Growth and Global Expansion 17 Growth and Global Expansion McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives Identify the expansion strategy that a service firm is using. Discuss the nature of franchising. Discuss the factors to be considered in multinational development. Describe and contrast global service strategies.

Expansion Strategies

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

Generic International Strategies   Transnational Strategy Global Strategy High Force Towards Global Integration No International Strategy Multi-domestic Strategy Low   Low High Force Towards Local Responsiveness

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 Transnational Operations Cultural Transferability Worker Norms Host Government Policy

International Strategic Service Vision   Service Delivery System Operating Strategy Service Concept Target Market Segments Available technology? Infrastructure? Utility service?   Labor market norms and customs? Space availability? Interaction with suppliers? Educating customers? Appropriate managerial practice? Participative? Autocratic? Labor market institutions? Government regulations? Unions? Host government policies? Language? Front office? Back office? What are customer expectations? Perception of value? Service ethic? Service encounter? Acceptance of self-serve? What are the usage patterns? Cultural transferability? What are the market segments? Domestic? Multinational? Tourist? What are important cultural differences? Life style? Disposable income? What are the workforce demographics? Skills? Age distribution? Attitudes? Work ethic?  

Considerations in Selecting a Global Service Strategy

Topics for Discussion Recall that service operations can be classified as processing people, goods, or information. What challenges are faced in each category when globalization is undertaken? Chili’s, a U.S. – based restaurant chain that offers Mexican food, has its largest establishment in Monterrey, Mexico. Why is Chili’s so successful in Monterrey? What is the inherent conflict in a franchising arrangement? What explains the continuing trade surplus in services for the United States?

Interactive Exercise Break the class into small groups with at least one international student in each group, if possible. Based on overseas travel, have the group report on features of day-to-day living that they have found different from home and worth emulating.

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

FedEx: Tiger International Acquisition Describe the growth strategy of Federal Express. How has this strategy differed from those of its competitors? What risks are involved in the acquisition of Tiger International? In addition to the question of merging FedEx and Flying Tigers pilots, what other problems could be anticipated in accomplishing this merger? Suggest a plan of action that Fred Smith could have used to address the potential acquisition problems given in your answer to question 3.