Developing global Developing global strategies for strategies for

service businessesservice businessesBy:By:

Christopher LovelockChristopher LovelockGeorge YipGeorge Yip

Presented by: Hieu Pham “BOB”Presented by: Hieu Pham “BOB”Article 21Article 21

PurposePurpose What is Globalization and Service Business What is Globalization and Service Business

Provides a framework for developing global Provides a framework for developing global strategies for service businesses.strategies for service businesses.

Integrates existing, separate frameworks on Integrates existing, separate frameworks on globalization and on service businesses. globalization and on service businesses.

Analyzed how the distinctive characteristics Analyzed how the distinctive characteristics of service businesses affect globalization. of service businesses affect globalization.

Previous Work/OverviewPrevious Work/Overview– Thomas Hout, Michael E. Porter, and Eileen Rudden, Thomas Hout, Michael E. Porter, and Eileen Rudden,

(September/October 1982) C. K. Prahalad and Yves L. Doz (September/October 1982) C. K. Prahalad and Yves L. Doz (1987); George S. Yip (Fall 1989):(1987); George S. Yip (Fall 1989): Multidomestic (or multilocal) approach that provides for Multidomestic (or multilocal) approach that provides for

independent development and implementation of strategies independent development and implementation of strategies by country or regional units.by country or regional units.

– Michael E. Porter (Winter 1986):Michael E. Porter (Winter 1986): One key theme is that globalization potential depends on One key theme is that globalization potential depends on

industry characteristicsindustry characteristics

– Yip (1989), (1992):Yip (1989), (1992): On specific industry globalization driversmarket, cost, On specific industry globalization driversmarket, cost,

government, and competitive.government, and competitive.

Previous Work/OverviewPrevious Work/Overview– Bruce Kogut, Prahalad and Doz, (Summer 1985):Bruce Kogut, Prahalad and Doz, (Summer 1985):

A second key theme is that the use of global strategy should A second key theme is that the use of global strategy should differ by dimension of strategy and for different elements of differ by dimension of strategy and for different elements of the value-adding chainthe value-adding chain

– Johny K. Johansson and George S. Yip, (October 1994): Johny K. Johansson and George S. Yip, (October 1994): The linkage between industry globalization drivers and The linkage between industry globalization drivers and

global strategy-as well as the relationship of these drivers to global strategy-as well as the relationship of these drivers to organization structure and management processes and to organization structure and management processes and to consequent effects on performance-have been empirically consequent effects on performance-have been empirically tested for manufacturing businesses in major American and tested for manufacturing businesses in major American and Japanese multinational corporations (MNCs).Japanese multinational corporations (MNCs).

– Susan Segal-Horn, P. Jones, (London: Pittman, 1988/89); Ram Susan Segal-Horn, P. Jones, (London: Pittman, 1988/89); Ram Kesavan and Eric Panitz, Ben L. Kedia and Lars Larson 1991; Kesavan and Eric Panitz, Ben L. Kedia and Lars Larson 1991; Alexandra Campbell and Alain Verbeke (1994) Mathe and Alexandra Campbell and Alain Verbeke (1994) Mathe and Perras:Perras: But research into global strategy for service businesses is But research into global strategy for service businesses is

still in an evolutionary stage.still in an evolutionary stage.

What is Globalization?What is Globalization?

Any service firm doing business Any service firm doing business across national frontiers can claim to across national frontiers can claim to be international.be international.

Company is one that not only does Company is one that not only does business in both the eastern and business in both the eastern and western hemispheres, but also in western hemispheres, but also in both the northern and southern ones.both the northern and southern ones.

What is Service Business?What is Service Business?

Three “lenses” which to examine the global Three “lenses” which to examine the global strategies of service-based business:strategies of service-based business:

– Set of characteristics by which service-based Set of characteristics by which service-based businesses differ from goods-based businesses.businesses differ from goods-based businesses.

– Categorization of three fundamental types of Categorization of three fundamental types of services businesses.services businesses.

– Set of eight supplementary services surrounding Set of eight supplementary services surrounding the core product or offering.the core product or offering.

FRAMWORKFRAMWORK Industry globalization Industry globalization

potentialpotential Filtered by SCSB.Filtered by SCSB. 4 types of global strategy 4 types of global strategy

response.response.– Participation, service Participation, service

offering, location and offering, location and configuration of value adding configuration of value adding chain, and nature of chain, and nature of marketing strategy.marketing strategy.

Global strategy response is Global strategy response is filtered by 3 types of filtered by 3 types of service.service.

Supp. Service augment the Supp. Service augment the core product and play a core product and play a direct role in the make up direct role in the make up of each aspect of global of each aspect of global strategy.strategy.

