Service Marketing

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Globalization is continuing at an inexorable pace. A survey of 497 senior executives around the world conducted by the Economist Intelligence Unit for AT&T say that almost 42% of firms will be deriving half or more of their revenue from foreign markets in coming years (The Economist, 2007). Companies will have to make use of variety of strategies to enter new markets to achieve international growth be it service or manufacturing sector. There are many routes for expansion such as, Greenfield investment, Joint venture, Mergers and acquisitions, sales or marketing alliances (The Economist, 2007). There will be many obstacles to achieve this. Services are an important part of global economy and this is increasing. While most of the international business strategies and theories which are good for manufacturing sector could be used for service firms but there are critical differences between goods and service and this effects international expansion strategy (Sarathy , 1994). A service firm operating in foreign land has a choice of three general entry mode strategies – full ownership arrangement, joint venture arrangement, and franchising arrangement (Kim, 2005). The main characteristics first discussed in the early services marketing literature are generally summarised as intangibility, inseparability, heterogeneity and perishability (Regan, 1963, Zeithaml et al 1985). This essay critically analyses how these different characteristics of services influence the global expansion strategies of service marketing. First this essay looks at different characteristics of services, then different concepts of international expansion models and how these vary with the nature of services and up to what extent these influence the expansion strategies. The literature of services marketing highlights intangibility as one of the key characteristics of services. Regan (1963) introduced the idea of services as activities, benefits or satisfactions which are offered for sale or in connection with the sale of that good. Darby and Karni (1973) and Zeithaml (1981) both say that degree of tangibility influences how consumers evaluate services products. There are a lot of implications of this characteristic of services in international market context. Sarathy (1994) says that managing corporate image in multiple markets will be an issue for service providers. Intangibility is a subjective determination of the quality and hence the perception will vary across different national markets and cultures (Sarathy, 1994). Inseparability is said to be the characteristic that reflects simultaneous delivery and consumption of services (Regan 1963; Onkvisit and Shaw 1991) and it is believed that it enables consumers to affect or shape the performance and quality of the service which they get. This is also categorized as soft service where the producer and consumer have to be in the close proximity to complete the activity (Erramilli, 1990). Here to expand globally the service providers have to answer questions like if their service can be provided from a distance internationally and they will have to find service providers locally for their clients which are a big constraint to expand globally. (Sarathy, 1994) Heterogeneity is nothing but the high variability in service delivery (Zeithaml et al 1985). Services with high labour content has this particular problem as the service is delivered by different people and thus the performance will vary day to day (Rathmell,1966; Onkvisit and Shaw, 1991). Some researchers like Wyckham et al (1975) suggest that heterogeneity can be introduced as a benefit and point of differentiation. Here to expand globally firms will have to reduce the cross-country variations in service quality which is inherent due to variations in local service providers. Company has to train all its service providers in the same level to provide the same level of service across the world (Dunning, 1989). For example Language schools assess...
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