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A SERVICE DOMINANT LOGIC PERSPECTIVE
ON VALUE CREATION IN THE MARITIME
BUSINESS NETWORK
CARLO BODE
[email protected]
Hochschule Bremen, Faculty 1 - School of International Business - Werderstrasse 73, 28199,
Bremen GERMANY
LUISA ANDREU
[email protected]
Departamento de Comerciaización e Investigación de Mercados. Universitat de València.
Avda. de los Naranjos s/n 46022 València. SPAIN
MARTINA G.GALLARZA
[email protected]
Departamento de Comerciaización e Investigación de Mercados. Universitat de València.
Avda. de los Naranjos s/n 46022 València. SPAIN
Abstract
This paper takes a Service-Dominant (S-D) logic perspective on value creation, resources
and networks in the maritime industry with a particular focus of the research application on
the maritime shipping business network in the Northern German city of Bremen. Based on he
contemporary relevance in the academic branch of service marketing as well as specific
characteristics of the maritime shipping industry such as a unique network structure and
density and strong relevance for and dependency from the world economy, a qualitative
research with semi-structured in-depth interviews was conducted with the aim of
understanding how operant resources in the mentioned industry create value within the
context of many-to-many marketing. We conclude a general applicability of S-D logic to the
context of the maritime shipping industry. The research has emphasized the role of co-created
value in this business and provides a framework, which allows practitioners to identify
crucial elements of value co-creation. The structure of networks in the shipping industry is
depicted and the imperative part of relationships in this business is established.
Key words. Maritime Industry, Service-Dominant logic, Value Creation, Qualitative
Research, Bremen
A SERVICE DOMINANT LOGIC PERSPECTIVE
ON VALUE CREATION IN THE MARITIME
BUSINESS NETWORK
Abstract
This paper takes a Service-Dominant (S-D) logic perspective on value creation, resources
and networks in the maritime industry with a particular focus of the research application on
the maritime shipping business network in the Northern German city of Bremen. Based on he
contemporary relevance in the academic branch of service marketing as well as specific
characteristics of the maritime shipping industry such as a unique network structure and
density and strong relevance for and dependency from the world economy, a qualitative
research with semi-structured in-depth interviews was conducted with the aim of
understanding how operant resources in the mentioned industry create value within the
context of many-to-many marketing. We conclude a general applicability of S-D logic to the
context of the maritime shipping industry. The research has emphasized the role of co-created
value in this business and provides a framework, which allows practitioners to identify
crucial elements of value co-creation. The structure of networks in the shipping industry is
depicted and the imperative part of relationships in this business is established.
Key words. Maritime Industry, Service-Dominant logic, Value Creation, Qualitative
Research, Bremen
1. INTRODUCTION
Service-Dominant logic is understood as an emerging marketing perspective that sees service
at the core of all economic exchange and is customer centric and relational (Vargo and Lusch
2004a, 2008a). In their seminal work on a new paradigm in marketing, Vargo and Lusch
(2004a) describe the emerging S-D logic in ways that place heavy emphasis, among other key
concepts, on the role of value that results from the interaction between a firm and its customer
or between a producer and the consumer (Gummesson 1998; Grönroos 2000). Besides,
Gummesson and Polese (2009) perceive the potential of network theory as still insufficiently
exploited and call for empirical research of business relationships. Following the recent
emergence of this new perspective, researchers identified a lack of empirical studies, which
take a specific S-D logic angle on value creating processes in business to business (B2B)
contexts, networks and the management of operant resources (Gummesson et al. 2010).
The present paper deals with the application of a S-D logic perspective on the business
context of the maritime shipping industry, where interactions and stakeholders have been
rarely analyzed through the prism of value co-creation. However, specific characteristics of
the maritime shipping industry such as a unique network structure and density and strong
relevance for and dependency from the world economy are particular appeals for studying the
proposition of this new academic perspective within this B2B context. To this end, drawing
from the S-D logic, it is interesting to deepen our understanding in how operant resources in
the mentioned industry create value within the context of many-to-many marketing. The
systematic observation of relational phenomena and the customer’s role is supposed to enable
marketers to foresee opportunities and avoid mistakes (Gummesson and Polese 2009).
Foundational to the new dominant logic is the notion that value in created in concert with the
customer, through experiences, interaction and relationships. The customer’s value-in-use is
seen as the overriding concept, which is supported by companies’ value propositions.
