1 / 29

Chapter – 3 Service Strategy

3. Service Management (5e) Operations, Strategy, Information Technology By Fitzsimmons and Fitzsimmons. Chapter – 3 Service Strategy. Learning Objectives. Formulate a strategic service vision. Discuss the competitive environment of services.

laronda
Download Presentation

Chapter – 3 Service Strategy

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. 3 Service Management (5e) Operations, Strategy, Information Technology By Fitzsimmons and Fitzsimmons Chapter – 3 Service Strategy

  2. Learning Objectives • Formulate a strategic service vision. • Discuss the competitive environment of services. • Describe how a service competes using the three generic service strategies. • Discuss the service purchase decision. • Discuss the competitive role of information in services. • Explain the role of the virtual value chain in service innovation. • Discuss the limits in the use of information. • Categorize a service firm according to its stage of competitiveness. • Conduct a data envelopment analysis (DEA).

  3. Strategic Service Vision1. Target Market Segments • What are common characteristics of important market segments? • What dimensions can be used to segment the market, demographic, psychographic? • How important are various segments? • What needs does each have? • How well are these needs being served, in what manner, by whom?

  4. Strategic Service Vision2. Service Concept • What are important elements of the service to be provided, stated in terms of results produced for customers? • How are these elements supposed to be perceived by the target market segment, by the market in general, by employees, by others? • How do customers perceive the service concept? • What efforts does this suggest in terms of the manner in which the service is designed, delivered, marketed?

  5. Strategic Service Vision3. Operating Strategy • What are important elements of the strategy: operations, financing, marketing, organization, human resources, control? • On which will the most effort be concentrated? • Where will investments be made? • How will quality and cost be controlled: measures, incentives, rewards? • What results will be expected versus competition in terms of, quality of service, cost profile, productivity, morale/loyalty of servers?

  6. Strategic Service Vision4. Service Delivery System • What are important features of the service delivery system including: role of people, technology, equipment, layout, procedures? • What capacity does it provide, normally, at peak levels? • To what extent does it, help insure quality standards, differentiate the service from competition, provide barriers to entry by competitors?

  7. South-west Airlines • Target market segment • Interstate business travelers with carry-on luggage who are currently driving • Short flights • Service Concept • On time performance • Frequent departures • Operating Strategy • Fast airport turnaround to allow productive use of aircraft and provide frequent departures • Service delivery system • Cabin crew with good interpersonal skills to create ‘fun’ atmosphere • No assigned seating to provide fast gate turnaround • Short distance haul – mostly carry-on luggage – less ground crew

  8. Competitive Environment of Services • Relatively Low Overall Entry Barriers • not patentable • Typically not capital intensive • Exception – when you are first in a small market, or prized location advantage • Economies of Scale Limited • limited opportunities for economies of scale because of simultaneous production and consumption • Erratic Sales Fluctuations- • demand varies by time of day and day of the week with random arrivals

  9. Continued… • No Power Dealing with Buyers or Suppliers • Typically service firms are small, so they have less power • Exception are McDonald’s buying beef • Product Substitutions for Service • For example blood pressure or diabetes checking can be done at home due to innovations. So service firms need to watch for competition from other service firms and product innovations. • High Customer Loyalty • This can act as a barrier to entry • Exit Barriers • Typically low

  10. Competitive Service Strategies • Porter argues that three generic competitive strategies exist: • Overall cost leadership • Differentiation • Focus

  11. 1. Overall Cost Leadership • Requires efficient scale facilities, tight cost and overhead control, and use of innovative technology • Implementation of this strategy typically requires high capital investment in state of the art equipment, and aggressive pricing (even when it may lead to start up losses). • Examples, Wal-Mart, McDonald’s

  12. How to attain cost leadership? • Seeking Out Low-cost Customers • Some customers cost less to serve than others • Sam’s club and Costco serve customers who buy bulk and ask for little to no service • Standardizing a Custom Service • Example H&R block has taken only routine preparation though tax forms can be customized • Reducing the Personal Element in Service Delivery (promote self-service) • Technology use has allowed banks to provide access to ATMs and reduce human interface • Reducing Network Costs (hub and spoke) • Taking Service Operations Off-line when customer is not required to be present – ex. drop off for laundry in Chicago

