Service-Dominant Value Analysis - Article Example

SDL-VALUE & VALUE CO-CREATION By Table of Contents Service Dominant Concept 3 Value 4 Goods Dominant Concept 4 Theoretical Foundation of the Article 6 A different Perspective 7 Smith’s Proposition 10 Conclusion 11 Works Cited 12 Introduction Vargo, Maglio, and Akaka (2008), best analyze the relationship between values of goods-dominant and service-dominant (SD) logic. In the article entitled “On value and value co-creation: a service systems and service logic perspective,” the authors redefines the conventional outlook on service and value creation. Supposedly, the article endorses exchange of services as the main concern in modern markets and services (Vargo, Maglio, & Akaka, 2008, p. 147-149). Consequently, the article explores the virtues of Aristotle’s stand on exchange and use value differences. Indeed, the article is based on claims and comments made by other prominent economic scholars such as Adam smith. In these references, the authors concentrate on the domain of goods-dominant logic. This presence is intended to compare and contrast the two logics taking into reference the business concept of Coca Cola Company. Service Dominant Concept The service-dominant model is based on the aspect of interdependence between consumers and producers. Presumably, the system is based on direct producer-consumer observations. It is sufficiently important that the relationship or transfer of value between producers and consumers have different forms of interpretation. Indeed, different interpretations depend on the corresponding discipline or field of study (Vargo, Maglio, & Akaka, 2009, p. 33-35). Apparently, the fundamentals of commerce are the underlying factors that streamline the aspect of utility and production. Thus, the different models translate to the fundamental principles of production and consumption as explained in consumer science and other related disciplines. Consequently, the article approaches the issue with the intentions of unearthing any underlying associations. Value In the view of service-dominant value, value is considered to be characterized by the total effects of both the producers and consumers. An illustration of this is that, goods are valued after reaching a particular point in the process of consumption. Therefore, the consumers confer the element of value to goods when these prove to be effective in their use. At this point, it is clear that there is a relationship between the aspect of value and the process of consumption (Vargo, Maglio, & Akaka, 2009, p. 35-38). Therefore, the aspect of value is best explained when consumption is put into consideration, since these two affect each other. The value of goods therefore, depends on how satisfactory they are to the consumer. This is the major differentiating factor between goods-dominant perspective and the service-dominant value perspective. For instance, Coca Cola would be interested in preparing and delivering Coca Cola drinks as a product in goods dominant logic. However, in service dominant logic, Coca Cola would be interested in synergising customer satisfaction with factors of production. Goods Dominant Concept In the goods-dominant value, value is attached to the transfer of goods to the consumers from the producers. In this perspective, the more goods are transferred between producers and consumers, the higher the value. On the other hand, the service-dominant value draws from different views and approaches (Vargo, Maglio, & Akaka, 2008, p. 147-149). In this case, to facilitate the transfer of goods between producers and consumers, the consumers must make their payments for the goods. This is meant to ensure the continuity of the value chain, so that consumers can come back and get more goods at a value. In the context of Coca Cola Company, service in service dominant logic, is the application of competences in terms of knowledge and skills in all factors of production aimed at providing refreshment service to the consumers. The issue of productive and non-productive labor is very important as far as Smith’s economic theory is concerned (Vargo, Lusch, & Akaka, 2010). The spirit of labor is the production of the productive labor as argued by Smith hence regarding the output got as a result of labor employed. However, he further argued that production of intangible services was unproductive and that the essence of exchange was determined by the productive labor (Vargo, Lusch, & Akaka, 2010). Considering the Newtonian school of thought, most scholars, after deeply regarding Smith’s ideas, saw it appropriate to determine the impact of his thought to be a reflection of the prevailing principle in physical objects. Clarifying way in which some aspects of thought obey the rules of value-in –exchange and value-in-use has led to creation of contending perceptions. Purpose of the problems has actually been regarded as the reason behind a number of features linking sufficiently with structures verifying the reality of products as labor derivatives (Vargo, Lusch, & Akaka, 2010). The issue of service is favored as the leading matter by many people. The presence of a numerous of activities in determining the service aspect is always regarded as the basis of exchange. The cost of goods as per the facet of service includes the determination of a number of factors joining successfully with the provision of service. Issues of competitive advantage are believed as reasons of some structure aligning with many attributes if service and that the various aspects checked on by economic philosophers within limits of time shows that a number of economic aspects are service economies. The