Service Commodities: When service providers fail to build sustainable competitive advantage

Allan Jensby Larsen

Student thesis: Master thesis

Abstract

Servicizing – the move from selling products to providing services – has been proclaimed by many strategy scholars, practitioners and advisers to be an excellent way of combatting commoditization of products and restore the competitive advantage of companies. All while providing growth, additional value to consumers and reducing the negative impact on society and environment. This thesis seeks to qualify the bold claims of competitive advantage through theoretical application of the established strategy frameworks of microeconomics, competitive forces and the resource-based view. The frameworks are synthesized to a coherent theory of competitive advantage which is carefully and critically applied to the arguments originating from the sources with generally optimistic view on servicizing. This assessment results in a contingency framework useful for evaluating the potential of servicizing to generate temporary or sustained competitive advantage to the servicizing company or whether the service is likely to become commoditized with little potential for profits. The usefulness of the theoretical framework is illustrated in four cases of servicizing by both established manufacturers and disruptive entrepreneurs, namely Xerox, Kodak, Better Place and Volt. The cases are analysed using the framework and show how it performs well in describing real-world causes and effects indicating the framework’s value for predicting competitive outcomes of servicizing. The theory suggests that potential servicizers should consider the impact of servicizing both on the industry level and on the firm’s existing resource base as well as the effects on resource acquisition and industry dynamics while keeping the temporary advantages and initial costs in mind. The main implication is that servicizing is not universally attractive and that the coveted sustained competitive advantage does not come by itself to servicizers. The second implication is that servicizing may nevertheless be driven by temporary profits but also that the transition is not without challenges. The thesis concludes by suggesting potential avenues for further research in the field of servicizing.

EducationsMSc in Management of Innovation and Business Development, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2016
Number of pages78