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 Cs that must be balanced in a borderless world. Identify and differentiate the five global service 14-2 strategies.

Expansion Strategies
Single Service Focused service: * Dental practice * Retail Store * Family restaurant Focused network: * Federal Express * McDonalds * Red Roof Inns Multiservice Clustered service: * Stanford University * Mayo Clinic * USAA Insurance Diversified network: * Nations Bank * American Express * Accenture

Single Location

Multisite

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Franchising

Benefits to the Franchisee Management Training Brand Name National Advertising Acquisition of Proven Business Economics of Scale Issues for the Franchisor Franchisee Autonomy Franchise Contract Conflict Resolution
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Generic International Strategies

High

Global Strategy

Transnational Strategy

Force Towards Global Integration

Low

No International Strategy

Multi-domestic Strategy

Low

High

Force Towards Local Responsiveness

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Multinational Development

The Nature of the Borderless World (Triad) Customers - information has empowered Competitors - nothing stays proprietary Company - fixed costs require large markets Currency - become currency neutral Country - deprive competitor of home market Planning Transnational Operations Cultural Transferability Worker Norms Host Government Policy
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International Strategic Service Vision

Service Delivery System
Available technology? Infrastructure? Utility service? Labor market norms and customs? Space availability? Interaction with suppliers?

Operating Strategy

Service Concept

Target Market Segments

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?

Appropriate managerial practice? Participative? Autocratic? Labor market institutions? Government regulations? Unions? Host government policies?

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

Educating customers?

Language? Front office? Back office?

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Considerations in Selecting a Global Service Strategy

Globalization Factors
Multicountry Expansion Customer Contact Train local workers

Global Service Strategies

Importing Customers Develop foreign language & cultural sensitivity skills Strategic opportunity Strategic opportunity On site advantage Follow Your Customers Develop foreign customers Re-prototype locally Modify operations Move experienced managers Could be necessary to achieve scale Hire local personnel Inadequate infrastructure Service Offshoring Specialize in back- office office service components Quality and coordination Opportunity for focus Training investments Cultural understanding Reduced labor costs Home office employee morale Beating the Clock Provide extended hours of service More need for reliability & coordination Time compression Exploit opportunity Common language necessary Reduced labor costs Capital investments
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Customization

Complexity

Information Intensity
Cultural Adaptation Labor Intensity

Usually a standard service Usually routine Satellite network Modify service Reduced labor costs Government restrictions

Accommodate foreign guests Increased labor costs Logistics management

Other

Goodwill Industries International

Service Renewal

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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 Goodwills decisions about the role of customer service? 14-10

Goodwill Industries Sources of Revenue

Donated Goods 4%5% 5% 6% 15% 65% Temporary Services Subcontract Services Public Support Grants Miscellaneous
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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 Goodwills customers and how have their demographics changed over time? How can Goodwill differentiate itself from the competition?
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Customer Issues

Discontinued pickup service (avoid trash) All sales are final policy

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Questions
1.

2.

3.

4.

Who are Goodwills customers and how have their demographics changed over time? How should the introduction of for-profit thrifts affect Goodwills decisions about the role of customer service? How can Goodwill differentiate itself from the competition? Visit http://shopgoodwill.com/ where Goodwill auctions items of special interest and discuss why this on-line store has great profit potential.
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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.

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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? Chilis, a U.S. based restaurant chain that offers Mexican food, has its largest establishment in Monterrey, Mexico. Why is Chilis 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?

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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.

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