control tothe creation of an invoice . The phrase "that constitute a function" means that it often is a questionof a number of activities, but also that it is not only a question of exactly the same activities beingtransferred from one actor to another ; it can also mean that the activities are partly changed.Hiemstra and van Tilburg (1990) distinguish capacity outsourcing (where the outsourced activitiesare also performed by the outsourcing company) and non-capacity outsourcing (where theoutsourced activities are not performed by the outsourcing company). Van Weele (2002)distinguishes turnkey (an entire function is contracted out) and partial (only a part of the function isoutsourced and the co-ordination of the function is still operated by the purchasing company)outsourcing .Van Weele (1996) gives four reasons why companies may outsource some of their activities :• Increased subcontracting as a result of make-or-buy-decisions . Many companies start make-

or-buy studies to lower their cost price . One of the less obvious reasons, but applicable to theEMS industry is the purchasing leverage of the supplier as described by Ellram and Billington(2001). Because a supplier can combine orders of different customers, he can enforce lowercomponent-prices and make the buy-option more attractive .

• Buying of finished products instead of components . This trend is the result of the high labourcosts in some European countries. In recent years there has been a shift of production capacityto developing countries .

• Turnkey delivery. Suppliers take care that all the additional services and equipment aredelivered.

• Technological development. In some industries the technology develops at such a pace thateven large manufacturers cannot afford the investment needed to keep up. Jennings (2002)adds access to superior quality, flexibility in volume and product range and easierdiversification as reasons to outsource .

Hiemstra and Van Tilburg (1990) state that outsourcing frees more capital for core activities . Theidea that outsourcing is a difficult operation is supported by the outcome of a survey, showing thatthe majority of managers is dissatisfied with the results of outsourcing (Lonsdale, 1999) .So the main reason for outsourcing is because companies want to focus on their corecompetencies. This reason can be divided in several arguments . A second reason is the need forextra capacity. In order to take full advantage of the outsourcing wish of its customers, Newaysneeds a strategy. This will be discussed in the next paragraph .

4.3 Strategy and focdsTreacy and Wiersema (1992) argue that only three strategies for becoming a market leader exist .The first is operational excellence . Operational excellent companies provide middle-of-the-marketproducts, at the best price with the least inconvenience. The second is product leadership . Itspractitioners offer thé best products as the result from continuous innovation . Competition forproduct leaders is not on price, but on product performance . The third is named customer intimacy .The focus is not on delivering what the market wants, but what specific customers want . Customer-intimate companies specialise in satisfying unique needs that they can serve because of their close

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relationship with and intimate knowledge of the customer. In the opinion of Treacy and Wiersemachoosing one of the three so-called value disciplines is essential for achieving market dominance .This theory is very similar to Porter's (1985) idea that three basic strategies exist that lead to adistinguishing market position . The first is cost leadership . The strategy is to manufacture largevolumes on streamlined production lines with specialised production equipment . The main focus iscost reduction . The second strategy is differentiation . The aim is to market products that areperceived as being unique. This can be achieved by for example the design, the logo, thetechnology or the service . The third one is focus strategy . This strategy aims to serve a particular,clearly defined group of customers in an optimal way . The company studies the activities of thecustomer group and provides specific solutions .Both Porter and Treacy and Wiersema agree that making a clear choice between the alternativesis crucial. Not making a choice will lead to small returns and a small market share . Porter (1985)addresses this with the famous expression "stuck in the middle ."

4.4 Customer valueAnderson and Narus (1999) state that value is the cornerstone of business market management,which is the process of understanding, creating and delivering value to targeted business marketsand customers. In the following part of the literature study these three mentioned steps will bediscussed, but first a definition of customer value will be selected .

4.4.1 Definitions of customer valueSeveral definitions of customer value exist in literature . When focussed on the business tobusiness market, the following definitions can be found : Customer value is the satisfaction ofcustomer requirements at the lowest possible cost of acquisition, ownership and cost (De Rose,1994) . Fletcher and Russell-Jones (1997) composed a commonly used definition : benefits minusprice. The benefits of an offering must exceed the price paid for . Benefits are the perceived gainsof the customer by doing business with a company . Price is the total costs that the customer incursto receive the benefits. According to Anderson and Narus (1999) value in business markets is theworth in monetary terms of the economic, technical, service and social benefits a customer firmreceives in exchange for the price it pays for a market offering . They also point out that a marketoffering consists of two elements : value and price . Therefore they defined the value equation :(value, - pricef) > (valuea - price,) . In the fundamental value equation they express that by makinga choice one always compares the value and price of the market offering (f) and the bestalternative (a) . This means that the value minus price should always have a positive result,otherwise buying the best alternative is a better idea . A special case is when the left-hand side andthe right-hand side of the equation are equal. This is the indifferent price, which means there is nopreferred purchase. Comparing the definitions given above, all cover the benefits versus priceissue. Anderson and Narus' definition is the most comprehensive and very suitable for thisresearch project . For that reason, this definition will be used in this project .

4.4.2 Understanding customer valueAccording to many leading marketing researchers there is in general a lack of understanding ofwhat is value . Understanding this value means that the supplier has to translate the features of amarket offering into the benefits for the customer . Then these benefits must be translated into theworth a product or service will have for the customer and how it fits into the needs .Mazur (2001) states that understanding value is a direct result of understanding customers . Intoday's world this means that setting a price strongly depends of what customers are willing to payfor a produdf. If the price is too high, customers tend to go to competitors, but on the other hand ifthe price is too low one is likely to miss profit . So the key aspect in setting the right price is valueand knowing the value of one's product . The most important aspect of value is the perception bythe customer . What is the value of a product to the customer? Therefore it is essential to measurevalue which is possible through for example market sensing (process for learning about markets)(Day, 1994). For each type of product the customer might have a different perception of value . For

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example, strategic products will be far more important for a customer than routine products (seeKraljic, 1983) .In order to understand value it is necessary to segment the business markets . Customers indifferent markets have different needs and different perceptions of the concept value . Segmentingthe business markets can be done on a conventional basis or on a more progressive basis . In thefirst approach markets are segmented according to features like geography, customer size,customer behaviour and industry. Nowadays it is more common to segment on characteristics likecontribution to profitability, customer capabilities, usage situation and application . Another way ofsegmenting the markets is to draw a distinction between the value sought by customers .

Companies must be focused on customers and they recognise that competitive success dependson delivering superior customer value . However key performance indicators in these companiesare usually based on financial or commercial criteria like optimising profit instead of criteria thatenhance customer value. Another problem is that these companies do not have a clear idea ofwhat different ways of delivering value can do with their business in terms of loyalty and growth .The following methods to assess value have been collected by Anderson and Narus (1999) :- Internal engineering assessment: engineers within the supplier's own firm conduct laboratory

tests on a product to provide an estimate of its value .- Field value in use assessment: Supplier personnel conduct interviews and often gather data at

customer firms to provide a comprehensive listing of benefit and costs elements associatedwith usage of supplier's market offering compared with the incumbent or next best alternativeoffering .

- Indirect survey questions : Participants in a field research study act as informants for their firm .They are asked what the effects of one or more changes in a presently used market offeringwould be .

- Focus group value assessment : Within a focus group setting, participants are shown potentialofferings or concepts and are asked what the value of these offerings or concepts would be totheir firms .

- Direct survey questions: participants are given a description of a potential offering and areasked what its value would be to their firms .

- Conjoint analysis: A family of methods for statistically transforming a research participant'sjudgements about potential market offerings into estimates of the value the participant placeson those offerings .

- Benchmarks: Participants are asked how much their firm would be willing to pay for selectedadditions to the benchmark offering they, received earlier .

4.4.3 Creating customer valueAccording to Anderson and Narus (1999), markets are becoming highly fragmented, whilecustomers are requesting more customised offerings . Thus customers do not compromise in theirdemands that market offerings should be sold for either the lowest price or the lowest total cost .The aspect of flexible market offerings will be discussed in this paragraph .

Flexible market offeringsA flexible market offering consists of naked solutions with options (Anderson and Narus, 1999) .These offerings are tailored to the customers, which means that for different groups of customersanother market offering exists. An offering can be divided in four layers (Anderson and Narus,1999) :1 . Core product, which is the fundamental, functional performance a generic product provides that

solves a customer's basic problem .2. Minimally augmented product gives the least amount of services, programs or systems that a

customer considers essential for doing business with anyone .3. Augmented product adds to the core product more elements to meet a broader set of customer

requirements .

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4. Potential product goes even further than an augmented product and has the aim to add value orto reduce cost in ways that set itself apart from other suppliers .

As stated before it is very important to offer the adequate market offering to each customer, andtherefore be as flexible as possible . The most common way to make flexible market offerings is bylocating and targeting unique market segments . In paragraph 4 .5 this topic will be elaborated .

4.4.4 Delivering customer valueAfter selecting high-opportunity combinations of market segments and the market offerings thathave been constructed to serve them, the resulting product will have to be offered to potentialcustomers. The final goal is to maximise profit as a result of the high value (at a sufficiently highprice) that is offered to clients .When introducing a new offering or targeting a new market segment, new customer relations willbe established . Attracting these new customers can be five times more expensive than retainingexisting customers as initial contacts have to be developed, product adaptations might be neededand procedures still have to be established . Once a customer is won, therefore, it is crucial toretain him ( Bishop, 2001). As Ness, Schrobeck, Letendre and Douglas (2001, p. 32) illustrate "aloyal customer for many years, provides you with 100% of his business, refers friends andassociates, orders products and pays invoices electronically and demands little in the way ofextraordinary care and attention ." This quote shows that there is more that customers can offerthan just ordering goods. This is different compared to business to consumer markets, in whichhigh profit often can be achieved with impulse buying . However, before additional loyal customerscan be attracted, an initial purchase will have to precede . Creating value for new customers is,therefore, a prerequisite for long-term profitability too. At the start of a new customer relation, therewill be no optimal value creation because the client requirements are not fully known to thesupplier . Therefore, a lot of effort is needed to identify high-opportunity customers for the futureand invest in the relation with this client . An important role in the relation is the input by supplieremployees. Especially in service environments, "the role of employees is indispensable" ( Heskettet al., 1994, p. 164). Therefore, managing the front-line employees is a key issue in the final phaseof taking profit of value creation : activating the created value in customer relations.

Tangible and intangible value aspectsValue can be split up in tangible and intangible aspects . The tangible aspects are things that arepalpable while intangible aspects are not . Tangibles consist of things like the product itself, theproducts that can be produced by the offering you ordered and the documentation thataccompanies the offering.Examples of intangible aspects are the reliability of the delivery date, the after sales service, thetotal length of the time between making an order and receiving the market offering, the condition ofthe product on arrival, needed efforts to get the offering .

