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Paper to be presented at the
35th DRUID Celebration Conference 2013, Barcelona, Spain, June
17-19
Servitization: The Extent of and Motivations for Service
Provision amongst
UK based ManufacturersElif Bascavusoglu-Moreau
University of CambridgeCentre for Business Research
[email protected]
Bruce TetherManchester Institute of Innovation Research and
Business School
[email protected]
AbstractServitization is the provision of services to clients by
manufacturing firms. For over twenty years, servitization has
beenadvocated as a strategy by which manufacturers in high cost
locations can compete against rivals based in low costlocations, as
providing services implies closer customer relations, and moving
from a transactional approach based onmaking and selling goods, to
an more relational approach which may involve providing tailored
packages of productsand services, sometimes as integrated
solutions. Little is known, however, about the extent to which
manufacturersprovide services, their motivations for so doing, or
the organizational arrangements associated with providing services.
Drawing on a bespoke survey of 256 manufacturers in the UK, this
paper provides evidence where previously there waslittle. We reveal
that manufacturers typically provide several services, and these
are commonly packaged with products.Most UK manufacturers in our
sample are therefore service-enhanced, rather than service
oriented. We also examinefirms' motivations for providing services,
and the characteristics of firms most likely (and least likely) to
provide services.
Jelcodes:M10,L60
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1
Servitization:
The Extent of and Motivations for Service Provision
amongst UK based Manufacturers
Abstract
Servitization is the provision of services to clients by
manufacturing firms. For over twenty
years, servitization has been advocated as a strategy by which
manufacturers in high cost
locations can compete against rivals based in low cost
locations, as providing services implies
closer customer relations, and moving from a transactional
approach based on making and
selling goods, to an more relational approach which may involve
providing tailored packages
of products and services, sometimes as integrated solutions.
Little is known, however, about
the extent to which manufacturers provide services, their
motivations for so doing, or the
organizational arrangements associated with providing services.
Drawing on a bespoke
survey of 256 manufacturers in the UK, this paper provides
evidence where previously there
was little. We reveal that manufacturers typically provide
several services, and these are
commonly packaged with products. Most UK manufacturers in our
sample are therefore
service-enhanced, rather than service oriented. We also examine
firmsげ motivations for providing services, and the characteristics
of firms most likely (and least likely) to provide
services.
Key Words: Manufacturing; Service Provision; Servitization
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2
1. INTRODUCTION
Manufacturing is usually defined as the making of goods,
articles or products, especially in factories
and H┞ キミS┌ゲデヴキ;ノ マW;ミゲ ラヴ ヮヴラIWゲゲWゲく M;ミ┌a;Iデ┌ヴキミェ
Iラミ┗Wミデキラミ;ノノ┞ け;SSゲ ┗;ノ┌Wげ H┞ デヴ;ミゲaラヴマキミェ raw materials into
semi-manufactured and final goods, the utility of which is embodied
in the
product; this process of transformation typically involves a
series ラa けゲデWヮゲげが with the production of intermediate goods as
components or sub-assemblies, within a value chain. Because final
and
intermediate manufactured goods typically embody utility that is
retained for some time they can
usually be produced at considerable distance from their place of
their final consumption.1 In this,
archetypal manufacturing differs markedly from archetypal or
classic services, which cannot be
stocked, are co-produced by the producer and consumer acting
together, and are therefore
provided in close physical proximity to the user.
The declining cost and increased speed of transportation,
coupled with political changes and
deregulation, is encouraging the globalization of production,
and more particularly the migration of
relatively labour intensive manufacturing from high cost
locations, such as the United States and
Western Europe, to low cost production locations, such as China
an Eastern Europe. Furthermore,
manufacturing firms are also increasingly offshoring and
outsourcing higher-value company
functions including research and development (BIS, 2010,
p.7)
These and other forces have seen a relative decline of
manufacturing in the UK, as a share of the
economy, and as a share of world production.2 YWデ デエW UK ヴWマ;キミゲ
デエW ┘ラヴノSげゲ ヶth largest manufacturer by value of output, and
moreover real manufacturing output has grown in value in
most years since the early 1980s. This implies a substantial
growth in productivity - real output per
employee - which increased by almost 50% in the twenty years
between 1987 and 2007. This
growth is due to investment in capital equipment, new tools and
technologies, some up-skilling and
new working practices such as outsourcing, and innovation (PWC,
2009).3
The financial crisis of 2008 and the recession that followed led
the UK government recognize the
danger of over-reliance on financial services, and the need to
けヴWH;ノ;ミIeげ デエW WIラnomy, with a particular focus on manufacturing.
TエW Iエ;ノノWミェW キゲ IラミゲキSWヴ;HノWく TエW UKげゲ H;ノ;ミIW ラa デヴ;SW キミ
manufactured goods has been consistently negative for the past 25
years, and became larger in the
past decade. Moreover, recessions tend to be particularly
harmful to manufacturing, with past
trends showing that manufacturing jobs lost in recessions rarely
reappear when growth returns.
The usual remedies to revive manufacturing include a greater
focus on knowledge and high value
added, through increased investments in R&D (which is being
encouraged by the provision of R&D
tax credits), training (which is being encouraged by the
provision of modern apprenticeships), and
quality. This paper examines another strategy, which is a move
towards services, which complement
products and production. It is frequently observed that the
distinction between manufacturing and
1 Exceptions arise where transport costs are prohibitive (e.g.,
iron and steel mills) and/or where the product is highly
perishable (e.g., bakeries). 2 Employment in UK based
manufacturing has also declined from around one in four jobs in
1980 to one in ten in 2008; a
loss of around 4 million jobs. The UK remains particularly
successful in some sectors of manufacturing, such as aerospace,
where the UK accounts for 15% of world output. 3 Profitability
in manufacturing has however declined steadily since 1997.
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3
services is becoming less distinct, or blurred, with more and
more companies operating in both
areas, bundling goods and services together in customized
packages for clients. The aero-engine
manufacturer Rolls Royce is the archetypal example (Johnstone et
al., 2009; The Economist, 2009).
Rolls Royce has made a significant and successful transition
from HWキミェ けa pure manufacturWヴげ to being an integrated solutions
provider. It now generates around half of its revenue from
services,
and looks to capture value throughout the lifecycle of its
products. Another example is Xerox, which
has マキェヴ;デWS aヴラマ HWキミェ ; マ;ミ┌a;Iデ┌ヴWヴ ラa ヮエラデラIラヮキWヴゲが デラ
HWIラマキミェ ; けSラI┌マWミデゲ Iラマヮ;ミ┞げく
It is thought that many other companies, both large and small,
old and new, are or have the
potential to do the same. But we know very little about the
extent to which this is occurring. One
reason for this is that official sources are poor at capturing
the range of a firmげs activities. Firms are typically classified by
their main line of activity. So Rolls Royce is an aircraft engine
manufacturer,
and its engine maintenance activity is therefore unrecognised in
most official sources.4 Some
businesses have been reclassified as their profile of activities
has changed. IBM was considered a
manufacturer of computer hardware, but the growth of its
software and consultancy business,
coupled with the sale of its personal computer division to
Lenovo, means that IBM is now considered
a service company, even though it still manufactures mainframe
computers (Gerstner, 2002).
However, some firms are け┘ヴラミェノ┞ IラSWSげく Dyson Ltd, for example,
is a renowned producer of domestic appliances (especially vacuum
cleaners) and is classified as a manufacturer. However, all
ラa D┞ゲラミげゲ production is undertaken in Malaysia: R&D,
engineering and support activities are undertaken in the UK.5 This
raises the question as to how to define manufacturing. Some, such
as
the Institute for Manufacturing at the University of Cambridge,
call for a broad definition which
Iラ┗Wヴゲ さデエW ┗;ヴキラ┌ゲ activities that need to be coordinated and
performed in order to deliver a ヮエ┞ゲキI;ノ ヮヴラS┌Iデざ ふIFMが ヲヰヰヶぶ;
others would say that classifying Dyson as a manufacturing company
in the UK is misleading.
In our study, we adopt a more strict definition of manufacturing
sector and only consider firms
whose manufacturing activities are based in the UK. By doing so,
we seek to contribute to the
understanding of the drivers of competitiveness of the UK
manufacturing firms, by exploring their
servitization strategies, often seen as the future of
manufacturing (Barclays/Mark Lee, 2011) . The
aim of this paper is to examine the extent to which
manufacturing firms based in the UK are engaged
in the provision of services to their customers, their
motivations for so doing, and the organizational
implications of providing services. The paper is structured as
follows. Section 2 provides a
discussion of servitization as a concept, its theoretical
underpinnings, and the existing evidence on
the extent of servitization amongst manufacturing firms based in
the UK and other advanced
economies. Section 3 outlines the methodology and provides a
preliminary analysis. Section 4
provides a detailed analysis of the survey results. And section
5 provides the conclusions.
