How Does the Need for Post-Purchase Services Affect The
Total Page:16
File Type:pdf, Size:1020Kb
How Does the Need for Post-Purchase Services Affect the Digital Transformation of Value Systems? Student: A.J. Hartman Student Number: S2561646 Supervisor: T.L.J. Broekhuizen Co-assessor: P.J. Steinberg Date: 02 March 2020 Word Count: 13636 Abstract The impact of digitalisation on value systems has received much attention from business scholars. Nevertheless, little is known about how digitalisation transforms value systems for physical products that require post-purchase services (PPSs) like product commissioning and repair service. Such services are traditionally offered by physical dealers and may strengthen their position, thus affect the digital transformation of value systems. By conducting a case study in the Dutch bicycle market, this study sheds new light on how digital transformation of value systems is affected by PPSs. Findings show that when there is a sufficient need for PPSs, incumbent intermediaries can use PPS resources to protect themselves against disintermediation. Furthermore, findings contradict the prevailing view that digital transformation is a one-way process. Findings evidentially portrait the digital transformation of value systems as a dynamic process; the extent to which activities in value systems are digitized can increase and decrease. Moreover, findings show that a high need for PPSs offers a temporal protection against digital disruption. Keywords: Activity redistribution, digital disruption, digital transformation, (dis)intermediation, post- purchase services, value systems reconfiguration, vertical integration 2 Table of Contents Introduction ............................................................................................................................................................................... 4 Theory ........................................................................................................................................................................................ 5 Channel Function and Activity Allocation ............................................................................................................................. 5 Transaction Cost Economics ............................................................................................................................................. 6 The Resource Based View ................................................................................................................................................ 7 Digital Transformation of Value Systems .............................................................................................................................. 7 Digital Disruption ............................................................................................................................................................. 7 The Desire of Producers to Bypass Intermediaries .......................................................................................................... 8 The Process of Digital Transformation of Value Systems ................................................................................................. 9 How Post-Purchase Services Affect Digital Disruption of Value Systems ......................................................................... 9 Methodology ........................................................................................................................................................................... 11 Research Design .................................................................................................................................................................. 11 Case Selection ................................................................................................................................................................ 11 Data Collection .................................................................................................................................................................... 12 Primary Data Sources ..................................................................................................................................................... 12 Secondary Data Sources ................................................................................................................................................. 13 Data Analysis ....................................................................................................................................................................... 15 Findings .................................................................................................................................................................................... 15 Industry Trends ................................................................................................................................................................... 16 Redistribution of Activities .................................................................................................................................................. 18 Horizontal Redistribution ............................................................................................................................................... 18 Vertical Redistribution ................................................................................................................................................... 20 Reconfiguration of Value Systems ...................................................................................................................................... 24 Entrance of Mobile PPS providers .................................................................................................................................. 24 Entrance of Bicycle-as-a-Service Providers .................................................................................................................... 25 Obsolescence of Intermediaries ..................................................................................................................................... 25 Discussion ................................................................................................................................................................................ 26 Interpretation of Findings ................................................................................................................................................... 26 Theoretical Implications ...................................................................................................................................................... 30 Managerial Implications ...................................................................................................................................................... 31 Research Limitations and Future Research ......................................................................................................................... 31 Conclusion ............................................................................................................................................................................... 32 References ............................................................................................................................................................................... 33 Appendices .............................................................................................................................................................................. 37 Appendix A: Product Distribution within the Bicycle Market ............................................................................................. 37 Appendix B: Subsidiary Producers ...................................................................................................................................... 37 Appendix C: Additional Primary Data Collection ................................................................................................................. 38 3 Introduction The advent of the Internet gave birth to decades of new business challenges. Activities within value systems (inter-linked firms active in the same industry) (c.f. Porter, 1985) are getting increasingly interwoven with the Internet. Product orientation has largely moved from physical stores to websites. The Internet has become a vital source for buyers to gather information about product offerings and seems to be increasingly preferred over interaction with physical salespeople (Forrester, 2017). Online selling (e-commerce) has expanded rapidly (UNCTAD, 2019) and continues to grow at a fast rate (Forrester, 2018; Statista, 2019). Moreover, new digital technologies (such as the Internet of Things (IoT) and 3D printing) are emerging and could drastically change the allocation of activities among actors within value systems. Our world is getting increasingly digitized (interwoven with the Internet), which gives rise to new business threats and opportunities. Existing business models adapting to the Internet and the emergence of new types of digital driven business models (hereinafter: digitalisation) questions the structure of traditional value systems. Digitisation of pre-purchase orientation and the rise of e- commerce questions the need for intermediaries (e.g. distributors and resellers) within distribution channels of producers (Broekhuizen, Lampel, & Rietveld, 2013). Furthermore, digitalisation challenges business models of incumbent intermediaries and their activities – sometimes