Developing global strategies for service businesses

1. Developing global strategies for service businesses By: Christopher Lovelock George Yip Presented by: Hieu Pham “BOB” Article 21

2. Purpose • What is Globalization and Service Business • Provides a framework for developing global strategies for service businesses. • Integrates existing, separate frameworks on globalization and on service businesses. • Analyzed how the distinctive characteristics of service businesses affect globalization.

3. Thomas Hout, Michael E. Porter, and Eileen Rudden, (September/October 1982) C. K. Prahalad and Yves L. Doz (1987); George S. Yip (Fall 1989): Multidomestic (or multilocal) approach that provides for independent development and implementation of strategies by country or regional units. Michael E. Porter (Winter 1986): One key theme is that globalization potential depends on industry characteristics Yip (1989), (1992): On specific industry globalization driversmarket, cost, government, and competitive. Previous Work/Overview

4. Bruce Kogut, Prahalad and Doz, (Summer 1985): A second key theme is that the use of global strategy should differ by dimension of strategy and for different elements of the value-adding chain Johny K. Johansson and George S. Yip, (October 1994): The linkage between industry globalization drivers and global strategy-as well as the relationship of these drivers to organization structure and management processes and to consequent effects on performance-have been empirically tested for manufacturing businesses in major American and Japanese multinational corporations (MNCs). Susan Segal-Horn, P. Jones, (London: Pittman, 1988/89); Ram Kesavan and Eric Panitz, Ben L. Kedia and Lars Larson 1991; Alexandra Campbell and Alain Verbeke (1994) Mathe and Perras: But research into global strategy for service businesses is still in an evolutionary stage. Previous Work/Overview

5. What is Globalization? • Any service firm doing business across national frontiers can claim to be international. • Company is one that not only does business in both the eastern and western hemispheres, but also in both the northern and southern ones.

6. What is Service Business? • Three “lenses” which to examine the global strategies of service-based business: • Set of characteristics by which service-based businesses differ from goods-based businesses. • Categorization of three fundamental types of services businesses. • Set of eight supplementary services surrounding the core product or offering.

7. FRAMWORK • Industry globalization potential • Filtered by SCSB. • 4 types of global strategy response. • Participation, service offering, location and configuration of value adding chain, and nature of marketing strategy. • Global strategy response is filtered by 3 types of service. • Supp. Service augment the core product and play a direct role in the make up of each aspect of global strategy.

8. 3 Categories of Services • People-processing • Involve tangible actions to customers in person. • Ex. Passenger transportation, health care, food service, and lodging services, the customer needs to enter the “service factory” • Service factory = Airliners and air terminal, hospital, restaurant, or a hotel.

9. 3 Categories of Services • Possession-processing • Involve tangible action to physical objects to improve their value to customers. • Ex. Freight transport, warehouse, equipment installation and maintenance, car repair, laundry, and disposal.

10. 3 Categories of Services • Information-based • Collecting, manipulating, interpreting, and transmitting data to create value. • Ex. Accounting, banking, consulting, eduation, insurance, legal services, and news.

11. 3 Categories of Services • People-processing = involve a high degree of contact with service personnel and facilities. • Possession-processing and Information-based = much lower contact in nature.

12. . Supplementary Services

13. Supplementary Services • “Flower of Service” • Information process that can be located in one part of the world and delivered electronically to another. • Customer requirements and competitive practices help manager to determine which Supp. service must be offer and which is usefully be added to enhance value and make it easy to do business with the Org. • Develop a global strategy. • Management must decide which supp. Elements should be consistent across all market and which is local needs, expectations, and competitive dynamic.

14. Global Customers • Possession-processing – prefer common procedures and standards. • Ex. Airlines aircraft need to me maintenance, so do cust. of factory and machinery maintenance services. • People-processing – services may care particularly about ubiquity, especially when traveling • Ex. New Zealander breaks her leg in Cancun Mexico needs medical treatment on the spot. • Information-based – service may have more diffuse set of needs, but these certainly include comprehensiveness, accuracy, and accessibility. • Ex. Business owner lost his traveler’s check in Shanghai needs reimbursement there, now, not back un U.S.

15. American Express – Traveler’s check and credit cards are useful precisely because they are widely accepted in most countries. Hewlett Packard – Global leader in computer-based customer support services for its customers. Federal Express – Delivery service national and world wide. AT&T – Offer customers traveling abroad the opportunity to dial a local number to place the call and charge it at American rates to the customer’s home account. Companies That Went Global

16. Conclusion • More and more service businesses are now operating across national borders. • Globalization and global strategy concepts developed for manufacturing businesses can also be applied to service businesses. • Some significant differences may exist, particularly among people-processing, possession-processing and information-based services. • Companies can develop effective global strategies by systematically analyzing the specific globalization drivers affecting their industries and the distinctive characteristics of their service businesses.