Question

How would a business benefit from being able to customize products more cheaply than its competitors? Services have the process of intangibility, heterogeneity, persishability, and simultaneity. Describe how manufacturing operations do not have these properties Why is it more difficult to reduce the outpu variability of a service than a manufacturing process? Describe the different view manufacturing operations under service-dominant logic as opposed to goods-dominant logic When successfully executed, how do the following strategies provide a competitive advantage? - cost leadership - focus - differentiation

Answer 1

By being able to customize products more cheaply than its competitors a business will benefit by being able to develop its own competitive advantage and sustaining it in the market. The market for customized products is growing at a rapid pace and the ability to be able to offer customized products at lower rates will enable the business to increase its market share. Also the number of loyal customers will increase and a certain degree of customer stickiness will get developed.

Manufacturing process does not have intangibility as the process makes use of tangible inputs like machine and manpower to produce tangible outputs. It also lacks heterogeneity as a manufacturing process will produce one type of goods and the one unit will be same as the next unit of output. Manufacturing operations are not perishable as the relevant resources, processes, and systems of a manufacturing process are assigned for delivery during an infinite period of time. Lastly manufacturing processes do not have simultaneity as goods manufactured can be stored prior to consumption.

It is more difficult to reduce the output variability of a service than a manufacturing process because of the fact that a service process can be heterogeneous. Unlike a manufacturing process no two service process can exactly be the same. Service process is highly dependent on human skills and intelligence and no two human beings can think exactly and no single human being will think, behave and act in the exact same manner in all situations. Hence it is more difficult to reduce the output variability of a service than a manufacturing process.

Service dominant logic in the manufacturing sector is based on the premise that value is co-created by the customers and with the customers in the context of their use. This is in stark contrast to goods-dominant logic which states that value is embedded within goods and is exchanged only at the point of delivery.

Cost leadership can lead to competitive advantage by enabling the firm to set lower prices than competitors while offering the same level of benefits to the customers. By being able to do so the cost leader will be able to attract more customers and will be able to rapidly gain market share. Focus can lead to competitive advantage by enabling the firm to concentrate on particular niche markets and by enabling them to understand dynamics of that niche market. This will allow the form to build a strong brand loyalty and will increase entry barriers for competitors. Differentiation can lead to competitive advantage by enabling the firm to make its products more attractive than the product of competitors. Firms differentiate on the basis of features, functionality, brand image etc. and these attributes allow it to create more value for its customers.