Description
Managed services is the practice of outsourcing day-to-day management responsibilities as a strategic method for improving operations. This can include outsourcing HR-activities, Production Support and lifecycle build/maintenance activities.
A Case Study on Managing Services Business for
Markets: Marel
1.
2.
3.
4.
5.
6.
TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................- 1 -
BACKGROUND ............................................................................................................- 1 -
THEORY ........................................................................................................................- 1 -
ANALYSIS.....................................................................................................................- 2 -
CONCLUSIONS.............................................................................................................- 4 -
REFERENCES ...............................................................................................................- 5 -
I
1. INTRODUCTION
Nowadays, customers of capital goods (B2B) require more and more value-adding
activities from their suppliers. That prompts industrials, in order to retain their final
customers' loyalty, focus on offering a range of value-added services centered on or
around their core products. The main purpose of doing so is to improve the overall
performance of the customer's value systems. Such services create new source of
revenue for suppliers, and therefore affect their profits positively in the long term. In
most cases, service products are intangible even though they could have a physical
appearance (Tidd & Hull, 2002). In B2B markets, manufacturers always offer at
leastminimum services to convince their customers to buy their products. Recently, there
are bundles of services offered by companies result in better value-adding system. That
may include maintenance, customer training, consultancy, or even tailor-made solutions
according to the customer needs. In this report, we highlight the growth of service
products in a manufacturing company, which is Marel in our case. The analysis is
dedicated to answer questions like why manufacturing companies may incorporate
service products, and what makes it service- or good-oriented company.
2. BACKGROUND
Marel is the leading global provider of advanced equipment, systems and services
to the fish, meat and poultry industries. Marel is a multinational company, with more
than 4000 employees worldwide, where their business units are mainly located in
Netherlands, Denmark, United States, Iceland, Slovakia, and Singapore. The company
operates a network of sales and services units all over the world (Marel 2013).
3. THEORY
One way to enhance manuIacturing companies' growth and revenue is by adding
services to the overall business as important element for their future success. There are
four factors account for the growth of business services including e-business, where
internet help in creating new business models based on range of e-commerce products
and services. The second factor is the outsourcing, where companies of all types moves
toward outsourcing functions and services that are not their core expertise. Innovations
stand as a third factor, since new technologies support creating new services that did not
-1-
exist over a decade ago. The fourth factor is accounted for manufacturing growth that
arose together with demand of collateral services (Hutt & Speh, 2004).
In B2B markets, services can be classified into two different categories. The first
category is products supported by services. In this case, services that accompany the
physical product are always important as the technical solutions offered by the product
itself. On the other hand, the second category refers to pure services, which are sold to
clients independently and without any relationship connected to any physical product.
That kind of services may include, for example, travel booking services, banking and
consulting (Hutt & Speh, 2004).
According to Vargo & Lusch (2004), marketing has moved from a goods-dominant
view, in which tangible output and discrete transactions were central, to a service-
dominant view, in which intangibility, exchange processes, and relationships are central.
In this situation, consumers are always involved in the value production, since they are
buying products as values instead of goods. Any service oriented organization should
consider service excellence as a strategic priority. That could be reached by
embracement of basic set of policies and practices, including anticipating customer
needs, giving high priority to services before goods, fulfilling customer satisfaction, and
building long-term relationships (Lytle, R.S. & Timmerman, J.E., 2006).
4. ANALYSIS
Marel incorporate eight different service products including maintenance,
consultancy, spare parts, innova service (software service portfolio), emergency
support, remote support, customer training, and traceable calibration (Marel 2013).
When reviewing such services, the main four factors account for the growth of business
services could be represented by each service in Marel (Hutt & Speh, 2004). For
instance, innova service, emergency support, and remote support are e-based services
that reflect how Marel could build additional value upon its core products using e-
businesses. Moreover, consultancy could be seen as exported experiences through the
channel of outsourcing. Marel offer flexible packages to allow their customer to select
the best option for their business, which could be regarded as exported experiences as
well. Additionally, Marel conduct training for their customers that could reflect their
intersection with innovation and new technology.
-2-
Generally, Marel's incorporated service products could be categorized into two
groups of services including products supported by services, and pure services (Hutt &
Speh, 2004). The first group may involve the maintenance, emergency support, remote
support, spare parts, tradable calibration, and innova software that Marel deliver to the
customers, while customer training and consultancy could be classified as pure services.
