The Globalization of Services chapter focuses on the current conditions of the globalizing world and how they can be addressed by businesses (Shameem). The international market presents interest as it holds the potential for the growth of revenues. However, there are some risks that companies are facing when trying to expand their presence.
Organizations can choose to either be presented locally or spread their service on the vast territory. The multisite strategy can become beneficial when a company is facing a financial failure at a particular location as it was with La Quinta inns in the mid-1980’s when some of the hotels were almost unoccupied after the oil boom ended (Kimes and Fitzsimmons). Both single and multisite frameworks can focus on one service or decide to provide a variety of them to customers. The risk of implementing several services offers lies in stepping away from the original idea. The concept of the concentric diversification has become an answer to this situation (Carman and Langeard). It lies in the importance of developing services that are similar to the primary one. Those companies, which combine both multiservice and multisite models, are perceived as diversified networks.
Franchising has become a popular method of business expansion. It offers benefits for both parties, yet possesses some risks. A franchisee usually saves money on advertising and equipment, as well as eliminates the potential risks by acquiring a working business with a reputation. A franchiser also benefits financially as there is no need for a significant capital input. However, there is a limit of control over the franchise points, and the arising disputes are sometimes hard to manage.
The globalization of services has become a common practice for a variety of organizations. Companies can either go for the multi-domestic or the transnational strategy depending on their force towards global integration. Nowadays, there exists the concept of the borderless world (Ohmae 19), which explains that customers look for services internationally rather than stick exclusively to the local choices. International operations must correspond with each country’s cultural and social norms to be successful. Studies identify different values in five dimensions, being power distance, individualism, masculinity, uncertainty avoidance, and long term orientation indexes (Hofstede). All these elements shape the company’s policies regarding overseas strategies.
The global service strategies include five elements, which are the multicountry expansion, importing customers, following customers, service offshoring, and beating the clock (McLaughlin and Fitzsimmons). The multicountry expansion concept is common to all globalizing businesses. It is usually implanted through franchising and is targeted at providing customers with an opportunity to reach the service physically in their home country. Importing customers might work when a business offers multiple services so that clients travel for one of them and using others at the same time. Following customers is usually a strategy for working with corporate offices. Service offshoring helps to cut operational costs since some countries have a comparatively cheap workforce. While there are issues of unemployment and low wages in the developing economies, there will be benefits from outsourcing. Finally, operating in several parts of the world at the same time helps to deliver service to customers in different parts of the world. Beating the clock lies in providing service while complying with the local labor regulations.
Although the overseas expansion presents certain risks to businesses, some may find it a necessity. Most of the major corporations nowadays have to plan their strategies for competing in the global market. Failure to organize international service delivery may result in the loss of thousands of potential customers.
Carman, James M., and Eric Langeard. “Growth Strategies for Service Firms.” Strategic Management Journal, vol. 1, no. 1, 1980, p. 19.
Hofstede, Geert. “National Culture.” ITIM International, Web.
Kimes, Sheryl E., and James A. Fitzsimmons. “Selecting Profitable Hotel Sites at La Quinta Motor Inns.” Interfaces, vol. 20, no. 2, 1990, pp. 12-20.
McLaughlin, Curtis P., and James A. Fitzsimmons. “Strategies for Globalizing Service Operations.” International Journal of Service Industry Management, vol. 7, no. 4, 1996, pp. 45-59.
Ohmae, Kenichi. The Borderless World. Harper Business, 1990.
Shameem, Beenish. Service Management: Operations, Strategy, Information Technology. 8th ed., McGraw-Hill, 2013.