Globalization in Operations

By Tharun(15)
Abhilash(5)
Saheth
Chaitanya
Objective
o As foreign competition in the service sector
increases, domestic services must develop a global
service strategy.
o Develop a methodology to assist service managers in
developing strategies for entering and competing in
global markets.


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Objective cont.
o To develop a strategy consider the following
questions:
What are the factors that we can use to classify services in
terms of their potential for moving globally?
Service Globalization Factors.
How do these factors translate into strategies for the
globalization of specific services?
Globalization Strategy.

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Service Globalization Factors
o Elements of service operations that need to be
considered when selecting a process as a possible
candidate for outsourcing.
o For service operations consider the level of the
following 6 factors:
Customer Contact (front-room)
Customization (front/back-room)
Complexity (back-room)
Information Intensity (back-room)
Cultural Adaptation (front/back-room)
Labor Intensity (back-room)

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Customer Contact
o Front-room operations based.
o Contact personnel speak or trained in native language.
o For success, the service must be adapted to the culture as
well.
o Example: Euro Disney
Main changes were both French/English used and adaptation to the
French culture. The major challenge was training the independently-
minded French employees to act out the roles of Disney characters
and perform their duties in a courteous manner.
o Adapting the service contact to native culture, one of the
more challenging tasks for service managers.
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Customization
o Language and distance create barriers to effective
communication, which detracts from ability to
customize service to customer needs.
o Coopers & Lybrand
Opened an office in Hungary, found clients to be more
comfortable working with Hungarian auditors.
o Customer contact elements also effect
customization.
o Front/back-room oriented.

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Complexity
o Globalization of back-room tasks fall under two
categories:
Make existing work routine such as data entry.
Technical but mundane work such as reprogramming or file expansion
that can lead to more complex tasks.
o Workers in other countries
Are often eager for such jobs and are content being compensated
according to the local job market.
Often approach work with different mindset resulting in more
motivation and creativity.
When workers have more motivation and creativity they can take on
more complex tasks which can lead to increased outsourcing of back-
room activities. (Like training new employees.)

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Information Intensity
o Once information is digitalized, it can be globalized.
o International communication using satellites make
up for poor infrastructures.
o Telecommunications and air freight have opened up
many information-intensive services to globalization.
o Example: Stock and financial markets, consulting
service.

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Cultural Adaptation
o Adapt services to customer culture or deliver service that
built the reputation in the home country?
Will changes still align with service strategy and mission?
Realign strategy?
o Both front and back-room activities can be impacted.
Culture can effect customer service and scheduling.
Culture and economy can effect back-room tasks, scheduling, and
employee compensation.
o Small town workers accept lower compensation to avoid
disrupting the fabric of community.
Culture can be individual or group oriented.

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Labor Intensity
o Seek less-expensive, well-educated labor.
o Labor-intensive tasks can be supported by major
investment in communication and computer systems
to transfer information.
o Labor rates in some countries are fractions of
domestic labor rates.
o Labor and time intensive activities are often the
prime candidates for globalizing.

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Other Considerations
o Technology is improving worldwide.
o Distance is becoming less of a factor.
o Governments are becoming aware of global market
changes and offer incentives for businesses to
provide work.
o Decreasing technical and legal restrictions.
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Taking Services Global
o Five basic Globalization Strategies
(1) Multi-country expansion
(2) Importing customers
(3) Following your customers
(4) Service unbundling
(5) Beating the clock
o These major strategies have been used by companies
that have entered global markets.
o The Globalization Strategies are compared with the
Service Globalization factors in a matrix to identify
strengths and challenges for each strategy and factor.
Displayed in Table II
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Taking Services Global
o These strategies are not all mutually exclusive.
o Strategies can be combined such as multi-country
expansion with beating the clock.
o Table II contains a summary of key opportunities and
potential problems that each (6) service
globalization factor (left) contributes to each (5)
global service strategy (top).

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Taking Services Global

Multi-Country Expansion
o Exporting a successful service to another country
without modification can sell a countrys cultural
experience.
McDonalds
Benihana
o Duplicating a service worldwide is easiest
accomplished if business is based on routine
services. (McDonalds)

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Multi-Country Expansion
o Some modifications must be made to better
accommodate foreign markets.
McDonalds in Germany serving Beer
McHefeweizen anyone?
Federal Express in Spain
Midday Siesta extends business and pickup hours later into
evening.
o The level of cultural adaptation determines if a
service will succeed or fail.
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Importing Customers
o Customers come to location of service because of
unique features:
Yosemite, Hawaii, Yellowstone
Disneyland/World
Universities, Museums
o Provide extended services for lodging, student loans,
discounted transportation.
o Works best when customers are willing to travel long
distances or stay for extended amounts of time.
o How can your service make it easier and more
enjoyable for you customers?
o Must also adapt to customer cultures.
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Follow Your Customers
o Services can follow previously global customers
around the world.
Any additional foreign customers acquired while serving
the primary customer adds opportunity for growth.
o This leaves the service manager with interesting
choices:
Design the service to follow customers and their needs?
Design it to adapt to the local culture?
Or make a compromise between the two, hoping to have a
successful straddle?
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Follow Your Customers
o Straddles may not be very successful due to
increased variation or complexity of the service.
We know what variation leads to: quality and consistency
problems.
o Elements also fall under Multi-Country Expansion.


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Service Unbundling
o Break-up elements of service processes to
determine what can be contracted out.
o Efficiency and labor savings can result from focusing
on specific back-room tasks.
o Labor-intensity of a process is also a factor.
o Managers need to identify the parts of the process
that are physical from those that are informational
to make service unbundling work.
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Beating The Clock
o The competitive advantage gained by:
Bypassing the constraints of the clock.
Constraints of domestic time zones.
Differing time-based domestic work rules and regulations.
24 hour operations.
Result in economies of operation.
Provide better access for foreign and domestic customers.
Support time-based competition in operations.
Add to the creativity available in the process without
slowing it down.

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Beating The Clock
o Analyze service operations to determine strategy:
Defensive Strategy:
Involves forming strategic alliances in other time zones.
Help support and maintain operations.
Offensive Strategy:
Activities might involve moving to, or modifying, operations in non-
domestic time zones to tap new markets or improving existing ones.
More competition and growth oriented.
o Operations infrastructure will need to improve:
Increased coordination and reliability between time zones.
Additional training.
Methods of operation.
Communications infrastructure.
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Conclusion
o Movement of information is easier and less costly
than the movement of goods.
o Cultural adaptation will prove to be the biggest
challenge for the front-room operations.
o Economic and workforce factors in various countries
will increase opportunities.
o Service operations managers should use these
various dimensions to analyze their own process.
o From analysis a globalization strategy can be formed.

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Thank You
o Questions?