4.5 Market focusA special form of creating customer value is by developing a market focus . Gelderman and van derHart (1999) state that market segmentation is one of the key areas of marketing . It corresponds tothe thinking and acting that centres on the customers' wishes . Anderson and Narus (1998)conclude that market segmentation is essential for making flexible offerings that lead to superiorcustomer value. Categorising customers into uniform groups using measures as geographicregions or company size will do this . However these categories are often not working, meaning thatthe segments do not respond differently to variations in the marketing mix . In the recent years newdevelopments have arisen in this segmentation research . The three most important aremultidimensional segmentation, artificial neural networks and fuzzy logic clustering . All thesemethods are based on using large sets of variables, instead of just one, since there is a largenumber of variables that determine buyers' response to offerings . By using modern technologies,researchers are able to manage massive amounts of data. Marketing management uses theseresults to make offerings that better fit the needs of an individual customer (Neal and Wurst, 2001) .

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By knowing what specific needs a group of customers has, for example the requirements on theservice and repair or specific design techniques, Neways can specialise in fulfilling theserequirements and thereby achieving competitive advantage in a certain market segment .

4.6 Industrial services as competitive advantageUnder the current market conditions (more intense and fierce competition, outsourcing,globalisation), services become a crucial factor in the process of creating superior value forcustomers (Matthyssens and Vandenbempt, 1998). Matthyssens and Vandenbempt (1998) foundthat the commonly agreed model of creating competitive advantage has to be adjusted in order todescribe the process of creating competitive advantage for industrial services . This adapted modelis presented in figure 4 .1 . The result of their study is the importance of the people component inindustrial services . The figure stresses the dynamic interplay among the different drivers ofcompetitive advantage. For instance, investments in a new operating company to achieve regionalcoverage (assets) will only result in performance improvements when this company is staffed withcommercial technicians (unique skills) who act as an empowered team (culture) . Only a balancedand market-driven investment in the three service-specific drivers of advantage will result insuperior customer value. In their research Matthyssens and Vandenbempt looked for key successfactors for creating competitive advantage with industrial services . These are visible in the"Superior Customer Value"-box in figure 4 .1, and will be briefly discussed here :

• explicit service quality• proactive, total solution

• timely, empathic design of new services

= drivers of competitive advantage

= necessary requirements for competitive advantage(= key success factors)

Figure 4 .1 Competitive advantage for industrial servicesSource: Matthyssens and Vandenbempt (1998)

Explicit service qualityTypically for the industrialmarkets is the application drivenand cost-of-ownership orientedviewpoint. Given the intangiblenature of industrial services, thechallenge is to communicateexplicitly the quality they offer .Service providers in the researchseek to demonstrate this qualitythrough conforming to qualitystandards, offering fullwarranties, like a guaranteed costsaving, huge investments inbrochures, interactive internetsites etc. and the active use ofreference sites and visits .

Pro-active, total solutionIndustrial service provides shouldoffer one-stop-shopping to theirclients. This implies a highdegree of customisation and aproactive sensing of hardlyexplicit client specifications . Theprovider has to give the customer

the idea that he is only working for him, while he is offering a tailor-made solution . The customerexpects that'thë service partner relieves him from a burden (problems, administration, attention) .This implies two consequences :1 . The provider takes part in the early design stages of a process2 . The provider is responsible for part of the execution, maintenance and management stages

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Timely, empathic design of new servicesThe innovation of new services is considered a key contributor to performance enhancement . Inorder to reach an excellent fit with the market, new services must be developed in close co-opetation with the customer. Matthyssens and Vandenbempt (1998) suggest joint new servicedevelopment with key customers and the establishment of customer innovation panels . Servicedevelopment should be applications know-how driven . Such a development approach has a niceside effect: it gives references and contributes to the reputation of "product" leadership andcustomer intimacy .In the other boxes of figure 4 .1 more key processes and capabilities are named, but they will notbe elaborated here, since they speak for themselves .

4.7 Supplier involvement in product developmentAs named in the previous paragraph, taking part in the early design stages of a process or productis very important for creating superior customer value . Therefore, it is interesting to see whatresearch has been done on involvement in product development .

What is supplier involvement?Although no definition can be found in literature, the term supplier involvement in productdevelopment speaks for itself . Lakemond (2001, page 14) describes it as follows : "Involvingsuppliers in product development signifies engaging suppliers in the product development for aspecific contribution to which the supplier commits itself . Supplier involvement is irrespective of thecharacteristics of the specific contribution of the supplier to the development process . Thiscontribution may vary from extensive, when suppliers get some own responsibility, to minor, forexample when a supplier manufactures a prototype based on the customer's detailedspecifications ."

Partnership sourcingPartnership sourcing describes a very advanced form of involving a supplier in productdevelopment. In a partnership customer (OEM) and supplier commit to continuous improvementand shared benefits by exchanging relevant information and by working together to resolveproblems. The supplier becomes a strategic resource and an extension of the customer in thedesign process, enabling the customer to capitalise upon the suppliers design expertise andcapacity for innovation (Mclvor and McHugh, 2000) . The supply contract is for the whole life cycleof the product and the focus in the relationship moves away from price towards jointly reducing thetotal supply chain cost .

Organisational aspects of co-operation/ hindrances with involvementOne should not underestimate the organisational problems. The involvement of a supplier in thedevelopment process is most often a change in the way people used to work . Cultural, structuraland behavioural issues can be expected .Another difficulty lays in the buyer's belief that switching supplier is a good method for achievingcost reductions, while at the same time expecting a collaborative supplier thinking in long-termrelationships . Mclvor and McHugh (2000) give some real life examples that show that strategicagreements for closer collaboration do not automatically change the behaviour of those involved inthe buyer-supplier relationship . A lack of understanding, trust and commitment by the individualsinvolved is devastating for a successful co-operation . Mclvor and Mchugh (2000) conclude thatpartnership sourcing represents strategic change that in turn necessitates cultural, structural andbehavioural -change . In pursuing mutually beneficial trading relationships a number of issues mustbe addressed . These include the adoptioo of an integrated approach to the management ofstrategic change, the pivotal role of senior managers as facilitators of change, and the involvementof those most affected .

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Advantages of supplier involvementExtensive research has been done on the topic of supplier involvement in product development .On the effect of supplier relationships on new product development outcomes the following resultshave been reported :

• Faster project times (Clark, 1989; Clark and Fujimoto, 1991)• Better product quality and lower project costs (McGinnis and Vallopra, 1998 ; Ragatz et al .,

1997))• Lower development costs (Kessler, 2000)• Improved manufacturability (Swink, 1999)• Early supplier involvement improves integration of several activities such as product design,

component design, process design and physical production, which are all necessary to bringnew products to the marketplace (Clark, 1989) .

• When initial design brings about potential constraint for the assembly activities, co-designmakes it possible to anticipate and manage such constraints and allows the customer toimprove not only time-to-market and design costs, but also manufacturing costs, quality anddependability (Spina and Zotteri, 2000)

Disadvantages of supplier involvementThe importance of early involvement is contested by some studies . McGinnes and Vallopra (1999)found that early supplier involvement is not always an important issue to new product success .Rather it varies according to the situation . They state that firms that develop successful newproducts involve suppliers in the process when they are needed, involve them at the stage ofdevelopment needed, and involve them only to the extent needed . Eisenhardt and Tabrizi (1995)suggest that early involvement may be difficult to achieve because there is less certainty aboutwhich suppliers will be used . Hartley et al . (1997) found that suppliers have little practical influenceon the overall project technical success . King en Penleskey ( 1992) found and a negative impact onproject development time . Flynn et al . (2000) noticed a lack of priority and co-operation that oftenled to bad results . Wynstra et al (2001) indicate that positive results cannot always be achieved .They identify three critical issues for successful supplier involvement: 1 . Identifying the specifictasks and processes that need to be carried out. 2 . Forming an organisation that supports theexecution of such tasks. 3. Staffing the organisation with the right commercial, technical and socialskills .

4.8 Conclusions from the literature reviewCompetitive advantage can be defined as competencies with which a company distinguishes itselfin a positive way from its competitors. For Neways this starts with the understanding of the reasonwhy customers outsource . The most important reason is that companies focus on their corecompetencies. This is especially important for the services Neways offers, since customers expectthe service partner to relieve him from the burden of the outsourced activity. But the role ofservices in creating customer value is bigger. Under the current market conditions (more intenseand fierce competition, outsourcing, globalisation and production in low wage countries), servicesbecome a crucial factor in the process of creating superior customer value . And customer value isa prerequisite for achieving competitive advantage . It can be defined as the as the worth inmonetary terms of the economic, technical, service and social benefits a customer firm receives inexchange for the price it pays for a market offering. Companies must be focused on customers andrecognise that competitive success depends on delivering superior customer value . Therefore it isimportant to-measure the value customers attach to the activities of Neways . One of the results ofthis literature review is the importance of the customer in achieving customer value . In chapter 7the results of a customer value analysis will be presented . More forms of achieving competitiveadvantage can be identified. Literature names supplier involvement in the early design stages of aproduct. This is a difficult activity that can bring advantages for the customer and thereby cancreate a long-term relationship between Neways and the customer . A specific form of creatingcustomer value, focusing on target markets can also help Neways to achieve competitive

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Neways Electronics International N ~•" i`7V

advantage. The same can be said about developing a value business strategy. Having identifiedand discussed the topics that play a role in achieving competitive advantage and their relations,research question 1 has been answered . In the remaining part of this research project the status ofNeways with regard to these topics will be explored, as well as interesting possibilities to achievecompetitive advantage .

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Chapter 5 Market, services and strategy5.1 IntroductionIn the previous chapter the literature review discussed the topics of industrial services, strategy,market focus and customer value . In this chapter research question 2 : "What is the current statusof Neways with regard to the topics found in the literature?" will be answered. The topics industrialservices, strategy and market focus will be addressed in paragraph 5 .3, 5.4 and 5.5 respectively .The topic of customer value as a crucial factor in achieving competitive advantage corresponds toresearch question 4: "How do customers perceive Neways and the services it offers?" Thisquestion will be extensively discussed in chapter 7 . Before the topics can be discussed, it ismeaningful to describe the structure of the EMS market and trends in this market to create a betterunderstanding of the background of these topics .

