Service Infusion in Manufacturing: Exploring Risks and Service Strategies

Abstract

Services assume an increasingly influential role in the modern economy, giving rise to what is known as the service economy. Manufacturing firms are therefore pursuing service strategies with an enhanced interest to expand their value propositions. Whilst the ambition is to create customer value, increase competitive advantage and deepen customer relationships, studies have found that expected benefits are rarely materialized. While it is necessary to accept some level of risk to capture emerging opportunities, it is critical to identify and mitigate risk exposure. For that reason, this thesis strives to fill a gap in the literature by identifying the risks associated with various service strategies. A qualitative multiple case study is conducted to explore this complex phenomenon where eleven interviews are performed with experienced managers at eight manufacturing multinational corporations (MNCs) to generate empirical data. An abductive approach makes it possible to move flexibly between existing theories and literature without being bound by them. According to the findings in this thesis, the service strategies are clearly connected to varying levels of risks. A pervading theme is that the level of risk is associated with uncertainty, customer co-creation and capital requirements needed to perform the service activity successfully. Based on the findings, three theoretical propositions are suggested; Co-creation decreases strategic risk; High volume decreases strategic and financial risk, and lastly; Capital intensive services increase financial risk whilst making some strategies less suitable. By identifying and analyzing the risks encountered by MNCs when pursuing new service strategies, the findings in this thesis can help firms and managers make more informed decisions