4 Where firms have several establishments that are engaged in
different activities, with for example, on manufacturing
plant, two repair and maintenance establishments, and one
separate R&D site, this should be recorded in the Business
Structures Database, which is an establishment rather than a
firm level database. However, even here, only the main
activity at each establishment is recorded, so any repair and
maintenance undertaken at the manufacturing site will be
hidden in official records. 5 According to its company accounts
reported on the FAME database, D┞ゲラミげゲ ヮrimary SIC (2003) code is
3162
さM;ミ┌a;Iデ┌ヴWヴ ラa ラデエWヴ WノWIデヴキI;ノ Wケ┌キヮマWミデ ミラデ WノゲW┘エWヴW
Iノ;ゲゲキaキWSくざ
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4
2. SERVITIZATION: THE CONCEPT, THEORY AND EVIDENCE
All manufacturers need to engage in some services (such as
administration) to produce their
products, but these services may be for internal purposes only.
Servitization occurs when
manufacturing firms provide services to their clients, as part
of their value proposition. It includes,
aラヴ W┝;マヮノWが デエW キミゲデ;ノノ;デキラミ ラa ヮヴラS┌Iデゲが ラヴ デエWキヴ マ;キミデWミ;ミIWが
ラミ ; ヴWェ┌ノ;ヴ ラヴ けラミ SWマ;ミSげ H;ゲキゲく
Tエキゲ デヴWミS エ;ゲ HWWミ ┗;ヴキラ┌ゲノ┞ SWゲIヴキHWS ;ゲ けゲWヴ┗キデキ┣;デキラミげ
ふV;ミSWヴマWヴ┘W ;ミS ‘;S;が 1989; Baines et ;ノくが ヲヰヰΓぶが けゲWヴ┗キIW
キミa┌ゲキラミげ ふBヴ;┝が ヲヰヰヵき EェェWヴデが ヲヰヱヱぶが けデWヴデキ;ヴキ┣;デキラミげ ふLWラ ;ミS
PエキノノキヮヮWが ヲヰヰヱぶが ;ミS デエW ヮヴラ┗キゲキラミ ラa けヮヴラS┌Iデ-ゲWヴ┗キIW ゲ┞ゲデWマゲげ
ふMラミデが ヲヰヰヲき T┌ニニWヴ ;ミS TキゲIエミWヴが ヲヰヰヶき JラエミWゲデラミW Wデ ;ノくが ヲヰヰΒぶ ラヴ
けキミデWェヴ;デWS ゲラノ┌デキラミゲげ (Davies, 2004; Windahl et al., 2004; Hobday
et al., 2005; Davies et al., 2007). The concept ラa けゲWヴ┗キデキ┣;デキラミげ
is normally attributed to Vandermerwe and Rada (1988), who に
despite a lack of supporting evidence - ヮヴラIノ;キマWS デエ;デぎ
さServitization is happening in almost all industries on a global
scale. Swept up by the forces of deregulation, technology,
globalization and
fierce competitive pressure, ... マ;ミ┌a;Iデ┌ヴWヴゲ ;ヴW マラ┗キミェ マラヴW
Sヴ;マ;デキI;ノノ┞ キミデラ ゲWヴ┗キIWゲざ (Vandermerwe and Rada, 1988, pp. 315).
Quinn et al (1990) also argued that in order to gain
competitive advantage aキヴマゲ ゲエラ┌ノS マラ┗W けHW┞ラミS ヮヴラS┌Iデゲげ ;ミS
WマHヴ;IW けゲWヴ┗キIW-H;ゲWS ゲデヴ;デWェキWゲげ (c.f., Andersen and Narus,
1995).
Despite these calls, servitization received scant attention in
the mainstream management and
engineering literatures before the 2000s, but is now seen as a
means by which manufacturing firms
in high-cost locations, can differentiate themselves (Tukker and
Halen, 2003; Sawhney et al., 2004;
Davies et al., 2007; Baines et al., 2009).6 By placing a strong
emphasis on service, manufacturers, it is
argued, can build stronger relationships with their clients, and
so escape commoditisation and
pernicious price based competition. This transition is however
considered to be difficult, and may
even risk the survival of the firm (Neely, 2009), for it
ultimately involves ; ゲ┘キデIエ aヴラマ けマ;ニキミェ ヮヴラS┌Iデゲげ デラ けヮヴラ┗キSキミェ
ゲWヴ┗キIWげ, which ヴWケ┌キヴWゲ ; ゲエキaデ aヴラマ ; けェララSゲ Sラマキミ;ミデ ノラェキIげ and
mindset, to ; けゲWヴ┗キIW Sラマキミ;ミデ ノラェキIげ and mindset, and associated
changes in organizational architecture and the business model
(Normann & Ramirez, 1993; Vargo and Lusch, 2004). As
Benedettini and
IラノノW;ェ┌Wゲ ヮ┌デ キデが さDWノキ┗Wヴキミェ くくく ┗;ノ┌W ;SSWS ゲWヴ┗キIWゲ マW;ミゲ
SW;ノキミェ ┘キデエ ; ミW┘ ゲWデ ラa Iエ;ノノWミges for マ;ミ┌a;Iデ┌ヴキミェ マ;ミ;ェWヴゲざ
ふBWミWSWデデキミキ Wデ ;ノくが ヲヰヱヰが ヮく ヲヵぶく TエWゲW Iエ;ノノWミェWゲ ヴWノ;デWゲ デラ デエW
ゲラ I;ノノWS けゲWヴ┗キIW ヮ;ヴ;Sラ┝げが ┘エWヴWH┞ aキヴマゲ デエ;デ Sラ Wミェ;ェW in the
provision of services often perform less well に at least initially
- than otherwise similar firms that do not (Gebauer, et al., 2005;
Fang et al., 2008;
Neely, 2009). When fully developed, servitization is thought to
be associated with a business model
based on relationships and customer retention, rather than one
based transactions, competing on
product characteristics, and the efficiency of production.
That services form an increasing share of advanced economies is
not in doubt. And nor can there be
any doubt that manufacturing and services are closely
inter-twined and interdependent. For even if
production is the defining activity of a manufacturing company,
achieving a manufactured output
inevitably requires a much broader base of activities, involving
R&D, design, marketing, distribution,
ゲWヴ┗キIW ;ミS ゲ┌ヮヮラヴデざ ふSchmenner, 2009; Benedettini et al.,
2010).7 This does not mean, however, that the same company should
undertake all of these activities. They may instead be more
6 Much of the early literature focused on Product Service
Systems and was inspired by an environmental or ecological
agenda, rather than an economic or commercial agenda. 7 TエW ゲ;マW
;┌デエラヴゲ IラミゲキSWヴ デエ;デ さWケ┌;デキミェ マ;ミ┌a;Iデ┌ヴキミェ デラ ヮヴラS┌Iデキラミ エ;ゲ ノWS
デラ ヮWラヮノW デエキミニキミェ デララ ミ;ヴヴラ┘ノ┞ ;Hラ┌デ
┗;ノ┌W IヴW;デキラミ ;ミS ┗;ノ┌W ゲ┞ゲデWマゲくざ ふBWミWSWデデキミキ Wデ ;ノくが ヲヰ10, p.
18)
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5
efficiently undertaken by different organizations, or by
separate business units within the same
organization. Indeed, declining transaction costs has encouraged
increasing specialization and a
growth in the outsourcing of activities previously ┌ミSWヴデ;ニWミ H┞
マ;ミ┌a;Iデ┌ヴWヴゲ けキミ-エラ┌ゲWげ (Langlois, 2003). This is one reason for
the growth in services in the economy (Kakaomerlioglu and
Carlsson,
1999), and implies the provision of services by specialized
service providers is generally superior to
their provision by manufacturers.
However, the relative merits of specialization (focusing as far
as possible on manufacturing) or
integration (combining the production of products with the
provision of services) varies with
circumstance and technologies, which can change over time
(Langlois, 2003). The question, then is
ミラデが ┘エWデエWヴ け;aデWヴ ゲ;ノWゲげ H┌ゲキミWゲゲ ラヮヮラヴデ┌ミキデキWゲ exist,8 but
whether the manufacturer is in a strong position to capitalize on
these. If it is to be successful, servitization ultimately implies
finding and
developing complementarities between the production of goods and
the provision of services
(Teece, 1986; Milgrom and Roberts, 1990). Without these
complementarities, the manufacturer has
no innate advantages over third party, or independent, service
providers. Rolls Royce, for example,
has integrated production and service provision by integrating a
whole host of sensors into its
engines, which help Rolls Royce to predict when component are
likely to fail, and these components
can be replaced under preventive maintenance prior to failure,
and at a time convenient to the
airline customer, rather than upon failure, which will typically
occur at an inconvenient time, and in
an inconvenient place (The Economist, 2009). Meanwhile, an
apparently similar company,
Bombardier, which in the UK manufactures railway trains, has
struggled to grow its service business,
and indeed has seen some refurbishment and maintenance work
drain away to specialist companies
such as Transys, Wabtec, Hunslett-Barclay and Railcare.