5.2 Market analysisIn the EMS market four types of companies exist . First of all the Original Equipment Manufacturers(OEM) are present. This group is outsourcing the production of the products it designed . The next

Customer

OEM

1 st TierI

2nd Tier

I3rd Tier

Situation 1

Figure 5 .1

Customer

OEM

1 st Tier

2nd Tier

3rd Tier

Situation 2

Customer

OEM

2nd Tier

I3rd Tier

Situation 3

Most common supply chains

group is the supplier-group, divided into three tiers .The third tier suppliers deliver the individualcomponents, the second tier suppliers producemodules (printed circuit boards or PCBs) and thefirst tier suppliers assemble the modules intocomplete systems by combining the modules,cables, case, etc. into a complete final product,ready to deliver to the customer . The first andsecond tier suppliers are also known as electronicmanufacturing services providers (EMS providers) .The supply chain can operate in different ways.The most common ways, as orientating interviewswith Neways' account managers show, arevisualised in figure 5 .1 . In situation 1 the chainworks pretty straightforward ; each supplier delivers

to its customer . In the second situation the first tier supplier delivers directly to the customer of theOEM. This necessitates a tested, complete and configured product, known as a turnkey solution .The third possibility is that the OEM acts as a first tier supplier by conducting the final assemblyand testing. The operational companies of Neways mostly act as a second tier supplier andoccasionally as a first tier supplier . The first situation is the most common, followed by situation 3 .Situation 2 is rare in case where Neways is first tier supplier .Total turnover by EMS providers in 2002 is estimated at an amount between 104 billion dollar(Technology Forecasters inc., 2002) and 93 billion dollar (Tuck, 2003). The biggest players areFlextronics (turnover 2002: 13,6 billion dollar), Solectron (turnover 2002 : 12,3 billion dollar) andSanmina-SCI (turnover 2002: 10,2 billion dollar) . Neways is world-wide a small company (turnover2002: 155 million Euro), but the largest EMS provider in the Netherlands and takes the 19th placein Europe based on turnover according to Harkness (2001). An estimation of Neways' marketshare in the Netherlands is 9,3% . See appendix 6 for methodology and calculations of thispercentage .

5.3 Market trendsIn the following-text the most remarkable market trends will be described .

Focus on core competenciesThe focus on core competencies and outsourcing as described in paragraph 4.3 is especially truefor the EMS industry, in fact it is the raison d'être of the EMS providers . Since OEMs no longer seeproduction as a core competence, EMS providers have jumped into this market . The trend towards

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tP i'S.-n~ Graduation report Peter SpaanIndustrial Engineering and Management ~A~sNeways Electronics International NV

outsourcing non-core competencies is still taking place in the EMS industry (Serant, 2000, 2001,2002) .

NPI and supplier involvement and value adding servicesOne of the unmistakable trends in the market is the rise of the NPI-centres (the abbreviation NPIstands for New Product Introduction). It has been noticed by Serant (2000, 2001, and 2002) andMagee (2002) and it can also be seen at the big EMS providers' websites. Major EMS providers,such as Celestica, Flextronics and Solectron as well as midsize EMS providers have NPI-centresto attract appealing business into their corporations .The term NPI is widely used within the EMS industry, but the meaning here is slightly different asused in literature outside the EMS market . The NPI process starts when a company approaches anEMS-company to help them bring a new product to the market . The EMS company typically offersdesign and layout activities, prototyping and testing and preparation for mass production . In thedesign the EMS-company take the production phase into consideration . Popular services are the"design for x"-services, where x can stand for manufacture, testing, cost or quality .According to Serant (2002) EMS providers claim that if they join the NPI process at the conceptualstage, they can help their customers to cut costs, improve time-to-market and streamline newdesigns to optimise manufacturing efficiencies . These collaborations in the development processand other value adding services including logistic services, management of the supply chain andlife cycle management are also noted by MacLellan (2001) and Franke (2003) . Franke (2003) alsoobserves specifically for the EMS industry the focus of OEMs on their core competencies, the shiftof production activities to low wage countries and an expected increase in the demand for designand development-services. From interviews with employees of Neways, these trends can beadded :

• Customers ask for smaller series, faster lead-times and more frequent deliveries . Instead ofone big order every year with a two months lead-time, they now use a monthly forecast withone month of commitment and the others for information .

• The current market situation is difficult . It is a buyers-market, where the buyer shops aroundfor the lowest prices . Low, degrees of capacity utilisation force companies focused on bigvolumes now to take small-volume orders to keep their factories running . Others offer belowcost price just to keep their production department running .

• Customers more and more demand a total solution for their manufacturing problem . Thisincludes purchasing of components, design for x-services, after sales services, etc.

5.4 Services offered by NewaysAs stated in paragraph 1 .3, the initial research objective was a search for a new service that couldbe added to the production process . In order to see what services are currently offered, keypersons of the management teams of the selected operational companies were interviewed . Anumber of 22 services were found in this research . Those services can be categorised as servicesrelated to the design process (for example component management), value adding services to theproduction (for example moulding) and services to facilitate operational aspects (for examplelogistic services and electro-mechanical repair) . Some services are invoiced (for example most ofthe design services are billed per engineering hour) and some are included in the business offeringfor free (for example tracking and tracing and some logistic services) . A complete overview of theservices and a short description can be found in appendix 2 . See appendix 1 for a list of theinterviewed people. At this moment the turnover generated by services is only marginal . Anestimate based on the information available in the annual report is 2% of the turnover .

5.5 Strategy at NewaysBecause the topic of this research project closely related to the company's strategy, it is necessaryto look at Neways' current strategy . Neways' mission statement as stated in paragraph 2 .3 iscombined with the slogan "The one-stop shop for customised electronics" . No strategic report or

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roadmap for the Neways group is available . The Chief Operations Officer of Neways, however, hasa clear vision about the future of Neways . In an interview he explained it as follows :

The goal is to let the Neways group function as a system supplier . This means that there will beone communication contact for a customer that handles all the services Neways offers . All thecapabilities have to be focused to this contact with the goal to take as much EMS-activities aspossible off the customer's hands. Being system supplier offers the best margins . Customers arepurchasing on a higher level (complete modules or systems) and Neways wants to meet thisdemand. So the transformation from jobber to system supplier has to take place by verticalintegration of services of the various operational companies; from design to service and repair .Choosing for the strategy of being system supplier requires the disposal of plain production workwithout additional service. However, some issues arise here . An easy job is a simple means toacquire a customer. The motto `pull them in, move them up" is appropriate here . Neways tries to"grow" in the relation with the customer and gradually prove it can offer additional services. At thismoment the strategy development at Neways is in a pretty tender phase. First hard work is neededto establish a good primary process before it makes sense to write a strategic plan . After all, first asolid base is necessary before one can continue building the organisation.

The operational companies however, do not adopt this strategy . In figure 5.2 the corecompetencies, capabilities and future focus of the operational companies under investigation aredisplayed. This figure has been created by combining the answers to the interview-questions of the

Hoyte Ripa NIS Leeuwa. Heerlen Evic Neways

Functionaldesign (PCB)Technical _design (PCB)Prototyping ~ OPCBPCB •assemblyCable & •wiringSubsystemassembly .System ~assemblyService &Repair .

O Capable • Core competence ® Future focus

Figure 5 .2 co.mpetencies, capabilities and future focus

management teams- of the operational companies about the offered capabilities, their corecompetencies and their vision of the future direction of their company . This figure shows someinteresting results . The ideal situation should be that each operational company has a corecompetence and together with the other operational companies the entire product life cycle wouldbe covered (Hamel and Prahalad, 1990). Unfortunately, this is not the case for Neways . Ripa and

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technis~ .he Graduation report Peter SpaanT~ ~'r~'r Industrial Engineering and Management N~

. °er~~cinove« Neways Electronics International NV VirNIS have a focus on their core competence and have no plans to develop their activities bydeveloping additional services that are present in other operational companies . Neways Heerlenand Leeuwarden wish to expand their capabilities in the vertical direction . Hoyte is planning tofocus more on prototyping . Evic has always been offering all the services of the product life cycleand will continue to do so .The capability of PCB-assembly is present at four of the six OpComs under investigation and canbe considered core competence for three of them . This is not that strange, since this has alwaysbeen the main activity for Neways and acquisitions were made in order to increase capacity .Furthermore the overlap in the capability service and repair is remarkable . To some extend this islogical, because production failures have to be repaired off the line, but Leeuwarden, Heerlen andEvic (Evic EMR) also provide service & repair as additional service . This is either offered inaddition to production as end-of-line service or as a separate service as Evic EMR andLeeuwarden do. The same goes for design-related services for PBCs, these are offered at Hoyte,Neways Leeuwarden and Neways Heerlen .Although some overlap in capabilities is explainable because of acquisition history, things becomemuch worse when we look at the future plans of the OpComs . The future focus for the operationalcompanies is the optimisation of the local operational company instead of combining the servicesof other operational companies to reach the goal of Neways as system supplier . Evic, with itsvertically integrated offerings (vertically integrated : offering all the services of the product-life cycle)seems to function as an example for several OpComs. Especially Neways Heerlen and NewaysLeeuwarden are looking in the direction of vertical integration for future expansion . In practice thiswill result in a small R&D-department or system builders group . It is impossible for thesedepartments to reach the same level of quality as the OpComs that have these capabilities as theircore competence . The advantages that could be realised by combining the knowledge of theindividual experts (teamwork, specialisation on specific areas, workload balancing, co-operationand verifying each other's work) are not taking place . For the non-design related services topicslike no economies of scale, double investments in equipment, low occupancy rates and parallellearning curves contribute to the conclusion that these future plans are sub-optimal for Neways .This sub-optimisation manifests itself in three areas . In the first place, operational companiesinvest in capabilities and technologies that are already available at other Neways offices . In thesecond place, the knowledge for specific services is scattered throughout the organisation with theresults described above . In the third place, by offering the same services it is more likely that oneoperational company will compete with the others instead of complementing each other .

5.6 Market focusMarketing research makes it clear that in order to create competitive advantage market focus isessential (see paragraph 4 .5), Anderson and Narus (1998) for example conclude that marketsegmentation is essential for making flexible offerings that lead to superior customer value .However, no clear market focus exists at Neways . Customers are present in almost every marketarea, for example consumer electronics, agriculture, medical industry, telecommunications andindustrial equipment manufacturers . In appendix 7 a figure is presented that shows the marketsegments defined by Neways . These are not focus markets as a result of a market strategy, but agraphic representation of the status quo . When new customers are found in other marketsegments, the figure is simply updated . Especially the market segment "miscellaneous" clearlyshows the absence of a market focus . In other words : in the current situation, instead of selectingcustomers with the help of the marketing strategy, the strategy is adjusted when new customerscan be selected . By focussing on target markets one can build specific knowledge of the specificcharacteristics of a market segment and the technology used . Recently, one initiative started atHymec. A specialist- in the area of military equipment gets involved when somewhere in theNeways group a business proposal for military equipment is made .

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5.7 ConclusionsIn answer to research question 2 : 'What is the current status of Neways with regard to the topicsfound in literature?" the answer for industrial services is that Neways is offering a large number ofservices next to their production activities but these services generate only a marginal percentageof the turnover . Those services are mostly related to the design-phase or intended to facilitate theoperational aspects of outsourcing production. For the topic of strategy it is concluded that thestrategy for the Neways group to develop towards a system supplier does not coincide with thestrategy of the local operational companies. Some operational companies are trying to become aone-stop-shop on their own, or at least expand their offerings by vertical integration, resulting insub-optimisation of the Neways group . For the topic of market focus the conclusion is that becauseof an absence of market focus at Neways, little knowledge of a specific market is available .Therefore, achieving competitive advantage by making good offerings that anticipate on therequirements of a specific market is not possible at Neways .

