Strategic Positioning

Chapter 2

Strategic Positioning and Service Strategy

Chapter 2 Strategic Positioning

Successful Service Operations Management, 2006, Thomson

The Strategic Planning Process for Services

Chapter 2 Strategic Positioning

Successful Service Operations Management, 2006, Thomson

Strategic Positioning
Industry and Competitor Analysis Approach to Strategy (Michel Porter, 1979) Five forces: Potential entrants, suppliers, buyers, substitute products, current competitors). External Conditions (OT) in order to set the internal operations (SW)

Core Competency Approach to Strategy (C.K. Prahalad and Gary Hamels, 1990). Internal competencies (SW) and builds out to address external conditions (OT)
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Industry/Competitor Analysis Approach to Strategic Consistency

Chapter 2 Strategic Positioning

Successful Service Operations Management, 2006, Thomson

Strategic Positioning
Core Competency Approach to Strategy (C.K. Prahalad and Gary Hamels, 1990).
Provide access to a wide array of potential Markets Contribute to the customers perception of the benefits of the end product or service Be different from the other competitors to imitate.

Chapter 2 Strategic Positioning

Successful Service Operations Management, 2006, Thomson

Industry/Competitor Analysis Approach to Strategic Consistency

External Strategy Step 3 Determine markets to be Step 2 served by the core competence

Internal Determine the core competence of the corporation

Execution

Step 4a Manage interaction with Step 1 external entities like suppliers

Step 4b

Scan operating system for potential competencies

Manage internal operations to meet objectives of the operating system design.

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Successful Service Operations Management, 2006, Thomson

Service Strategy
Service strategy involves: Service Concept The operating strategy The service delivery system
It is critical as it links companys strategic position with tactical execution.

A significant portion of determining the service strategy is determining which competitive priorities company will emphasize as order winners or as order qualifiers.
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Service Strategy (Cont)

The set of operationally oriented dimensions that company can compete on are called competitive priorities. (Cost, quality, time, service, flexibility and environment).

Determining which competitive priorities the company will emphasize as order winners and order qualifiers.

Chapter 2 Strategic Positioning

Successful Service Operations Management, 2006, Thomson

Service Strategy (Cont)

Service Concept describes how the target market, the employees of the service company and the market as a whole would perceive the service elements. Operating Strategy describes the competitive priorities that the internal operations will emphasize (both order winners and qualifiers).

Service Delivery System sets in place the physical and procedural assets that are needed to execute the service concept.
(job responsibility, technology and equipment requirement, facility layout, etc.)
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Strategic Service Vision

Target market
May result in different treatment of different customers All employees must understand target market

Service concept
Why customers choose a particular firm
Motivation can be emotional or physical

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Strategic Service Vision

Operating strategy
How should the firm be structured to produce the service concept? How should resources be allocated?

Service delivery system

Specific decisions made by the firm regarding personnel, procedures, equipment, capacity, facilities, etc.
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Strategic Service Vision

Ideally, a service delivery system should support the operating strategy, which should support the service concept, which supports the target market
Target Market Service Concept

Operating Strategy

Service Delivery System

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Tactical Execution
Managing the services day-to-day activities to meet the requirement of the target market segment.

Tasks like
Managing staffing levels to meet capacity strategies Managing quality systems to continually improve the efficiency and effectiveness of the service delivery system Selecting the specific site for new location What items to stock in inventory and at what levels.

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Managing for Growth

Multi-site Service Firm Life Cycle (Sasser, Olsen and Wycoff, 1978)

Entrepreneurial

Multi-site Rationalization

Growth

Maturity

Decline/ Regeneration

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Managing Growth Skill Sets

Entrepreneurial
Charismatic leader Local marketing and PR Innovation and development of service strategy Employees typically underpaid with little stability
Chapter 2 Strategic Positioning

Multi-site rationalization
Selection of dominant paradigm for marketing, operations and HR Standardization or procedures

Growth

Maturity

Decline/ Regeneration
Revising service concept and implementing revisions over a large network Requires charismatic leader

Operations and Maintaining design are already market position set and awareness and keeping Sell concept to concept fresh consumer and managerial Maintaining audiences standards and operating control Wider scale advertising Keeping employees motivated

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Growth Strategies
Industry Roll-Ups
Use stock to buy up dozens of small firms in a fragmented industry Gain synergies when once-competing firms share facilities, supplies, marketing expenses and operational expertise

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Franchising
A self-financing growth strategy
Franchisees pay an up-front fee and a percentage of gross revenue

Can limit profitability because a large portion of the profits go to the franchisee
Firms may buy back mature franchises

Common in international expansion

Bypass ethical walls/US Foreign Corrupt Practices Act
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Challenges of Franchising
Channel conflict
For example, retail outlets may oppose the introduction of on-line channels

Operational control issues

Franchisees may oppose changes initiated at the firm level Franchisers cannot dictate retail prices or require that franchisees purchase supplies from the franchiser

Franchisers providing on-going value

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Chapter Summary
The strategic planning process for services is formulated as a hierarchical model that includes:
strategic positioning, service strategy, and tactical execution

Services strategy decisions link the strategic position of a firm to its day-to-day tactical execution
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Chapter Summary
Growth strategies include industry rollup or franchising

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