Suggested answers

1. DEA : Data Envelopment Analysis (DEA) is a nonparametric method of

measuring
the efficiency of a decision-making unit (DMU). It is a linear programming model that
attempts to maximize a service unit’s efficiency, expressed as a ratio of outputs to inputs,
by comparing a particular unit’s efficiency with the performance of a group of similar
service units that are delivering the same service.
DEA model is formulated according to Charles, Cooper and Rhodes, and thus is referred
to as CCR Model.

(64-65)

2. Service Concept:
The definition of service concept is a fundamental part of the strategic advantage seeking
processes of service design, service development and service innovation.
The service concept has commonly been defined in terms of the service package; Collier
(1994) coins the phrase “Customer Benefit Package” whereas Goldstein et al (2002) see
it as the mix of physical and non-physical components that combine to create the service.
However, service concept extends beyond the service package and includes the service
experience derived by the customers.
The service concept is seen by many as a means for the service provider to identify the
value being delivered to customers and the value expected by customers from the
organization.
3. Service strategy:

A service strategy determines which services are required to support business goals and
objectives. Business and service management must carefully discern which initiatives
offer the highest business value while ensuring the availability of necessary resources and
the commitment to deliver on the investment.
The service strategy begins with strategic vision – target segment, service concept,
operating strategy, and service delivery system. However, the competitive environment
of services presents challenges such as low entry barriers, product substitution and
limited opportunities of economies of scale that must be overcome.
The three generic strategies that have been found to be successful for service firms are
overall low cost leadership, differentiation and market focus.

4. Elements of service design:

The service design elements communicate to the customers and employees alike what
services they should expect to give and to receive. These elements are:
• Structural
o Delivery system
o Facility design
o Location
o Capacity planning
 • Managerial
o Service encounter
o Quality
o Managing capacity and demand
o Information

5. Role of technology in service encounter

The introduction of technology often empowers the customer to perform the service
unassisted. There are five modes of technology’s contribution to the service
encounter:

• Face to face contact

o Technology free service encounter
o Technology assisted service encounter
o Technology facilitated service encounter
• Face to screen contact
o Technology mediated service encounter
o Technology generated service encounter

6. Servicescape

Servicescape is a concept that was developed by Booms and Bitner to emphasize the
impact of the physical environment in which a service process takes place. Booms
and Bitner defined a servicescape as "the environment in which the service is
assembled and in which the seller and customer interact, combined with tangible
commodities that facilitate performance or communication of the service".
Servicescapes provide visual metaphor for the organization’s offerings. It can aid or
hinder customers or employees from fulfilling their responsibilities. It can also help in
segment, position and differentiate an organization from its competitors.

7. Service encounter triad

The services encounter triad catches the relationships among in the service which three
parties involved and shows possible source of conflict.
In order to control service delivery, the contact personnel follow normal rules and
procedures, which are made by service providers, to restrict contact personnel’s
autonomy and judgment while serving customers. However, customers could feel
unsatisfied because of the restriction in service encounter.
Eventually, the customer and contact personnel are in the interactive relationship.

8. SERVQAL
SERVQUAL is a survey instrument that measures service quality. It measures the gap
between customer expectations and experience.
SERVQUAL was originally measured on 10 dimensions of service quality: (reliability,
responsiveness, competence, access, courtesy, communication, credibility, security,
understanding or knowing the customer and tangibles) and a list of 97 items on a seven
point scale was developed…
After testing and subsequent refinement (i.e. factor analysis) the list was collapsed into a
22-item questionnaire covering 5 dimensions (reliability, responsiveness, assurance,
empathy and tangibles).