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Chapter 6 Competitor analysis6.1 IntroductionIn the previous chapter Neways' current strategy of Neways with regard to competitive advantagewas described . In this chapter research question 3 : "How do competitors try to achieve competitiveadvantage?" will be discussed . In order to answer this question an analysis of thirteen competitorswas performed. How this analysis was designed, is described in paragraph 3 .3.3. In the nextparagraph the results from the analysis are discussed . In table 6.1 on the next page the generaland financial information of the companies is compared, as well as their competencies andcommon parts in their strategy . A more detailed report per company can be found in appendix 8 .

6.2 Competitor analysisIn this analysis four characteristics of the competitors will be discussed . First the company size andthe financial properties will be discussed and second the capabilities of the competitors and theirstrategy . The analysis ends with a discussion of the results .

6.2.1 Company size and financial propertiesComparing the size of the companies based on the number of employees, one can see that thenumber of large (>100 employees) companies is very limited . Only Neways, Variass, Stork,Pemstar and Solid Semecs exceed this number . A customer named AEC, a company with only 18employees, as a competitor of Neways . The average number of employees per competitor isapproximately 50. This is a very low number compared to the 1578 employees of Neways .Interpreting the financial results is quite difficult . Since the EMS market is very volatile, turnover,gross margin and result fluctuate a lot over time . Comparing these results therefore does not makemuch sense. Comparing the turnover/gross margin per employee ratio therefore only provides arough indication . TPB and Betronic products have a high score on the gross margin per employee-ratio (a common performance indicator in the EMS industry) . Neways scores a little below average .

6.2.2 Capabilities and strategyWhen looking at the capabilities, the trend towards solutions instead of production as described byfor example Serant (2001) and Sherman (2000), is clearly visible . All competitors except TBP offerdesign and prototype services next to their production capabilities . These services can beconsidered standard services of EMS providers . When one examines the promotional material ofthese companies, one can see why the companies offer these capabilities: Almost everycompetitor in this research is striving towards being system supplier. This means that companiesoffer a one-stop-shop for electronics ; not only including design and production of PCBs, but alsothe integration of casing and mechanical parts resulting in a complete product . Betronic states ontheir website : "We combine design and production into a compact whole. We offer you one-stopshopping." Pemstar puts it like this in their mission : "From the very genesis of the idea - even aquick sketch on the back of a napkin - until your product is in the hands of a satisfied customer, wesupport you with complete product realisation solutions'" . Only four of the thirteen companies underinvestigation have a different strategy than system supplier . AEC focuses on fast prototype buildingand TPB on production of high tech boards . OD Leeuwarden and Pemstar both have targetedmarkets (semiconductors & medical and communications, computers, medical and industrialequipment respectively) . Besides these four companies, all companies portray themselves asgeneral system suppliers for all market segments .

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6.2.3 Discussion of the analysisFirst, it is striking to see that Neways competes with small companies . The possible advantages ofa Large international company (economies of scale, purchasing power, factories in low wagecountries) appear not to deprive the right to exist of small companies without a specific (niche)strategy . This brings up the topic of strategy . Nine out of thirteen competitors see system supply astheir unique selling point. This focus on being system supplier was recognised by the NEVAT(Dutch association of general supply) . In 2000 they started the project "de nationaletoeleveranciers en uitbesteders agenda" (the national suppliers and outsourcers agenda) in orderto construct a vision for the future . In the beginning of this project Van der Spek (2000) firstdescribes the trend that took place in the past years : OEMs that outsource production on a higherlevel towards system suppliers including more responsibility for the complete manufacturing . VanWeele (2002) also reports this trend on a general level and Serant (2001) and Sherman (2000) onthe level of the EMS market . Then Van der Spek (2000) states that the time when a supplier couldbe sufficient by converting designs into products is over and pleads for a division of tasks in thesupply chain . In the conclusions of the project (NEVAT, 2002) is stated by the researchers andOEMs involved in the project that the value chain needs assembly jobbers and specialists inproduction and market segments besides general system suppliers . The EMS providers, however,see no need for specialisation but prefer becoming a general system supplier . This latterconclusion of NEVAT is supported by this competitor research . Specialisation or market targetingis rare. Except for four companies, all companies portray themselves as general system suppliers .In one of its reports NEVAT (2002) comments on the Dutch system suppliers as small-scale andtoo generic. These conclusions are supported by this competitor research . The argument of small-scale can be supported by the fact that the average number of employees for Neways' mostimportant competitors is approximately 50. The argument of too generic shows in the dominatingsystem supply-strategy .

6.3 ConclusionsAs an answer to research question 3 : "How do Neways' competitors try to achieve competitiveadvantage?" the following conclusion can be stated : There is little differentiation amongst thestrategy of the EMS providers under investigation . Neways does not stand on its own with nomarket focus. Only two out of thirteen companies have target markets and only two specialise in apart of the production . All the other companies try to achieve competitive advantage by presentingthemselves as general system suppliers . It is striking that nine out of thirteen competitors andNeways itself see this as their unique selling point . It is the vision of the current management board(see paragraph 5.5) and it is advocated by Donders (2002) in a previous study at NewaysIndustrial Systems . However, without distinction of quality, being general system supplier is clearlyno competitive advantage .

30

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Chapter 7 Customer value analysis7.1 IntroductionIn this chapter the results from the customer value analysis will be discussed . The design andmethodology of this research can be found in paragraph 3 .3.4. The goal of the customer researchis to gather in-depth insight in the customers' perception of Neways and customer value . Theseresults indicate what customers value in a company and the services it offers . As shown in theliterature review, creating superior customer value is a prerequisite for achieving competitiveadvantage. The topics covered in this customer research are outsourcing strategy, co-operation,perception of Neways and value of the services offered by Neways (see also table 3 .3). Theoutsourcing strategy will be discussed in paragraph 7 .2, co-operation in 7.3, the perception in 7.4and the customer value analysis in 7 .5. Paragraph 7 .6 discusses these results in the perspective ofthe research project .

7.2 OutsourcingThe first goal of the customer research is to gain an insight to customer's outsourcing strategy . Tounderstand the logic and reasoning of customers in relation to outsourcing, the information isvisualised in a causal flowchart . In the middle of the chart the topic or choice is displayed in blue(or dark grey). The main causes are coloured yellow (or light grey) and the other causes are white .In figure 7 .1 the part of the causal flowchart related to outsourcing is presented . The two rotatedsquares indicate a dichotomy between choices made by customers . The full flowchart is added tothis report as appendix 9 .

Supplier is not available Supplier cannot deliver

No in-house production

Knowledge not available

No core competence

Shorter time to market

Easy to switch whenproblems occur

Ensure continuation ofown production

Spreading of risks

Partnership

No high volumeproduction capabilities

Extra capacity

Make-or-buy descision

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Current capacityResulting flexibility

Figure 7 .1 Causal flowchart for outsourcing

Volume too lowfor muliplesuppliers

Easeconvenience

Less administrative burden

Supplier

Cost reductionthrough larger series

Expensive tooling isneeded at only one place

The answers from the customers in the interviews were filtered for arguments and thesearguments were grouped per question, followed by the creation of cause and effect-relationships .In this way the causal flowchart was designed for the topic of outsourcing and the perception ofNeways (paragraph 7 .4) . The analysis of the interviews revealed that for outsourcing a differencecould be made between customers that outsource for extra capacity and customer that have

Stronger negotiationposition

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capacity on their own and outsource because it is not their core competence . This is in line with thestatements found in the literature review . In addition to that, two groups of customers can bedefined, customers that have a single supplier for a product and customers that have multiplesuppliers for one product. Customers have two reasons for multiple suppliers : Spreading of riskand realising better prices due to a better negotiation position . Two quotes from interviews withcustomers illustrate these arguments :

"Our strategy is to divide our production activities over two suppliers . You never know what willhappen in the future . The financial situation of EMS-providers seems not very good when you lookat the companies that went bankrupt this year. If my supplier went bankrupt, I would follow within amonth, because I can no longer deliver my products to my customers . The penalties for notdelivering are gigantic."

"Per product we offer pre-selected suppliers the chance to make an offering for the production . Inthis pre-selection we verify if a supplier meets our quality demands . This is done by auditing thecompanies. These suppliers can make an offer and we select the supplier with the lowest price ."

Customers that choose for a single supplier see convenience and cost reduction as main reasons .Also a partnership with Neways is a reason to have only one supplier . Again, this is in line with theresults from the literature review. One customer put it this way:

"For our company, it makes no sense to select multiple suppliers for a single product . Our seriesare too small to spread over multiple suppliers. We lose the economies of scale for componentpurchasing if we split our production over two suppliers. Second, we have developed testequipment. If we outsource the production to two suppliers, we need a second test machine, whichis expense tooling."

Supplier selection can take place in a systematic method with defined selection criteria or as aresult of historical factors . A third possibility is that Neways is a prescribed supplier. This is thecase when an OEM can enforce the customer to select Neways as supplier of electronics, becauseof arrangements between the OEM and Neways . In this situation Neways acts as second tiersupplier and the customer as first tier supplier . So the conclusion for the customers' outsourcingstrategy is two-fold . First it shows that it is in line with the common strategies as described in theliterature and second customers can clearly be segmented into different groups based on theiroutsourcing strategy.

7.3 Co-operationCo-operation takes place in two forms : consultation of the management of Neways and thecustomers and co-operation between engineers .Almost every company has an arrangement with Neways that frequent (for example, two times peryear) consultations of the management of both companies take place to discuss current problemsand to develop a long-term view. This comes on top of the communication between the accountmanager and his counterpart at the customer's side . In some cases improvement projects aboutquality, stock issues and delivery problems were in place .Neways and customers regularly use co-development to develop new products . In most cases, thetasks are strictly separated and interaction between the customer and Neways takes place whenthe next step is about to start . The following example describes this co-development from acustomer's l5oirit of view:

"We develop the functional design; the functional specifications about what tasks the product hasto fulfil, the size, the speed of the interface, etc. We send this information to Neways and in ameeting we discuss these requirements . Then Neways starts the technical design and builds aprototype. Sometimes they contact us if they need more information . The prototype is presented to

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us and we start testing it. We discuss the results of the testing and if necessary Neways makessome adjustments. Then all the information is passed over to us and we select a supplier for theproduction."

Design services require interaction between the two parties . For most cases, engineers of bothsides contact each other on a more informal level to clear up lack of clarity . So structural co-operation between Neways and its customers takes place frequently . Co-development takesplaces as a succession of activities performed by either Neways or the customer .

