Authors: Sandy Young, S. Altan Erdem Presented by: Jason Nguyen

1. An Exploratory Study of Services Marketing in Global Markets:Major Areas of Inquiry for the Health Care Services Industry Authors: Sandy Young, S. Altan Erdem Presented by: Jason Nguyen

2. Objectives • Overview of service industry. • Understand how health care service industry is marketed overseas. • Propose a list of consideration areas important for entry into overseas markets by service providers.

3. Previous WorksSERVICE INDUSTRY • Cateora and Hess (1979): one should examine the opportunities in overseas markets to assure the continued profitability and growth in a competitive industry. • Kothari (1988): According to the U.S. Bureau of Census, the services sector grew from 30.9% to 49.6%, and manufacturing fell from 56.7% to 41%. • Murdick, Render, and Russel (1990): Seven out of ten American workers are employed in service sector. • Rosenbloom (1991): Almost 80% of all new jobs over the last ten years in the U.S. have been in service sector, and this sector accounted for more than half of all consumer expenditures.

4. Previous Works Cont. • Sanderson and Luffman (1988): Technical, social, political, and economic environments of foreign markets represent some of the major factors for strategic planning of international marketing. • Carman and Langeard (1980): stated that out-of-country marketing expansion was reported to be the most risky growth strategy for service firms. • Kothari (1988): The United States is estimated to command a 20 percent share of the over $650 billion annual international service trade. Service account for 40 percent of all U.S. exports, and provide a surplus in contrast to a deficit in the merchandise account. • Nicoulaud (1989): Services make up the fastest growing sector in international trade with an annual growth rate of 17 percent in real term compared to six percent for merchandise in 1980

5. Previous Works Cont. • Cundiff and Hilger (1988): business services such as banking, research, consulting, advertising, engineering, information and maintenance work have been the fastest growing U.S. exports during the 1970s and 1980s. • Bateson (1989); Berry (1980); Bessom and Jackson (1975); Gronroos (1990); Lovelock (1983); Shostack (1977); Uhl and Upah (1983): Products’ characteristics versus services’ characteristics: • Products are tangible entities separate from the producer, services are intangible and inseparable from the provider. • Products also lend themselves to standardization more easily than services. Because services are delivered by different people at different times, it is difficult to guarantee that they will be delivered the same way each time. • Services also appear to be more perishable since they are usually measured in time rather than in physical quantity, and there is usually more consumer involvement with services than is customary with products.

6. Previous Works Cont.SERVICE MARKETING • Judd (1964); Levitt (1972, 1976 ); Zeithaml, Parasuraman, and Berry (1985); Cateora (1993); Hill and Neeley (1988); Lovelock (1983, 1988); Shostack (1977); Porter (1986): While the marketing concept of satisfying customers' needs/wants is still applicable to the delivery of services, the primary difference is in the approach. Services in the value chain of global competition are downstream value activities that are inherently tied to the buyer's location in a particular country

7. Previous Works Cont. • Gronroos (1984); Parasuraman, Zeithaml and Berry (1985); Kotler and Armstrong (1991); Kotler and Bloom (1984): • Suggest that service companies need to practice both internal and interactive marketing along with the four basic variables of marketing mix. • Traditional (external) marketing covers the performance of a company in terms of producing, pricing, promoting, and distributing services. • Internal marketing is directed to customer-contact and/or supporting service employees - organize the company personnel as a cohesive team to maximize customer satisfaction • Interactive marketing deals with the marketers , skill in handling customer contacts • The time and money spent on marketing should be carefully assessed not to have the over-marketing problem.