Ultimately, the interesting question then is when do
manufacturers hold an advantage in the
provision of services, or (how) can they attain an advantage,
and when do independent businesses
or business units hold the advantage. In other words, when are
production and service activities
complementary economic activities best undertaken by the same
business? These are complex
issues, which we cannot fully examine here. The aim of this
paper is instead to shed light on the
extent to which manufacturers are engaged in the provision of
services, their motivations for so
doing, and to explore the organizational implications of this.
We now review the existing empirical
evidence on the extent to which manufacturers are engaged in
providing services.
The Existing Empirical Evidence
We know remarkably little about the extent to which
manufacturers provide services, or indeed the
extent to which predominantly service firms manufacture goods.
As mentioned earlier, this is
largely because firms and establishments are classified in
official statistics by their principal
economic activity: secondary and tertiary activities are often
hidden.9 The aggregate extent of non-
production activities within manufacturing is known to be
increasing, ┘エキノゲデ けゲエラヮ aノララヴげ ┘ラヴニ キゲ contracting. Less than half
of the workforce in UK manufacturing is now engaged in production.
Of
the other half, 15% is engaged in R&D, sales and marketing,
7% in distribution and logistics, and 28%
8 And indeed some pre-production business opportunities, such as
in design and development.
9 Sometimes secondary and further codes are provided, but very
often these do not cover the full range of activities
undertaken by the firm.
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6
in けsupport servicesげく “ラマW ラa デエWゲW ゲ┌ヮヮラヴデ ゲWヴ┗キIWゲ ;ヴW
キミデWヴミ;ノ ;Sマキミキゲデヴ;デキラミが H┌デ ラデエWヴゲ ;ヴW externally oriented.10 This
ゲエキaデ キミ デエW けマ;ミ┌a;Iデ┌ヴキミェげ labour force away from production is
understandable for two reasons. First, productivity improvements,
such as replacing labour with
capital, have tended to easiest in production itself, and
second, with the increased importation of
lower-value added components and sub-assemblies, the roles that
remain in the UK are increasingly
concentrated in non-production activities such as design,
management, R&D and customer support.
Because official statistics shed little light on the phenomenon,
the evidence base on the extent of
servitization is very largely based on surveys. One survey
conducted in 2007 by the Confederation of
British Industry (CBI, 2007) asked UK based manufacturers to
identify their three leading sources of
competitive advantage. This found that production and assembly
ranked highest, followed by
service provision, and design and development.11 The
significance of production and assembly was
however found to be declining, whilst the significance services,
including logistics and integration,
was rising. Two years later, a survey by the Engineering
Employers Federation (EEF, 2009) found the
same activities to be the most important sources of competitive
advantage amongst UK
manufacturers. The CBI and EEF surveys reflect broad trends に
and hint at complementariites between production and service
activities, but they do not provide evidence of servitization at
the
level of individual firms. Most existing academic studies of
servitization have instead examined case
studies of individual companies. By contrast, Neely (2009, see
also Gebauer, 2007; Antioco et al.,
2008; Fang et al., 2008) undertook a large scale analysis of the
extent of servitization amongst
manufacturers. Using the OSIRIS database (which, like the FAME
dataset we used for our survey, is
maintained by Bureau van Dijk), and by examining デエW
けSWゲIヴキヮデキラミ ;ミS エキゲデラヴ┞げ aキWノS aラヴ テ┌ゲデ ラ┗Wヴ ヱヰがヰヰヰ けマ;ミ┌a;Iデ┌ヴキミェ
aキヴマゲげ with at least 100 employees and incorporated in 23
countries,12 Neely found that almost 30% of manufacturing firms
report providing services, with a further 1.7% being
キSWミデキaキWS ;ゲ けヮ┌ヴW ゲWヴ┗キIWげ aキヴマゲ ┘キデエラ┌デ ヮヴラS┌Iデキラミ ;Iデキ┗キデキWゲ
ふSWゲヮキデW HWキミェ IラSWS ;ゲ manufacturers). Over two-thirds (68.7%)
were however classified as けヮ┌ヴW マ;ミ┌a;Iデ┌ヴキミェげ with no reported
services. けDesign and developmentげ, けsystems and solutionsげ,
けretail and distributionげ, and けmaintenance and supportげ were the
most widespread types of services provided.
Neely also found substantial differences between countries, with
58% of the manufacturing firms
incorporated in the United States offering services, compared
with just 2% of Chinese firms. He
found that a quarter of UK manufacturers were providing
services, a smaller proportion than
amongst German and US manufacturers. However, in a second study,
Neely and colleagues
(Neely et al., 2011) found that the extent of service provision
amongst UK based manufacturing
firms had increased to 40%. Also notable is that the extent of
servitization amongst Chinese
manufacturers was found to have increased to 19%. Yet overall,
the level of servitization in all
countries had not increased markedly, indicating that the growth
amongst UK and Chinese
manufacturers has been exceptional.
10
Interesting also are differences in educational attainment
between the workforce engaged in production, distribution
and trades within support services, amongst which just under
half had obtained an NVQ level 3 or above, with less than
one in ten holding a degree or equivalent, compared with
R&D, sales and marketing and professional support staff,
amongst whom nearly two thirds held an NVQ level 3 or above, and
nearly one third held a degree. 11
The other sources examined were research, logistics and
integration, brand and marketing, and sales. 12
Fラヴ W┝;マヮノWが デエW H┌ゲキミWゲゲ SWゲIヴキヮデキラミ aラヴ “キWマWミゲ ゲデ;デWゲ デエ;デ
デエ;デ aキヴマ キゲ さヮヴWSラマキミ;ミデノ┞ キミ┗ラノ┗WS キミ WノWIデヴラミキIゲ ;ミS WノWIデヴキI;ノ
WミェキミWWヴキミェが H┌デ ヮヴラ┗キSWゲ ; ┘キSW ┗;ヴキWデ┞ ラa Iラミゲ┌ノデキミェが マ;キミデWミ;ミIW
;ミS ラデエWヴ ゲWヴ┗キIWゲざく HWミIW “キemens in classified as a servitized
firm, specifically coded as engaged in consulting and
maintenance.
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7
Using trade or business descriptions in databases designed
primarily for other purposes (such as the
provision of financial information), may however severely
understate the true extent that
manufacturers provide services, not least because the data
provider has no particular reason to
provide a full picture of the activities of the firm. Other
scholars have used bespoke surveys to she
light on the extent of sertivization. Baines and colleagues
(2009) targeted 500 UK-based
manufacturing firms with turnovers in excess of £10 million.
They received 55 responses. Amongst
this small sample, the provision of services was near universal,
with over 80% of the firms providing
each of five services to customers: training, delivery, spare
parts, repair, and a customer helpdesk.
Other frequently provided services (i.e., provided by 60%+ of
the firms) included installation, labour,
spare parts remanufacture, preventive maintenance, and system
integration. Relatively infrequently
provided services (provided by
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8
generally very good. This sample represents just over 10% of the
original target population, or
ヱヱくヵХ キa デエW aキヴマゲ aラ┌ミS デラ エ;┗W けェラミW ;┘;┞げが ラ┌デ ラa H┌ゲキミWゲゲが
ラヴ ミラデ デラ HW Wミェ;ェWS キミ マanufacturing are excluded from the sampled
population. This response rate is comparable with those achieved
by
other, similar surveys.
Table 1 provides an overview of the sample of responses to the
survey. The firms are of various
sizes, fairly evenly divided between four size classes. Just
over half are independent firms, with 45%
being subsidiaries of larger company groups. Nearly 80% were
established before 1991, with only
5% having been established since 2001. The firms are also active
in a variety of industries, with
マ;IエキミWヴ┞が WノWIデヴキI;ノ ;ミS WノWIデヴラミキIゲ ;ミS デエW マキゲIWノノ;ミWラ┌ゲ
けラデエWヴ マ;ミ┌a;Iデ┌ヴキミェげ ;IIラ┌ミデキミェ aラヴ 70% of the sample. Table 2
provides further descriptive statistics on the variables we include
in the
modelling below. This shows that correlations between variables
are generally low, and there are no
problems of multicollinearity, as the highest Variance Inflation
Factor (VIF) amongst the variable is
2.63.
---- INSERT TABLE 1 ABOUT HERE ----
---- INSERT TABLE 2 ABOUT HERE ----
The questions and responses were all been coded in SPSS. Using
logistic regressions, we modelled
the response against the target population. This found that
whilst there is some variation in the
pattern of response, with lower response rates for transport
equipment firms (SIC 34 and 35), and
for firms based in Northern Ireland, overall there were no
statistically significant differences in the
propensity to respond by firm size (as measured by employment),
2 digit industry, or by region. The
model as a whole was not significant.13 On these criteria at
least, the sample is reasonably
representative of the population of firms from which it is
drawn. In the analysis that follows we use
the dataset as a simple sample, and no attempt is made to adjust
the sample to the population.