CUSTOMER
Word-of-mouth
Communications

Gap 5
 Part ‘B’

Case study (Ericsson)

Ericsson, the largest supplier of mobile systems in the world, was facing changing market
conditions that prompted management to review the operational model and transform the
processes supporting its business.
• Analysis phase
A study across the EMEA region (Europe, the Middle East and Asia) revealed underlying
processes for Finance & Administration and Purchase-to-Pay characterized by Standard
Global Applications.
Ericsson EMEA decided to consolidate activities in both process areas and to re-engineer
ways of working. A key element of the strategy was to establish a BSC for Western
European countries to facilitate: service efficiency and productivity to derive substantial
process cost reduction, quality, consistency and transparency in business processes and
information, Organizational flexibility to establish a change agent to drive standards.
• Partnership
Recognizing the value of partnership, Ericsson started looking for a range of skills, in
strength and depth, in a partner. Capgemini had a global profile coupled with local
presence in affected markets and expertise in process and technology consulting.
Capgemini was selected as business partner to help Ericsson design and implement the
BSC initiative.
• BSC (Business Support Centre)
The BSC would provide Shared Services to involved businesses, re-engineer and
standardize business processes, and support deployment of global, enabling business
applications.
• Strategic Visioning Phase:
The target market was for in-scope services in Ericsson’s EMEA organization with initial
customers being Market Units in Western Europe. Ericsson decided to standardize in-
scope systems and processes and integrate them into a common Market Unit Solution
(MUS) based on SAP R/3®, and incorporating an eProcurement solution to facilitate a
seamless Purchase-to-Pay (eP2P) process.
• Set-Up Phase
Capgemini coordinated the design of the BSC service delivery model with functions
consolidated in four hubs. During the set-up phase, it was decided to consolidate in two
hubs across three locations serving the 17 countries, with each hub organized in a matrix
structure. Process-oriented teams would provide the services, with Service Managers
assigned to Market Units managing customer relationships. The model facilitated front-
office culture in the back-office.
• Development Phase
Experts from Ericsson and Capgemini collaborated in a single, cohesive team to derive a
current state analysis. Based on information gathered, the team refined the Business Case,
developed the service scope in detail and designed a future-state organization. Service
level agreements (SLAs) were established after negotiation with demand managers of
hub countries. Within six months of project start, the BSC was formally established.
• Training Phase
For customer units in hub countries, the BSC commenced service delivery from Day One
with existing staff transferring to the new entity. Transition activities focused on
achieving a change of mindset towards a service centre culture. The team derived a
baseline against actual performance, refined SLAs and set new performance targets.
• Relationship Management
For customer units in other countries, all aspects - service migration, people and system
transition - had to be considered. Strong relationships with local management were
critical to address the people issue, a key challenge of major transformation programmes.
Effective change management at a local level facilitated awareness of the strategy and its
impact, and secured buy-in.
• Implementation Phase
The migration strategy of the collaborative team linked service migration to
implementation of the MUS and eP2P. The BSC would become responsible for service
delivery at a defined stage prior to system implementation and manage the process in-
situ. A local management team in each country was responsible to secure sponsorship,
plan the migration, manage change and support communication.
• Consistent Methodology
Service migration was organized using a consistent methodology. Key tasks were
adaptation of future-state processes, recruit and train new hub-based staff, knowledge
transfer, cutover to hub and post-migration support. Each deployment was managed as a
project via defined ‘tollgates’ and supported by steering groups. Readiness was jointly
agreed by the BSC and local companies based on pre-defined criterions. Capgemini
supported the BSC local service management in all countries. It also managed the first
large-scale service migration to set the stage for subsequent rollouts.

• Stabilizing Services
With transitions for remaining countries complete, the BSC turned its attention to
stabilize services, optimize resource utilization and bed down all elements of a Service
Management Framework. Service Managers now deliver services to each customer
according to agreed principles and procedures. The BSC programme delivers standard
systems and processes to support Market Units in Western Europe, thus helping Ericsson
to re-establish its profitability.
• Benefits
Direct reduction of process costs managed by the BSC - about 30% in Finance and
Administration, as well as in Purchase-to-Pay, service consolidation deriving process
and systems standardization, process-oriented teams focused on service efficiency to
facilitate continuous improvement, Organizational flexibility to changing business
priorities, allowing Ericsson to adapt its shared service model without compromising
stability and competency levels.

