Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Global Services Chapter 15

Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Differences Between Services and Goods Definitions and distinctions –Goods are physical objects, devices, or things. –Services are deeds, performances, or efforts. –Goods are fixed in form and require physical distribution. –The main difference between goods and services is intangibility. Services are generally more intangible,personalized, and perishable.

Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Linkage between Services and Goods Goods and services complement one another. Goods frequently require servicing after their purchase. Goods and services are marketed in varying packages or combinations to targeted customer groups. Customer groups have differing perspectives on the features and provision of services.

Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Airline Offerings

Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Stand-Alone Services Services compete with goods and compete with other services (e.g., video rentals). Services are intangible and perishable, presenting problems in matching service capacity to variations in demand. Consumption of services requires provider and customer involvement. Service consistency is required.

Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Problems with Services Market transparency –Consumers have difficulty in evaluating services because customers may use (or require )the same service in different way. Service heterogeneity –Services vary in their content and quality of delivery as customer requirements change. Cultural sensitivity –Services are delivered directly to the customer, making them potentially more culturally sensitive than products.

Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. The Role of Services In the U.S. economy –The service sector produces 80.5% of U.S. GDP. –Financial and technical services exporting and importing are both growing rapidly. –Total services imported into the U.S. in 2005 was $319 billion. In the world economy –Services account for 66.7% of the GDP.

Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Global Transformation of Services Reduced governmental regulation –Transportation, banking, and telecommunications Decreased regulation by industry groups. Technological advances are opening up and increasing worldwide service trade opportunities. Both labor-intensive and technology-intensive services are expanding into global markets.

Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. International Trade Problems in Services Data collection problems –The quality of data collected on the service trade is poor due to the difficulty of quantifying and tracking the delivery of services. –Services lack of homogeneity for transparency, making comparisons and the measurement of the effects of services in global markets difficult.

Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Regulation of Services Trade U.S. disincentives to international services –state and federal regulations are formidable barriers to entry Governmental justification for entry barriers –national Security –economic Security –protection of infant industries Obstacles to service trade abroad –barriers to entry –performance –discriminatory and nondiscriminatory regulations

Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Corporations and Involvement in International Services Marketing E-commerce has played an important role in expanding global services. Many service providers know customers “virtually” only. Language barriers slow e-commerce service expansion. Typical international services include financial, construction, design, engineering services, legal and accounting, teaching, and management consulting.

Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Starting to Market Services Internationally For services tied to complementary goods –Follow the path of the good in the market. For services independent of goods –Identify market situations abroad similar to the domestic market where the application of services expertise presents opportunities for market entry and expansion. Identify and understand transition points –Domestic and economics changes in foreign countries can create the need for services expertise.

Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. International Services Marketing Strategic Implications –Identify the nature and the aim of the service offering core. –Communicate the performance of the service on both the mass level and the personal level. –Train organizational personnel to convey the spirit, values, and attitudes of the corporation. –Address issues of service pricing and financing. –Consider the distribution implications of international services.