internationalisation of services Flashcards
Define international services
” Deeds, performances, efforts, conducted across national boundaries in critical contact with foreign cultures” ( Clark et al, 1996)
What is important to consider regarding service transactions? (6)
- In service context we often don’t move physical products
- Experiences, performances and solutions are not being physically shipped and stored
- More and more informational transactions are conducted through electronic and not physical channels
- Physical proximity between supplier and customers is essential (hotels, hairdressing, industrial cleaning)
- Services have characteristics of inseparability (cannot be traded separately from their production)
- Many service producers find it necessary to establish a commercial presence in countries they wish to trade ins in order to be close to their customers
Why expand service firm into International market? (4)
- A firms portfolio management may direct that the company reduce its dependence on one geographic market (economic cycles and influence of govt policies)
- Environmental factors may make it difficult for a company to exploit its service concept fully in its domestic market (forces firm to look overseas)
- Firms may have saturate the existing domestic market (maturity stage of PLC)
- Consumers,ers demand the service to be international available (car-hire business e.g.)
For what reasons do serve firm expand into International market to pursue growth? (6)
- firms may be obliged to follow competitors to protect position elsewhere
- Saturation of domestic markets
- Desire to reduce dependency upon one market
- Spread risks in numerous markets
- Extend product life cycle in other markets
- Stretch a strong brand to new markets
What are factors influencing service internationalisation? (PESTEL) (6)
- Exploitation of comparative cost advantages:
- an economy will export those services that is particularly well suited for producing and
- import those services in which another country has an advantage (economic) - Removal of trade barriers:
- favourable trade policies, compatible technical standards, common marketing regulations (legal) - Increasing disposable household incomes:
- means greater consumption of “Luxury” services (economic) - Cultural convergence: homogenisation of international market segments (common customer needs across countries) (social)
- Ability to cater for needs overseas (e.g. using accountants that are familiar with the country) (social)
- Advances in information technology: internet offers access to international markets (technological)
What are Methods of international trade in services? (3)
- Production of service in one country for consumption in another country:
- this can occur for services where consumption and production can be separate. E.g. the internet and falling communication costs have created opportunities, such as call centres miles away. - Production of a service at home for sale to foreign customer for consumption in the domestic market:
- demand for high specialised service may be very thinly dispersed, making it uneconomic to take highly specialised staff and equipment to the market (e.g. visiting specialist doctor far away) - Production of a service by a domestic company in a foreign market for foreign consumption:
- domestic producer might only be able to access the foreign market by setting up production facilities in that market.
- production costs may be lower in the organisations own country
- a country may possess unique geographical features: tourism, that must travel to that country to see X
How is people processing affected by international market distribution? (3)
People processing: services require direct contact with people:
1. Export service concept: reach or follow existing customers to new locations, act alone or in partnership with local suppliers
- Import customers: inviting customers from overseas to firms home country (hospitals, resorts)
- Transport customers to new locations: passengers transportation (air, seas, rail)
How is possession processing affected by international market distribution?(2)
possession processing involves services to customers physical possessions
- Repair and maintenance, freight transport
- May require ongoing local presence;
- is geographically constrained although personnel may visit customers or vice-versa
- items may also be shipped for repair maintenance
How is information based services affected by international market distribution? (3)
information based: service include mental processing services
- Export the service to a local service factory
(Hollywood film shown around the world) - Import customers – similar to people processing, e.g. education
- Export the information via telecommunications and transform it locally
(Data can be downloaded via CDs or DVDs)
How is people processing affected by competitors, market, tech, cost and gov?
Competitors: Simultaneity of production and consumption limits leverage of foreign competitive advantage especially in front-service, but management systems can be globalized.
Market: People differ economically and culturally, so needs for service and ability to pay may vary.
Culture may affect adoption of self-service
Tech: Use of IT for delivery of supplementary services may be a function of ownership and familiarity with technology.
Cost: Variable labor rates may impact pricing in labor-sensitive services.
Government: Social policies (e.g., health) vary widely and may affect labor cost, etc.
Role of women in labor force etc
How is possession processing affected by competitors, market, tech, cost and gov?
Competitors: Technology may be key basis for competitive edge
Market: Level of economic development impacts demand for services to individually owned goods.
Tech: Need for technology- based service delivery systems depends on possessions requiring service and the cost trade-offs in labor substitution
Cost: Variable labor rates may favor low-cost locations.
Can equipment be substituted for labor?
Government:Policies may decrease/increase cost and encourage/discourage certain activities
How is information processing affected by competitors, market, tech, cost and gov?
Competitors: Highly vulnerable to global dominance by competitors with monopoly or competitive advantage in information (e.g. CNN)
Market: Demand for many services is derived to a significant degree from economic and educational levels. (e.g. demand for entertainment)
Tech: Ability to deliver core services through remote terminals may be a function of investment in computerization, etc.
Cost: Major cost elements can be centralized and minor cost elements localized.
Government:Policies may impact demand and supply and distort pricing
Define culture and explain it! (def + 2)
‘The sum of all behavioural norms and patterns collectively shared by a social group’ (Usinier, 1993)
- Is learned, shared, multidimensional and transmitted from one generation to the next
- People from different cultures have different behavioural norms
What are other important dimensions of culture? (5)
- Long-Term Orientation
The extent to which a society exhibits a pragmatic future-oriented perspective (fostering virtues like perseverance and thrift), rather than a conventional historic or short-term point of view - Masculinity-Feminism
Pertains to societies in which social gender roles are clearly distinct:
Masculinity side represents a preference in society for achievement, heroism, assertiveness and material reward for success
Feminism - preference for cooperation, modesty, caring for the weak and quality of life - Uncertainty avoidance
Degree to which the members of a society feel uncomfortable with uncertainty and ambiguity - Power Distance
The extent to which the less powerful members of a society expect and accept that power is distributed unequally - Individualism/Collectivism
Pertains with societies in which the ties between individuals are loose: everyone is expected to look after himself or herself and his or her immediate family
Compared with societies that have a more communal orientation (collectivism)
What are the implications of culture in service internationalisation for marketers? (5)
- Individuals from different markets buy different services but also respond differently to the same service
- Social structure could render the service obsolete
- Family structure may be able to produce services
Example: Caring for children - Customs may make the service obsolete
- Example: staying with friends and family as opposed to staying in a hotel which could be seen as discourteous - Buying processes vary between different cultures
- Role of women in selecting a service may differ in a foreign market compared with the domestic market - Different approach to service design and promotion needed