Recently the creation of value has become a focal point of contemporary marketing literature
(Payne et al. 2008). Since academic research generally has difficulties to measure and define
value (Grönroos 2008, Gallarza, Gil-Saura and Holbrook 2011), in this paper we propose an
overall thought to analyze the general understanding of value in the maritime shipping
industry. What is value, how is it generated? Is value understood on basis of processes that
integrate resources (Vargo, Maglio and Akaka 2008), or is it rather conventionally measured
in financial terms and effects on profit and revenues? Past research revealed that interactive
processes largely determine the value perception of business transactions dominated by
operant resources, such as employees, their knowledge and skills and the quality of the
relationship between customer and supplier (Payne et al. 2008, Thai 2008). SD-Logic views
operant resources as the prime source of competitive advantage.
Tanking into consideration this background, in this paper, we want to establish to which
extend operant resources are recognized as key value drivers, which type of resource is
perceived as being most important and how they are obtained and nurtured. Once the
mutually integrated resources are identified their match can be assessed (Andreu et al. 2010).
The empirical research conducted aims to provide researchers and managers with more
knowledge, based on the S-D logic, with a specific locus on value co-creation, the role of
operant resources and networks, which could enhance value creation. The context of the
research has been the maritime shipping industry in the northern German city of Bremen, a
place particularly rich of maritime history and economy. Methodologically, within the recent
stream of research on S-D Logic, Gummesson (2008b) suggests including network theory
research into qualitative research approaches and demands a large series of case studies in
order to prove the validity of S-D logic and its related concepts. With his claim in mind, for
the present study we chose the in-depth interviews as the primary empirical research method.
Since we identified a networked structure of the maritime shipping industry, in-depth
interviews allowed us to gain insights into processes and perceptions from different angles,
which provided us with a broader perspective.
The paper starts with a conceptual framework that offers a literature review on S-D logic and
its applications in many-to-many marketing, and in second place shows how literature from
the fields of nautical sciences and logistics provided a solid foundation for a S-D logic
approach, as settled in the empirical research.
In the second part, after presenting the
objectives and research questions, the setting and the method chosen are shown: six in-depth
interviews have been conducted semi-structured, using an interview guide, which listed key
issues and questions. Results from empirical research are presented, showing how they
enabled us to gain specific knowledge about the processes involved in service provision and
value creation as well as the roles of customers and suppliers and the resources each involved
party is supposed to integrate.
2. CONCEPTUAL FRAMEWORK
2.1. S-D logic, the value concept and value creation
There has been an increasing awareness of the value-creating potential that can be achieved
through the application of S-D logic to the management of numerous services; Vargo and
Lusch (2004a) define S-D logic as “a mindset for a unified understanding of the purpose and
nature of organizations, markets and society”. They describe it as a “new conceptual lens”
through which exchange, markets, enterprises and competition can be viewed from a service
science perspective (Lusch, Vargo and O’Brien, 2007). Following this approach, there is an
exchange between the participating parties, of competences (knowledge and skills) and
resources (operand and operant) (Tronvoll, 2007), which can only be presented as value
propositions by the marketer (Ballantyne and Varey, 2008) because value for the customer is
generated in self-service processes. This is why co-creation of value with the customer is
important and where the focus of S-D logic marketing lies (Lusch, Vargo and O’Brien 2007).
The concept of value has an increasingly unanimous recognition as an imperative focus for
both practitioners and researchers (Day 1999; Heskett, Sasser and Schlesinger 1997; Nilson
1992; Parasuraman 1997; Woodruff and Gardial 1996). Indeed, grounded on fundamental
marketing principles, the concept of customer value has been revisited and refined by
academicians and practitioners for the last 30 years (Gallarza, Gil –Saura and Holbrook,
2011). Relevant aspects of the customer-value concept have emerged in tandem with the
developments that have culminated in the new service-dominant paradigm. In fact, today
value is considered to be the ultimate goal of business and marketing and in 2004 the
American Marketing Association adopted the term in its marketing definition. However, until
now many firms and even researchers experience difficulties in defining and measuring value
(Payne and Holt 1999, Tzokas and Saren 1999, Lindgreen et al. 2005, Grönroos 2008). This
appears to be a significant nuisance, considering that firms’ raison d’être is the offering of
propositions, which are valued by customers, and the understanding of how to deliver
superior value is supposedly a source of competitive advantage (Payne and Holt 1999).
Traditionally, from a goods-dominant logic perspective, value has been seen as embedded in a
firm’s operand resources, to which, in different processes of the value chain, value has been
added (Porter 1985). This concept however has a significant flaw. It suggests that the less
disciplined a firm handles costs in the value chain, the more value it adds to the final output.
