On Value and Value Co-Creation: A Service Systems and Service Logic Perspective - Essay Example

Rough Draft According to Vargo, Melissa, and Akaka (2008) in their article "On value and value co-creation: A service systems and service logic perspective" global business services are mainly regulated by the two factors of goods-dominant (GD) logic and service-dominant (SD) logic. Global Business Services and Global Shared Services have evolved as indispensable factors in the liberalization and globalization of commercial enterprises. These two factors have opened up the global business space as a limitless space of inter-related business operations. Global Business Services (GBS) generally refer to the integrated systems that run the services within a company setting. Shared services, on the other hand is defined by process ownership and partnering as key characteristics. The efficiency and productivity of doing business is entirely reliant on the kind and degree of elements of global business services and global shared services that might be employed within organizations. One fundamental aspect of Global Business Services is the 80/15/5 rule. According to this rule 80 percent of a business process can be standardized in accordance with global basis. The other 15 percent of the process can be standardized in line with regional structures. The remaining 5 of the process is then standardized on a localized scale. This aspect represents the sweeping scope of (GBS). Another defining aspect of GBS is the integrated suite which illustrates the component of inter-connectivity of systems that manifest within the substance of the GBS. The concept of inter-connectivity is, in fact, an important feature that distinguishes GBS from Global Shared Services. Another important feature of GBS is the virtual centers that act as the locale for expertise which aids in the task of the dissemination of the subject matter. What this implies is the fact that the sphere of operation of the GBS might not be physically verifiable but its effects are significant. Subsidiary aspects of GBS are numerous but are commonly centered on the global ownership of the process as the singular aspect of global control. In shared services, goals and accountabilities are distributed among business units and organizations that engage in the services. In this manner there is little chance for the occurrence of loss of control between the parent organizations from where the particular services originated. The concept of shared services is anchored on the giving out of some core functions by some services, which has always led to the misconception that organizations might lose their control by sharing out these functions. More specifically shared services bring about value through three main different ways: economies of scale, simplification, and standardization. The essence of shared services, however, is to limit the operational focus of the firm to the most important aspects of its operation so that the phenomenon of irrelevancy and redundancy is effectively eliminated. This naturally means that a business gets the ‘breathing space’ to adjust its scales of efficiency while at the same time minimizing on costs. Some of the areas that are positively affected include efficient use of company resources, process ownership, partnering and teamwork. Moreover, there is an efficient utilization of tools and technology. This process also encourages specialization, the growth of expertise within the work force, which ultimately leads to excellence. The import of value drivers in GBS is cost-saving. Some of the value drivers that have been known to reflect within the framework of the GBS include economies of scale, economies of scope, standardization, simplification, access to talent, skill arbitrage, visibility, labor arbitrage, and pure arbitrage. Through the economies of scale organizations are able to make savings basing on their sizes. Economies of scope involve leveraging the systems of management and the expertise through several service offerings. The process of simplification involves the removal of unnecessary steps within the structure of a process. Standardization manages to bring about savings by the adoption of a single standard, method or process so that the resources that might have been used for extraneous varieties are channeled to other systems. Visibility as a value driver manages to lower costs and bring about efficiency in the system through the creation of a transparent system within the labor force in a manner that eases the task of management. This is traditionally achieved through structural adjustment programs that might involve downsizing, or in other cases, restructuring the management system by creating alternative designs. Access to talent is an important driver that ensures that the firm is able to get the best talent in the world. This will naturally translate into the improvement of quality in the systems, processes and products. There is usually the aspect of balance where by organizations will deliberate on the best talent against the most cost-effective price of hiring this talent. Labor arbitrage has been a common feature in the western countries in the past decade. It is a driver that ensures savings by allowing the countries to move into alternative locations that might promise better costs of productions. Skill arbitrage as a driver of global business services implies that the management shall seek out for higher-skilled labor at affordable costs so that the costs of hiring do not burden the projections on returns in both the long-term and short-term. Pure arbitrage implies the ability to transfer the operations from one location to another with the objective of taking advantage of the relatively lower costs of production that might be found in the alternative location. The differences between Global Business Services (GBS), and Global Shared Services (GSS) can be reduced into four main categories: functional scope, employment opportunities, leadership focus, service delivery models (SDM). In terms of leadership focus GBS are usually run like separate business entities that have lives of their own. On the other hand, GSS are simply focused on streamlining efficiency and effectiveness within an organization, and do not extend their goals beyond these. In the aspect of employment GBS act as a larger pool from where the organizations can draw talent, but in the GSS, this pool is limited due to the relatively smaller size of the organization. Another difference between GBS and GSS is that the functional scope of the GBS is an end-to-end process that reflects a multiplicity of general and administrative functions. GSS on the other hand is usually defined by a transactional process that is narrower in scope. Naturally GBS has the capacity to handle multiple service delivery models whereas GSS usually reflects a single service delivery model. The most suitable case illustrations of the operations of both global business services (GBS), and global shared services is the commercial presence of American companies in the People’s Republic of China. Avon, G.E, AT&T are companies that have retained there presence in China because of the strategic commercial benefits that they might not have found in the United States or in other parts of Europe. In terms of taxes and the cost of labor, China compares better than the United States and other parts of Europe. The shifting of base from the US to China has therefore ensured that the companies remain stable at the time when other companies that trade is similar products have grappled with operational pressures in high labor-cost economies. One other advantage that