The strategic role of unused service capacity

Abstract

Services are by nature perishable. As such, managing a service firm's capacity to match supply and demand has been touted as one of the key problems of services marketing and management practice. This paper advances an alternative perspective of unused service capacity. Based on a review of current literature and an exploratory study, this paper employs a theory-in-use methodology to map out a set of capacity strategy propositions. These propositions show a divergence between what literature suggests and what service firms actually practice with regard to reducing the occurrence of unused service capacity. The paper also demonstrates that capacity can be employed as a resource to achieve a series of strategic objectives that serve to improve the performance of the firm. Service firms should therefore approach capacity management not only from the standpoint of operations management but from that of marketing as well.