When this output switches ownership value-in-exchange is created. It is measured by the price
received for the goods exchanged - the nominal value. The concept also suggests that value is
created by the supplier alone: the value chain stops at the customer, no customer involvement
required. Contemporary research argues that the important aspects of value, value for
customers and their satisfaction cannot be observed before consumption. Therefore a focus on
value-in-exchange fails to determine if real value for customers has been created and makes
marketers concentrate on short-term transactions, through which no sustainable competitive
advantage can be obtained (Grönroos 2008).
Value-creation takes place in a network involving not just two but multiple stakeholders. A
supplier has a value proposition but the value actualization takes place during the customer's
usage and consumption process (Gummesson 2007b). Furthermore, the notion of value cocreation has far reaching implication for both, academicians and practitioners. Indeed, cocreation must be understood a distinct form of collaboration; co-creation of value is especially
interesting conceptually, in reconnecting production and consumption through interaction,
marketing opportunities come into view among new groups of "value makers and takers"
(Ballantyne and Varey 2008).
This new perspective is a radical deviation from the traditional goods centered view, the G-D
logic, which focuses around the tangible output of goods and the value embedded in those.
However, S-D logic does not stand in absolute opposition to G-D logic; it is rather a
reorientation in marketing philosophy, which embraces all marketing offerings (Vargo and
Lusch 2004a). S-D logic has generated a considerable amount of academic interest, although
the empirical approaches that can account for managerial knowledge are still arising, the
present work being one of these attempts.
2.2. Literature review on logistic services
In recent years, researchers interested in logistics agreed on the growing awareness of the
significance of the maritime industry and an increasing appreciation and interest from the
academic community (Gil, Ruiz and Servera, 2008; Pallis and Vitsounis 2010; ServeraFrancés 2010). Although previous research with an empirical testing of any of the S-D logic
premises is still scarce, some of the previous knowledge based on secondary sources and
scholar research has been useful for understanding the idiosyncrasy of value creation and the
relationships between different agents in the shipping industry.
According to the OCDE, the current competitive situation in the maritime shipping industry
has evolved in recent years: competition shifts from single market participants to entire
supply chains, where a growing market power accumulation has emerged among a small
number of companies, largely obtained through M andA activities (van de Voorde and
Vanelslander, 2009). In academic research, Berglund, Laarhoven, Sharman and Wandel
(1999) provided a conceptual taxonomy for value creation in shipping: operational efficiency,
integration of customer operations, vertical or horizontal integration and supply chain
management are the four ways logistics providers can create value. Furthermore, in an
international research among western European shipping companies, Miller (2003) confirmed
the centrality of personal relationships, networks and face-to-face interaction in the shipping
business. The business trip was identified as an important tool to establish and maintain these
networks and relationships. In fact, all authors agreed in the need of these strategic alliances,
although the complexity of networks among major shipping lines is also a commonplace in
logistics literature (van de Voorde, andVanelslander 2009; Pallis, Vitsounis, and de Langen,
2009; Ferrari, Parola, and Benacchio 2008; Servera-Francés 2010). Besides a shift of capacity
and container throughput from North America and Europe towards East Asia, small shipping
lines, offering niche routes can benefit greatly from scale economies generated by strategic
alliances (Ferrari, Parola, Benacchio, 2008). The major carriers however have already passed
this point and alliances in their case are likely to produce overcapacity. In that sense, Myers
(2008) proposed that carriers of bulk and project cargo passed out on the development of ecommerce solutions, which container carriers introduced a long time ago and were able to add
significant customer value with online booking and track-and-trace technologies.
A framework to benchmark port performance and evaluate and improve their
competitive position has been provided in Cuadrado, Frasquet and Cervera (2004),
where the three most critical dimensions found were time, safety and costs. More
specifically, according to the relevance of time for this industry, the speed of loading and
unloading, hence the quay crane performance, as been found to be the most critical
determining factor (Bell, 2008). But time efficiency is not the only key element:
reliability and empathy are also important antecedents of service quality in logistics,
both elements being positively influenced by the use of information technology, all of
them leading finally to a better customer satisfaction and loyalty (Gil, Ruiz and Servera,
2008). The multidimensionality of the maritime transport service quality is fully studied
by Thai (2009), who propose a six dimensional construct: resources, outcomes, process,
management, image and social responsibility. In all dimensions the human factor
receives high significance, process and management related factors being the strongest
determinants of service quality. All this is a valuable knowledge for a S-D logic
perspective, where operant resources have a high relevance in value creation.