Marel represent a helpful example for how manufacturing companies can get
benefits from delivering their products as values (SD-logic) instead of goods (GD-logic)
(Vargo & Lusch, 2004) . The analysis built upon this discussion is mainly derived from
the relationships between the goods and services Marel deliver. Being a large
manufacturing company that delivers food production systems and equipment, Marel
offer preventive maintenance to their customers not only to gain extra profit from the
core business, but also to guarantee that everything goes technically right, and therefore,
the business is still alive. For consultancy, we think that such large company as Marel
would undoubtedly have high skilled staff involved in the R&D department within the
company. They may be partially dedicated to consulting responsibilities, which would
increase their utilization. Besides, food industry deals with high degree of customization
that makes closing to the customer's thoughts very signiIicant concern. Similarly, many other relevant
relationships could be drawn between each service product and the core product. Most
importantly, the service products in Marel are built upon the overall system so that to
benefit from the costly large base and infrastructure of the system dedicated to the core
product. Thus, the servitization of business opportunities relevant to the core system could
be accounted Ior increasing oI Iacilities' utilization, even iI that requires small investment
relatively. Besides, because the services can be best developed, sold and delivered by
the product supplier, there is a lock-in effect resulting in relatively high profit margins.
We think that Marel could not be regarded as service-oriented company. The
dependency of their service products on the core system is relatively high. They provide
services that are connected to the core products more than the other services that are
relatively independent or pure services. What makes us find them hardly service-
oriented is that the independent services are not characterized by long-term
relationships. However, that does not change the fact that they gain high profits
relatively from their service products.
-3-
5. CONCLUSIONS
Marel represent a good example for why a company may integrate service products.
Marel deliver nine different services relevant to its main industry to enhance the
performance of their core product in the customer value system and render new revenue
potentials. Furthermore, Marel as business deliver non-dynamic core product could
reduce the risk of inconsistent demand by providing such services. That is because the
services can be best developed, sold and delivered by them, and thus, there is a possible
lock-in effect resulting in relatively high profit margins. And because services are
related to the (large) installed base, Marel suffer less from cyclical economic cycles than
the core product business.
-4-
6. REFERENCES
Literature Sources:
Hutt, M.D. and Speh, T.W. (2004). "Business Marketing Management: A Strategic View
of Industrial and Organizational Markets", 8
th
edition, Fort Worth TX: Dryden
Lytle, R.S., and Timmerman, J.E. (2006). "Service orientation and performance: an
organizational perspective", Journal of Services Marketing, 20/2, pp. 136-147.
Tidd, J. and Hull, F. (2002). "Introduces and tests a framework for new service
development in the US and UK". The organization oI new service development in the USA and UK,
SPRU Science and Technology Policy Research - University of Sussex. Vargo, S. L. and
Lusch, L. F. (2004), "Evolving to a New Dominant Logic for Marketing".
Electronic Sources:
Marel (2013). The company. Available: http://www.marel.com/company/company/
[2013-03-02].
-5-
doc_285134376.docx
Managed services is the practice of outsourcing day-to-day management responsibilities as a strategic method for improving operations. This can include outsourcing HR-activities, Production Support and lifecycle build/maintenance activities.
A Case Study on Managing Services Business for
Markets: Marel
1.
2.
3.
4.
5.
6.
TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................- 1 -
BACKGROUND ............................................................................................................- 1 -
THEORY ........................................................................................................................- 1 -
ANALYSIS.....................................................................................................................- 2 -
CONCLUSIONS.............................................................................................................- 4 -
REFERENCES ...............................................................................................................- 5 -
I
1. INTRODUCTION
Nowadays, customers of capital goods (B2B) require more and more value-adding
activities from their suppliers. That prompts industrials, in order to retain their final
customers' loyalty, focus on offering a range of value-added services centered on or
around their core products. The main purpose of doing so is to improve the overall
performance of the customer's value systems. Such services create new source of
revenue for suppliers, and therefore affect their profits positively in the long term. In
most cases, service products are intangible even though they could have a physical
appearance (Tidd & Hull, 2002). In B2B markets, manufacturers always offer at
leastminimum services to convince their customers to buy their products. Recently, there
are bundles of services offered by companies result in better value-adding system. That
may include maintenance, customer training, consultancy, or even tailor-made solutions
according to the customer needs. In this report, we highlight the growth of service
products in a manufacturing company, which is Marel in our case. The analysis is
dedicated to answer questions like why manufacturing companies may incorporate
service products, and what makes it service- or good-oriented company.
2. BACKGROUND
Marel is the leading global provider of advanced equipment, systems and services
to the fish, meat and poultry industries. Marel is a multinational company, with more
than 4000 employees worldwide, where their business units are mainly located in
Netherlands, Denmark, United States, Iceland, Slovakia, and Singapore. The company
operates a network of sales and services units all over the world (Marel 2013).
3. THEORY
One way to enhance manuIacturing companies' growth and revenue is by adding
services to the overall business as important element for their future success. There are
four factors account for the growth of business services including e-business, where
internet help in creating new business models based on range of e-commerce products
and services. The second factor is the outsourcing, where companies of all types moves
toward outsourcing functions and services that are not their core expertise. Innovations
stand as a third factor, since new technologies support creating new services that did not
-1-
exist over a decade ago. The fourth factor is accounted for manufacturing growth that
arose together with demand of collateral services (Hutt & Speh, 2004).