consumer’s role is defined in a way that they become the integral part of the value within the economy. Flow of ideas is very important to determine as far as forces affecting service delivery in economic framework of service is concerned (Vargo, Lusch, & Akaka, 2010). Experiences of an individual are mostly important in determining the value of products and there is an experiment making it difficult to understand a number of issues relating to variations. Theoretical Foundation of the Article The theoretical foundation of the article deviates from other mainstream system thinking and ideas developments. This results from privileges of the goods-dominant logic as a key determinant of economic exchange as initially determined. Consequently, the author asserts that all kinds of exchange are based on service (Vargo, Maglio, & Akaka, 2008, p. 145). This is the main factor that differentiates the article’s argument from conventional thinking. Arguably, the convention of goods-based logic promotes a sense of dissonance between conventional accounting practices and the current economic hypothesis that stress more on the need to develop value-based systems and structures. Ideally, the author affirms the claim that all forms of dealings are eventually reducible to services to benefit the consumers. The author investigates service science as a multidimensional variable. In this analysis, the author explores the connections between production and utility. In addition, the author explores the product and processing in the context of generation value. The article tracks how a product gains or losses value as it translate from one generation to another. Throughout the analysis, the study revolves on the difference between the goods-dominant logic and the service-dominant logic. The author hopes to connect the values of productivity and utilization (Vargo, Maglio, & Akaka, 2008, p. 147). The goods-dominant logic operates under a system that offers unique advantages to the end user. Technically, the concept assumes the existence of differentiated producers and consumers. In this assumption, both the consumer and the producer have needs, which are not related. In relation to this model, the consumer utilizes value while producers create such values. Thus, the value of a good or a service is realized at the point of consumption. Similarly, Coca Cola consumers would utilise value through the overall customer satisfaction under service dominant logic as opposed to use of the drink as a product under goods dominant logic. In this article, focus is given to the various distinctions between use-value and exchange value, and how the differences between these two have evolved over the years. The philosophy of Aristotle has been used to debunk the use-value phenomenon. Aristotle utilized different relevant attribute to explain use value. Ideally, he made sure to show the clear difference between different elements that form nature. He then went ahead to establish the different characteristics of those elements in nature, which made them dissimilar to each other. Therefore, with regard to use value, Aristotle believed that goods should be defined using their different characteristics, amounts, and how they relate (Vargo, Maglio, & Akaka, 2008, p. 147-149). These characteristics of goods have to be the primary characteristics, which are perceived equally by different consumers. For instance, value perception of a Coca Cola service in Africa is almost certainly different from that experienced by developed economies such as U.K. A different Perspective In Aristotle’s perspective, an important factor, which contributes to the significance of use-value, is the fact that the aspects of knowing are not prioritized in this perspective, instead, the primacy of senses is given an upper hand. It thus, becomes clear that the adoption of this perception would not allow for the universal relevance of use-value, since some aspects of knowledge are specific to different people and communities. According to Vargo, Maglio, & Akaka, 2009, it is also considerably challenging to determine the use-value of goods, since the determination of value in the context of the value concept is quite problematic. Since people perceive things in different ways, this would mean that, there would lack a universal approach of perceiving the concept of value. For instance, Coca Cola consumers would probably find it difficult to apprehend the value of Coca Cola drinks in the same way. Most probably, they would think of service offered by the company as products, perhaps a perspective of the goods dominant logic concept. However, some thinkers have modified use value, to make it transcend beyond the aspect of senses. Different types of aspects, which relate to use-value and exchange value, have been addressed in this article in an intensive manner. In addition, focus has been given on identifying the strengths and weaknesses of different thinker, who have addressed these issues. In order to determine the strengths and weaknesses of each thinker, the effectiveness of the issues were evaluated. According to, Vargo, Lusch, & Akaka, 2010, although the different factors relating to use-value have been described in relation to type of need, the obstacle that presents itself is that of failure to have a reliable standard of measure for needs, since needs are not quantifiable. In this case, therefore, it becomes clear that the element of need has to be ruled out as a determinant of the use-value or exchange value of goods. It remains challenging to develop a reliable description of exchange value, since this lacks a reliable measure. Although some thinkers have suggested