Strategies for Globalizing Service Operations

1
Strategies for GlobalizingService Operations

• Curtis P. McLaughlin
• University of North Carolina, USA
• James A. Fitzsimmons
• University of Texas, USA
• Presented by David Truong

Article 17
2
Objective

• This paper outlines approaches to considering two
  questions that managers face when developing a
  global service strategy.
• What are the factors that we can use to classify
  services in terms of their potential for moving
  globally?
• How do these factors translate into strategies
  for the globalization of specific services?

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Factors Affecting Service Globalization

• The most useful dimensions for classifying
  service operations are
• Customer contact
• Customization
• Complexity
• Information intensity
• Cultural adaptation
• Labor intensity
• Other factors

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Description of Factors

• Customer contact
• customer contact is not a factor where routine
  back office operations are involved.
• the globalization of front office operations with
  its verbal customer contact still depends heavily
  on cultural adaptation of the service.
• Customization
• to learn what the customer needs and to adapt the
  service accordingly.
• when taking a high customer contact service
  overseas, language and culture can create
  barriers to effective communication.

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Description of Factors

• Complexity
• one path makes existing work routine.
• the other path accepts mundane work but provides
  the opportunity to develop skills that ultimately
  lead to more interesting and complex work.
• Information intensity
• there is little doubt that new telecommunications
  modes have helped the globalization of services.
• information-intensive services, such as financial
  services, travel reservations, and technical
  publishing, have led the way in globalization.

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Description of Factors

• Cultural adaptation
• local attitudes towards work is a key attribute
  involved in the decision to relocate services.
• because services relocate back office operations
  to small towns and cities, workers may accept low
  wage structures, if they are in line with that of
  the surrounding community.
• Labor intensity
• many of the back office operations moving
  offshore are doing so to acquire less expensive,
  but well-educated labor.
• these activities can be supported by major
  investments in communications and computer
  systems that facilitate the transfer of
  information into and out of the process.

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Description of Factors

• Other factors
• technical capability, legal restrictions and
  distance, are becoming less and less important.
• flexibility and public policy are important.

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Global Service Strategies

• Five basic globalization strategies are
  identified
• multi-country expansion
• importing customers
• following your customers
• service unbundling
• beating the clock

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Description of Strategies

• Multi-country expansion
• this strategy is necessary when the service
  market is defined by the need for customers to
  travel physically to the service facility.
• Importing customers
• customers must be willing to travel a long
  distance and stay for an extended time.

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Description of Strategies

• Follow your customers
• most foreign service companies entering China are
  not there to serve the local Chinese markets so
  much as to follow their corporate clients
  overseas and continue to serve them.
• Service unbundling
• involves separating out pieces of the value-added
  chain and focusing on those parts not requiring
  face-to-face interactions.

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Description of Strategies

• Beating the clock
• describes the competitive advantages gained owing
  to the fact that one can bypass the constraints
  of the clock and the constraints of domestic time
  zones, including time-based domestic work rules
  and regulations.
• by combining the demand from multiple time zones,
  it could improve the productivity of reservation
  clerks and telemarketers.

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Conclusions

• It is up to managers and management scholars to
  study this phenomenon and to provide useful
  analyses of it.
• There exists an interesting array of factors to
  study, which are the factors of service
  globalization, and includes strategic
  requirements, flexibility, and public policy
  issues.
• Within these factors there is great potential for
  managerial creativity and for new research topics
  and research hypotheses, especially for
  understanding better the issues pertaining to the
  cultural adaptation.
• The benefits of globalization for domestic
  service managers include tapping overseas markets
  with large populations of rapidly expanding
  middle classes and retarding the growth rate of
  potential foreign competitors.