7.4 Perception of NewaysIn this paragraph the general perception of

Table 7 .1 Acquaintance with the services Neways by customers will be discussed .'ServiceFunctional designTechnical DesignComponent ManagementTech. Prod. Doc. MgtPrototypingNPI-processesPCBACable & WiringCasingMouldingSystem supplyEnd-of-life mgtEMRMft for local marketsMicro electronicsLogistic services

Known In use83%92%100%90%100%75%100%100%78%70%100%83%73%100%63%100%

33%55%56%30%67%25%80%55%33%10%20%55%36%0%29%38%

The first question to be answered waswhether customers are familiar with theservices Neways offers as a prerequisite forthe one-stop shop strategy . As one can see intable 7.1, this prerequisite is met. Onlymoulding, EMR and microelectronics are notknown very well (around 30% of thecustomers are not familiar with theseservices). It therefore makes sense that theone-stop shop concept is recognised by themajority of the interviewed customers (92%,see appendix 10 for the names of thecompanies). Surprisingly, approximately halfof the customers say that this one-stop shopconcept does not match their demand (46%,see appendix 10 for the names of thecompanies) . Some of the capabilities of thesecompanies are equal to the services Neways

offers and they use Neways to fill the remaining gaps in their competencies . Two companies (Océand Wallace & Tiernan) fear that they have to pay for the services they do not need as overheadcosts .

In the causal flowchart (figure 7 .2) the reasoning of customers in relation to Neways is visualised(full flowchart is added to this report as appendix 9) . When a customer selects Neways as theirsupplier, customers can be satisfied and dissatisfied . In the right-hand side of the causal flowchart,reasons for satisfaction and dissatisfaction are displayed . What strikes the most here is theimportance of communication and pro-activity . Although these two issues are interpreted indifferent ways and with different accents, they can either lead to satisfaction as well asdissatisfaction . The importance of communication and pro-activity is in line with the results found inthe literature review (discussed in paragraph 4 .5) . Customers interpret pro-activity in two ways : Asgiving advice and as showing initiative . Giving advice on components and layout as well asfrequent consultation to discuss current problems fall in this category . An example of a customer'sperception of pro-activity:

"Pro-activity is a very important aspect for me. When Neways faces problems with the productionof my product, because of an error in the design or when a component becomes obsolete, I wantthem to contact me and present me the solution for the problem, instead of finding out myself thatmy delivery is delayed for some reason ."

Initiative is interpreted as initiating contact when problems occur and when improvements can bemade. This gives customers the feeling that Neways is on top of their products and that it is in

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Bad delivery accuracy

Pro-activity

Transparantorganisation

Stable organisation

--Communic tion

Too Expensive

Initiative

Initiate contact to improveproduct, lower price etc .

One contactperson for allbusiness with Neways

Figure 7 .2 Causal flowchart of perception of Neways

good hands. This customer perception is in line with the importance of pro-active total solutions asdiscussed in the literature review (paragraph 4 .6). Furthermore, one can see that basic operationalaspects like timeliness, quality and costs cause dissatisfaction whereas the drivers of satisfactionare less measurable like a high quality organisation, flexibility and supply chain thinking .

7.5 Value of services7.5.1 IntroductionIn the following paragraphs the results of the value analysis of Neways' services will be presented.For a list of the services and a short explanation, see appendix 2 . The results of the value analysisof the services offered by Neways are summarised in a matrix (table 7 .3) . For each activity listed inthis matrix the following information is displayed :

• Important properties : In the eyes of the customers, what are important properties of theoffered activity?

• Advantages: What do customers see as advantages for outsourcing the activity?• Investments : What investments do customers have to make to outsource the activity?• Risks: What risks do customers take when they outsource the activity to Neways?

In the following paragraphs this matrix is presented and discussed per service and in general .

7.5.2 Specific results from the customer value matrixOn the next page the customer value matrix for the services offered by Neways is displayed . Thenthe matrix is discussed per service .

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Table 7.3 Customer value matrixService Important Advantages Investments Risks

PropertiesDesign Feedback and Focus on own Time for Wrong

reaction product explanation understanding ofNewaysNo own expertise

Technical Design Knowledge No equipment Time for training DependencyDesign for needed and explanationmanufacturing No focus needed

Component Future availability No attention Connection of Dependencymanagement of chosen required databases

components Cost pricePro-active reductionreporting of No obsolescenceobsolete Up to datecomponents information

Technical product Pro-activity No focus needed Time for training Dependencydocumentation No engineering and explanation Product errors(TPD) needed for regular Tuning of the because of TPDmanagement production software errors

Longer lead timePrototyping Speed (from 48 Feedback on the Time Delay in the

hours to 3 weeks) design design phaseNo investmentsneeded

Printed Circuit Timeliness No investments DependencyBoard Assembly Quality needed(PCBA) Cost Extra capacity

No specificknowledgeneeded

Cable & Wiring Timeliness No investments Delivery problemsproduction & Quality neededdesign, CostCasting in No extra supplier

neededSystem supply Quality Purchasing on a Initial effort

Logistics higher levelTechnology Focus on coreCosts competence

End of life No focus needed Training of Dependencymanagement Neways engineers Higher costs

Unsure aboutuali

: No information found

Functional and technical designThis research found little difference between the characteristics and value issues of functional andtechnical design . The biggest advantage to outsource design is that no focus is needed, in otherwords, it is a non-core activity or the design is for non-focus products (cash cows for example) . Asinvestment only some time for training and explanation is given . The biggest risk for outsourcing

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design activities is dependency . This can be because the customer has no own expertise orbecause of errors due to wrong understanding of specifications by Neways engineers .

Component managementThe management of components can be interpreted in different ways . Sharing information ofcomponents that become obsolete is one aspect, as well as presenting alternative componentswith better availability or lower price. But no matter how one specifies this service, the importantproperties are the same: the pro-active reporting of obsolete or alternative components . Withcomponent management customers want to buy the comfort of not having to worry aboutcomponent issues (the assurance that the chosen components can be delivered during the productlife cycle and that no cheaper components are available) . In that perspective, the advantages areobvious: no attention required, no obsolescence, up-to-date information and cost price reduction .The risk of dependency is clear as well, especially if the customer has no component knowledge .Customers see connection of the databases as an investment .

PrototypingThe most important characteristic of prototyping by far is speed. A prototype has to be ready assoon as possible, so that the customer can continue the development with pre-production tests .However, the interpretation of "as soon as possible" differs per company . One names 48 hours asfast and another three weeks . Of course does the complexity of the prototype influence theexpected time to finish a prototype, but it seems that companies have an expectation how muchtime building a prototype costs and only a few companies were interested in faster prototyping for ahigher price. The most important characteristic is that the given delivery date is met. Theadvantage of outsourcing prototype building is either the non-focus of design related activities ingeneral or when the customer does employ engineers the feedback on the design . Littleinvestments are needed for outsourcing prototyping, but some name time as an investment . Delayin the design phase due to delays at Neways is the biggest risk customers feel when theyoutsource prototyping to Neways .

New Product Introduction (NPI)The process of managing a customer's new product introduction from design to productionincludes managing and executing the previous discussed services . However, most companies donot outsource this entire process to Neways. Either they all have a part of the capabilities in houseand prefer to let Neways "fill the gaps" or they do not want to be dependent of one supplier andhave multiple suppliers (parallel or sequential). Customers tend towards solutions instead ofproducts, for example they outsource for a new product the design & prototyping or the PCBA andthe building of the module around it, but they feel they are taking too much risk and feel toodependent when they let one supplier manage the process from a to z . Wallace and Tiernan andPrins autogássystemen are exceptions to this statement, since they use Neways for NPI, but theydo have the feeling that they are very dependent and taking too much risk .

Printed circuit board assembly (PCBA)The actual assembly of components on PCBs is Neways' main activity . The outsourcing of thisactivity is much more in the hands of purchasers than the buying of added value activities, whichshows in this research is more a decision of managers and technicians . The main cause of thisdifferent decision-making is that PCBA is easy to understand (placing components on PCBs), verygeneric and the performance is easy to measure . This results in straightforward properties : Time,quality and bost . Quality and lead time are measured with so called vendor ratings : standardisedcharacteristics of a supplier that can be measured and rated and result in a final score . Withpurchasers in charge and the little difference in production, it is obvious that price/cost is aconstant point of discussion .

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Cable & Wiring design & productionThe story for cable & wiring design & production is almost identical to PCB assembly . Timeliness,quality and costs are important properties, no investments needed the big advantage and deliveryproblems (a form of dependency) as the largest risk .

System supply -In regard to system supply, the supply of a complete system of module the properties are equal tothe other production-services: timeliness, quality, cost . Technology is also named as an importantproperty. Besides the no focus advantage, purchasing on a higher level is also named . The initialeffort is seen as the only investment .

Technical product documentation (TPD) managementThe main role for outsourced TPD management is that changes in the design (either done byNeways or by the customer) are documented so that when the production starts (or continues) thelatest changes are processed . The most important characteristic for customers here is pro-activity .More in detail it comes down to always have up to date documentation for the customer . So whenchanges are made, Neways should immediately change the documentation . Customer's engineerssee this activity as boring work and a hindrance to working on new projects, so it seems an idealactivity for outsourcing . No focus and engineering needed for regular production are thereforenamed as the biggest advantages. Customers feel that some time and training is needed beforeNeways engineers document the changes in the desired format . Also, some software has to betuned to communicate and process the changes . Of course is dependency again the major risk,because production can go wrong because of errors in the TPD . Also longer lead times due toincorrect TPD are seen as a risk .

For the services end of life management, electromechanical repair, manufacturing on localmarkets, microelectronics and logistic services no useful information was found . The reason forthis is that the interviewed customers did not use the service or did not have enough information toanswer the questions .

7.5.3 The customer value matrix in generalThe general conclusion from the value analysis is that customers feel similar advantages,investments and risks for different activities offered by Neways (see table 7 .3). The mainadvantage of outsourcing value-adding services to Neways is that customers do not have to focuson this, service. Especially when outsourcing takes place because it is not a core competence forthe customer, this is seen as the biggest advantage . In line with this "no focus" are relatedadvantages like no equipment needed, engineers can focus on new products, and no investmentshave to be done . In general the important properties in the eyes of the participating customers aretime, quality'and cost on one hand (which seems very logical for production related activities) andpro-activity and feedback on the other hand (for value adding services) . The main investment thathas to be done by customers for buying value-adding services is the investment in time and effort .This is mostly related to the initial training of and explaining to the Neways employees about thework methods and expected results . The biggest risk customers see in using Neways value addedservices is the dependency on Neways . This is the case for the pre- and post- production serviceslike design and end-of-life management as well as the production services itself . When thisdependency is examined more closely, delay in the time to market of new products and errors inthe design are the most feared consequences .