the three American companies in China benefit from is the massive market for their products. The survival and performance of companies in the twenty first century is entirely reliant on the choices that are made regarding the type, degree, and nature of the Global Business Services (GBS), and the Global Shared Services (GSS). The internal workings within these two systems are not static since they have to respond to the external pressures on the market and other legal, political, and other institutional conditionality that bear, either directly or indirectly, on the markets and organizations. The ability to analyze the markets and choose the most suitable structures within these two systems is the determining mark that defines the curve of growth for most institutions. Global Business Services and Global Shared Services are a significant feature that determines the competitive advantage on local, regional, and international markets. Firms that have survived the devastating effects of global inflationary pressures are the ones that adopt liberal guides that suit the objectives of their operations within flexible climatic paradigms. Choosing between the two systems is a factor that must necessarily attach to the realities of globalization and liberalization of the market economy, which continues to widen the concentric circles of the world’s economic and commercial ties. Prices as a factor have a strong influence on the market conditions and play a significant role in predicting the outcome of situations. From the answers given by the respondents the airlines across Cyprus charge varying prices mostly as in form of incentives, discounts and other related objectives. The margin of difference in costs across most airlines does not show significant variations. This means that the price bracket remains the same so that the discourse of competition is transacted through other forms. The prices of airline services in Cypress do not vary much from the international rates. The implication here is that the challenges in costs and the reactions thereof as expressed in the opinions of the respondents are not localized. They are basically a reflection of the price forces on the global airlines market. The distinction in prices is ordinarily made to reflect on the matters of class, privilege and utility. There is little consequence weather neither positive nor negative in minor price fluctuations which affect the airlines industries across the world. The perceptions of prices of consumers in relation to prices are therefore made in reference to the services obtained in return. Some of the respondents who argued that the prices are relatively expensive fall in the upper middle class and upper class category. The meaning of this is that comfort and service delivery are inextricably tied to the factor of pricing. The consumers who pay to use the airline services expect that in return they shall find value for their money. The forces that determine the prices of airline services are beyond the reach and influence of local players. The prices charged by airlines in Cyprus are not a factor that should determine the consumer trends and preferences. The field of alternatives does not have much variety to offer. It is presumably because of this reason that the disgruntled consumers must attach the factor of quality to their argument. Another factor is that high prices have always been presumed to maintain some form of a direct proportionality with high quality of services. This high quality services is assumed to imply low risk factor. The question of safety has, therefore come to condition the question of pricing so that by paying highly for a service the consumers usually assume that their safety is guaranteed. This has been made more so by the fact that airlines that charge highly also bill themselves as the safest on the market. Some consumers who responded to the questionnaire argued that they have always preferred to pay highly as a guarantee for better services. Opinions were sought from the respondents regarding the question of attitude of personnel towards consumers. A majority of the sampled respondents representing 55.5 percent of the sample argued that the attitude of the personnel was moderately good. Another 2.5 percent and 3 percent of the respondents opined that attitudes of the personnel were excellent and superb respectively. Comparatively 15 percent of the respondents argued that the attitude of the personnel was very poor, while 24 percent of them said that the attitude was poor. Although the majority seems to give a positive commendation to the question of attitude, the significant percentages that oppose them means there might be some human resource dimension to the apparent dissatisfaction of the personnel. The disgruntled personnel are likely to develop burnout because their attitude towards work and clients is entirely dependent on the level of job satisfaction that they experience. This might suggest some absence of incentives to work up the morale and attitudes of the workers. This will in turn translate into their positive attitude towards work and prod them into warming up to the clientele. Corporate Social Responsibility program was another terrain that defined the opinions of consumers on the airlines industry in Cyprus. About 45 percent of the people interviewed said that they thought the airlines industry did not respond sufficiently to the course of corporate social responsibility. Another 13 percent of the respondents thought that the airlines sector in Cyprus did not have a CSR program at all. A portion of the respondents reaching up to 27 percent of the respondents argued that the CSR programs that the airlines operated did not align with the wishes of the majority. Another 8 percent of the respondents argued that the CSR programs were meaningless. The remaining minority adding up to 5 percent of the respondents said that the CSR programs as conducted by the Cyprus airlines industry are very much adequate. The responses on the CSR programs are important in determining the relationship between the airlines industry and the stakeholders. This relationship when analyzed from the point of view of consumers hint at the degree of acceptance and the place of the sector in the eyes of the consumers. From these results it can be observed that a significant majority of the people interviewed were dissatisfied with the scheme as relates to the airlines sector of Cyprus. This group illustrates the basic assumptions that consumer satisfaction must be multi-sectional and for the industry to earn the good will that would turn around its fortunes in favor of the stakeholders. The choice of CSR programs that are adopted by the airlines sector in Cyprus does not meet the threshold of shared needs and values of the community of stakeholders. The concept of CSR is intended to provide a terrain through which a firm can engage informally with the distinct categories of stakeholders whom it might not reach in the formal discourses of commerce. The respondents who expressed their dissatisfaction with the CSR program argued that some of the programs that have been adopted by most airline industries are superficial and cosmetic which alienates them with specific categories of consumers. The companies that fail to choose appropriate CSR programs end up loosing to rival environments that activate associations with all categories of stakeholders on a lateral basis. The slight minority who endorsed the CSR programs as currently constituted might be thought of as the top cream of the stakeholders who might have some privileged access to the centers of influence within the industry set-up. Read More