3 Categories of Services3 Categories of Services

People-processingPeople-processing– Involve tangible actions to customers in Involve tangible actions to customers in

person.person. Ex. Passenger transportation, health care, Ex. Passenger transportation, health care,

food service, and lodging services, the food service, and lodging services, the customer needs to enter the “service customer needs to enter the “service factory”factory”

– Service factory = Airliners and air terminal, Service factory = Airliners and air terminal, hospital, restaurant, or a hotel. hospital, restaurant, or a hotel.

3 Categories of Services3 Categories of Services

Possession-processingPossession-processing– Involve tangible action to physical Involve tangible action to physical

objects to improve their value to objects to improve their value to customers. customers. Ex. Freight transport, warehouse, equipment Ex. Freight transport, warehouse, equipment

installation and maintenance, car repair, installation and maintenance, car repair, laundry, and disposal. laundry, and disposal.

3 Categories of Services3 Categories of Services

Information-basedInformation-based– Collecting, manipulating, interpreting, Collecting, manipulating, interpreting,

and transmitting data to create value.and transmitting data to create value. Ex. Accounting, banking, consulting, Ex. Accounting, banking, consulting,

eduation, insurance, legal services, and eduation, insurance, legal services, and news. news.

3 Categories of Services3 Categories of Services

People-processingPeople-processing = involve a high = involve a high degree of contact with service degree of contact with service personnel and facilities.personnel and facilities.

Possession-processing and Possession-processing and Information-basedInformation-based = much lower = much lower contact in nature. contact in nature.

Supplementary ServicesSupplementary Services . .

Supplementary ServicesSupplementary Services ““Flower of Service”Flower of Service”

Information process that can be located in one part of Information process that can be located in one part of the world and delivered electronically to another.the world and delivered electronically to another.

Customer requirements and competitive practices Customer requirements and competitive practices help manager to determine which Supp. service must help manager to determine which Supp. service must be offer and which is usefully be added to enhance be offer and which is usefully be added to enhance value and make it easy to do business with the Org.value and make it easy to do business with the Org.

Develop a global strategy.Develop a global strategy.– Management must decide which supp. Elements should be Management must decide which supp. Elements should be

consistent across all market and which is local needs, consistent across all market and which is local needs, expectations, and competitive dynamic. expectations, and competitive dynamic.

Global CustomersGlobal Customers Possession-processing – prefer common Possession-processing – prefer common

procedures and standards.procedures and standards.– Ex. Airlines aircraft need to me maintenance, so do cust. Ex. Airlines aircraft need to me maintenance, so do cust.

of factory and machinery maintenance services.of factory and machinery maintenance services.

People-processing – services may care particularly People-processing – services may care particularly about ubiquity, especially when travelingabout ubiquity, especially when traveling– Ex. New Zealander breaks her leg in Cancun Mexico Ex. New Zealander breaks her leg in Cancun Mexico

needs medical treatment on the spot.needs medical treatment on the spot.

Information-based – service may have more Information-based – service may have more diffuse set of needs, but these certainly include diffuse set of needs, but these certainly include comprehensiveness, accuracy, and accessibility.comprehensiveness, accuracy, and accessibility.– Ex. Business owner lost his traveler’s check in Shanghai Ex. Business owner lost his traveler’s check in Shanghai

needs reimbursement there, now, not back un U.S.needs reimbursement there, now, not back un U.S.

Companies That Went Companies That Went GlobalGlobal

American Express – Traveler’s check and credit American Express – Traveler’s check and credit cards are useful precisely because they are widely cards are useful precisely because they are widely accepted in most countries.accepted in most countries.

Hewlett Packard – Global leader in computer-Hewlett Packard – Global leader in computer-based customer support services for its customers.based customer support services for its customers.

Federal Express – Delivery service national and Federal Express – Delivery service national and world wide.world wide.

AT&T – Offer customers traveling abroad the AT&T – Offer customers traveling abroad the opportunity to dial a local number to place the call opportunity to dial a local number to place the call and charge it at American rates to the customer’s and charge it at American rates to the customer’s home account. home account.

ConclusionConclusion More and more service businesses are now More and more service businesses are now

operating across national borders. operating across national borders. Globalization and global strategy concepts Globalization and global strategy concepts

developed for manufacturing businesses can also developed for manufacturing businesses can also be applied to service businesses. be applied to service businesses.

Some significant differences may exist, Some significant differences may exist, particularly among people-processing, possession-particularly among people-processing, possession-processing and information-based services. processing and information-based services.

Companies can develop effective global strategies Companies can develop effective global strategies by systematically analyzing the specific by systematically analyzing the specific globalization drivers affecting their industries and globalization drivers affecting their industries and the distinctive characteristics of their service the distinctive characteristics of their service businesses. businesses.