  13. 2. Differentiation Differentiation in service means being unique in brand image, technology use, features, or reputation for customer service. HOW? • Making the Intangible Tangible (memorable) • For example giving toiletries in hotels to remind of the comfortable stay • Customizing the Standard Product • For example addressing a customer by the name can give an impression of customization of otherwise a standardized service • Reducing Perceived Risk • By providing guarantee, example pest control • Giving Attention to Personnel Training • Service providers will ultimately make the difference • Delivering consistent level of high Quality at multiple sites

  14. 3. Focus • This strategy is built around providing a target market with very specific need. • Works on the assumption that the firm can serve its narrow market more effectively and efficiently. • Example • Service Offered: (e.g. Shouldice Hospital and hernia patients). • Harley Davidson

  15. Customer Criteria for Selecting a Service Provider • Availability (24 hour ATM) • Convenience (Site location) • Dependability (On-time performance) • Personalization (Know customer’s name) • Price (Quality surrogate because of intangibility) • Quality (both outcome & process; Perceptions important) • Reputation (Word-of-mouth) • Safety (Customer well-being) • Speed (Avoid excessive waiting)

  16. Service Purchase Decision • Service Qualifier • To be taken seriously a certain level must be attained by the service provider on the competitive dimension, as defined by other market players. • Examples are cleanliness for a fast food restaurant or safe aircraft for an airline. • Service Winner • The competitive dimension used to make the final choice among competitors. • Example is price, convenience, reputation.

  17. Service Purchase Decision (cont.) • Service Loser • Failure to deliver at or above the expected level for a competitive dimension. • Examples are failure to repair auto (dependability), rude treatment (personalization) or late delivery of package (speed).

  18. Competitive Role of Information in Services

  19. 1. Creation of Barriers to Entry • Reservation system • American Airline’s Sabre System • Frequent User club • American airlines used its reservation system to also create frequent flyer club to reward people to accumulate credit • Switching cost • Data transfer • New software and hardware requirements

  20. 2. Revenue Generation • Yield management • Real time pricing by monitoring demand and supply • Point of sale • information can travel to suppliers for real time inventory management • Server can transmit order information directly to the kitchen and to the cashier at the same time • Expert system • Past data can be fed to create expert systems – which maintenance people can recall to trouble shoot problems

  21. 3. Database Asset • Selling information • Developing services • Data mining to find new trends for new services or improving existing services • Micromarketing • To target your advertisements

  22. Using Information to Categorize Customers • Coding • grade customers on how profitable their business is. • Routing • used by call centers to place customers in different queues based on customer code. • Targeting • allows choice customers to have fees waived and get other hidden discounts. • Sharing • data about your transaction history with other firms is a source of revenue.

  23. 4. Productivity Enhancement • Inventory status • Real time inventory management and tie up with suppliers • Better movement of inventory through multiple sites

  24. The Virtual Value Chain • Marketplace vs Marketspace • Physical versus virtual • Creating New Marketspace Using Information - 5 steps • Gather • Organize • Select • Synthesize • Distribute

  25. Example of USAA • United Service Automobile Association (USAA), which provides financial services to military personnel and their families has become a world class competitor by exploiting the virtual value chain. • Three Stage Evolution • 1st Stage (Visibility): See physical operations more effectively with information – Ex. USAA “paperless operation • 2nd Stage (Mirroring Capability): Substitute virtual activities for physical – Ex. USAA “automate underwriting” • 3rd Stage (New Customer Relationships): Draw on information to deliver value to customer in new ways – Ex. USAA “event oriented service”

  26. Limits in the Use of Information • Anti-competitive (Barrier to entry) • How to account the expense on frequent flyer service? • Fairness (Yield management) • How to justify different price paid for same service by customers? • Invasion of Privacy (Micro-marketing) • Data Security (Medical records) • How to protect sensitive information about people? • Reliability (Credit report) • How to challenge erroneous information?

  27. Stages in Service Firm Competitiveness

  28. Stages in Service Firm Competitiveness

  29. Discussion Topics • Give examples of service firms that use both the strategy of focus and differentiation and the strategy of focus and overall cost leadership. • What ethical issues are associated with micro-marketing? • For each of the three generic strategies (i.e., cost leadership, differentiation, and focus) which of the four competitive uses of information is most powerful? • Give an example of a firm that begin as world-class and has remained in that category. • Could firms in the “world-class service delivery” stage of competitiveness be descried as “learning organizations”?

More Related