VALERIE MATHIEU PAPER NO. 13

Presented By Jared Norrell

Service strategies within the manufacturing sector: Benefits,

costs and partnership.

Purpose of Article

“This paper proposes an original typology of service maneuvers achieved by manufacturing companies and addresses the implementation issue within the framework of this typology” (Mathieu, 2001).

Previous Work

Levitt (1972) Everyone is in the business of service

Berry and Parasuraman (1991) Manufacturing companies are also service

companies

Bitner (1997) All businesses are service businesses in some form

Jack Welch “The service market is bigger than we ever

dreamt”

Overview

Typology for manufacturing service1. Service specificity2. Organizational intensity

Benefits from implementation of service strategy1. Financial benefits 2. Strategic benefits3. Marketing benefits

Costs inherent in implementation of service strategy1. Competitive cost2. Political cost

The collaborative option for implementing a service strategy

1. Collaborative continuum2. Potential partners3. Points of application4. Costs of collaborative option

Typology for manufacturing service(Ways manufacturing companies can take to embrace service field)

Service specificity- content of manufacturing service maneuver.1. Customer service- addresses general quality of interactions

between seller and customer.2. Product services- support the supplier’s product in such ways as

physical distribution, after-sale service, or technical assistance.3. “Service as a product”- type of service which is independent from a

company’s goods, may experience a company’s service without consuming its goods.

Organizational intensity- manufacturing service maneuver refers to both the strength and the scope of its impact on the firm.

1. Cultural- reshapes the mission of the firm and has potential to modify some fundamental characteristics of the firm.

2. Strategic- aims to add some key competency to a firm’s portfolio.3. Tactical- specific actions within the marketing mix of the firm.

Benefits from implementation of service strategy

1. Financial benefits• Commercialization of services around a tangible product can

raise revenues.• Product services tend to reduce vulnerability and volatility of

cash flow allowing for a higher shareholder value.

2. Strategic benefits• Service strategy can provide a competitive advantage through

differentiation.• Service strategy can help in building industry barriers to entry.

3. Marketing benefits• Have potential to augment the goods offering and appeal to the

client.• Product service strategies can influence overall client

satisfaction.• Superior service can increase both first-time and repeat sales,

thus increasing market share.

Concerning the financial and strategic benefits, the more intense and specific the service maneuver, the higher the benefits

For marketing benefits, the more intense the service maneuver, the higher the benefits.

Costs inherent in implementation of service strategy

Competitive cost- manufacturing firm must build its own competitive advantage with three opportunities.

1. Using drivers of positional advantage- skills and resources which have the highest leverage on competitive advantage non-accessible to the competitors.

2. Weakening the competitors’ drivers- Ex. An auto dealer changing oil not only on its own cars but also on its competitors’ cars.

3. Develop new sources of competitive advantage- many manufacturers have developed global strategies and can now use these geographic odds in order to set up specific competitive positions.

Political cost- emergence, adoption and implementation of service maneuvers is expected to pose a threat to some organizational units and present an opportunity to others. Two ways to counter resistance.

1. Interpret service maneuver as an innovation.2. Necessity to implement service management principles.

Strategic cost or political cost are proportional to both the service specificity and the organizational intensity.

The collaborative option for implementing a service strategy(Implementation of partnerships with potential competitors)

1. The collaborative continuum- existence of various intensities and diverse realities in the potential collaboration.

• Internalizing- keeping entire service maneuver at home.• Outsourcing- entrusting a partner with the whole

implementation of the service maneuver.• Partnering- In between internalizing and outsourcing.• Benchmarking- manufacturing firm must consider this

as one of the very first steps in the implementation of service maneuver.

2. Potential Partners- distributor, client, service provider, and now the traditional competitor.

The collaborative option for implementing a service strategy, Continued

3. Points of application- potential domains for collaboration. Two main phases of any service maneuver by a manufacturing company.

1. Service development- generate “customer-driven service designs and standards.”

2. Service performing- focuses on service delivery.1. Back office- support employees, physical facilities, and technology.2. Front office- front-line employees, physical evidence and technology.

4. Costs of the collaborative option1. Role specification- decisions and functions are assigned to the parties

in the relationship.2. Nature of planning- viewed as frameworks within which subsequent

adaptations can, and are expected to, take place.3. Nature of adjustments- must be prepared to show flexibility and to

accept jointly negotiated changes.4. Monitoring procedures- establishment of the extent to which

contractual compliance has taken place.5. Incentive systems- type of incentives used and to the basis on which

they are distributed.6. Means of enforcement- must be considered above and beyond

incentives and must be an ongoing relationship.

Conclusion

Broadly speaking, the article has aimed at contributing to the field of service maneuvers within the manufacturing sector.

The more intense and specific the service maneuvers, the higher the benefits, the strategic and cultural costs, and the cost of running the collaborative option.