3. OBJETIVES AND RESEARCH QUESTIONS
The research conducted in this paper aims to enhance value creation in the maritime sector
with a precise interest in the shipping industry in Bremen. In order to achieve this research
aim, we propose four research objectives that are related to four key areas in the S-D logic
literature: (RQ1) S-D logic foundational premises, (RQ2) value co-creation processes, (RQ3)
operant resources, and (RQ4) interaction and networks.

RQ1: Analyze the ten S-D logic foundational premises as potential value drivers; Are the
ten S-D logic foundational premises applicable to the maritime shipping industry context?
Does an application of the ten foundational premises contribute to increased mutual value
generation?

RQ2 Value co-creation processes: two research questions are under this premise of S-D
logic in its application to the maritime industry.
o RQ2a: Analyze the process of value co-creation, answering questions such as what
are the critical processes involved in value creation in the maritime shipping
industry? and secondly,
o RQ2b: Establish a framework to facilitate value co-creation, which aims to answer
questions similar to: has increased intensity of co-creation positive impact on
value perception for any of the involved parties?

RQ3 Operant resources. Analyze the nature, role and differentiation potential of operant
resources. Several questions arouse according to this issue:
o RQ3a: Which are the operant resources integrated in the value creation process by
the different involved parties?
o RQ3b: Which operant resources are regarded as being of primary importance in
the shipping industry?
o RQ3c: To which extend are operant resources regarded as a potential source of
competitive advantage?
o RQ3d: To which extend are operant resources treated and developed according to
their importance?

RQ4: Interactions and networks: Analyze the role of networks and interaction in
relationships and the potential of many-to-many marketing techniques. Questions to be
answered by interviewees will be: How and to which extend are the different players in
the industry and their customers connected? Which role can many-to-many marketing
play in increasing the value derived from these networks?
The research questions phrased above and the underlying objectives build the framework to
guide the empirical research pursued in this work.
4. THE SETTING CHOSEN FOR THE EMPIRICAL STUDY
With 2.7 million jobs in Germany, the logistics industry is an important employment factor.
The maritime industry directly employs 380.000 people. The maritime shipping service
providers account for a workforce of 60.000, which obtained a turnover of 31 billion Euros in
2006. According to the Bremen ship owner association a much larger number of jobs in
adjacent industries depends on the wellbeing of the maritime sector, such as marine
insurances and banks. (2010 annual report Bremer Rhederverein). The German merchant fleet
is the world third largest after the Japanese and the Greek. By the end of 2008 German ship
owners had 3.473 merchant vessels with a total gross tonnage of 76, 3 million under service.
When in the 1960s containerization emerged, the backbone of globalization was born. The
intermodal container paved the way for entirely new organizational models, which entered the
arena of logistics services with worldwide door-to-door services. Strong growth in
international trade in the 1970s fuelled the development of these services. The long lasting
legislative pressure on alliances, which eventually lead to their abolishment and the
recognition of the need to differentiate from competition, resulted in an increasing vertical
integration in the logistics business. From basic door-to-door services maritime operators
transformed into highly integrated logistics providers, being able to manage entire supply
chains including operations on the cargo itself (Frémont 2009).
Besides the trend towards vertical integration, growing consolidation can be observed in
marine shipping. The need for higher profitability becomes evident when looking at the
numerous failures of carriers at Western stock exchanges. A number of large shipping lines is
privately held, and therefore not under such demanding income scrutiny as publicly traded
companies. However, eventually the shipping industry too must prove that it is able to gain
quality income in the competition over investors and capital (Tirschwell 2008).
Both above described phenomena have changed the nature of competition in the maritime
shipping industry. Have previously individual actors competed against each other, now the
level has risen to competition between entire supply chains. Such supply chains are well-oiled
machines, in which one member depends on the synchronization and performance of the
other. This dependence reveals the growing importance of effective network and relationship
management (van de Voorde and Vanelslander 2009). These customer oriented marketing
perspectives are interesting to be analyzed through a S-D logic perspective In views of
providing better ways of increasing customer value.
In order to provide a comprehensive knowledge on the specificity of the Maritime Shipping
industry as a setting for an empirical research on S-D logic, we provide the following table as
a summary of its opportunities and threats to be considered as an overview for accomplishing
research on value creation within this industry.
Table 1: Opportunities and Threats in Maritime Shipping
Opportunities
Economies of scale through increased vessel
size
Threats
Dependency on global economic development
Cost savings through slow steam
Economic downturns hit shipping industry
first
Efficiency savings through technological
advancement
Increased price pressure due to abolishment of
liner conferences
Adoption of state-of-the-art relationship
management techniques
Oil price volatility
Outsourcing of refinement, assembling and
storage functions to shipping companies.