2. Because of the volatility in the market, Ericsson was facing difficulty in positioning in
the market. The following are some of the suggestions that can be followed by the
company.
There are two dominant ways of thinking about strategic positioning, and they are nearly
exact opposites. The first view of strategic positioning derives from Michael Porter's
work (1979) on corporate strategy, "generic strategies," and industry analysis. This point
of view starts with external conditions (OT in the SWOT vernacular) in order to set
internal operations (SW). The second view, derived from C.K. Prahalad and Gary
Hamel's work (1990) on core competencies of the corporation, begins with internal
competen¬cies (SW) and builds out to address external conditions (OT). Regardless of
the approach taken, the objec¬tive of strategic positioning is to define the "target market"
the company will serve, as well as to define the organization's strategy, including its
mission and objectives. As an initial initiative Ericsson is needed to build up a strong
strategy and frame its mission and objectives to support the stated strategy.
Industry and Competitor Analysis Approach to Strategy
Porter's influential work in the area of strategy focuses on two related issues: what
generic strategies are available for a company to choose from, and how external forces
like suppliers, customers, and competitors influence the choice of generic strategies.
In this view, the three generic strategies a company might pick are
overall cost leadership
differentiation
focus
Ericsson can position in the market by managing the cost. Differentiation entails trying to
serve the needs of a broad group of constituencies in the industry while having everyone
in the industry perceive the specific bundle of product and service a company offers as
unique, different from everyone else's. Ericsson can accomplish differentiation through
various mechanisms like having a unique brand image, distribution network, or service
delivery system. What makes differentiation different from focus is that focus is not
aimed at the needs of everyone in the industry, only the specific needs of a small, focused
subset of the industry (hence the name). Focus as a generic strategy describes who the
customers are, but the company can still choose to compete on cost leadership or
differentiation within this market segment.
What makes Porter's point of view so powerful, though, is the technique for industry and
competitor analysis he developed. Porter identifies "five forces" that have to be
considered before a company can decide on its strategy. These forces are potential
entrants, suppliers, buyers, substitute products, and current competitors. Ericsson needed
to look outside the company to these external forces, to determine how to position itself
in the industry.
Core Competence Approach to Strategy
Prahalad and Hamel attack the question of strategy in nearly a completely opposite way
from Porter. This "resource based view of the firm" looks at what resources and
competencies the company possesses, and then looks outward to find markets and
opportunities to exploit. Ericsson can position itself competitively by meeting the
following three tests.
1. Ericsson needs to provide access to a wide array of potential markets.
2. It has to design the end products or services to meet the expectations of the customers.
3. It has to design its products and services in such a manner that it is difficult for other
competitors to imitate.

Service blueprint for a bank

Components of Service Blueprints

There are five components of a typical service blueprint (See Figure 1 for a diagram of
key components):
• Customer Actions,
• Onstage/Visible Contact Employee Actions,
• Backstage/Invisible Contact Employee Actions,
• Support Processes, and
• Physical Evidence.

“Customer actions” include all of the steps that customers take as part of the service
delivery process. Customer actions are depicted chronologically across the top of the
blueprint. What makes blueprinting different from other flowcharting approaches is that
the actions of the customer are central to the creation of the blueprint, and as such they
are typically laid out first so that all other activities can be seen as supporting the value
proposition offered to or co-created with the customer. The next critical component is the
“onstage/visible contact employee actions,” separated from the customer by the line of
interaction. Those actions of frontline contact employees that occur as part of a face-to-
face encounter are depicted as onstage contact employee actions. Every time the line of
interaction is crossed via a link from the customer to a contact employee (or company
self-service technology, etc.), a moment of truth has occurred. The next significant
component of the blueprint is the “backstage/invisible contact employee actions,”
separated from the onstage actions by the very important line of visibility. Everything
that appears above the line of visibility is seen by the customer, while everything below it
is invisible. Below the line of visibility, all of the other contact employee actions are
described, both those that involve invisible interaction with customers (e.g., telephone
calls) as well as any other activities that contact employees do in order to prepare to serve
customers or that are part of their role responsibilities. The fourth critical component of
the blueprint is “support processes” separated from contact employees by the internal line
of interaction. These are all of the activities carried out by individuals and units within
the company who are not contact employees but that need to happen in order for the
service to be delivered.
Vertical lines from the support area connecting with other areas of the blueprint show the
inter-functional connections and support that are essential to delivering the service to the
final customer. Finally, for each customer action, and every moment of truth, the physical
evidence that customers come in contact with is described at the very top of the blueprint.
These are all the tangibles that customers are exposed to that can influence their quality
perceptions.