7.6 Discussion and conclusionsBefore the conclusions of this chapter are presented, first the results will be discussed .The expected difference in results of current large customers and promising customers for thefuture failed to appear. This can be because the current acquisition and selection of customersshows no difference than when the current customers were acquired . However, relations can be

37

rPchli ~5-nt Graduation report Peter Spaan~°`~"`^~' ~'tC'r Industrial Engineering and Management NQAJA\/~°

E""{1'"v°" Neways Electronics International N `•• i~7V Vorfound in the classifications of the customers. Customer's that outsource because some activitiesare not their core competence are more likely to go for a single supplier, are more interested inbuying value added services and tend to be more satisfied with Neways. On the other hand,customers that outsource because they need more capacity, have an outsourcing strategy ofmultiple suppliers, are less interested in buying services and less content with Neways'performance. This result makes clear that it definitely makes sense to segment customers indifferent groups and approach them differently.

There is a difference in the purchasing of production services (PCBA, cable & wiring and systemsupply) and the purchasing of services . Production related services are bought by purchasers,while value added services are purchased by technicians and management . Value added servicesrequire investments in time, change an organisation and the IT-infrastructure . Therefore theseservices need the customer's management commitment and fit in a long-term vision, whileproduction services are measured with "hard numbers" in supplier vendor ratings and pricebenchmarks. Supplier switching for these production activities is easier and the results areimmediately visible. The conclusion here is that when Neways is able to sell the value-addedservices to customers in addition to production services, the customer is less likely to switch whencompetitors offer lower prices for the production . Even if competitors also offer value-addedservices, a customer will not switch when he is satisfied about the current services of Neways .In the light of competitive advantage this leads to the following conclusion : Neways can create longtime relationships with customers if they are able to sell value added services as long as Newaysperforms those services well . Although this goes as well for production services, customers aremore sensitive for lower prices and multiple suppliers when no added value services are offered .Unfortunately for Neways, a large part of the customers in this research is dissatisfied about theoffered services . This relates to the production services with bad delivery accuracy and a highprice, as well as the non-production related services, where the main issue is a non pro-activeattitude, which customers value as an important characteristic for many services .

This chapter described the customer value of Neways and the services in offers . Variousoutsourcing related issues are described, different ways of co-operation and the customer value ofNeways' services as well as causes of satisfaction and dissatisfaction . This answers researchquestion 4 .

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Neways Electronics International NV VorChapter 8 Discussion and conclusions from the analysis8.1 IntroductionIn order to answer research question 5 : "When combining the results of the internal strategicanalysis, the customer analysis and the competitor analysis, what are interesting possibilities forNeways to achieve competitive advantage?" in this chapter the results of the previous research willbe presented and combined. As defined in paragraph 4.1, competitive advantage is the positivedistinction from competitors. At this moment it seems that first Neways has to work to overcomethe negative distinguishing from competitors, before the view can be turned into the future . In otherwords, achieving competitive advantage can only be realised by Neways if first some issuesimprove to at least the market average . In paragraph 8.2 these prerequisites for competitiveadvantage will be discussed . Then, in paragraph 8 .3 possible opportunities for competitiveadvantage will be presented .

8.2 Prerequisites for competitive advantageThe customer research reveals two prerequisites for competitive advantage: process control andpro-activity . From the internal research strategy alignment can be added .

Process controlTimeliness, quality and cost are the most valued properties by customers of production relatedactivities . These production activities (PCBA, system supply and cable & wiring production) are themain activities performed by Neways . It is therefore crucial that before one can speak aboutachieving competitive advantage, these operations function at market average at least . Currentvendor ratings by customers and internal benchmarks of Neways show results that areunsatisfactory . Good operational performance is the basis for satisfied customers and the first steptowards competitive advantage . One of the trends in the market is the shift of production to lowwage countries, especially Asia and Eastern Europe . Neways possesses production facilities inthose regions, so it should be able to follow this trend. However, these remote production locationscause a greater pressure on Neways' logistic organisation . Improved logistic performance is anecessity for meeting the demands of current and future customers .

Pro-activityThe main reason for customers to outsource non-production related value-adding services likecomponent management and technical product documentation management is the fact that theydo not want to spend energy in the outsourced activity . Customer engineers want to focus on newdevelopments or the customer does not have the knowledge to carry out the activity itself . In otherwords, the customer does not want to focus on the activity. To provide the customer with thecomfort of not having to worry about the activities that are outsourced to Neways, pro-activity is acrucial property. If customers have to find out by themselves that something is delayed, notupdated, etc., they can no longer lean back and have to focus on the activities performed byNeways to verify them .

Strategy alignmentAs shown in figure 4.1, for reaching superior customer value one has to invest in assets, uniqueskills and the organisation . Due to the overlap in competencies and future plans at Neways, theinvestments are not optimal for the Neways group . For the non-design related services topics likeno economies of scale, double investments in equipment, low occupancy rates and parallellearning curves contribute to the conclusion that the future plans of the operational companies aresub-optimal for Neways . This sub-optimisation manifests itself in three areas. In the first place,operational companies invest in capabilities and technologies that are already available at otherNeways offices. In the second place, the knowledge for specific services is scattered throughoutthe organisation with the results described above . In the third place, by offering the same servicesit is more likely that one will compete with another instead of complement each other .

39

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Graduation report Peter SpaanIndustrial Engineering and ManagementNeways Electronics International NV NEWAYS•

8.3 Possible opportunities for achieving competitive advantageThe prerequisites described above present three major challenges to Neways . Nevertheless, thosethree issues are required as a basis on which Neways can start the development towardscompetitive advantage . In this paragraph the possible opportunities for achieving competitiveadvantage are discussed . These opportunities are based on the conclusions in the previouschapters. The most promising opportunity is elaborated in chapter 9 .

Achieving competitive advantage through a value business strategyThe choice between the three strategies as described in the literature review (operationalexcellence, diversification and focus strategy / customer intimacy) is not the most urgent issue forthe Neways organisation . A focus on operational excellence is in terms of cost leadership almostimpossible since competitors in low wage countries have much lower wage costs . Differentiationand customer intimacy are both applicable if one looks at the current strategy of Neways, but noexplicit choice has been made so far . This is also due to the complex organisational structure ofthe Neways group as explained in chapter five. Therefore, developing a strategy for Neways wouldcertainly improve the competitiveness of the organisation, since sub-optimisations would bediminished. This topic of strategy development, however, will not be elaborated further in thisreport, since it is considered to be an issue of the management of Neways . It can be achieved bydeveloping a common vision on Neways by all the managing directors .

Develop a market focusAs shown in the literature review, a market focus can lead to competitive advantage in certaintargeted markets. Targeting market segments and developing specific knowledge of therequirements in that market segment can distinguish Neways in a positive way from thecompetition. Next to that the customer research indicated that it makes sense to segmentcustomers in groups based on their outsourcing strategy . It is recommended that further researchon this topic is performed, to discover the requirements of different market segments and to furtherinvestigate the possibilities of segmenting customers based on either their market or theiroutsourcing strategy. After that,, the second research question should be how Neways couldorganise its business to profit from this segmentation . This topic will not be elaborated in the nextpart of the research project, for the following reason : Focusing on target markets will probably leadto the supply of additional services, since specific requirements will be found . This extra supply ofservices is in line with the current activities of Neways and therefore it is more interesting toinvestigate the topic of services .

Towards a service centred organisationTerrill and Middlebrooks (1999) state that stretching the goals of continuous improvement becomeunhealthy when there are no balancing strategies for producing a competitive edge withcustomers. Companies pursue the "be better-strategy" with the intention to create dramatic marketimpact. In fact, however, this does not happen . Two types of the be better trap exist :

• The continuous improvement trap: an inward focusThe company focuses its attention to improve internal operations and be slightly better thancompetitors, although this does not add value for the customer

• The comparison trap: a copycat focusIn the absence of true strategies that uniquely fulfil customers' needs, management canoverextend operational improvement strategies focused on, competitor benchmarking,quality improvement etc. The result is a profit-killing trap while still offering the same valueas competitors do .

The question should be "What new, meaningful and unique value can we offer to our customers?"This statement is in line with other authors, like Kotler (1997) and Treacy and Wiersema (1995) asdiscussed in the literature review .Linking this statement to Neways' situation, the following remarks can be made :

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tPi7C1lISCiIM_ Graduation report Peter SpaanN~A~sTU /e ~~~i• ci S~rvi r industrial Engineering and Management

TWernar,,va ~ Neways Electronics International NV

A statement like this is dangerous, since Neways still faces some trouble meeting the requirementsthat customers have for operational activities, as discussed in the previous paragraph . But lookingbeyond these prerequisites this statement of Terrill and Middlebrooks is very applicable to the caseof Neways. Currently, Néways has a strong inward focus on improving internal operations andincidentally benchmarks its performance and activities with the competition . But, as the customerresearch reveals, customers see no difference in the production services (PCB and cableassembly) offered by Neways and its competitors. Services could bring competitive advantage, as'customers perceive them different than production . As suggested by Duffy and Flynn (2003), it ismeaningful to use the Kraljic matrix to clarify the situation. Figure 8.1 displays the original Kraljicmatrix with the classification of product groups . Figure 8.2 displays the common reaction ofpurchasers for each segment as described by van Weele (1997) . Figure 8.3 displays thecustomers' perception of the position of the services of Neways, based on the information from thecustomer value analysis as discussed in chapter 7, combined with the results from the competitorreview. As one can see, the operational activities PCB and cable assembly are consideredleverage products and the purchasing strategy of customers is in line with the conclusions fromchapter 7. Services, however, are perceived as bottleneck or even strategic products . System

N ~ +kec.vc.+err. ic. re.~lla .~ ia.mr~l~+r~ r.r~ .d~ ~n+ .ui+M fir.nl3 ~ u ic a7y~7Gri111 lo 1vany a %.vi i 1Nicac Nr vuua. L vvru 1 1 u iaiEssential

> 1 tests etc. or just a module that is assembled by~; I another party. Combining the statements above~ ~ and the interpretation of the Kraljic matrices, theó I following conclusions can be made :.9 1 As long as customers see PCB and cablecapability As long as customers see PCB and cable

Leverage• Focus on unit costs • for operations

• Substitution is possible • Supplier technology is

• Competitive market with important

several sources • Changing supplier is difficult

Routine Bottleneck• Competitive supply market • Unique

Commodities Difficult b

with many suppliers. Supplier technology is assembly as leverage products, Neways can

• Substitutes readily available important never achieve competitive advantage with these• to su stitute t/,f i t: th t• ;+; • I I t

Supply risk

Figure 8 .1 Kraljic matrixSource: Kraljic (1983)

iiviesa ocusmg on ese ac ives wi nolead to long time relationships, due to the natureof leverage products . Focusing on improvingthese activities beyond the market average willlead to a profit killing trap due to price erosion .Competitive advantage can be realised by

offering new, meaningful and unique value and judging from the customer research, this is inservices or system supply . Since 9 out of 13 competitors focus on system supply, this is likely tobecome a new leverage service in the Dutch EMS industry.

