Lecture 1

SERVICE OPERATIONS

GLOBALISATION

GROWTH STRATEGIES

SINGLE SERVICE MULTISERVICE

Focused service Clustered serviceSINGLE LOCATION * Dental Practice * University

* Retail store * Apolo clinic* Family restaurant * Insurance

Focused network Diversified networkMULTILOCATION * Federal express * Banks

* McDonald's* Hotel chains

FRANCHISING

• Expand using own resources• Franchising is an alternative• Independent owner operators bound by a

contractual agreement• Initial investment varies• Market or region is specified• Franchiser dictates operating policies - Purchase source/quality - No deviation from product - Franchise fee

BENEFITS : FRANCHISEE

• Management training

• Brand name

• National advertising

• Acquisition of proven business

• Economies of scale

GLOBAL DEMAND

• Service from centralized location

• Open service centers in new locations

OPERATIONAL ISSUES

• Language

• Culture

• Operating standards

• Local firms to handle marketing & deliveries

GENERIC STRATEGIES

GLOBAL STRATEGY

TRANSNATIONAL STRATEGY

HIGH

NO INERNATIONAL STRATEGY

MULTIDOMESTIC STRATEGY

LOW

LOW HIGH

GLOBAL STRATEGIES

• World is one large market

• Homogenous approach

• Integrated across countries

• Strong brand name /special identity

• Example : Citibank allows customers to do banking anyway, anywhere & anytime

MULTIDOMESTIC

• Operation in each country is autonomous serving the needs of the local country

• Staffed /manned by local nationals

• Confederation

TRANSNATIONAL

• Service is homogenous : Fast food chains offering local menus

• R&D (Specialized expertise) centralized

• Centralized procurement

BORDERLESS WORLD

• Customer :Availability of information

• Competitors : - Nothing stays proprietary for long - First mover - Timely delivery - Operating with partners (not alone)

BORDERLESS WORLD

• Company : Reduce unit fixed cost

• Airlines & communications

• Huge investments in equipments & facilities

• Focus shifting from variable cost to fixed cost

• Search for a larger market

BORDERLESS WORLD

• Currencies

• Fluctuating exchange rates

• Hedging & options

• Forced in to global expansion to become currency neutral

BORDERLESS WORLD

• Country

• Economic downturn in one country offset by operations in other countries

• Compete in competitors country

• Global localization

• Understand the unique service needs

• Local units to be able to modify to meet the local needs

TRANSNATIONAL OPERATIONS

• Cultural transferability :

• Global standardization vs local customization (Banking – Islamic countries)

• Language barrier

• Behavioral customs ( non smoking zones in Restaurants)

TRANSNATIONAL OPERATIONS

• Worker Norms :• Power Distance Index : equality• Individualism : Focus on individual achievement• Masculinity :• Uncertainty Avoidance index : Tolerance• Long Term Orientation : Long term commitment

& respect for tradition ( strong work ethic & reward in long term). Change takes time

TRANSNATIONAL OPERATIONS

• Host Government policies• Repatriation of profits• Entry barrier for certain operations (insurance)• Delays in licensing agreements• Foreign airlines landing rights• Preferential treatment to local shippers• Nations may perceive threat (economic &

cultural).• Labor intensive services welcome : creates more

job opportunities

GLOBAL SERVICE STRATEGIES

• Efficient delivery system

• High quality product

• Flexible cost structure

GLOBAL SERVICE STRATEGIES

• Multi country expansion

• Importing customers

• Following your customers

• Service offshoring

• Beating the clock

GLOBAL SERVICE STRATEGIES Multi country expansion

• Customer travels physically to the service facility

• Franchisee route• Clone the service rapidly in multiple

locations• Customer contact & front office requires

sensitivity to local culture• Recruit & train locals• Cultural adaptation a major issue

GLOBAL SERVICE STRATEGIES Importing customers

• Multi service single-site strategy

• Customer to travel long distance or substitute travel with communication tools

• Example : Universities

Medical centers

Places of tourist attraction

GLOBAL SERVICE STRATEGIES Following your customers

• Follow corporate clients & provide service in other countries

• Attracting local business may need modification in the service package

• Examples : Travel agents

Consultants

Auditors

Hotel chains

GLOBAL SERVICE STRATEGIES Service offshoring

• Global service strategy

• Back office operations to cheaper locations

• BPO

• Examples : Customer service, Financial analysis, software development

GLOBAL SERVICE STRATEGIES Beating the clock

• Bypass the constraint of domestic time zones, working hour regulations

• Combining the demand from multiple time zones can improve productivity of Reservation clerks

• Example : Telemarketing

Service Definitions

Services are deeds, processes, and performances.

Valarie Zeithaml & Mary Jo Bitner

A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer.

James Fitzsimmons

Definition of Service Firms

Service enterprises are organizations that facilitate the production and distribution of goods, support other firms in meeting their goals, and add value to our personal lives.

James Fitzsimmons

Role of Services in an Economy

The Four Realms of an Experience

Customer Participation

Passive Active

Environmental

Absorption Entertainment (Movie)

Education (Language)

Relationship Immersion Esthetic (Tourist)

Escapist (ScubaDiving)