The survey asked the firms about their engagement in services.
We also examined the extent to
which they were engaged in services using two other approaches.
Firstly, using a methodology
similar to Neely (2009), we examined the trade descriptions
provided in the FAME dataset for
mentions of services of various types. For example, one company
is described as being engaged in:
さTエW キミゲデ;ノノ;デキラミが ヴWミデ;ノ ;ミS マ;キミデWミ;ミIW ラa WノWIデヴラミキI ゲWI┌ヴキデ┞
ゲ┞ゲデWマゲ ;ミS デエW マ;ミufacture and ゲ;ノW ラa ゲWI┌ヴキデ┞ ヮヴラS┌Iデゲくざ Tエキゲ
Iラマヮ;ミ┞ ┘;ゲ IラSWS ;ゲ HWキミェ Wミェ;ェWS キミ けキミゲデ;ノノ;デキラミ ゲWヴ┗キIWゲげが
けヴWミデ;ノ ゲWヴ┗キIWゲげが けマ;キミデWミ;ミIW ゲWヴ┗キIWゲげ ;ミS ゲ;ノWゲく B┞ Iラミデヴ;ゲデが
;ミラデエWヴ aキヴマが SWゲIヴキHWS ;ゲ HWキミェ Wミェ;ェWS キミぎ さThe manufacture of a
wide range of tooling, incorporating industrial diamond and other
superabヴ;ゲキ┗Wゲざが ┘;ゲ IラSWS ;ゲ ミラデ providing any services to
customers.
We coded the services described in the trade descriptions of the
256 firms into eight categories:
けSキゲデヴキH┌デキラミ ;ミS SWノキ┗Wヴ┞げ ふキミIノ┌Sキミェ ノラェキゲデキIゲぶが けヴWヮ;キヴ ;ミS
マ;キミデWミ;ミIWげが けふゲ┌ヮヮノ┞ ラaぶ ゲヮ;ヴW ヮ;ヴデゲげが けノW;ゲキミェげが けゲ┌ヮヮラヴデげが
けIラミゲ┌ノデキミェげが ;ミS ; マキゲIWノノ;ミWラ┌ゲ I;デWェラヴ┞ ラa け┗;ヴキラ┌ゲ ラデエWヴ
ゲWヴ┗キIWゲげく Iミ addition, we coded whether the firm was described as
being engaged in R&D, design and/or
development. Usually it was unclear whether these activities
were undertaken solely for internal
purposes, or whether they were made available to clients as
services. Similarly, sales and marketing
13
A second model used turnover for firm size rather than
employment. This found that larger firms were slightly less
likely
to respond, but again no significant differences in the pattern
of response were found by region or industry, and overall the
model was not statistically significant.
-
9
activities were identified and coded, and presumably these
activities were undertaken to promote
;ミS ゲWノノ デエW Iラマヮ;ミ┞げゲ ラ┘ミ product, but it is conceivable that
they could be applied to products produced by others, with the
surveyed firm acting as an agent or distributor.
---- INSERT FIGURE 1 ABOUT HERE ----
Our review of trade descriptions found that with R&D, design
and development (RDD) and sales and
marketing (S&M) all included, almost 80% of the firms were
identified as being engaged in services
(Figure 1). With RDD and S&M excluded, the proportion of
firms identified as engaged in services
fell to just under half, with distribution and delivery being
the most widespread, followed by repair
and maintenance services, and installation services.
Interestingly the proportion of firms identified
as providing at least one service (excluding RDD and S&M)
exceeds the 40% found by Neely et al.げゲ (2011) analysis of UK
manufacturing firms found on the OSIRIS database.
Secondly, we reviewed the websites of each of the businesses,
and found websites for all but two of
the firms. We coded two デエキミェゲく Fキヴゲデが ┘エWデエWヴ デエWヴW ┘;ゲ ;
ヮヴラマキミWミデ ゲWヴ┗キIW ラヴ ゲ┌ヮヮラヴデ けH┌デデラミげ on the home page, which, if
clicked, took the viewer to a page outlining the services or
product
support provided by the firm. In the absence of this, we coded
whether or not the firm mentioned
providing services, or having a service orientation. No attempt
was made to code the particular
services provided.
We found that almost half (120: 47%) the firms had the provision
of services prominently displayed
ラミ デエWキヴ キミデWヴミWデ エラマW ヮ;ェW ふキくWくが ┘キデエ ; け“Wヴ┗キIWげ ラヴ け“┌ヮヮラヴデげ
IノキIニ;HノW さH┌デデラミざが デ;ニキミェ デエW ┗キW┘Wヴ to a special section). And
almost another third (79: 31%) mentioned services as being part of
what
they provide. We found no reference to services on the remaining
websites (55: 22% of companies).
This indicates that at least 80% of the firms provide services
to customers, considerably more than
was revealed by our ふ;ミS NWWノ┞げゲぶ analysis of trade
descriptions. We now turn to the survey results, the analysis of
which constitutes the empirical heart of this paper.
4. ANALYSIS OF THE SURVEY RESULTS
The Extent of Service Provision
Our survey asked the firms whether or not they provided 15
different services. All but two of the
firms reported providing at least one of these, with the most
widespread being delivery services,
whilst the least widespread was product leasing, with or without
operatives. Interestingly, our けデラヮ aキ┗Wげ ゲWヴ┗キIWゲ are the same as
those identified by Baines et al. (2009), i.e., training, delivery,
spare parts, repair, and customer helpdesks. Like Baines et al, we
also find widespread provision of
installation services, but less provision of systems
integration, preventive maintenance and
condition monitoringく Tエキゲ マ;┞ HW S┌W デラ デエW ェWミWヴ;ノノ┞ ノ;ヴェWヴ
ゲキ┣W ラa aキヴマゲ キミ B;キミWゲ Wデ ;ノげゲ ゲ;マヮノW. By contrast, we find
greater provision of financial services, and more consulting. The
survey results
indicate that all of the main services identified in the trade
descriptions were much more frequently
provided than is indicated by the trade descriptions. In other
words, trade descriptions under record
service provision.
---- INSERT FIGURE 2 HERE ----
-
10
To analyse which firms provided these services, and which did
not, we estimated a series of logistic
regressions. In each model, we included:
[Firm size] the size of the firm, measured by the natural log of
its employment. [Sector] ; ゲWデ ラa キミSキI;デラヴ ふラヴ けS┌ママ┞げぶ ┗;ヴキ;HノWゲ
aラヴ ゲWIデラヴ ラa ;Iデキ┗キデ┞が ┘キデエ けラデエWヴ
manufact┌ヴキミェげ acting as the reference sector. [Ownership] an
indicator variable identifying subsidiary firms owned by others
(with
independent firms acting as the reference group).
[Age] an indicator variable for relatively young firms
established after the year 2000. [Type of Product] an indicator
variables for firms that manufactured stand alone appliances
or equipment, and another for those that manufactured systems,
often tailored to particular
customers needs, that combine a large number of components
(here, the manufacture of
けIラマヮラミWミデゲ ラヴ ヮ;ヴデゲげ ┘;ゲ デエW ヴWaWヴWミIW I;デWェラヴ┞ぶく [Unit Cost of
Product] a set of indicator variables relating to the unit cost of
the firms main
ヮヴラS┌Iデゲく Tエキゲ ┗;ヴキWS aヴラマ けノWゲゲ デエ;ミ グヱヰ ヮWヴ ┌ミキデげ ふデエW
ヴWaWヴWミIW I;デWェラヴ┞ぶ デエヴラ┌ェエ デラ けラ┗Wヴ グヱヰヰがヰヰヰ ヮWヴ ┌ミキデげが ┘キデエ aラ┌ヴ
キミデWヴマWSキ;デW I;デWェラヴキWゲく
[Main Customer Dependency] an indicator variable for firms for
which their largest customer accounted for at least half their
total revenues. And a second indicator variable was
included for other firms whose five largest customers accounted
for half or more of their
income.
[Competition] an indicator variable for firms that claimed to
have no more than two competitors. A second indicator variable for
firms with over 10 competitors. Firms with 3 to
10 competitors were the reference group.
We estimated individual regressions for thirteen of the
services, with an additional conflated model
for leasing with or without operatives. In four cases に
delivery, consulting, managed services, and leasing - the overall
models were not significant, meaning that the variables outlined
above failed to
explain any of the variation in whether or not the firms
provided these services. Because these
models were insignificant, we do not therefore report their
results. Models for ten of the services
were significant, meaning that some of the variation in whether
or not firms provide these services
can be attributed to these variables.