Vessel overcapacity. Capacity constrains in
port facilities and hinterland connections.
Increasing consolidation provides major
players with growing market power
In economic crises customers might focus on
price only if relationship building has been
neglected
Scale and efficiency economies through
increased collaboration between Northern
German ports
Piracy in the Gulf of Aden
5. METHOD
As aforementioned, the context of the research is the maritime shipping industry in the
northern German city of Bremen, a place particularly rich of maritime history and economy.
We identified numerous parties involved in the value creation process in this industry. Our
objective therefore was to obtain an insight as broad as possible, by interviewing at least one
representative of each involved entity. The interview participants are all experts in their
particular field of profession, drawing upon years of experience in the field of maritime
shipping. The functions the participants hold include Marketing Manager, Key Account
Manager, Fund Manager and Sales Director. In depth interviews are aimed to the person that
is in possession of specific expert knowledge or experience and helps the researcher to set his
theoretical background into context and probe his hypotheses (Bradley 2010, p.234). Hence,
this research method is most suitable to gain depth insights and explanations. Furthermore,
the technique allows for adjustment and refinement on the way, after additional knowledge
about the research topic has been gained.
The sample for our qualitative research was chosen from a set of organizations from the
maritime business network in Bremen, their profiles being shown in Table 2. The six
participants in in-depth interviews throughout claimed middle management positions, which
makes them day-to-day participants in the value creation processes the firms conduct in
concert with their customers. The level of experience ranged from five to twenty-five years in
the maritime business. The following table lists the companies and positions of the
individuals who contributed to our empirical research. In our case, the in-depth interviews
have been conducted semi-structured, using an interview guide, which listed key issues and
questions. The course of the interviews were however flexible, largely guided by the
development of the conversation and the topics the interviewee was able and willing to
provide most in-depth information about. All interviews lasted between 50 to 70 minutes and
have been sound recorded for later analysis.
Table 2: Participants‘ Profile
Organization
Samskip
MSC Germany
HCI Capital
HEGO Group
DHL
Hanseatic Lloyd
Position
Manager Marketing and Sales
Key Account Manager
Fund Manager
Head of Project Department
Sales Manager
Head of Marketing
Years of
Experience
12
8
5
25
9
6
6. RESULTS AND DISCUSSION
The knowledge obtained by our empirical research is organized and discussed according to
the aforementioned Research questions: S-D logic foundational premises (RQ1), Value cocreation processes (RQ2), Operant resources (RQ3) and Interaction and networks (RQ4).
Some verbatim are included for a better description of the results.
6.1. S-D logic foundational premises (RQ1)

Service is the fundamental unit of exchange, but often not the mere transportation
activity is fundamental to a transaction in the shipping business but, and especially in the
project cargo sector, the knowledge that experts handle the precious freight with greatest
possible care and will do everything possible to bring the project to a satisfactory end is of
high value. The following statement provides an example.
“Especially in the machinery sector reliability has highest priority. A customer,
who ships a machine worth a couple of million Euros, does not want to hear his
shipment is stuck in a port due to erroneous documentation. These customers
want things to work and don’t care about a couple of Euros more in freight
rate.”(Marketing and Sales Manager of a freight forwarder and shipping line)
Apart from the fact that shipping is service, a focus on these additional elements such a trust
and reliability can provide considerable additional value on the customer side.

Goods are a distribution mechanism for service provision: The tangible elements of
service provision, the vessels, are truly distribution mechanisms for the core service
shipping lines provide. More so than in any other transportation businesses, the capital
requirements for the distribution mechanism of shipping lines are extremely high, which
lead to the emergence of additional services such as issuing houses specialized on ship
funds.

Operant resources are the fundamental source of competitive advantage: one
resource is of highest value in the industry and has the power to truly set a company apart
from its competition: relationships. Also knowledge has repetitively been mentioned as an
important competitive factor, mainly in the form of professional expertise providing trust
in the providers’ abilities on the customers’ side.
“…many shippers book with us, just because they know we get the things done
to their satisfaction and we are there in case of any problems. Although, at
times we might be slightly more expensive than the big lines.” (Marketing and
Sales Manager of a freight forwarder and shipping line)

All economies are service economies. All interviewees confirmed the interdependency of
actors in and the complexity of the maritime economy. A separation of maritime service
providers from vessel equipment producers does not do justice to this interdependency.

The customer is always co-creator of value: the value creation process in shipping
consists of different stages, each characterized by different degrees of customer
involvement. Value co-creation in shipping is most apparent in the phases leading up to
the performance of the actual shipping process. These early stages are characterized by
intensive mutual resource integration, largely in form of information provision.