Leverage Strategic• Focus:- lower unit costs • Establish long term

• Switch supplier for lower relationships

costs • Supplier involvement

• No long term contracts • Co-operation

Routine Bottleneck• Bundle products • Ensure supply

• Multiple suppliers • Establish good relationship

• Improve efficiency and agreements

Supply risk

Figure 8 .2 Common buyers' responseSource: Van Weele (1997)

supply is somewhere in between thestrategic classification leverage and strategic . It depends if

StrategicSystemsupply

BottleneckComponentmgt

Design

Leverage

PCBA

Routine

Cable

Supply risk.

Figure 8.3 Neways services according tocustomers

Proto-typing

End of lifemanagement

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tPrhm5,nt Graduation report Peter SpaanU a Industrial Engineering and Management N~sNeways Electronics International NV

Given the arguments of Terrill and Middlebrooks (1999) it is striking to see the resemblance of theirscenario and the situation Neways is in . Transforming into a service centred organisation seems agood way to achieve competitive advantage for Neways, with the prerequisites in mind asdescribed in the previous paragraph . How this can be organised best and what implications thishas, will be discussed in the next chapter .

8.4 ConclusionWhen the results from the previous chapters are combined three prerequisites and threepossibilities for competitive advantage have been discovered in the answer to research questionfive. Pro-activity, process-control and strategy alignment are three issues that have to be improvedbefore it makes sense to focus on achieving competitive advantage . Nevertheless the followingopportunities to develop competitive advantage have been identified : developing a value businessstrategy, develop a market focus and transform into a service centred organisation . The servicecentred organisation is the most interesting alternative to elaborate since the production services ofNeways have been "commodified ." The production services are leverage products and value-adding services can be seen as bottleneck products and therefore value-adding services offer agood start to develop competitive advantage .

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Chapter 9 Steps towards competitive advantage9.1 IntroductionThis chapter aims tp answer research question 6 : 'What changes are needed in order to achievecompetitive advantage and what are the consequences?" As substantiated in the previous chapter,competitive advantage can be realised by becoming a service centred company . In this chapter thechanges that are needed to become service centred are discussed as well as what is needed tokeep the organisation that way. Paragraph 9.2 discusses the changes that are needed and theproblems that might occur . Paragraph 9 .3 deals with the topic of sustaining the service centredorganisation. In paragraph 9 .4 a case study of a company that has gone through a similar shiftfrom production centred towards service centred will be discussed . Paragraph 9.5 discusses theresults and the conclusions are presented in 9 .6 .

9.2 Steps towards a service centred organisationIn this paragraph the necessary steps will be described for Neways to take towards a servicecentred organisation . This will be done by building a model based on literature about servicescombined with the information gathered in this project . These phases are displayed in figure 9 .1 atthe end of this paragraph and elaborated in the next sub-paragraphs .

9.2.1 Meet prerequisitesAs stated in the discussion and conclusion of the previous chapter, trying to achieve competitiveadvantage only makes sense if the current offerings of Neways are at the average market level .For this to happen, the prerequisites described in chapter 8 have to be met .

9.2.2 Commitment of the managementKotler (1991) identifies four important differences between production and services . These fourcharacteristics greatly affect the design of a service-centred organisation and its marketing .Therefore these four characteristics will be discussed here .

• IntangibilityDe Brentani (1995) states that because services are largely intangible, customers riskbuying an eventual outcome which they cannot fully assess prior to purchase . This presentsa challenge to marketers to use tangible evidence to help explain the service . Also,sustainable advantage is difficult to achieve, since competitors can copy the service moreeasily .

• InseparabilityDe Brentani (1995) states that services are often produced and consumed in the presenceof customers or they require substantial interaction with the client . Extensive customercontact means that client satisfaction is linked to both the outcome of the service as well asthe process by which

• VariabilityKotler (1991) states that services are highly variable, since they depend on who providesthem and when and where . Service buyers are aware of this high variability and frequentlytalk to others before selecting a service provider . The reputation of a company is animportant factor for customers in buying services .

• PerishabilityServices cannot be stored . This is not a problem when the demand is steady, but whendemand-fluctuates problems arise .

These four characteristics make one thing clear: Services cannot be treated like production sincethey have a fundamentally different nature . Focussing on services is not something that can beadded to the current activities in spare time, but it requires a big change in the organisation with alot of attention and commitment of the management to enable the organisational change .

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TU/e tPc }II, i„ :heu i, 1SM_`IS/YCIC„i„„„„,.„, Graduation report Peter Spaan

Industrial Engineering and ManagementNeways Electronics International NV IrGrrQi ~7•

9.2.3 Change managementOnce the management of Neways has committed itself to the strategy of transforming Newaystowards a service centred organisation, the process has to be started . Since this would be aprocess that involves all operational companies, it makes sense to install a project team withparticipants of all operational companies. This project team should overcome the problems ofdifferent strategies of the operational companies as was described in paragraph 5 .4. This teamshould also be cross-functional, because it would deal with all aspects of service development .Project teams are advocated by Robbins (2001) as a constructive way to realise changes in anorganisation. It speaks for itself that decent project planning, including measurable results,deadlines, etc . should be applied, so this topic will not be elaborated further .

9.2.4 Evaluation of the current servicesThe big advantage for Neways in this process is that Neways already has experience with sellingand producing services . Therefore, the transformation towards a service centred organisation doesnot have to start with the design of new services . Instead, the current services can be evaluatedand, if necessary, redesigned . This statement is supported by Berry and Lampo (2000) . They saythat that developing new services is not the only innovation option available to a company seekingto rejuvenate its business . Service redesign offers a vital source of competitive vitality in a dynamicmarketplace. Traditional services may lend themselves to revitalisation through service redesign .This is the case for Neways, since it has a lot of services available (listed in appendix 2) . As thecustomer research revealed (chapter 7) customers are not always satisfied with the currentservices . De Brentani (1995) states that for service products there is no greater emphasis than theneed to understand and listen to the customer. So an extra discussion with customers is needed tofind out in detail what their expectations and problems are . With this information Neways canupdate its services.

9.2.5 Develop and market the updated servicesAs Berry and Lampo (2000) state, the main step for service redesign is to explain exactly theservices it offers . The question to be answered is how the services should be delivered andreceived. The services should be standardised so that it is clear what roles, responsibilities andprocesses exist per service . This should also greatly improve the customer perception of pro-activity, since no more incorrect expectations exist . If necessary the updated services can becustomised to specific customer wishes, but this has to be documented . Johnson, Menor, Roth andChase (2000) define the following steps after the concepts are developed :

• Business analysis• Project authorisation• Design and testing of :

• The service• The process and system• The marketing program

• Employee training• Service testing an pilot run• Test marketing

According to Berry and Lampo (2000) it is especially critical for incremental type of new services/updated services to show business customers that they are gaining unique and worthwhilebenefits, because competing services are difficult to distinguish from . Also the potentjally highswitching costs associated with changing service providers makes customers careful . However,this argument also stresses the possibility to achieve competitive advantage and long-termrelationships with customers as a result of offering good services .

9.2.6 Implement the servicesWhen the services are developed and tested, the time is ready to implement the services .Implementing services supposes that customers are willing to purchase the service . So a

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Graduation report Peter SpaanN~A~ssTU/~°"~ Industrial Engineering and Management

TVNeways Electronics International NV

marketing campaign should precede the introduction as well as a training of the sales employeesto enable them to present the services as solutions to customers' problems .

9.2.7 Evaluation of the processThe transition towards a service-centred organisation seems a process of sequential steps, butnevertheless is a thorough evaluation of the process a necessity . Reflections in the process arenecessary to see if the process is still on track and an evaluation after the introduction of theredesigned services may bring imperfections to the light that have to be adjusted . Especially thecustomers have to be involved in the evaluation to see if the services solve their problems .

Meetprerequisites

Currentstatus

Commitment ofthe management

Change I I Develop and marketmanagement current services

Evaluationcurrent services

Implementservices

Evaluation ofthe process

Towards a service centred organisation

Figure 9 .1 Steps towards a service centred organisation

9.3 Staying ahead: The need for new service development9.3. i IntroductionAs stated by Johnson et al . (2000) and Matthyssens and Vandenbempt (1998) the ongoingdevelopment of new services is critical for competitive survival . The methodologies that arefrequently used for the development of new products are not suitable for the development ofservices, because of the differences between the production of goods and services, as describedin paragraph 9 .2.1 (Bitran and Pedrosa, 1998) . Service development has to be an ongoing activity,driven by the increasing heterogeneity in demands and the diminishing returns . How this can berealised is discussed in the next paragraph .

9.3.2 The loop of New Service DevelopmentDe Brentani. (2001) defines two types of service developments : highly innovative, discontinuousinnovations and incremental, improved customer service experiences . Both are key successscenarios according to her. First companies often achieve major competitive advantage as a resultof new-to-the-world innovation, but they can only sustain this advantage in the long run through thesubsequent development and introduction of improvements . Companies have to do this, due to theintangibility of services: The development of new services usually takes significantly less time andrequires fewer resources, so they are less protected from imitation by competitors. So the time acompany can enjoy the success of a new service will be shorter compared to product innovations,but as Terril and Middlebrook (1999) state, it can play an important role in the perception of thecustomer, since the reputation of the innovating company improves and the customer is more likelyto buy additional services . Johnson et al . (2000) build a model for the development of newservices. This model is presented in figure 9 .2 . As the figure clearly shows, developing services isnot a linear process, but iterative and cyclical . The cycle represents a progression of planning(design and analysis) and execution (development and launch) . The enablers have a positiveimpact on the easy of going through the cycle. The triangles in the middle represent the service,

45

tNrhnis~-n- Graduation report Peter Spaan~ j~ urliti^~~s~r cl r Industrial Engineering and Management

TWNG:rAi~7°i~7°er ijc~hove« Neways Electronics International NV

consisting of a tangible aspect (product) and the intangible aspect of a service offering (technology,people and systems) .

• Full scale launch• Post-launch review

Design and test of :• Service• Process and system• Marketing program

• Personnel training• Service testing andpilot run• Test marketing

Figure 9 .2 NSD-cycleSource: Johnson et al. (2000)

CDesignD• Formulation of newservices• Idea generation andscreening• Concept developmentand testing

Analysis

• Business analysis• Project authorisation

9.3.3 DiscussionWhile paragraph 9 .2 presented the first steps that have to be taken towards a service centredorganisation, paragraph 9 .3 showed that being a service centred organisation is just as difficult . Inorder to achieve competitive advantage new innovative services have to be designed, wherelistening to the customers' problems is of utmost importance . But to sustain this competitiveadvantage, a company has to improve the existing services . The model presented in figure 9 .1 canbe used to formalise the development of both the discontinuous as the improved servicedevelopment. It stresses on the cyclic and iterative process of the service development and paysattention to the enablers . For Neways the biggest change would be the working in cross-functionalteams, as well for the move towards a service centred organisation as well as remaining it . Thismodel, as well as other information of this research project will be benchmarked with a best-in-class service company, to see if the model holds .