---- INSERT TABLE 3 HERE ----
The results are reported in Table 3. The figures reported are
the exponents of the coefficients,
which means that if there is no significant influence of the
characteristics then this number is one, or
not significantly different from one. If firms with this
characteristic are more (less) likely to provide
the service in question then the figure will be greater (less)
than one. For example, firm size and the
five largest customers accounting for over half of total sales
have no significant impact on the
provision of spares parts or consumables (Exp(B) = 0.99 and 1.06
respectively). However, firms
making appliances and systems are roughly three times as likely
to provide spare parts or
consumables as firms that only produce components or parts
(Exp(B) = 3.31 and 2.83 respectively).
Meanwhile, young firms, and those with fewer than three
competitors, are much less likely than
otherwise similar firms to provide spares or consumables (Exp(B)
= 0.14 and 0.25 respectively).
-
11
Oliva and Kallenberg (2003) distinguish between product and
client-process oriented services, and
drawing on this distinction we have grouped the models into
those that relate primarily to the
product and its maintenance (spares, repair & maintenance on
demand, scheduled maintenance,
condition monitoring and preventive maintenance, and regular
product or systems upgrades) and
those that relate to helping the client use the product or
system (training, installation, and systems
integration), as well as more general services (help desk and
financial services).
These models, which implicitly assume each of these services is
provided independently of the
others, show a variety of factors influence the provision of
services amongst manufacturing firms.
The nature of the product is often important. Firms that make
stand-alone appliances are three
times more likely than those that make components to provide
spares or consumables and a
customer helpline, and twice as likely to provide financial
services such as insurance and warranties.
Those that manufacturer systems are at least 2.5 times more
likely than those that make
components to provide all of these services except a customer
helpline and financial services. They
are roughly seven times more likely to provide systems
integration services. The sector of
production also matters, with metal product firms being less
likely to provide most of these services.
Most probably, this relates to the robust and static nature of
most metal products, such that they
require little after-sales servicing. Electrical and electronics
firms are three times more likely to
provide systems integration services, and twice as likely to
provide regular product or systems
upgrades. Instruments companies are four times more likely to
provide regular upgrades. The cost
of the product (which probably reflects its complexity), has a
strong influence on whether or not the
firms provide almost all of these services, the two exceptions
being a customer helpline and financial
services. With all the other services the manufacturers of the
most expensive products are several
times more likely to provide the service than manufacturers of
the least expensive products. This
stands to reason, as low cost product are typically discarded
and replaced when worn out or
damaged, whereas expensive equipment is repaired and maintained.
Generally the provision of
services increases incrementally with the cost of the product.
This is true of all services except
customer helplines and financial services, and spares and
consumables, the provision of which
appears most widespread amongst producers of medium-cost
products. This suggests that whilst
the customer or a third party often carry out repairs on
mid-cost products, the manufacturer
typically provides repairs and maintenance on the highest cost
equipment.
Firms that are highly dependent on a small number of customers,
and especially one customer, seem
to be less likely to provide some of these services, including
scheduled maintenance services,
training, installation and set-up services, systems integration
and a customer helpline. These firms
are however more likely to provide spare parts and consumables.
We had not anticipated these
findings, and one possible interpretation of them is that these
firms are relatively weak. With the
possible exception of spares, there is no evidence that
customers in powerful positions are forcing
manufacturers to provide additional services, which is sometimes
suggested (Spring and Araujo,
2009).
Meanwhile, firms with very few competitors are less likely to
provide spares or regular product or
systems upgrades, but are more likely to engage in systems
integration. Indeed, this may be
endogenous, as engaging in systems integration may limit
competition. Firms that face an unusually
high number of competitors are more likely to provide spare
parts or consumables, but do not
otherwise differ from those with a normal number of
competitors.
-
12
Perhaps surprisingly, firm size has very little effect. We had
anticipated that larger firms would tend
to provide more services, but firm size is only significant for
the provision of regular product or
systems upgrades. It is thought that smaller firms are not
disadvantaged in the provision of services
(which are typically difficult to scale up), and our findings
support this conclusion.
Firm age and ownership also had very little effect. With respect
to ownership, the only significant
difference found was that subsidiary firms are less likely to
provide systems integration. Again, this
implies that independent firms are not generally disadvantaged
in providing services relative to firms
that are part of larger groups. With regard to age, we found
that young firms were much more likely
to be engaged in systems integration, and much less likely to
provide spare parts. These findings are
surprising, and may indicate that the young firms in our sample
are unusual. Young firms were not
more or less likely to provide any of the other services.
As mentioned earlier, the analysis reported above which is based
on a set of individual logistic
regressions implicitly assumes that the provision of each of
these services is independent of the
provision of the others. Instead, firms might provide several
services which complement one
another. To explore this, we undertook multiple correspondence
analysis on the incidence of the
various services. If services are closely related they should
appear close together, and the various
けデ┞ヮWゲげ ラa ゲWヴ┗キIWゲ ゲエラ┌ノS Iノ┌ゲデWヴ デラェWデエWヴ ふTWデエWヴ ;ミS T;テ;ヴが
ヲヰヰΒぶく Wエキノゲデ デエis analysis did show that the services are more or
less related to each other, it did not reveal any strong clusters
of
ゲWヴ┗キIWゲ H┞ けデ┞ヮWげが ゲ┌Iエ ;ゲ デエW けデ┞ヮWゲげ キSWミデキaキWS H┞ Oノキ┗; ;ミS
K;ノノWミHWヴェ ふヲヰヰンぶく14 Instead, pursuing the assumption of
independence, we calculated the probability that a firm would
provide any
number of these services between 0 and 15, based on the naive
assumption that the provision of
each is independent of the other. We then compared this with the
observed distribution based on
the count of services provided. This revealed that デエW けW┝ヮWIデWS
ミ┌マHWヴげ ラa ゲWヴ┗キIWゲ キゲ ;ヴラ┌ミS seven, and that many firms provide
fewer than this, whilst others provide more than this. We then
classified the firms into three groups: those providing no or
feweヴ デエ;ミ けW┝ヮWIデWSげ ゲWヴ┗キIWゲ ふキくWくが ヰ デラ ン ゲWヴ┗キIWゲき Nく Э ヴΑ
ふヱΒくヶХぶぶき デエラゲW ヮヴラ┗キSキミェ マラヴW デエ;ミ デエW けW┝ヮWIデWSげ ミ┌マHWヴ ラa
ゲWヴ┗キIWゲ ふキくWくが ヱヰ デラ ヱヵき Nく Э Αン ふヲΒくヵХぶぶき ;ミS デエラゲW ヮヴラ┗キSキミェ
;ヴラ┌ミS デエW けW┝ヮWIデWSげ ミ┌マHWヴ ふキくWくが ヴ デラ Γき Nく Э ヱンン (52.6%)).
Later in the paper we examine the factors that distinguish those
with no or limited service
provision and those with extensive service provision, from those
in the middle.
Motivations: Why Do Firms Provide Services?
Another interesting question is why do firms provide services?
and the survey asked the
respondents about this. Specifically, we ;ゲニWS さHラ┘ キマヮラヴデ;ミデ
;ヴW デエW aラノノラ┘キミェ ヴW;ゲラミゲ aラヴ ┞ラ┌ヴ ヮヴラ┗キゲキラミ ラa ヮヴラS┌Iデ ゲ┌ヮヮラヴデ ;ミS
ゲWヴ┗キIWゲざが ┘キデエ デエキヴデWWミ ゲデ;デWマWミデゲ デエWミ ヮヴラ┗キSWSが ┘エキIエ デエW
respondents scored on a 5-ヮラキミデ ゲI;ノW HWデ┘WWミ けラa no importanceげ
;ミS けIヴ┌Iキ;ノげ (Figure 4). Six of these motivations can be
considered aggressive or offensive reasons (improving understanding
of
┌ゲWヴゲげ ミWWSゲき エWノヮキミェ デラ SキaaWヴWミデキ;デW デエW ラaaWヴき キミIヴW;ゲキミェ
ラヮヮラヴデ┌ミキデキWゲ aラヴ I┌ゲデラマキゲ;デキラミき increasing opportunities for
cross-selling; increases total turnover; increases
profitability),15 whilst
five others can be considered defensive (required to comply with
regulations; necessary because key
14
i.e., product-ラヴキWミデWS ゲWヴ┗キIWゲ ;ミS IノキWミデゲげ ヮヴラIWゲゲ-oriented
services, as well those that are transactional versus those that
are relational. 15
PヴキミIキヮ;ノ CラマヮラミWミデゲ Aミ;ノ┞ゲキゲ aラヴ デエW けOaaWミゲキ┗W “キ┝げ ヮヴラS┌IWゲ ;
ゲキミェノW IラマヮラミWミデ ゲラノ┌デキラミが ┘キデエ ;ミ EキェWミ┗;ノ┌W ラa ンくヴΒが which
accounts for 58% of the variance. Individual item loadings range
between 0.73 and 0.80. The Cronbach also for this
set is 0.85.
