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Service fitness ladders: improving business performance in low cost and differentiated markets

Alex Hill (Department of Management, Kingston University, Kingston upon Thames, UK)
Richard Cuthbertson (Said Business School, Oxford University, Oxford, UK)
Benjamin Laker (Kingston Business School, Kingston University, Kingston upon Thames, UK)
Steve Brown (Business School, University of Southampton, Southampton, UK)

International Journal of Operations & Production Management

ISSN: 0144-3577

Article publication date: 2 October 2017

1283

Abstract

Purpose

The purpose of this paper is to present 13 propositions about how internal strategic fit (often referred to as fit) impacts the business performance of low cost and differentiated services. It then uses these relationships to develop two “fitness ladder” frameworks to help practitioners understand how to improve fit given their business strategy (low cost or differentiation) and performance objectives (operational, financial or competitiveness).

Design/methodology/approach

In total, 11 strategic business units were studied that perform differently and provide a range of low cost and differentiated services to understand how changes in internal strategic fit impacted business performance over a 7 year period.

Findings

The findings suggest aligning systems with market needs does not improve performance. Instead, firms serving low cost markets should first focus managers’ attention on processes and centralise resources around key processes, before reducing process flexibility and automate as many steps as possible to develop a low cost capability that is difficult to imitate. By contrast, firms serving differentiated markets should first focus managers’ attention on customers and then locate resources near them, before increasing customer contact with their processes and making them more flexible so they can develop customer knowledge, relationships and services that are difficult to imitate.

Research limitations/implications

Some significant factors may not have been considered as the study only looked at the impact of 14 internal strategic fit variables on 7 performance variables. Also, the performance changes may not be a direct result of the strategic fit improvements identified and may not generalise to other service organisations, settings and environments.

Practical implications

The strategic fit-performance relationships identified and the “fitness ladder” frameworks developed can be used by organisations to make decisions about how best to improve fit given their different market needs, business strategies and performance objectives.

Originality/value

The findings offer more clarity than previous research about how internal fit impacts business performance for low cost and differentiated services.

Keywords

Acknowledgements

The authors would like to thank 257 executives interviewed who have asked to remain anonymous to protect the identity of the organisations researched. They all committed significant time and effort to the project by providing data and information about the firms in which they worked, enabling us to observe how they operated, giving us access to documents and letting us test the emerging fit-performance relationships from the research against their knowledge, insight and experience. In particular, the authors wish to thank 14 executives who formed part of the research steering group. This paper has also been significantly guided and improved by the comments and suggestions from a number of academics such as Professors Kunal Basu, Keith Blois, Terry Hill, Jonathan Reynolds and David Upton.

Citation

Hill, A., Cuthbertson, R., Laker, B. and Brown, S. (2017), "Service fitness ladders: improving business performance in low cost and differentiated markets", International Journal of Operations & Production Management, Vol. 37 No. 10, pp. 1266-1303. https://doi.org/10.1108/IJOPM-03-2016-0142

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

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