that money and need can be applicable in this case, others, such as Aristotle, were against this proposal, owing to the incapability of money and need to form a framework upon which other characteristics can relate. Therefore, this nature of exchange value makes it impossible for it to be applied to various change aspects (Vargo, Maglio, & Akaka, 2008, p. 146-148). Indeed, measuring value would even be more complicated in dynamic markets such as soft drink market enjoyed by companies such as Coca Cola. For instance, all factors of production are dynamic making it overwhelmingly challenging to measure value at a given time. For exchange value to gain relevance and applicability there must be equilibrium between different aspects, which balance the consumers’ expectations of the goods and the nature of the goods, of which producers are responsible for their design and nature. This phenomenon takes us back to the role and importance of activities occurring between production and consumption of goods, which act as determinants of the value of goods. Another important aspect of use-value of goods lies in its relationship with the elements of satisfaction and pleasure. Therefore, this shows that the concept of value is closely associated with pleasure and satisfaction, considering that these three influence one another in different ways. The author has noted that in the past, people derived pleasure from purchasing a new item, probably because this gave them a new ownership. Therefore, it is considered that the newly bought goods and services served the purpose of satisfying people’s pleasure. Therefore, Vargo, Lusch, & Akaka, 2010 has argued that in this case, pleasure is bought in form of goods. Thus, this proves a relationship between value, pleasure, and satisfaction, since consumers will purchase goods and services, after evaluating the amount of pleasure the good or service will offer them. Hence, pleasure in this case, is somehow equated with value of the good or service. Adam Smith is responsible for the new concepts of value-in-use and value-in-exchange. Smith’s argument was based on the difference between the level of value between goods in value-in-use and value-in-exchange. He argued that those goods with the highest value-in-use had the lowest value-in-exchange, while those goods with highest value-in-exchange, had the lowest value-in-use. Therefore, according to Smith, the value concepts of value-i-use and value-in-exchange were inversely proportional. Smith’s Proposition Adam Smith also made an important contribution with regard to the relationship between labour and exchange. Smith argued that most aspects of labour were deliberately conducted in order to gain and actualize the outcome of increased pleasure. In addition, since the outcome of pleasure was the motivation behind various aspects of labour, Smith believed that the aspect of pleasure, therefore, had a close relationship with those labour aspects, which actualized the labour process (Vargo, Maglio, & Akaka, 2009, p. 36-40). Smith’s argument can be said to recommend significant relationship between demand and supply and can be further argued that the achievement of labor depended wholly on consumers demand. Size and worthiness of goods and services play a major role in determining the market forces and controls such as tendency, market procedures, environment, fashion, and preferences. Additionally, uniformity can be seen between the initiatives of economic philosophers explaining the distinction in the wealth levels and countries in terms of labor cost and the Smith’s idea. The excess products for export are because of the great role of labor since Smith argued that the riches of most countries relied mostly on surplus production and the expenditure on labor used in the production scheme. Establishment of one’s idea towards aligning with the call to justify gaining of free or cheap labor from the slave market has led to the creation of balance of power between two countries. Market control was really dependant on rivalry between numerous countries and the need to thrive geopolitical power (Vargo, Maglio, & Akaka, 2009, p. 36-40). When measured against other issues attempting to enlarge alternative reference points of reference, the groupings acquire significance. Conclusion In conclusion, roles of the customers and the firms entail many factors that determine the various forms connecting between the processes and the output of the products. Increasing the aspect of value within the market requires modern technology and strategies that may be of use. Customers have become very important in forming a complete chain of supply by actively supporting the whole system. Customers’ idea is always very important in determining the processes, aspects, and thoughts that may help in promoting the business systems. Value has been a subject of many forces in determining the global customers’ base that has been ease by globalization. The overall current market performance greatly needs the suitability of various rising features because of globalization. Works Cited Vargo, S, L, Maglio, P, P, & Akaka, M, R 2009. Service Dominant Logic as a Foundation for Service Science: Clarifications. European Management Journal, 26, 145-152. Vargo, S, L, Maglio, P, P, & Akaka, M, R 2008, On Value and Value-co-creation: A service systems and service logic perspective, European Management Journal, pp. 1 (1), 32-41. Vargo, S, L., Lusch, F., & Akaka, M, R 2010, Advancing Service Science with Service-Dominant Logic; Clarifications and Conceptual Development. Handbook of Service Science, Service Science: Research and Innovations in the Service Economy. Read More