-
13
customers require them; increase customer loyalty; helps tie
customers in; and increases the
stability of turnover).16 Two environmental or ecological
reasons were also included (extends the
life of older products; has environmental or ecological
benefits), reflecting the fact that the early
literature on product-service-systems (PSS) had strongly links
to ecological motivations (Mont, 2002;
Tukker and Tischner, 2006).
---- INSERT FIGURE 3 HERE ----
Interestingly, the defensive motivations tended to be identified
as more significant than the
ラaaWミゲキ┗W マラデキ┗;デキラミゲが ┘キデエ デエW けenvironmentalげ マラデキ┗;デキラミゲ ノWゲゲ
キマヮラヴデ;ミデ ゲデキノノく However, further analysis showed that firms tended
to provide services for a mix of offensive and defensive
reasons
(with the correlation between the scores on the two sets of
components being 0.8).
Allowed to associate freely, an exploratory Principal Components
Analysis of these responses
identified three components with Eigenvalues greater than one.
The first of these (Motivation PC1)
relates primarily to the impact of offering services on the
business itself, including items such as
increasing turnover, increasing profitability, increasing the
stability of income, and providing
opportunities to cross-sell. The second (Motivation PC2) is
related to engaging with customers に increasing customer loyalty,
understanding of customers, and increasing the opportunities
for
customization and the capacity to differentiate the firms offer.
The third component (Motivation
PC3) was weaker, and is related to complying with regulations
and ecological benefits.
---- INSERT TABLE 4 HERE ----
Organizational Arrangements for Service Provision
We also asked about the organizational arrangements associated
with providing services. It is
sometimes argued that the provision of services requires
different organizational arrangements
from those required to produce physical products. Oliva and
Kallenberg (2003, p. 161), for example,
ゲデ;デWぎ さTヴ;ミゲキデキラミキミェ aヴラマ ヮヴラS┌Iデ マ;ミ┌a;Iデ┌ヴWヴ デラ ゲWヴ┗キIW
ヮヴラ┗キSWヴ Iラミゲデキデ┌デWゲ ; マ;テラヴ マ;ミ;ェWヴキ;ノ challenge. Services require
organizational principles, structures and processes new to the
product
manufacturer. Not only are new capabilities, metrics and
incentives needed, but also the emphasis
ラa デエW H┌ゲキミWゲゲ マラSWノ Iエ;ミェWゲ aヴラマ デヴ;ミゲ;Iデキラミ デラ ヴWノ;デキラミゲエキヮ
H;ゲWSざく
---- INSERT FIGURE 5 HERE ----
Figure 5 shows the extent to which the firms agreed or disagreed
that they had various
organizational arrangements related to providing services.17
Most respondents agreed that there
was close communication between their services activities and
production, whilst around half: 1.
16
PヴキミIキヮ;ノ CラマヮラミWミデゲ Aミ;ノ┞ゲキゲ ラa デエW けDWaWミゲキ┗W Fキ┗Wげ ヮヴラS┌IWゲ ;
ゲキミェノW IラマヮラミWミデ ゲラノ┌デキラミが ┘キデエ ;ミ EキェWミ┗;ノ┌W ヲくンンが ┘エキIエ ;IIラ┌ミデゲ
aラヴ ヴΑХ ラa デエW ┗;ヴキ;デキラミく Wキデエ デエW W┝IWヮデキラミ ラa さAざ ふヴWケ┌キヴWS デラ
Iラマヮノ┞ ┘キデエ ヴWェ┌ノ;デキラミゲぶが all component ノラ;Sキミェゲ ;ヴW HWデ┘WWミ ヰくΑヱ
;ミS ヰくΑヵ ふAげゲ ノラ;Sキミェ キゲ ヰくンヶぶく TエW CヴラミH;Iエ ;ノヮエ; aラヴ デエキゲ ゲWデ キゲ
ヰくヶヶが ┘エキIエ キゲ デララ ノラ┘く ‘Wマラ┗キミェ さAざ キミIヴW;ゲWゲ デエW CヴラミH;Iエ ;ノヮエ;
デラ ヰくΑンく A ゲキミェノW IラマヮラミWミデ キゲ ;ェ;キミ aラ┌ミS ふEキェミW┗;ノ┌W Э ヲくヲヴぶが
;IIラ┌ミデキミェ aラヴ 56% of the variance. Item loadings range from 0.70
to 0.78. 17
WW ;ノゲラ ;ゲニWS デエW ヴWゲヮラミSWミデゲ ┘エWデエWヴ デエW┞ ;ェヴWWS ラヴ Sキゲ;ェヴWWS
┘キデエ デエW ゲデ;デWマWミデ デエ;デ デエWキヴ aキヴマ エ;S け; IノW;ヴノ┞ SWaキミWS ゲデヴ;デWェ┞
aラヴ ゲWヴ┗キIW ヮヴラ┗キゲキラミげ ふヶヰХ ;ェヴWWSき ヱヵХ Sキゲ;ェヴWWSき ヲヵХ ┘WヴW
ミW┌tral) and that けゲWヴ┗キIWゲ ;ヴW ; ニW┞ ヮ;ヴデ ラa デエW ┗;ノ┌W ヮヴラヮラゲキデキラミ
ラaaWヴWS デラ I┌ゲデラマWヴゲげ ふΑヲХ ;ェヴWWSき ヱヰХ Sキゲ;ェヴWWSき ヱΒХ ┘WヴW
neutral)
-
14
agreed that they had a dedicated sales force and technicians
dedicated to services activities, 2. that
their service personnel were in near continuous communication
with customers, and 3. That their
service personnel were trained and empowered to offer services
actively to customers. Only a
minority of firms had different incentives and rewards for their
service personnel compared with
their production personnel, or had given their services
organization its own profit and loss
responsibility. Examined by Principal Components Analysis, these
answers load onto a single
component with an Eigenvalue of 4.4. This accounted for 55% of
the variance in the data, and item
loadings varied from 0.61 to 0.82. TエW CヴラミH;Iエげゲ ;ノヮエ; aラヴ デエW
ゲWデ ラa Wキェエデ キデWマゲ ┘;ゲ ヰくΒΒく
Modelling the Extent of Service Provision
We now model the extent of service provision. As outlined
earlier, we classified the firms in our
ゲ;マヮノW キミデラ デエヴWW ェヴラ┌ヮゲぎ デエラゲW デエ;デ ヮヴラ┗キSW aW┘Wヴ デエ;ミ デエW
けW┝ヮWIデWS ミ┌マHWヴげ ラa ゲWヴ┗キIWゲ ふキくWくが ヰ デラ ンぶき デエラゲW デエ;デ ヮヴラ┗キSW
;ヴラ┌ミS デエW けW┝ヮWIデWS ミ┌マHWヴげ ふキくWくが ヴ デラ 9), and those extensive
service ヮヴラ┗キSWヴゲ デエ;デ ヮヴラ┗キSW マラヴW デエ;ミ デエW けW┝ヮWIデWS ミ┌マHWヴげ ラa
ゲWヴ┗キIWゲ ふキくWくが ヱヰ デラ ヱヵぶく O┌ヴ ;キマ キゲ デラ uncover the factors that
distinguish firms that provide few and many services, from those in
the
マキSSノW デエ;デ ヮヴラ┗キSW ; けミラヴマ;ノげ ミ┌マHWヴ ラa ゲWヴ┗キIWゲく
We build the models incrementally, starting with the structural
characteristics of the firms: i.e., their
sector of activity, size, age and independence. Four sectors are
separately identified with dummy
variables, with rubber and ヮノ;ゲデキIゲ マ;ミ┌a;Iデ┌ヴキミェ IラマHキミWS キミ
┘キデエ けラデエWヴ マ;ミ┌a;Iデ┌ヴキミェげ ;ゲ デエW reference category. Size is
measured by the natural log of employment (including working
directors). New firms, established after the year 2000, are also
identified with a dummy variable.
AミS ノ;ゲデノ┞ デエW aキヴマゲ け;┌デラミラマ┞げ キゲ I;ノI┌ノ;デWSく Tエキゲ キゲ SWヴキ┗WS
aヴラマ ; ゲ┌ヴ┗W┞ ケ┌Wゲデキラミ (inspired by Birkinshaw et al., 1998) with
four items, each on a five point scale between strongly agree
and
disagree, which asked subsidiary firms the extent to whiIエ デエW
aキヴマゲげ マ;ミ;ェWマWミデ デW;マ エ;S a┌ノノ authority to decide on: 1. Changes
to product design and engineering; 2. Outsourcing or sub-
contracting of production; 3. Switching to a new manufacturing
process; and 4. Adding product
support or services to the firmげゲ ヮラヴデaラノキラ ラa ;Iデキ┗キデキWゲく
Principal components analysis found these items loaded onto a
single component, with an Eigenvalue of 2.8 and which accounted for
69% of
the variance in the data. Item loadings ranged from 0.78 to
0.87. TエW CヴラミH;Iエげゲ ;ノヮエ; for the set of four items was 0.85. We
therefore summed these items and rescaled them such that if the
respondent strongly agreed with all four this was coded 1, and
if the respondent strongly disagreed
with all this was coded 0. The mean score amongst subsidiaries
is 0.87. Because independent firms
are autonomous by definition, these were assigned an autonomy
score of 1.