8. Previous Works Cont. • Bitner and Zeithaml (1989); Booms and Bitner (1983); Murdick, Render, and Russell (1990); Gronroos (1984): • Suggest the idea that the four P's (product, price, place, promotion) of product marketing could be expanded to the seven P's for services marketing • The new marketing mix for services would additionally include three supplementary P's basically refer to the comprehensive coverage of services marketing : • Participants (skills, attitudes, commitment of employees and customers), • Physical evidence (tangible evidences such as materials, equipment, and uniforms), • Process (activities required in producing the services such as customer involvement, demand/quality control, and customer follow up)

9. Previous Works Cont. • Langeard, Bateson, Lovelock, and Eiglier (1981) : • In terms of distribution of services, service businesses either use electronic channels or combine the service factor, retail outlet, and point of consumption into one unit and perform the retailing task of channel intermediaries. • Vandermerwe and Chadwick (1989); Boddewyn, Halbrich, and Perry (1986); Erramilli (1990); Shostack (1984): • In terms of service exports, intangibility of services requires special arrangements in reviewing the international entry modes • Some services are somewhat unique in the sense that their creation and consumption can actually be separated. Once they are separated, "intrinsic value" of those services is transferred into tangible forms (such as blueprint) so that they can be exported to other countries and reproduced in those countries

10. Previous Work Cont. • Berry (1986): The key in services is to think high-tech and high-touch: • High-tech services should strive to provide lower delivery costs, faster delivery, control quality, and free personnel to provide better and more varied services. • High touch capabilities should deliver more customized service, superior problem resolution, effective cross-selling, and greater customer confidence in the technology. • Identification of the right mix of high-tech and high-touch depends on the markets served and this is not a simple task since technology in these markets changes in somewhat unpredictable patterns.

11. Previous Work Cont. • Nicoulaud (1988): other important considerations in services marketing: • Service quality is a key to success in building a good reputation and name exposure: the more intangible the service is, the more important it will be to differentiate the service based on firm's reputation and the quality provided. • Exports of services are impacted by changing economic conditions and exchange rates. • Western Europe and the United Kingdom are serious competitors as they shift from production to service economies. • There are also non-tariff trade barriers such as local labor, ownership restrictions, foreign exchange controls, discriminatory taxation policies, bans on certain business investments, employment bans, quotas, local standards, and discriminatory codes.

12. Previous Works Cont.HEALTH CARE INDUSTRY • Leite-Ferraz (1991); Walker and Roscoe (1988): • The Mayo brothers pioneered international marketing of health care services, but the Texas Medical Center in Houston has perfected this marketing approach • With the introduction of the Medicare prospective payment system in 1983, U.S. hospitals lose money if their costs exceed their payment rates • Involvement of the medical staff and well-trained marketing professionals made a difference in the effectiveness of the marketing plan

13. Previous Works Cont. • Walker and Roscoe (1988); Hout, Porter, and Rudden (1982): • Studies reveal that substantial economies of scale are not present in the hospital industry and serve as a hinderance to the success of a global marketing approach • Suggest a multi-domestic strategy if there are insufficient scale economies to yield the global competitors a significant competitive edge • Another potential problem exists because hospitals may not be able to profit from the experience curve if there are constant changes in medical technology or product differentiation services. Rather hospitals may move from one experience curve to the next. • Another problem in globalization of health care is government regulation. The U.S. system of health care is based primarily on employer-provided coverage whereas the health care system in most countries of Western Europe, Japan, Canada, and Australia is based on government-sponsored programs

14. Health Care Services Industry. • This is an industry which is in the mature stage of the product life cycle in the domestic market, faces saturated markets, and needs to consider global marketing of its services for continued growth. • Focuses on the exchange of benefits between the consumer and the health care service provider. • Identifies target market, their characteristics, geographic location, and the health care needs of consumers (prevention of disease or illness, the maintenance of health, or the regaining of health). • Matching specific clients’ needs with the necessary service. • Satisfaction of current customers and the attraction of new customers are essential in the competitive environment of this industry. • Method: market the over capacity of beds and services to other nations where advanced treatment and state-of-the -art technology are not available. For those foreigners who can afford better health care than socialized medicine provides, the United States is an attractive alternative.

17. Management Implication • Managers can use the list to assist in deciding whether to enter an overseas market or not. • The list can be used to decide what markets possess the most potential for growth and profit and where a match exists with the comparative advantages of a specific health care or fast food firm.

18. Conclusion • Because the environment of health care overseas is typically highly regulated, organizations involved with its delivery will need to take a proactive stance. • Strategic coordination of economic, psychological, political, and public relations skills are necessary to gain the cooperation of several parties in order to enter or operate in an obstructed or protected market. • The four P's of the marketing mix now become the seven P's with personnel, physical facilities, and process management as the additions.