Derivative Proposition 7
Firms can compete more effectively through the adoption of collaboratively developed, risk-based pricing value propositions.
S-D logic points toward collaboration and coordination as essential approaches to innovation and competition. They represent means for integrating activities and resources. Vargo and Lusch (2006), in the ninth foundational premise (FP9) identify resource integration as the essential role of the ﬁrm. Christensen et al. (2001) identify it as the most critical aspect of innovation. At one end of a coordination/integration continuum are transactional markets where the “invisiblehand” of the marketplace becomes the key coordination mechanism and integrator. At the other end of the continuum are relational markets (i.e., long-term relationships, partnerships, alliances, joint ventures, and networks), which are highly collaborative (Webster 1992). S-D logic embraces relational and collaborative markets. However, under a collaborative model of coordination, who should be the prime integrator?
etailers have a distinct advantage in being the customer’s closest link to the marketplace. As such, it is possible that within the value network the retailer may be positioned best to develop a core competence in market sensing. It can also be argued that investment in manufacturing is increasingly viewed as constraining market responsiveness (Vargo and Lusch 2004)—in fact, even ﬁrms historically considered to be primarily manufacturing ﬁrms are increasingly outsourcing the manufacturing process. Achrol (1991, pp. 88, 91) identiﬁes “transorganizational ﬁrms,” which he refers to as “marketing exchange” and “marketing coalition” companies, both of which have “one primary function—all aspects of marketing.” Achrol and Kotler (1999) envision marketing as largely performing the role of a network integrator that develops skills in research, forecasting, pricing, distribution, advertising, and promotion, and they envision other network members as bringing other necessary skills to the network. Consider that the consumer is also faced with more and more choices and may be receptive to domesticating or taming the market by adopting and developing a relationship with a limited number of organizations (Vargo and Lusch 2004). Rifkin (2000) argues that consumers will develop relationships with organizations that can provide them with an entire host of related services over an extended period.
As such, S-D logic suggests retailing is best characterized as a service-integration function. This is somewhat different from the typical conceptualization of retailing representing
the ﬁnal link in a directional distribution ﬂowor supply chain. In S-D logic, the retailer is part of a value network comprising all the parties (including the customer) involved in value creation. The retailer differs from other network members by the fact that his exchange with the customer is direct. Since other network partners are increasingly retaining this direct exchange function, the retail/nonretail lines are often blurred. More generally, since all parties to value creation are service integrators, service-based competitive strategies are not limited to traditional retailers.
However, by redeﬁning their role in terms of this integration function and becoming prime integrators rather than distributors, we believe retailers could remain the pivotal link in the value network. For instance, over the past 20 years a group of independent auto dealers has obtained multiple franchises operating as independent businesses but under a common ownership. One of these mega-dealers has the ability to sell a Mercedes, Honda, Ford, Toyota, Kia, Volvo, Chrysler, and so forth. However, the needs of an auto owner are much broader. They need ﬁnancing, auto insurance, fuel, maintenance, parking, and places to stop for food and lodging, and also assistance on airline and other travel when use of a car is not economical or timely. The mega auto dealer could relatively easily move into this entire market space and be the household’s major provider of transportation services. Similarly, PETsMART could be the integrator for a household’s entire pet related needs; Home Depot for all the housing related needs; Ofﬁce Depot for home business related needs, and so forth. This is consistent with Achrol and Kotler’s (1999) observation that marketing may become a customer-consulting function.
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