“For the successful completion of a project it is essential to be in constant
contact with the customer.”(Sales Manager of a Freight Forwarder)
There was full agreement about the fact that the more a customer becomes involved in a
project and the more interaction is conducted the better the outcome of the project will be.
The manager of a project forwarder took the co-creational aspect a step further by stating:
“Tailoring a project to the exact requirements of the customer is actually what
sets a project forwarder apart from the competition. It is also a sign of respect
towards the customer to grand every individual project the utmost
consideration.”(Head of Project Department)

The enterprise cannot deliver value, but only offer value propositions. The process of
customer acquisition and business initiation is characterized by intensive interaction
between the prospective customer and the service supplier, in a long-term basis (more
than two years). The supplier constantly strives to establish a relationship with the
customer, which is based on trust and the confidence in the supplier’s expertise and
abilities. Due to the global competition even in niche markets shippers have a wide choice
and the suppliers have to evaluate carefully each customer’s specific requirements in order
to make a most suitable value proposition. However, sometimes logistics providers turn
down requests too, as the following quote explains.
“If a company like Beiersdorf asks me for a quote on a container from
Hamburg to Sidney, I would just thank them politely for the request but tell
them that we are not the right partner for this business. A shipper like this does
not only ask us but asks everyone else in the business too and will eventually
always end up with the big players.” (Marketing and Sales Manager of a
freight forwarder and shipping line)

A service-centred view is inherently customer oriented and relational. The role of
relationships in the shipping industry cannot be overestimated. Answers to our research
questions revealed that actors in the business are very aware of this fact and established a
variety of measures to build and nurture relationships. The high touch approach is clearly
given priority. Nevertheless, good use is made of state-of-the are communication and
information technology. One interview participant highlighted the significance of
relationships by statement as the following.
“Top management has very intimate relations to decision makers around the
world. This is the nuts and bolds in maritime shipping.” (Head of Marketing of
a ship financier)
The interviewee further stated that relationships are nurtured on a highly personal basis, often
through business trips to the respective partners and thereby confirmed notions of Miller
(2003).

All social and economic actors are resource integrators. Knowledge, experience and
expertise, those were the resources most often mentioned being determinant for the
success of a business project in maritime shipping. Furthermore, we have established that
the customer plays a crucial role in resource integration as well. Especially the
professional preparation and timely delivery of data required by the shipping company is a
crucial part of the customer’s role.

Value is always and phenomenologically determined by the beneficiary. In the course
of the interviews the importance of references in the shipping business became apparent.
The fact that many shipping companies would post statements of satisfied customers on
their websites and provide video footage of successful projects verifies the validity of this
premise in the context of the shipping industry. The following statement shows how easily
companies can verify that customers received the value they expected.
“After every project, successful or not, we would arrange for a feedback
meeting with the customer in order to evaluate if we have met his
expectations.” (Sales Manager of a freight forwarder)
6.2. Value co-creation processes (RQ2)
The aspect of co-created value appears to be highly present in maritime shipping. Co-creation
happens in various forms. The reciprocal integration of resources in the form of information
and expertise is the most apparent one. Information provision often is facilitated by dedicated
IT platforms, online Bills of Lading and intranet menus including track and trace services, to
which registered customers obtain access. Of great importance in the value creation process is
the mutual knowledge generation about internal processes. The better the processes and the
required resources of the other party are known, the better the own resources can be
integrated. Interviewees confirmed that projects with very knowledgeable customers always
have the greatest chances to run successfully.
Other essential elements of value creation that appeared in the answers of the interviewees is
timeliness and reliability; the ability to provide information and services in a timely manner is
related to knowledge about other parties’ processes but to the largest extent to functioning
relationships within the maritime business network. In the process of service provision, which
is typically characterized by a meshing of multimodal service elements performed by different
providers, every link bears a potential for delay and even service failure. Good relationships
among the involved parties provide for a more undisruptive service provision and timely
service delivery. The importance of reliability is impressively reflected in the following quote.
“Especially in the machinery sector reliability has highest priority. A customer,
who ships a machine worth a couple of million Euros, does not want to hear his
shipment is stuck in a port due to erroneous documentation. These customers
want things to work and don’t care about a couple of Euros more in freight
rate.” (Manager Marketing and Sales of a freight forwarder and shipping line)
The manager quoted above stated that reliability to the largest extent is a product of
experience and good relations within the network of service providers. Another sales manager
from a large shipping line confirmed that especially good relationships with terminal and rail
operators are crucial for a quick and smooth cargo handling in the port, where according to
his opinion the most delays are caused.