---- INSERT TABLE 5 HERE ----
Model 1 with only these structural characteristics found nothing
statistically significant that
Sキゲデキミェ┌キゲエWS aキヴマゲ ┘キデエ ミラっノキマキデWS ゲWヴ┗キIWゲ aヴラマ デエラゲW ┘キデエ ;
けミラヴマ;ノげ ゲWヴ┗キIW ラヴキWミデ;デキラミく18 Several factors distinguished firms
with an extensive portfolio of services, including being
machinery,
instruments or electrical/electronics manufacturers, and having
a high level of autonomy. There was
also some indication that young firms are more likely to provide
several services (Table 5).
18
The strongest evidence, at 12% significance, was that
instruments manufactures are less likely to provide
no/few services.
-
15
In Model 2 we added in the type of products manufactured に i.e.,
dummy variables for the manufacture of appliances and of systems,
with the manufacture of components acting as the
ヴWaWヴWミIW I;デWェラヴ┞く AミS ; ゲWデ ラa S┌ママ┞ ┗;ヴキ;HノWゲが ヴ;ミェキミェ ┌ヮ デラ
けラ┗Wヴ グヱヰヰがヰヰヰげが ヴWaノWIデキミェ SキaaWヴWミデ ┌ミキデ ヮヴキIWゲ aラヴ デエW aキヴマげゲ
マ;キミ ヮヴラS┌Iデく Tエキゲ revealed that systems manufacturers were around
half as likely to provide no/few services, whilst firms providing
products with mid-range unit
costs (specifically £1,000 to £10,000) were much less likely to
provide no/few services. Again, there
was stronger evidence distinguishing firms with extensive
service portfolios, with systems
manufacturers and high cost goods manufacturers being much more
likely to provide 10 or more
services.
In Model 3 we added in the extent to which the firms dependent
on one or a few customers, and the
extent to which they face many or few competitors. With respect
to customers, we identified with a
dummy variable those firms which stated that their largest
customer accounted for at least half of
their total income (N. = 19), and (excluding these), used a
second dummy variable to identify firms
that stated their five largest customers accounted for at least
half their total income (N. = 85). We
;ノゲラ ┌ゲWS S┌ママ┞ ┗;ヴキ;HノWゲ デラ キSWミデキa┞ デエラゲW aキヴマゲ デエ;デ Iノ;キマWS
デラ エ;┗W ミラ マラヴW デエ;ミ デ┘ラ けSキヴWIデ competitors to their core
businessげ ふNく Э ヲヴぶが ;ミS デエラゲW aキヴマゲ デエ;デ Iノ;キマWS デラ エ;┗W マラヴW デエ;ミ
ヱヰ direct competitors (N. 36). Most firms (N. = 194) claimed to
have between 3 and 10 direct
competitors. Our analysis found however that neither customer
dependence nor the extent of
competition had any significant impact on the extent of the
service offered by the firms.
In Model 4a, we added in the principal component scores
associated with the motivations for
providing services. Here, Motivation PC1 relates primarily to
the impact of offering services on the
business itself, including items such as increasing turnover,
profitability, the stability of income, and
providing opportunities to cross-sell; Motivation PC2 relates to
engaging with customers に increasing customer loyalty,
understanding of customers, etc.; whilst Motivation PC3 is weaker,
but relates to
complying with regulations and ecological benefits. We find that
none of these motivations is
associated with having an extensive portfolio of services, but
the first two are significantly associated
with offering services: firms which score highly on these
components are much less likely to provide
no or few services.
In Model 4b, we substitute the principal components associated
with the motivations for providing
services with the principal component associated with
organizational arrangements for service
provision. The results show that scoring highly on this
Arrangements PC significantly reduces the
probability that the firms will provide no or few services, and
significantly enhances the probability
that it will engage in extensive service provision.
Finally, in Model 5, we reintroduce the three dummy variables
for the Motivations, whilst retaining
that for the Arrangements. The reintroduction of the Motivations
PC dummies removes the
significance on the Arrangements dummy with respect to the
provision of no/few services, but
(unsurprisingly) Arrangements remains important for the
provision of an extensive set of services.
Motivations are not significant for the provision of an
extensive set of services, but Motivation PC2
(enhancing customer engagement) is important for the provision
of some service (i.e. it is negatively
related to the provision of no or few services). Meanwhile, we
find that customer dependence and
the extent of competition has no significant impact on the
extent of service provision, whilst
structural factors (sector, size, age, autonomy) are generally
more important for distinguishing
-
16
between firms that provide many services (from those that
provide around the けW┝ヮWIデWS ミ┌マHWヴげぶ than for distinguishing
between those that provide none or very few (from those that
provide
;ヴラ┌ミS デエW けW┝ヮWIデWS ミ┌マHWヴげぶく A┌デラミラマ┞ ゲWWマゲ デラ HW ヮ;ヴデキI┌ノ;ヴノ┞
キマヮラヴデ;ミデ aラヴ デエW ヮヴラ┗キゲキラミ ラa an extensive range of services,
which is also higher amongst young firms, and those producing
machinery, electrical and electronic products and (more
marginally) instruments.
5. CONCLUSIONS
Servitization, the provision of services by manufacturing firms
to their customers, and a shift from
けマ;ニキミェ ;ミS ゲWノノキミェ ヮヴラS┌Iデゲげ デラ ヮヴラ┗キSキミェ IラマHキミ;デキラミゲが ラヴ
ヮ;Iニ;ェWゲが ラヴ けキミデWェヴ;デWS ゲラノ┌デキラミゲげが of products and services, has
been advocated for some time as a means by which manufacturers
in
high cost locations such as the United States and Western Europe
can compete in an era of
globalization and against lower-cost producers in Eastern Europe
and East Asia. However,
surprisingly little is known about the extent to which
manufacturers in advanced economies such as
the UK provide services, their motivations for so doing, or the
organizational implications of
providing services. This paper therefore contributes significant
evidence where previously there was
little.
Based on a bespoke survey of manufacturing firms, we have found
that almost all manufacturers
provide at least some services to their clients. The extent of
service provision is also substantially
greater than that revealed by the analysis and coding of trade
descriptions (Neely, 2009; Neely et al.,
2011). The most commonly provided service is delivery of
products, followed by the provision of
spare parts and consumables, a customer helpline or support
desk, and product or systems training.
Interestingly, these same services were also found to be the
most widespread in a previous, but
much smaller survey, undertaken by Baines and colleagues
(2009).
In relation to their motivations for providing services, firms
tend to cite both defensive and offensive
reasons simultaneously. Defensive reasons include tying
customers in, and increasingly the stability
of turnover, whilst offensive reasons include learning about
customer needs and increasing turnover
and profitability. Firms also vary substantially in the extent
to which they have implemented
organizational arrangements thought favourable to the provision
of services, and establishing a
service oriented culture.
We examined the factors that distinguish between firms that
provided no or few services, and those
providing many services, both compared with firms providing an
average number. Generally
speaking, manufacturers of high value products, of systems, and
to a lesser extent of appliances,
were much more likely to provide services than were
manufacturers of components. This is
understandable, as cheap goods are normally discarded and
replaced, rather than repaired and
maintained, which is the case with expensive, complex equipment.
Another factor here is likely to
be the scale of the market. Because there is strong demand for
low cost products, the scale of the
market will tend to be large, encouraging an increased division
of labour, with third party service
providers often in a stronger position to provide services than
the original manufacturer.
Manufacturers of machinery were also more likely to provide many
services, which is
understandable due to the dynamic nature of machines.
Interestingly, the number of competitors
did not generally influence the extent of service provision, and
nor did high dependency on one or a
-
17
few customers. We did find that firms motivated to learn more
about their customers tended to be
more likely to provide at least an average number of services,
whilst those that had implemented
service oriented arrangements tended to provide the most
extensive range of services.
