Managing Services ‎Business for ‎Markets: A Case ‎Study of Marel

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This is a case study about why manufacturing companies may integerate services into their business.

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Managing Services ‎Business for ‎Markets: A Case ‎Study of Marel

  1. 1. Managing services business formarkets: A Case study of Marel
  2. 2. Karlstad Business School Handelshögskolan vid Karlstads UniversitetCourse code: FEAD51Course name: Industrial MarketingTitle: Managing services for business markets: A ‎ ase study of Marel CDate of Submission: 2013-03-04Family name Given nameShurrab HafezEl Bouassami MohammedName of the teacher: Maria ÅkessonName of the administrator: Frania Johansson
  3. 3. TABLE OF CONTENTS1. INTRODUCTION ..........................................................................................................- 1 -2. BACKGROUND ............................................................................................................- 1 -3. THEORY ........................................................................................................................- 1 -4. ANALYSIS .....................................................................................................................- 2 -5. CONCLUSIONS.............................................................................................................- 4 -6. REFERENCES ...............................................................................................................- 5 - I
  4. 4. 1. INTRODUCTION Nowadays, customers of capital goods (B2B) require more and more value-addingactivities from their suppliers. That prompts industrials, in order to retain their finalcustomers’ loyalty, focus on offering a range of value-added services centered on oraround their core products. The main purpose of doing so is to improve the overallperformance of the customer’s value systems. Such services create new source ofrevenue for suppliers, and therefore affect their profits positively in the long term. Inmost cases, service products are intangible even though they could have a physicalappearance (Tidd & Hull, 2002). In B2B markets, manufacturers always offer at leastminimum services to convince their customers to buy their products. Recently, there arebundles of services offered by companies result in better value-adding system. That mayinclude maintenance, customer training, consultancy, or even tailor-made solutionsaccording to the customer needs. In this report, we highlight the growth of serviceproducts in a manufacturing company, which is Marel in our case. The analysis isdedicated to answer questions like why manufacturing companies may incorporateservice products, and what makes it service- or good-oriented company.2. BACKGROUND ‎ arel is the leading global provider of advanced equipment, systems and services Mto the fish, meat and poultry industries. Marel is a multinational company, with morethan 4000 employees worldwide, where their business units are mainly located inNetherlands, Denmark, United States, Iceland, Slovakia, and Singapore. The companyoperates a network of sales and services units all over the world (Marel 2013).3. THEORY O ‎ ne‎ way‎ to‎ enhance‎ manufacturing‎ companies’‎ growth‎ and‎ revenue‎ is‎ by‎ adding‎services to the overall business as important element for their future success. There arefour factors account for the growth of business services including e-business, whereinternet help in creating new business models based on range of e-commerce productsand services. The second factor is the outsourcing, where companies of all types movestoward outsourcing functions and services that are not their core expertise. Innovationsstand as a third factor, since new technologies support creating new services that did not -1-
  5. 5. exist over a decade ago. The fourth factor is accounted for manufacturing growth thatarose together with demand of collateral services (Hutt & Speh, 2004). In B2B markets, services can be classified into two different categories. The firstcategory is products supported by services. In this case, services that accompany thephysical product are always important as the technical solutions offered by the productitself. On the other hand, the second category refers to pure services, which are sold toclients independently and without any relationship connected to any physical product.That kind of services may include, for example, travel booking services, banking andconsulting (Hutt & Speh, 2004). According to Vargo & Lusch (2004), marketing has moved from a goods-dominantview, 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 arebuying products as values instead of goods. Any service oriented organization shouldconsider service excellence as a strategic priority. That could be reached byembracement of basic set of policies and practices, including anticipating customerneeds, giving high priority to services before goods, fulfilling customer satisfaction, andbuilding 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), emergencysupport, remote support, customer training, and traceable calibration (Marel 2013).When reviewing such services, the main four factors account for the growth of businessservices could be represented by each service in Marel (Hutt & Speh, 2004). Forinstance, innova service, emergency support, and remote support are e-based servicesthat reflect how Marel could build additional value upon its core products using e-businesses. Moreover, consultancy could be seen as exported experiences through thechannel of outsourcing. Marel offer flexible packages to allow their customer to selectthe best option for their business, which could be regarded as exported experiences aswell. Additionally, Marel conduct training for their customers that could reflect theirintersection with innovation and new technology. -2-
  6. 6. Generally, Marel’s incorporated service products could be categorized into twogroups of services including products supported by services, and pure services (Hutt &Speh, 2004). The first group may involve the maintenance, emergency support, remotesupport, spare parts, tradable calibration, and innova software that Marel deliver to thecustomers, while customer training and consultancy could be classified as pure services. Marel represent a helpful example for how manufacturing companies can getbenefits 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 largemanufacturing company that delivers food production systems and equipment, Mareloffer preventive maintenance to their customers not only to gain extra profit from thecore 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 Marelwould undoubtedly have high skilled staff involved in the R&D department within thecompany. They may be partially dedicated to consulting responsibilities, which wouldincrease their utilization. Besides, food industry deals with high degree of customizationthat‎makes‎closing‎to‎the‎customer’s‎thoughts‎very‎significant‎concern.‎Similarly, manyother relevant relationships could be drawn between each service product and the coreproduct. Most importantly, the service products in Marel are built upon the overallsystem so that to benefit from the costly large base and infrastructure of the systemdedicated to the core product. Thus, the servitization of business opportunities relevantto the core system could be accounted for increasing of facilities’‎utilization,‎even‎if‎that‎requires small investment relatively. Besides, because the services can be bestdeveloped, sold and delivered by the product supplier, there is a lock-in effect resultingin relatively high profit margins. We think that Marel could not be regarded as service-oriented company. Thedependency of their service products on the core system is relatively high. They provideservices that are connected to the core products more than the other services that arerelatively independent or pure services. What makes us find them hardly service-oriented is that the independent services are not characterized by long-termrelationships. However, that does not change the fact that they gain high profitsrelatively from their service products. -3-
  7. 7. 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 theperformance of their core product in the customer value system and render new revenuepotentials. Furthermore, Marel as business deliver non-dynamic core product couldreduce the risk of inconsistent demand by providing such services. That is because theservices can be best developed, sold and delivered by them, and thus, there is a possiblelock-in effect resulting in relatively high profit margins. And because services arerelated to the (large) installed base, Marel suffer less from cyclical economic cycles thanthe core product business. -4-
  8. 8. 6. REFERENCESLiterature Sources:Hutt,‎M.D.‎and‎Speh,‎T.W.‎(2004).‎“Business Marketing Management: A Strategic Viewof Industrial and Organizational Markets”, 8th edition, Fort Worth TX: DrydenLytle,‎ R.S.,‎ and‎ Timmerman,‎ J.E.‎ (2006).‎ “Service orientation and performance: anorganizational perspective”, Journal of Services Marketing, 20/2, pp. 136–147.Tidd,‎ J.‎ and‎ Hull,‎ F.‎ (2002).‎ “Introduces and tests a framework for new servicedevelopment in the US and UK”.‎The‎organization‎of‎new‎service‎development‎in‎the‎USA 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 forMarketing”.Electronic Sources:Marel (2013). The company. Available: http://www.marel.com/company/company/[2013-03-02]. -5-

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