Growth and Global Expansion

Learning Objectives Recommend an expansion strategy for a service firm. Discuss the nature of franchising. Discuss the factors to be considered in multinational development. Describe and contrast global service strategies.

Expansion Strategies Focused service: Clustered service: Single Service Multiservice Focused service: Clustered service: Single * Dental practice * Stanford University Location * Retail Store * Mayo Clinic * Family restaurant * USAA Insurance Focused network: Diversified network: Multisite * Federal Express * Nations Bank * McDonald’s * American Express * Red Roof Inns * Arthur Andersen

Franchising Benefits to the Franchisee Management Training Brand Name National Advertising Acquisition of Proven Business Economics of Scale Issues for the Franchisor Franchisee Autonomy Franchise Contract Conflict Resolution

Multinational Development The Nature of the Borderless World (Triad) Customers - information has empowered Competitors - nothing stays proprietary Company - fixed costs require large markets Currency - become currency neutral Country - deprive competitor of home market Planning Multinational Operations Cultural Transferability Worker Norms Host Government Policy

International Strategic Service Vision Target Market Service Concept Operating Strategy Service Delivery System --culture --culture --labor market --technology --industry structure --perceptions --managerial --operating premises of value practices --demographics --expectations --labor market norms --language and customs --usage patterns

Considerations in Selecting a Global Service Strategy Globalization Global Service Strategies Factors Multicountry Importing Follow Your Service Beating the Expansion Customers Customers Unbundling Clock Customer Train local Develop foreign Develop Specialize in Provide Contact workers language & foreign front- or back- extended cultural sensitivity customers office service hours of skills components service Customization Usually a Strategic Re-prototype Meet segments’ More need for standard opportunity locally needs better reliability & service coordination Complexity Usually Strategic Modify Opportunity for Time routine opportunity operations focus compression Information Satellite On site advantage Move May require Exploit Intensity network experienced heavy capital opportunity managers investments Cultural Modify Accommodate Could be Manage worker Common Adaptation service foreign guests necessary to diversity language achieve scale necessary Labor Intensity Reduced Increased labor Hire local Reduced labor Reduced labor labor costs costs personnel costs costs Other Government Logistics Inadequate Merchandise Capital restrictions management infrastructure unbundled investments component

Topics for Discussion For service firms, how does the operations strategy differ from the marketing strategy? Is the competitive role of operations more important for a service firm than a manufacturing firm? Do you agree that the effect of learning and experience on total unit cost has not been demonstrated in a service situation? Manufacturing firms often grow through product innovation. Are there examples of service firms that practice the equivalent strategy? What is your assessment of the multinational competition in services?

Goodwill Industries International Who are Goodwill’s customers and how have their demographics changed over time? How should the introduction of for-profit thrifts affect Goodwill’s decisions about the role of customer service? How can Goodwill differentiate itself from the competition? Visit http://shopgoodwill.com/ where Goodwill auctions items of special interest and discuss why this on-line store has great profit potential.

Goodwill Industries International Sources of Revenue