Growth and Global Expansion
Learning Objectives
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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
Single Service
Single
Location
Multisite
Multiservice
Focused service:
* Dental practice
* Retail Store
* Family restaurant
Clustered service:
* Stanford University
* Mayo Clinic
* USAA Insurance
Focused network:
* Federal Express
* McDonald’s
* Red Roof Inns
Diversified network:
* Nations Bank
* American Express
* Accenture
Franchising
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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
High
Force
Towards
Global
Integration
Low
Global
Strategy
No
International
Strategy
Low
Transnational
Strategy
Multi-domestic
Strategy
High
Force Towards Local Responsiveness
Multinational Development
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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
Available technology?
Infrastructure?
Utility service?
Operating Strategy
Service Concept
Appropriate managerial
practice?
Participative?
Autocratic?
What are customer
expectations?
Perception of value?
Service ethic?
Space availability?
Labor market institutions?
Government regulations?
Unions?
Service encounter?
Language?
Acceptance of self-serve?
Interaction with suppliers?
Host government policies?
What are the usage
patterns?
Educating customers?
Language?
Front office?
Back office?
Labor market norms and
customs?
Cultural transferability?
Target Market
Segments
What are the market
segments?
Domestic?
Multinational?
Tourist?
What are important cultural
differences?
Language?
Life style?
Disposable income?
What are the workforce
demographics?
Skills?
Age distribution?
Attitudes?
Work ethic?
Considerations in Selecting a
Global Service Strategy
Global Service Strategies
Globalization
Factors
Multicountry
Expansion
Importing
Customers
Follow Your
Customers
Service
Offshoring
Beating the
Clock
Customer
Contact
Train local
workers
Develop
foreign
customers
Customization
Specialize in
back- office
office service
components
Quality and
coordination
Information
Intensity
Usually a
standard
service
Usually
routine
Satellite
network
Develop foreign
language &
cultural sensitivity
skills
Strategic
opportunity
Strategic
opportunity
On site advantage
Cultural
Adaptation
Modify
service
Accommodate
foreign guests
Labor Intensity
Reduced
labor costs
Government
restrictions
Increased labor
costs
Logistics
management
Modify
operations
Move
experienced
managers
Could be
necessary to
achieve scale
Hire local
personnel
Inadequate
infrastructure
Provide
extended
hours of
service
More need for
reliability &
coordination
Time
compression
Exploit
opportunity
Complexity
Other
Re-prototype
locally
Opportunity for
focus
Training
investments
Cultural
understanding
Reduced labor
costs
Home office
employee
morale
Common
language
necessary
Reduced labor
costs
Capital
investments
Topics for Discussion
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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
1.
2.
3.
4.
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
Donated Goods
4%5%
5%
6%
Temporary
Services
Subcontract
Services
15%
65%
Public Support
Grants
Miscellaneous
FedEx: Tiger International Acquisition
1.
2.
3.
4.
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.