Developing Global Strategies for Service Businesses

1. Developing Global Strategies for Service Businesses By Christopher H. Lovelock George S. Yip Presented by Yuliya Poutkaradze

2. Objective • To examine how globalization drivers and the use of global strategy might apply to various types of services by combining two different frameworks, one used to analyze global strategy and one for service businesses.

3. Defining Globalization Global Company – one that not only does business in both the eastern and western hemispheres, but also in both the northern and southern ones. *Simply operating globally does not mean that a company possesses a global strategy.

4. Methodology • Defining the Service Business by using: • A set of characteristics by which service-based businesses differ from goods based businesses. • Categorize three fundamental types of service businesses. • Identify the set of eight supplementary services surrounding the core product/service.

5. Methodology Globalization framework for Service Businesses.

6. Globalization Framework for Service Businesses • Industry Globalization Drivers • Common customer needs • Global customers • Global Channels • Global economies of scale • Favorable logistics • Information technology • Government policies and regulations • Transferable competitive advantage

7. Globalization Framework of Service Businesses • Special Characteristics of Service Businesses • Performance not an object • Customer involvement in production • People as part of service experience • Quality control problems • Harder for customers to evaluate • Lack of inventories • Importance of time factor • Electronic channels of distribution

8. Globalization Framework for Service Businesses • Three Categories of Services • People processing services – involve tangible actions to customers in person. The customer becomes a part of the production process, which tends to be simultaneous with consumption. ex: passenger transportation, health care, food service. • Possession processing services – involve tangible actions to physical objects to improve their value to customers. The object needs to be involved in the production process, but the customer does not. ex: freight service, car repair, laundry. • Information based services – involve collecting, manipulating, interpreting, and transmitting data to create value. ex: accounting, banking, education, legal services.

9. Globalization Framework for Service Businesses • Global Strategy • Global market participation strategy – building significant share in global strategic markets. ex: Tokyo, London, New York. • Global services – a standardized core product or service that requires a minimum of local adaptation. ex: In Britain, McDonald’s includes both coffee and tea on the menu, while it serves beer in France and Germany. • Global location value chain – where to locate a business’s activities and how to coordinate them. ex: sending checks to be processed in a different country. • Global marketing of services – applying a uniform marketing approach around the world, although not all elements of the marketing mix need to be identical. ex: a strong global brand image.

10. Supplementary Services • Supplementary services - are used to add value and provide differentiation from competition, enabling firms do develop effective globalization strategies. • The Flower of Service – composed of eight supplementary service categories.

11. Supplementary Services

12. 8 Supplementary Services to the Core Process. • Information – giving customers rlevalnt information about the service. • Payment – ease and convenience of payment. • Consultation – involves a dialogue to probe customer requirements and then develop a tailored solution. • Order Taking – making it wasy to place orders or reservations in the language of their choice. • Hospitality – take care of the customer by considering cultural definitions of appropriate hospitality, which may differ widely from one country to another. • Safekeeping – looking after a customer’s possessions. • Exceptions – fall outside of normal service delivery. This includes special requests, handling customer complaints, and problem solving. • Billing – clear and timely billing.

13. Implications for Types of Service Businesses • Global Market Participation • Adopt a professional style that fits the local culture through extensive advertising and public relations as well as hiring host country nationals who have obtained education and work experience in other countries. • ex: Law firms and other professional service providers .

14. Implications for Types of Service Businesses • Globally Standardized Service • Possession processing businesses can provide the most globally standardized offerings. These services need to cope with cultural and taste differences that vary geographically like different voltage or measurement systems. • People processing services almost always need some deviation from standardization. • Information based services deviation will vary widely from none to near total. • ex: information on international flight schedules (none), or tax advice (nearly total). 14

15. Implications for Types of Service Businesses • Global Location of Value Chain • People processing and possession processing services depends on the extent of local presence needed. Usually more local sites will be needed for people-processing, making that service the most difficult to operate globally. • Information based services should find it the easiest to locate globally due to their “virtual nature” where no physical presence is needed. However when information services have a physical component, or require specialized delivery equipment, a physical presence should be provided. 15

16. Implications for Types of Service Businesses • Globally Uniform Marketing • All three types of services should be able to make use of globally uniform marketing, but the extent will differ for each element of the marketing mix. • People processing services have the most to gain from uniform branding as a way to build both local and foreign customers. • Possession processing services often attract multinational customers making it necessary to coordinate global marketing strategy and offer uniform terms of service. 16

17. Lessons for Service Managers • Management needs to understand the components of a service and the processes by which its different elements are created and delivered by: - First, distinguishing between the core product and the supplementary service elements - Second, recognizing the three broad categories of the core product/service - Third, using the Flower of Service model as a means of understanding and disaggregating the package of supplementary services that augment and add value to the core product/service.

18. Conclusion • Companies can develop effective global strategies by systematically analyzing the specific globalization drivers affecting their industries and the distinctive characteristics of their service businesses.