9.4 Benchmark9.4.1 IntroductionThe research on service is at this mom2nt still in development. Basing a design only on literaturetherefore has a chance to be incomplete. Besides that, a second source of information to verify thestatements of this design is a welcome reference. The goal of this benchmark is to learn from thesuccesses and failures of a company that has gone through the process described in the previousparagraphs. A case study at a large manufacturer of office appliances that has been transformingitself into a service Wntred organisation the last years was performed. This company, that wishesto remain anonymous and therefore will be called X, has been very successful in this change andwas nominated as best-in-class service provider (source has to be anonymous to keep thecompany anonymous). In the following text the information of the interview with one of themarketing managers is presented .

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9.4.2 The case studyIn this case study the following topics will be discussed : The transformation towards a servicecentred organisation, the design of services, the standardisation of services, the contacts withcustomers and the organisational aspects .

TransformationThe transformation from product oriented towards service-oriented organisation came forth fromthe strong competition and low prices for machines . As a defensive move X decided to startrunning office facilities at customers' sites . What happened was that employees from X withmachines from X performed the work in the habit of the customer. The danger of this defensiveposition was that a competitor that did see services as an opportunity took away the market byinvesting and focussing on it . So X decided to treat services as a focus and developed a strategyfor the development and selling of their services .

From trick to serviceOne of the first services that X put on the market came from the department that sold printers . Forsome customers X did not only sell and install the printer, but also developed some software totransform the output of old legacy systems that were not designed for printing towards a prettylayout. This programming consisted of customising programs already on the market and of self-written code. Every now and then this programming was sold to the customer on a per hour basis .So the knowledge was available, only it was not properly marketed . Then the marketing-department picked it up and developed a marketing strategy for it . It was presented as a solutionfor printing problems with legacy systems and after an advertising campaign it became a profitableservice. At this moment, X has a more sophisticated system to develop new services . When acustomer indicates he needs a new service or if an idea is generated elsewhere, a corporateservice manager is contacted . He collects the ideas and in a meeting with people from the variousoperational companies, the services are discussed and prioritised . Then the service is developedand productised (see next topic) . When the service is operational, feedback loops are establishedto improve the services .

Standardising servicesX has three methodologies for standardising services . In X's opinion standardising services iscrucial, for the following reasons: Selling services for sales managers that have only experiencewith selling products is difficult . They have to sell value that they were unfamiliar with . Bystandardising the service in a, what they call, solution bundle, the service becomes less intangibleand is more easy to sell . Of course the solution bundle could be customised, but as a start it is astandard service . A second reason is that X owns a large number of operational companies . Inorder to duplicate the service for these operational companies, so that they can sell the newservice, X`productises" them . A productised service consists of the following aspects :

• A value proposition . In this proposition is explained what the value is of the service. Whywould a customer need this service? Also is mentioned what contacts in a customer'sorganisation would be interested in the service .

• An explanation of the service . In this part is described what the service looks like, how itshould be operated and what hardware and software is needed to implement and operatethe service

• A service level agreement. In this agreement is documented what will be delivered and whatrequirements have to be met.

With this pr6ductised service description the rollout to the operational companies is performed andthe corporate service-manager collects feedback and possible improvements .

Different ContactsX noted the same difference as was noted in this project : For selling services, the contacts at thecustomers' sites are different. For selling equipment X normally contacted facility managers, but

47

cPcnnk,.n~, Graduation report Peter Spaan~ ~ volsircIr Industrial Engineering and Management NGrri~7°

er~~cin«v?n Neways Electronics International NV ITW

they were no problem owners in the discussion of outsourcing office facilities . In general this was agroup of people from the corporate information or board of directors . X did not have these contactsand it took some effort before discussions could be started with the right persons .

Organisational aspectsThe transition from product oriented towards service oriented caused no trouble at the customers'side. A part of the existing customers was triggered by the new services and generated moreturnover. Internally the transition caused more problems . As mentioned before, the salesrepresentatives were not used to sell services . Next to that, X's proposals had to be adjusted tofocus on quality (for example : deliver 100 manuals within 24 hours) instead of effort (always threeX-employees present at customer's site). A second organisational learning was that developing,rolling-out and selling of services is a process that requires a lot of effort and without a dedicatedperson that pushes the implementation of the service concept in general, nothing will happen .

9.4.3 DiscussionWhen comparing the information in this case study to the information presented in this researchproject, the following statements can be made :

• The position of X when it decided to focus itself on providing services is the same as one ofthe reasons for Neways to start this research project : Market pressure on the prices of theirproducts .

• The transition towards a service centred organisation at X was indeed a difficult operationand it required strong commitment and energy of the people involved .

• Redesigning a service as X did with the legacy-printing software seems a good method tostart focussing on services and service development .

• Although not so much attention is paid to standardising services in literature, X considers itas one of the key success factors for the successful roll-out and implementation of services .

• Several organisational aspects play a role in the transition towards a service centredorganisation. Trying to find new contact persons is one of them that was found in thisresearch project as well as at X's. X can also add the unfamiliarity of sales representativeswith the services and the different performance measures that have to be agreed upon withcustomers.

• The service development methodology of X is in line with the NSD-model of Johnson et al .(2000) . X follows the steps of design, analysis, development, launch, applies improvementcycles, and has the enablers in place with a special organisation for services, cross-functional teams and a service development support tools like the productised servicedescription .

9.5 ConclusionAs shown in this chapter, the transition from a product-oriented organisation towards a servicecentred organisation is a difficult operation . And even if this transition succeeds, it is no guaranteefor sustainable competitive advantage, since services are easy to imitate by competitors . OnceNeways becomes a service centred organisation, it should invest time and money in the empathicdesign of new services, either incremental improvements as well as new-to-the world services .This would be a hard job with lots of hindrances, organisational problems and fierce competition .But note that the nature of the competition has shifted then . No longer is price the most importantissue and Neways has created services that can be characterised as bottleneck or even strategicproducts for-.customers. This will make customers want to establish long term relationships withNeways. These results describe the desired situation as formulated in the problem description ofthis research project in paragraph 1 .3. This chapter described the necessary steps and theconsequences of achieving competitive advantage by transforming into a service centredorganisation. This answers research question six .

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tP r,i5<n, Graduation report Peter Spaan~ cis ~r cC Industrial Engineering and Management NEWAYEsHONDO


Recommendations for further researchOne of the remarkable things about Neways is the lack of documentation of topics related tostrategy and marketing . Several topics addressed in this research project were new to theorganisation. It is the opinion of the author that further research on a broad range of topics isessential for Neways to solve current problems and start projects to realise a better future . It wouldbe wise for Neways to invest in a relationship with the Eindhoven University of Technology andstart projects to analyse and improve on the following topics :

• Operations management. The current logistics, methods and information systems have tobe examined further to improve the logistic performance and to adapt to the increasingoutsourcing of production towards low wage countries .

• The internal distribution of capabilities . This research showed that improvements could bemade by a better distribution of Neways' capabilities over the operational companies . Howthese capabilities should be divided, in what ways the company can profit from co-operationof the operational companies and how the core competencies can be developed in aneffective way are related topics for further research .

• Market research on interesting target markets and their needs . This research proved that itmakes sense to segment Neways' customers . Further research should focus on whatrequirements different market segments have and what interesting markets are for Newaysto focus on . Also further differentiation of customers based on their outsourcing strategymakes sense and should be further examined .

• Further market research on customer value at customers . The customer research in thisresearch project consisted of thirteen case studies. More research on this topic enablesquantitative analysis of the customers and could provide a more detailed view on customeroutsourcing behaviour and customer requirements . It could also quantify the expectedresults of customer segmentation .

• The marketing of services . This research showed that the marketing of services isfundamentally different from the marketing of production activities. Neways has currentlylittle experience with the marketing of services . More research on this topic should enableNeways to market and sell services in a successful way .

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te h ti,-n~ Graduation report Peter Spaanr~~~rcic Industrial Engineering and Management NEWAY19Neways Electronics International NV

Personal reflection

In a few lines the personal reflection of the author on this project will be given . This reflection isseparated in the following topics :

Internal versus external viewOf course, when one operates in an organisation for eight months, one becomes familiar with theprocedures and habits of the organisation and the danger is there that one will lose its objectiveview on the subject . I think, however, that I was able to keep an objective view on the matter fortwo reasons. First, the part that is the most sensitive for subjective colouring, the internal analysis,was performed at the beginning of the research project, when I was new to the organisation andnot influenced by previous knowledge about certain aspects of the Neways organisation . Thesecond reason is that I was able to keep an objective view due to the extensive use of literature . Inthis literature I found an objective reference for the observations at Neways .

Exploratory nature of the projectThis report can be seen as a first orientation on competitive advantage for Neways . Little researchhas been done before by Neways and the organisation has a strong inward focus . Theimplementation of the service centred organisation, as advocated in chapter nine, is likely not to beimplemented in the near future . The recommendations for further research cover a wide range oftopics. On the one hand this is due to the fact that many topics were covered in this research buton the other hand because little research has been done and little documentation is available atNeways. This has had some influence on the research project . Competitive advantage is a broadtopic and touches many different aspects of an organisation .

Analysis and designIn this research project a relative large part is dedicated to the analysis of the situation on Newaysand a relative small part to the design of a solution . Especially when one considers the guidelinesof the faculty in relation to this issue (approximately 50% of the time should be invested in thedesign) the analysis phase is much larger than the design phase . This has two causes . First thetopic of this research project demands a considerable analysis of several factors before statementscan be made about the competitive position of Neways and the causes . Second, as discussed inthe text above, little research has been done by Neways . So it was concluded, as well from thecompany-side as well as from the side of the author, that this research project would be moreuseful if more attention was paid to a high-quality analysis instead of a detailed design of asolution .

Scientific importance versus company importanceBesides the author, this research project, like all graduation projects, has two interested partiesinvolved: the company and the university. In this project the area of tension between these twoparties seemed limited, because the results from the analysis were interesting for both thecompany and the university. Unfortunately, Neways could not agree with the public nature of agraduation report and demanded confidentiality for this research, because it fears for a negativeimage and competitors that profit from this research project . Therefore Neways cannot profit fromresearch that could build on this research project nor can the university use this case in researchon customer-supplier relations, services, strategic marketing, etc .

In general this research project was an interesting experience for me . Little attention to competitiveadvantage and customer value was paid in the education, but for me it was an interestingopportunity to gain more in-depth knowledge into this subject . The involved Neways employeeswere all co-operative and interested as were the participants of the customer research . This issomething I really appreciate and it contributed to a pleasant and interesting graduation project forme.

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í?C}IIllS['lY_ Graduation report Peter Spaan~ssTU/~°~'"^ c i -ire ir Industrial Engineering and Management N~A

Neways Electronics International NV 1*

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Documents

Eindhoven University of Technology MASTER …Neways ElectronicsInternational NV offered by Neways. Analysis of the customer research consisted of two parts . In the first part the