Globalization of Services

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives Identify and differentiate the four domestic

growth and expansion strategies. Discuss the nature of franchising from point of

view of the franchiser and the franchisee. Differentiate between the three generic

international strategies. Discuss the three factors to be considered in

planning transnational operations. Discuss the five C’s that must be balanced in a

borderless world. Identify and differentiate the five global

service strategies. 14-2

Expansion Strategies

Single Service Multiservice

Focused service: Clustered service:Single * Dental practice * Stanford UniversityLocation * Retail Store * Mayo Clinic * Family restaurant * USAA Insurance

Focused network: Diversified network:Multisite * Federal Express * Nations Bank * McDonald’s * American Express * Red Roof Inns * Accenture

14-3

Franchising Benefits to the Franchisee

Management TrainingBrand NameNational AdvertisingAcquisition of Proven BusinessEconomics of Scale

Issues for the FranchisorFranchisee AutonomyFranchise ContractConflict Resolution

14-4

Generic International Strategies

 

TransnationalStrategy

GlobalStrategy

Multi-domesticStrategy

NoInternational

Strategy

Low High

Force Towards Local Responsiveness

Force Towards GlobalIntegration

High

Low

 

14-5

Multinational Development The Nature of the Borderless World

(Triad)Customers - information has

empowered Competitors - nothing stays

proprietaryCompany - fixed costs require large

marketsCurrency - become currency neutralCountry - deprive competitor of home

market Planning Transnational Operations

Cultural TransferabilityWorker NormsHost Government Policy

14-6

International Strategic Service Vision

 

Service DeliverySystem

Operating Strategy Service Concept Target Market Segments

Available technology?Infrastructure?Utility service? Labor market norms and customs? Space availability? Interaction with suppliers? Educating customers?    

Appropriate managerial practice?Participative?Autocratic? Labor market institutions?Government regulations?Unions? Host government policies? Language?Front office?Back office? 

What are customer expectations?Perception of value?Service ethic? Service encounter?Language?Acceptance of self-serve? What are the usage patterns? Cultural transferability?  

What are the market segments?Domestic?Multinational?Tourist? What are important cultural differences?Language?Life style?Disposable income? What are the workforce demographics?Skills?Age distribution?Attitudes?Work ethic?

 

14-7

Considerations in Selecting a Global Service Strategy

Globalization Global Service Strategies Factors Multicountry Importing Follow Your Service Beating the Expansion Customers Customers Offshoring Clock Customer Train local Develop foreign Develop Specialize in Provide Contact workers language & foreign back- office extended cultural sensitivity customers office service hours of skills components service Customization Usually a Strategic Re-prototype Quality and More need for standard opportunity locally coordination reliability & service coordination Complexity Usually Strategic Modify Opportunity for Time routine opportunity operations focus compression Information Satellite On site advantage Move Training Exploit Intensity network experienced investments opportunity managers Cultural Modify Accommodate Could be Cultural Common Adaptation service foreign guests necessary to understanding language achieve scale necessary Labor Intensity Reduced Increased labor Hire local Reduced labor Reduced labor labor costs costs personnel costs costs Other Government Logistics Inadequate Home office Capital restrictions management infrastructure employee investments morale

14-8

Goodwill Industries International

Service Renewal

14-9

Background

Goodwill mission is to help people with disabilities lead productive lives

Major source of revenue from donations of used clothing, house ware, electronics, and other salable items.

Competition for donations and sales emerging:- Salvation Army- Small consignment and thrift stores- Aggressive encroachment from for-profit thrift stores (e.g. Thrift Town)

How should the introduction of for-profit thrifts affect Goodwill’s decisions about the role of customer service?

14-10

Goodwill Industries Sources of Revenue

65%

15%

6%

5%4%5%

Donated Goods

TemporaryServices

SubcontractServices

Public Support

Grants

Miscellaneous14-11

Goodwill Strategy Avoid head-to-head competition by

using a niche marketing strategy (e.g. Halloween costumes)

Open stores in high-traffic locations Polish image to look more like a

department store than a thrift shop. Who are Goodwill’s customers and how

have their demographics changed over time?

How can Goodwill differentiate itself from the competition?

14-12

Customer Issues

Discontinued pickup service (avoid trash)

“All sales are final” policy

14-13

Questions

1. Who are Goodwill’s customers and how have their demographics changed over time?

2. How should the introduction of for-profit thrifts affect Goodwill’s decisions about the role of customer service?

3. How can Goodwill differentiate itself from the competition?

4. Visit http://shopgoodwill.com/ where Goodwill auctions items of special interest and discuss why this on-line store has great profit potential. 14-14

FedEx: Tiger International Acquisition

1. Describe the growth strategy of Federal Express. How has this strategy differed from those of its competitors?

2. What risks are involved in the acquisition of Tiger International?

3. In addition to the question of merging FedEx and Flying Tigers pilots, what other problems could be anticipated in accomplishing this acquisition?

4. Suggest a plan of action that Fred Smith could have used to address the potential acquisition problems given in your answer to question 3.

14-15

Topics for Discussion Recall that service operations can be

classified as processing people, goods, or information. What challenges are faced in each category when globalization is undertaken?

Chili’s, a U.S. – based restaurant chain that offers Mexican food, has its largest establishment in Monterrey, Mexico. Why is Chili’s so successful in Monterrey?

What is the inherent conflict in a franchising arrangement?

What explains the continuing trade surplus in services for the United States?

14-16

Interactive Exercise

Break the class into small groups with at least one international student in each group, if possible. Based on overseas travel, have the group report on features of day-to-day living that they have found different from home and worth emulating.

14-17