CHAPTER 10CHAPTER 10SERVICE STRATEGYSERVICE STRATEGY

SERVICE STRATEGY

• Characteristics of Services

• Capacity Management

• Concentrated Service Niches

• Major Services

CHARACTERISTICS OF SERVICES

• Produced and consumed at the same time

• More variability in quality control

• Intangible

• No inventory with services

CAPACITY MANAGEMENT

Examples

• Hotel weekend specials

• Travel in Europe in low season

• Ski resorts in March

Matching supply and demand for services

INCOME TAX

Preparation by CPA’S

April 10 $500

Feb 10 $400

CONCENTRATED SERVICE NICHES

• USAA Military Market • Lending Tree Online lending

• Hotels Last minute reservations

HYATT PRICING

Monday-Thursday $200

Friday-Sunday $100

LENDING TREE

State Law – Cannot take out equity except by a Texas lending company

MAJOR SERVICES

• Professional Services

• Health Services

• Financial Services

• Educational Services

PROFESSIONAL SERVICES

• Lawyers

• CPAs

• Real Estate

SIMPLE LEGAL SERVICES

• Simple wills

• Simple tax filing

• Uncontested divorces

MAJOR CPA SERVICES

• Auditing

• Taxes

• Consulting

MAJOR ACCOUNTING FIRMSBig Four 2009 Big Eight 1989Price Waterhouse Price Waterhouse CoopersCoopers & Lybrand

Deloitte Touche Deloitte Haskins & SellsTohmatsu Touche & Ross

Ernst & Young Arthur YoungErnst & Whinney

KPMG Peat Marwick & MitchellArthur Anderson

PROFESSIONAL SERVICES CHANGES

• Lawyers Price Fixing

• CPA’s Soliciting Competitors’ Business & Advertising

HEALTH SERVICES

• Doctors and nurses

• Hospitals and clinics

• Medical insurance

DOCTORS AND NURSES

• General Doctors

• Specialist Doctors

• Role of Nurses

% OF U.S. MEDICAL SCHOOL DOCTORS AS GENERAL PRACTIONERS

1970 40%

2013 15%

HOSPITALS AND CLINICS

• Large hospitals

• Emergency centers

• Minor health clinics

USE OF HOSPICE CARE

2000 22%

2009 42%

MEDICAL INSURANCE

• Medicare

• Medicaid

• Insurance providers

HOSPITAL PRICING

City Hospital Procedure Hospital Cost#1 #2

Dallas Lower Joint Replacement $162k $43k

New Jersey Respiratory Ailment $100k $7k

Alabama Pneumonia $150k $14k

FINANCIAL SERVICES

• Banking

• Insurance

• Stock Brokers

DISCOUNT STOCK BROKERS

• Fidelity

• Vanguard

• Schwab

EDUCATION SERVICES

• High Schools

• Community Colleges

• Universities

HIGH SCHOOL CHOICES

• Public schools

• Private schools

• Charter schools

• Home schooling

COMMUNITY COLLEGES IN HOUSTON AREA

• Houston Community College

• San Jacinto College

• Lone Star College

UNIVERSITIES

• State Public Universities

• State Private Universities

DIFFICULTY OF CHANGE IN EDUCATION

Reforming and changing a curriculum is about as difficult as moving a cemetery