Managing in the Competitive Environment. Value Creation
Introduction: Kotler et al (2009) describe today’s economy as hyper-competitive market place in which increasingly rational buyers are faced with an abundance of choices. Companies only succeed by “fine tuning the value delivery process and choosing, providing and communicating superior customer perceived value” (Kotler, et al 2009 p78). With technological capabilities allowing more availability and options (Srinivasan et all, 2008), companies must continually thrive to discover new methods to achieve competitive advantage for the discriminating consumer pool. This essay will illustrate development and creation of value through a hypothetical product. It will explain the difference between goods and services and define the theory of “total product concept” and its implication for a business needing to create a successful product which the customer is able to differentiate from the competitors offerings (Levitt, 1980). In its second part, four approaches to producing the physical product namely the aggregate production concept, mass production, the ”just in time” as well the “optimized production technology” will illustrate the advantages and disadvantages each approach will have to offer for the hypothetical product of this essay. The third part will demonstrate which marketing strategy will lead to a successful value add process for the product. Furthermore, a well-managed marketing concept that communicates both tangible and intangible offerings may influence the potential buyer to make a favorable purchasing decision. The hypothetical product which is used as a guideline through the production and marketing process has been chosen to be a a reusable Christmas Tree as the physical good itself and services surrounding it to add value to the customer.
Goods and Services The differentiation between services and goods is fairly simple to define. Goods are a physical item that are a natural resource, commodities or raw materials or have been subject to a transformation process, that included the input of physical goods, chemical or mechanical action through the knowledge and skill of the operator to produce a new tangible output. The physical goods may have attributes such as being perishable or not, it can be stored or not, it can be packaged, transported, its production can either be customized or standardized and quality can be checked (Slack et al, 2010). Berry (1980) defines a service as a “deed, act or performance”. Similar to a physical good,
service is also subject to a transformation process. However, service as opposed to a physical product, has characters that define it as intangible (Berry, 1980, Slack et al 2010). Slack further differentiates between professional services, service shops and mass services. Professional services such as consultancies, legal counselors, architects etc require high level of customization as the client has specific needs that are part the service process. Mass services are defined as providing customer solutions on a less customized level for example supermarkets, airline transportation or online banking. A shop service is the intermediate level for example retail, where a customer receives advice from a sales person on a specific product. Services are rendered to an individual customer who are involved in the process of the service delivery. Lovelock (1983) had looked at services from a managerial perspective and created a scheme placing services into four distinct view points: -Tangible actions to people’s bodies such as airline transportation -Tangible actions to goods and other physical possessions such as air fright or lawn mowing -Intangible actions directed at people’s minds such as broadcasting and education -Intangible actions directed at people’s intangible assets such as investment banking or consulting Comparing Lovelocks model of a four tier classification as opposed to Slack et al., he defines services as...
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