Domestic Growth and Expansion Strategies

Domestic Growth and Expansion Strategies

• Service innovation typically starts in one location with an initial service concept.
• The initial service concept is a well-defined vision focused on delivering new and unique service.
• Fred Smith's vision for Federal Express utilized Memphis, Tennessee, as a single hub-and-spoke network.
• The hub-and-spoke network guaranteed overnight delivery of packages.
• Service firms needing accessibility for customers add sites for significant growth, like fast-food restaurants.
• Focused networks such as McDonald's use franchising to allow management maintain control.
• Franchising allows for the consistency of service across locations

Clustered service diversification

• Service firms with fixed facilities diversify to grow.
• Small colleges became four-year regional universities in the 1970s due to increasing demand.
• USAA expanded from automobile insurance for military officers via direct mail, to serving the entire military community.

Growth through acquisition

• Service firms can grow through the multisite and multiservice strategies.
• United Airlines acquired hotels and car rental agencies.
• United Airlines believed that its Apollo reservation system could direct the traveling customer to its several businesses; this synergy did not materialize.
• United Airlines sold off the peripheral services and focused on its core airline business.

Franchising

• Franchising is an alternative to internally generated expansion.
• The alternative is suitable for firms wanting geographically dispersed units.
• Modern franchising began with Singer sewing machines using independent sellers in the late 19th century.
• Franchising enables firms to expand rapidly with minimal capital.
• The business concept is sold to prospective owner-operators who are bound by a contractual agreement.
• The International Franchise Association defines franchising is a system: a firm grants to others the right and license to sell a product or service, and potentially use the business system that was developed.
• Franchisees own the business by paying a franchise fee and buying equipment.
• Franchisees are responsible for hiring, daily decisions, and local advertising.
• Franchisees give up some independence in return for gains through group membership.
• Franchisees have the opportunity to own a small business carrying a lower risk of failure through identification with an established brand.

Benefits for Franchisee

• Brand recognition
• National advertising
• Acquisition of a proven business model
• Economies of scale

Issues for the Franchisor

• Franchisee autonomy
• Franchise Contract concerns
• Conflict resolution

Globalization of Services and Strategic Planning

• There are 5 C's of strategic planning: Customers, Competitors, Company, Currency, and Country.

International Operations Strategies

• No specific strategies were overtly mentioned

Global strategy standardization

• The world may be seen as one market to be approached in a homogeneous way or closely integrated.
• Firms with a strong brand identity, such as Ikea and Singapore Airlines, use this approach.
• Citibank is positioned as a global retail bank, providing banking anywhere, anytime.

Multi-domestic Strategy Localization

• Professional service firms such as Fulbright and Jaworski, Booz Allen Hamilton, and McGraw-Hill utilize this strategy.
• Overseas offices function as a confederation of autonomous units serving the local country's needs.
• Overseas offices are staffed and managed by local nationals.

Transnational Strategy Adaptation

• When there are benefits from corporate assets and expertise, yet the service delivery must adapt to local needs, a transnational strategy is adopted.
• McDonald's is moving from global standardization toward transnational adaptation.
• McDonald's alters menus to appeal to local tastes such as vegetarian sandwiches in India, and beer in Germany.

Multisite expansion

• Multisite Expansion commonly uses franchising to attract investors.
• Multisite Expansion utilizes a "cookie-cutter" approach to rapidly clone the service in multiple locations.
• This expansion strategy is used when customers need to travel to the service facility.

Exporting and Cultural Adaptation

• Exporting a service without modification promotes "a country's cultural experience."
• McDonald's in Europe, especially in Moscow, exemplifies this.
• Cultural adaptation requires modifications to the service concept.
• The availability of beer in German McDonald's exemplifies this.

Multiservice Single-Site Strategy

• For multiservice single-site, internationally, customers must travel long distances and stay for an extended time.
• Telecommunications must substitute for physical travel.
• Prestigious colleges, universities, medical centers such as the Mayo Clinic, and Disney World meet these conditions.

Unique Locations

• A service evolves from a unique tourist attraction.
• Mt. Crested Butte in Colorado creates a service to cater to skiers in winter and mountain bikers in summer.
• Rather than exporting the service as in a multisite strategy, a multiservice strategy imports customers.

Overseas Expansion

• Many service companies open offices overseas to serve corporate clients.
• Attracting local business might mean modifications to the service package.
• Attracting local business might also mean the employ people whom are familiar with local practices.

Following Customers

• To follow customers, business-travel agencies have formed partnerships globally.
• Corporate customers want their people served adequately anywhere.

Service Offshoring

• Service offshoring involves a foreign provider, this is a type of outsourcing.
• Offshoring is a global service strategy.
• Service firms save labor costs.
• Service firms send back-office operations via the Internet to overseas locations allowing focus on local customer contact.
• A discount brokerage can handle routine market transactions overseas, while maintaining customized professional advising activities domestically.

Overcoming Time Constraints

• Beating the clock involves competitive advantages gained from bypassing time constraints, domestic time zones, and work rules.
• Combining demand from multiple time zones increases productivity in reservation and telemarketing.
• Symantec provides technical support to easterly U.S. customers with a support center in Ireland for early morning inquiries.

Balancing Standardization with Customization

• Balancing standardization with local customization is the greatest dilemma for service globalization.
• Commercial banking seems culturally neutral due to the fairly homogenous financial needs involved.
• The Middle East bans explicit interest, this requires alternative fees for revenue.
• Customer Service faces language barriers and behavioral customs like midday siestas in Spain.

Cultural and Governmental Influences

• Labor market norms extend beyond language.
• Geert Hofstede surveyed work values across 50 countries, capturing differences across five dimensions.
• Host governments plays a role in restricting service growth.
• Host government's restriction includes limiting repatriation of funds.