In B2B markets, services can be classified into two different categories. The first
category is products supported by services. In this case, services that accompany the
physical product are always important as the technical solutions offered by the product
itself. On the other hand, the second category refers to pure services, which are sold to
clients independently and without any relationship connected to any physical product.
That kind of services may include, for example, travel booking services, banking and
consulting (Hutt & Speh, 2004).
According to Vargo & Lusch (2004), marketing has moved from a goods-dominant
view, in which tangible output and discrete transactions were central, to a service-
dominant view, in which intangibility, exchange processes, and relationships are central.
In this situation, consumers are always involved in the value production, since they are
buying products as values instead of goods. Any service oriented organization should
consider service excellence as a strategic priority. That could be reached by
embracement of basic set of policies and practices, including anticipating customer
needs, giving high priority to services before goods, fulfilling customer satisfaction, and
building long-term relationships (Lytle, R.S. & Timmerman, J.E., 2006).
4. ANALYSIS
Marel incorporate eight different service products including maintenance,
consultancy, spare parts, innova service (software service portfolio), emergency
support, remote support, customer training, and traceable calibration (Marel 2013).
When reviewing such services, the main four factors account for the growth of business
services could be represented by each service in Marel (Hutt & Speh, 2004). For
instance, innova service, emergency support, and remote support are e-based services
that reflect how Marel could build additional value upon its core products using e-
businesses. Moreover, consultancy could be seen as exported experiences through the
channel of outsourcing. Marel offer flexible packages to allow their customer to select
the best option for their business, which could be regarded as exported experiences as
well. Additionally, Marel conduct training for their customers that could reflect their
intersection with innovation and new technology.
-2-
Generally, Marel's incorporated service products could be categorized into two
groups of services including products supported by services, and pure services (Hutt &
Speh, 2004). The first group may involve the maintenance, emergency support, remote
support, spare parts, tradable calibration, and innova software that Marel deliver to the
customers, while customer training and consultancy could be classified as pure services.
Marel represent a helpful example for how manufacturing companies can get
benefits from delivering their products as values (SD-logic) instead of goods (GD-logic)
(Vargo & Lusch, 2004) . The analysis built upon this discussion is mainly derived from
the relationships between the goods and services Marel deliver. Being a large
manufacturing company that delivers food production systems and equipment, Marel
offer preventive maintenance to their customers not only to gain extra profit from the
core business, but also to guarantee that everything goes technically right, and therefore,
the business is still alive. For consultancy, we think that such large company as Marel
would undoubtedly have high skilled staff involved in the R&D department within the
company. They may be partially dedicated to consulting responsibilities, which would
increase their utilization. Besides, food industry deals with high degree of customization
that makes closing to the customer's thoughts very signiIicant concern. Similarly, many other relevant
relationships could be drawn between each service product and the core product. Most
importantly, the service products in Marel are built upon the overall system so that to
benefit from the costly large base and infrastructure of the system dedicated to the core
product. Thus, the servitization of business opportunities relevant to the core system could
be accounted Ior increasing oI Iacilities' utilization, even iI that requires small investment
relatively. Besides, because the services can be best developed, sold and delivered by
the product supplier, there is a lock-in effect resulting in relatively high profit margins.
We think that Marel could not be regarded as service-oriented company. The
dependency of their service products on the core system is relatively high. They provide
services that are connected to the core products more than the other services that are
relatively independent or pure services. What makes us find them hardly service-
oriented is that the independent services are not characterized by long-term
relationships. However, that does not change the fact that they gain high profits
relatively from their service products.
-3-
5. CONCLUSIONS
Marel represent a good example for why a company may integrate service products.
Marel deliver nine different services relevant to its main industry to enhance the
performance of their core product in the customer value system and render new revenue
potentials. Furthermore, Marel as business deliver non-dynamic core product could
reduce the risk of inconsistent demand by providing such services. That is because the
services can be best developed, sold and delivered by them, and thus, there is a possible
lock-in effect resulting in relatively high profit margins. And because services are
related to the (large) installed base, Marel suffer less from cyclical economic cycles than
the core product business.
-4-
6. REFERENCES
Literature Sources:
Hutt, M.D. and Speh, T.W. (2004). "Business Marketing Management: A Strategic View
of Industrial and Organizational Markets", 8
th
edition, Fort Worth TX: Dryden
Lytle, R.S., and Timmerman, J.E. (2006). "Service orientation and performance: an
organizational perspective", Journal of Services Marketing, 20/2, pp. 136-147.
Tidd, J. and Hull, F. (2002). "Introduces and tests a framework for new service
development in the US and UK". The organization oI new service development in the USA and UK,
SPRU Science and Technology Policy Research - University of Sussex. Vargo, S. L. and
Lusch, L. F. (2004), "Evolving to a New Dominant Logic for Marketing".
Electronic Sources:
Marel (2013). The company. Available: http://www.marel.com/company/company/
[2013-03-02].
-5-
doc_285134376.docx