1. Chapter 14 Growth and Global Expansion
McGraw-Hill/Irwin
Service Management: Operations, Strategy, and Information Technology, 6e
Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.

2. Learning Objectives
Identify and differentiate the four domestic growth and expansion strategies.
Discuss the nature of franchising from point of view of the franchiser and the franchisee.
Differentiate between the three generic international strategies.
Discuss the three factors to be considered in planning transnational operations.
Discuss the five C’s that must be balanced in a borderless world.
Identify and differentiate the five global service strategies.
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3. Importance of Services in US
Consider May, 2008
Goods balance of payments deficit is $72.5 billion
Services balance of payments surplus is $12.7 billion
Net deficit is $59.8 billion
Source: Bureau Economic Analysis, July 11, 2008

4. 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 * Accenture
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5. 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
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6. 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
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7. 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
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8. 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?
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9. Considerations in Selecting a Global Service Strategy
Globalization Global Service Strategies
Factors
Multicountry Importing Follow Your Service Beating the
Expansion Customers Customers Offshoring Clock
Customer Train local Develop foreign Develop Specialize in Provide
Contact workers language & foreign back- office extended
cultural sensitivity customers office service hours of
skills components service
Customization Usually a Strategic Re-prototype Quality and More need for
standard opportunity locally coordination reliability &
service coordination
Complexity Usually Strategic Modify Opportunity for Time
routine opportunity operations focus compression
Information Satellite On site advantage Move Training Exploit
Intensity network experienced investments opportunity
managers
Cultural Modify Accommodate Could be Cultural Common
Adaptation service foreign guests necessary to understanding 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 Home office Capital
restrictions management infrastructure employee investments
morale
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10. 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?
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