All interview participants described their service offering as highly flexible towards
individual customer requests. However, flexibility can be understood differently depending
on the specific field of business the interviewee operates in. While flexibility in the case of
large container lines seem to stem from size, in terms of capacity and schedule design, and
from market power, smaller bulk carriers and project forwarders obtain their flexibility from
highly personalized service, which provides for tailor made transportation solutions for every
individual customer. This notion is reflected in the following quotation.
“In contrast to the big players, who only go by price, our business is the
transport planning – to think through the shipping from A to B.” (Manager
Marketing and Sales of a freight forwarder and shipping line)
Through the analysis of value creation processes and the role and potential of co-creational
elements in the maritime shipping business we were able to identify resources and other
factors characterizing value creation in this industry context. Considering the information
gathered in the interviews, we propose the following framework, depicting the elements and
parties involved in value creation in maritime shipping.
Figure 1: Value Co-creation in Maritime Shipping
The above framework depicts the processes involved in adapting a S-D logic perspective on
business in maritime shipping. Distinguished is between activities directed ‘backwards’
towards cooperating logistics providers, involving mutual learning, reciprocal resource
integration and relationship management. Competence development, reliability improvement,
trust generation and in-house relationship management characterize internal processes. The
‘forward’ oriented activities are directed towards the customer and other involved parties such
as sub-contractors and customers’ suppliers. They similarly involve mutual learning,
reciprocal resource integration and relationship management.
6.3. Operant resources (RQ3)
The empirical research confirmed the centrality of operant resources to business success put
forward by S-D logic (Lusch and Vargo 2006). Within the shipping companies,
organizational learning about customers’ processes and specific requirements especially
regarding the handling of the cargo were generally perceived as crucial for successful
operations. The extent to which this knowledge is required varies however among the
providers of different services within the shipping business. The depth of information
regarding the cargo, required by a container shipping line can be described as modest in
comparison to a project forwarder transporting a power plant. The amount of required
information also increases with the number of additional services booked by the shipper.
Process and cargo specific information are obtained through several ways. The learning
process’ complexity can range from email correspondence or telephone conversations to
employees implanted at the customers’ site. These people are supposed to obtain detailed
knowledge about the customer’s internal practices and manage logistics processes on the
ground. In depth knowledge of customer’s products and processes does not only facilitate
service provision in shipping but is also a sign of respect and mutual appreciation. Besides
knowledge important in the attraction of business in maritime shipping also is the ability to
present expertise in form of trusted references and a “good name”.
“As a small forwarder it becomes increasingly difficult to attract big projects.
You have to have a name and good references.”(Sales Manager of a freight
forwarder)
In order to achieve positions of competitive advantage however, expertise and relationships
are clearly the dominant factors. All interview participants confirmed either one or both
elements as being their company’s fundamental source of competitive advantage. Our
research results here are strongly congruent with S-D logic. Expertise has been referred to as
stemming from the following factors.
 Long reaching experience in the particular field of business
 Particularly skilled employees with academic or practical education and experience
 Top management dedicated to competence building
 Constant training and internal knowledge building
 Active promotion and development of apprentices
Knowledge and the many ways it finds expression, clearly occupies a central position in the
competitive struggle among the players of the maritime shipping industry. As the manager of
a freight-forwarding company put it:
“…it’s competences, pure and simple.”
(Head of project department)
6.4
Interaction and networks (RQ5)
Companies in maritime shipping find themselves being part of a complex network of market
participants – service provider and competitors, customers, government entities, nongovernmental organizations and the general public. Relationships within these networks are
characterized by mutual interest and dependency. Our research revealed that there is a great
awareness among the market participants about this central role of relationships and therefore
the development and management of relationships receives great attention in the industry and
is part of daily business. This does not mean that all companies that provided interview
partners operate with sophisticated CRM programs or even consider the latest state-of-the-art
in Relationship Marketing theory. In fact, for most firms the management and nurturing of
relationships seems to be a very natural, day-to-day task, as the following quotation
emphasizes.
“In this business most of the things are fixed through relationships. There are a
couple of heads pressing keys here and there, they know many people and spend
at lot of time on the phone. It’s difficult to understand but that’s how things are
done in this business and it works.”(Fund manager of an issuing house)
The “high-touch” approach is clearly given priority in the maritime shipping industry. One-toone meetings or team conferences with the customers’ people are conducted continuously to
promote specific projects and to nurture good relations in general. During the course of the
interviews we were able to identify a number of key reasons for the conduction of social
events with business partners.