All told, this paper sheds considerable light on the provision
of services by manufacturing firms. This
understanding provides a valuable platform upon which to
understand strategies and managerial
choices. Too often, in our view, bold or sweeping statements are
made, such as this one:
さIミ デラS;┞げゲ H┌ゲキミWゲゲ ノ;ミSゲI;ヮWが マ;ミ┌a;Iデ┌ヴWヴゲ ;ヴW キミ┗Wミデラヴゲが
キミミラ┗;デラヴゲが ゲ┌ヮヮノ┞-chain managers and service providers, as well as
producers .... Firms in the UK must respond
[to the competitive threat of China, etc.] by constantly
adapting their business
models, product offerings, processes and service systems in
order to stay competitive
H┞ SWノキ┗Wヴキミェ エキェエWヴ ┗;ノ┌W マ;ミ┌a;Iデ┌ヴキミェくざ ふBenedettini et al,
2010, p. 6),
Change comes at a price に it has costs as well as benefits. It
makes considerable sense for manufacturers of expensive systems to
have and to develop a services strategy, but the same
strategy would not be sensible for a manufacturer of low cost
components, or highly durable metal
products. But the provision of services can also have spillover
benefits. For example, by engaging in
installation and training the manufacturer can gain considerable
insight into how its products are
used, which can lead to further product improvements (Orr,
1996). The key here is to exploit the
complementarities that can arise when offering both products and
services. In this context, it may
even be sensible to provide services at a loss in order to gain
market intelligence. A full
consideration of these matters is beyond the scope of the
present paper, as is an analysis of the
performance implications of providing services, which we will
address in a companion paper.
-
18
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キミデWェヴ;デWS ゲラノ┌デキラミゲぎ Iエ;ヴ;IデWヴキゲデキIゲ ;ミS キマヮノキI;デキラミゲげ European
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Dキ┗Wヴゲキa┞キミェ キミデラ “Wヴ┗キIWゲぎ A CラミIWヮデ┌;ノ ;ミS EマヮキヴキI;ノ AゲゲWゲゲマWミデざが
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21
Figure 1
Figure 2
79%
25%
68%
30%
47%
28%
10% 8% 3% 2% 1% 1%
4%
0%
20%
40%
60%
80%
Services reported in Trade Descriptions
94%
78% 74% 74%
69%
60% 59%
44% 42% 37% 35%
29%
12% 11%
3%
Extent of Service Provision
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22
Figure 3
0%
10
%
20
%
30
%
40
%
50
%
60
%
70
%
80
%
90
%
10
0%
Helps Differentiate Our Offer
Aids Understanding Customer Needs
Increases Total Turnover
Increases Firm's Profitability
Increases Opportunities to Cross-Sell
Enables Increased Customisation
Key Customers Require Them
Increases Customer Loyalty
Helps Tie Customers In
Improves the Stability of Tunover
Required to comply with regulations
Extends Life of Older Products
Has Environmental Benefits
Off
en
sive
D
efe
nsi
ve
Ne
utr
al
Motivations for Providing Services
No Importance Minor Importance Quite Important Very Important
Crucial
-
23
Figure 5
0%
10
%
20
%
30
%
40
%
50
%
60
%
70
%
80
%
90
%
10
0%
In Close Communications with Production
Have Dedicated Service Salesforce & Technicans
In Close Communications with Customers
Service Personnel offer Services Actively
Service Operations are Distinct & Separate
IT System used to closely Monitor Services
Service Personnel Rewarded Differently
Service Organization has own P&L Responsibility
Arrangements for Service Provison
Strongly Disagree Disagree Neither Agree Strongly Agree
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24
Table 1 に Characteristics of the Sample of Respondents
Industry Firm Size & Ownership Year Established
Rubber & Plastics 6.3% 8 to 49 employees 20.9% Before 1981
59.0%
Metal Products 14.8% ヵヰ デラ ΓΓ Wマヮげゲ 31.1% 1981-1990 19.5%
Machinery 20.3% ヱヰヰ デラ ヱΓΓ Wマヮげゲ 27.6% 1991-2000 16.4% Electrical
& Electronics 18.8% ヲヰヰЩ Wマヮげゲ 20.5% 2001-2005 3.1% Instruments
9.4% Independent Firms 55.1% 2006-2010 2.0%
Other Manufacturing 30.5% Subsidiary Firms 44.9%
Table 2 に Descriptive Statistics
Var. # Variable Mean S.D. Min Max. Abs Max
Correl.* VIF
1 Sector: Rubber/Plastics 0.06 0.24 0.00 1.00 0.17 1.32
2 Sector: Metal Products 0.15 0.36 0.00 1.00 0.28 1.35
3 Sector: Machinery 0.20 0.40 0.00 1.00 0.33 1.75
4 Sector: Electr-ical/onics 0.19 0.39 0.00 1.00 0.32 1.58
5 Sector: Instruments 0.09 0.29 0.00 1.00 0.21 1.36
6 Sector: Other Manuf. 0.30 0.46 0.00 1.00 0.33 Ref.
7 Size (Ln Employment) 4.55 0.95 2.08 8.52 0.21 1.16
8 Established after 2000 0.05 0.22 0.00 1.00 0.21 1.19
9 Ownership (Subsidiary) 0.45 0.50 0.00 1.00 0.15 1.69
10 Autonomy Score 0.92 0.16 0.13 1.00 0.16 1.67
11 Manuf. Appliances 0.68 0.47 0.00 1.00 0.15 1.36
12 Manuf. Systems 0.52 0.50 0.00 1.00 0.23 1.31
13 Unit Cost: £10 to £100 0.13 0.33 0.00 1.00 0.26 1.93
13 Unit Cost: £100 to £1k 0.25 0.44 0.00 1.00 0.28 2.52
15 Unit Cost: £1k to £10k 0.15 0.36 0.00 1.00 0.25 2.17
16 Unit Cost: £10k - £100k 0.18 0.39 0.00 1.00 0.28 2.63
17 Unit Cost: Over £100k 0.11 0.31 0.00 1.00 0.24 2.37
18 Top Cust. 50%+ of sales 0.07 0.26 0.00 1.00 0.20 1.36
19 5 Top Custs 50%+ sales 0.33 0.47 0.00 1.00 0.20 1.29
20 < 3 Competitors 0.09 0.29 0.00 1.00 0.13 1.15
21 > 10 Competitors 0.14 0.35 0.00 1.00 0.13 1.17
22 Motivation PC1 0.00 0.96 -3.55 2.39 0.44$ 1.56
23 Motivation PC2 0.00 0.96 -2.72 2.45 0.18 1.23
24 Motivation PC3 0.00 0.96 -2.32 2.98 0.23 1.19
25 Arrangements PC 0.00 0.96 -2.20 2.08 0.44$ 1.89
* Absolute value of the largest correlation between this and any
other variable
Note, Ownership and Autonomy Score are correlated at 0.57, but
do never appear in the same models. $ Motivation PC1 and
Arrangements PC are correlated at 0.44. Their next highest
correlations are 0.16 and 0.25 respectively
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25
Table 3: Modelling Specific Service Provision に Binary Logisitic
Regressions
Spares & Consumables
Repair on
Demand
Scheduled
Maintenance
Condition
Monitoring
Regular
Upgrades
Exp(B) Exp(B) Exp(B) Exp(B) Exp(B)
Size 0.99 1.30 0.94 1.06 1.47**
Rubber & Plastics (d) 0.54 0.45 0.27 0.65 n.a.
Metal Products (d) 1.62 0.38* 0.41* 0.31** 0.21**
Machinery (d) 3.19 0.54 1.28 1.18 1.38
Electrical & Electronics (d) 1.20 0.90 0.76 1.08 2.18*
Instruments (d) 6.26 3.07 2.34 2.20 4.51**
Ownership (d) 1.51 0.91 0.74 0.71 0.80
Young Firm (d) 0.14** 0.58 1.39 1.61 2.40
Firm makes Appliances (d) 3.31*** 1.71 1.64 1.37 0.86
Firm makes Systems (d) 2.83** 2.40** 2.57*** 2.56*** 3.36***
Unit Cost £10-100 (d) 3.49** 3.42** 1.61 1.76 1.69
Unit Cost £100- £1,000 (d) 5.04*** 7.66*** 1.68 2.12 1.27
Unit Cost £1,000-£10,000 (d) 28.86*** 21.19*** 5.43** 5.13**
1.64
Unit Cost £10,000-£100,000 (d) 20.45*** 28.04*** 12.96***
11.09*** 3.44*
Unit Cost >£100,000 (d) 12.55** 90.11*** 16.72*** 24.67***
6.10**
Top Customer = 50%+ of Sales (d) 9.85* 0.78 0.27* 0.86 2.40
Top 5 Customers = 50%+ Sales (d) 1.06 0.86 0.50* 0.88 1.11
10 Competitors (d) 3.56* 2.16 1.29 1.45 1.12
Constant 0.14 0.06 0.19 0.06 0.02
Model Chi-square 91.8*** 91.8*** 99.1*** 84.4*** 87.4***
-2 Log Likelihood 169.1 217.7 243.8 246.6 237.8
Nagelkerke R2 0.474 0.432 0.439 0.390 0.405
Training Installation
& Set-up
Systems
Integration
Customer
Helpline
Financi