 To familiarize in a social atmosphere with people that is dealt with daily in a less
casual environment.
 Foster knowledge about the other party’s products, processes and ways of decision
making.
 To increase the sense of commitment to provide better and more personalized service.
 Foster friendship, interaction, supportiveness and commitment among colleagues.
 Establish a personal preference among the people of the own and the partner
organization in order to smooth daily processes.
Personal preference and trust are two factors, which received great attention by our interview
partners. Predominantly in the forwarding business, business partners are often chosen on an
ad-hoc basis, depending on the nature and requirements of the specific project at hand. It is
obvious that a trusted company, with a record of successful projects and personal attachment
will be of first choice. However, the maintenance of free choice has been stressed as well. If
the preferred partner does not perform to the promised standards, the competition will be
ready to serve.
Another important factor of networking is the mutual learning process, which is bound to
improve business processes and is a sign of respect for the other party’s business as well. The
following quotation underlines the role of mutual learning in relationship management.
“The customer needs to feel I am interested in his products and I actually
understand what we are dealing with and how they work. You don’t need to be
a doctorate engineer but it’s simply a sign of respect and appreciation, which is
very important in networking.”(Head of project department)
Interaction plays a vital role in maritime shipping, in relationship building and maintenance as
well as in daily business dealings. Interaction manifests links and provides the business
partner with the information required for successful project completion.
“For the successful completion of a project it is essential to be in constant
contact with the customer.”(Sales Manager of a freight forwarder)
Especially in the initial stage of a shipping project the mutual information requirements call
for intensive interaction. As the above statement shows however, interaction is a vital part at
every stage of a project.
“Initially, the largest part of the work is the interaction and relationship
establishment with the customer, and then we need to prove we deserve his
trust.”(Head of project department)
As previously stated, companies in the maritime shipping industry are well aware of the
significance of relationships in their business, the appreciation however does not seem to go
beyond the simple dyad. Only one of our interview partners confirmed acquisition activities
extending to the partners and sub-contractors of clients and business partners. The notion of
network management appears to be widely unknown or unaccepted in maritime business. At
this point we identified significant opportunities for a more effective relationship
management, reaching beyond the immediate customer contact to involve the gradual network
environment.
7. CONCLUSIONS
This paper takes a S-D logic perspective on value creation, resources and networks in the
maritime shipping industry with a particular focus of the research application on the maritime
business network in the Northern German city of Bremen. After literature review on S-D
logic and value-co creation, specific research propositions regarding the application of S-D
logic were proposed and applied to our research context. The empirical research consisted of
six in depth interviews with key actors in the maritime business network in Bremen: the
research results are brought into context with the framework of the theoretical background.
The nature of in the maritime shipping business let us conclude that a marketing approach
based on a S-D logic perspective with a focus on customer involvement, co-creation of value,
interaction, knowledge development and network maintenance will enable service providers
to offer customized services, provide better value propositions to current and prospective
customers and obtain greater advantages from customer relations and the networked structure
of the industry.
As S-D logic is thought to be a universal perspective for a “unified understanding of the
purpose of organizations, markets and society” (Vargo and Lusch on www.sdlogic.net)
knowledge and its descendants should be perceived as being universally responsible for
competitive advantage in any industry. What we perceive as rather unique to the maritime
shipping industry however is the imperative weight of relationships within and beyond the
business network.
At the end of this study, acknowledging as limiting factor that, taking into account the novelty
of the topic, we concentrated our research in a preliminary qualitative study that will need
further quantitative development. The use of such qualitative methods inevitably implies a
sample size that is considerably small and insufficient to represent the population of shipping
industry managers and therefore the findings of this study are strictly subjective. This
limitation, among other factors, presents certain implications or opportunities for future
research. This research was only conducted from one side of the consumer/provider
interaction: we propose implication for future research that should engage the customer on
this topic, so as to reveal the similarities or discrepancies in the two points of view. However,
research that engages the customer in B2B environments would most likely be qualitative or
conceptual at first, because before any quantitative methods are used to research ServiceDominant logic, there is a need for a more profound base of conceptual understanding. Then,
in a second stage, scales and structural models could be established in order to use
quantitative methods. These quantitative methods can be applied to both, the consumer and
provider and compare the two different points of view, regarding the foundational premises of
S-D logic. From this, we can see a possible connection and potential effects that this new lens
could have on the current theories and practices that make up services in B2B settings, and
thus continue to contribute to this lucrative and appealing area for both managers and
researchers.
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