Chapter 15
Services
1
Learning Objectives
Examine the important role of services
in international business.
Understand why trade in services is more
complex than trade in goods.
Appreciate the heightened sensitivity required
for international service success.
Learn that stand-alone services are becoming
more important to world trade.
Examine the competitive advantage of firms in
the service sector.
2
Differences Between Sales and Goods
“a good is an
object, a device, a
thing;”
“a service is a deed,
a performance, an
effort.”
3
Links Between Services and Goods
Services may
complement
goods; at other
times, goods
may
complement
services.
4
Stand-Alone Services
Services Can Compete Against Goods
Types of Communication
Offerings:
services,
reservations,
Intangible car rentals, etc.
Food and drink,
cars, books,
etc.
Tangible
5
How Services Differ From Goods
Services are difficult to
inventory.
For services offerings, the
time of production is close
to the time of consumption.
Services are more often
intangible.
Services are often custom-
made.
Services often require new
forms of distribution.
6
The Role of Services in the U.S.
Since the Industrial Revolution, the
United States has seen itself as a
primary international competitor in:
The Production of Goods
7
The Role of Services in the U.S.
In the past decades the U.S. economy
has increasingly become a:
Service Economy
8
The Role of Global Services in the
World Economy
The rise of the service sector is a global
phenomenon.
Economies of developing countries
generally first establish agricultural and
manufacturing sectors before entering into
the services sector.
As more countries enter the sector, the
global services business will become more
competitive.
9
Global Transformations in the
Services Sector
The rise in services trade is due to
changes in the environment and in
technology.
10
Global Transformations in the
Services Sector
Reduction of
government
regulation.
Technological
advancement.
11
Problems in Service Trade
New problems have emerged in the
service sector together with the
increase in the importance of
service trade.
12
Problems in Service Trade
Data Collection Problems.
Data is often sketchy.
Service transactions are often statistically
invisible.
Global Regulations of Services.
National and economic security issues result in
barriers to entry.
Additional problems in the performance of services
abroad—tradition, regulation, etc.
13
Corporations and Services Trade
Services and E-Commerce
Easy access to
global markets.
Little-known firms
can become known.
Electronic business
media occurs at
different rates in
different countries.
14
Corporations and Services Trade
Typical International Services
Banking and consulting services can
become internationally competitive.
Insurance services can be sold
internationally.
Communication services have excellent
success in international operations.
Institutions successfully offer
international teaching services.
Tourism is a major service export.
15
Starting to Offer Services
Internationally
Novices follow the path of
the good, if the service is
delivered in support of a
good.
New marketers search for
similar market situations
abroad if the service is
independent from goods.
16
Strategic Indications
Will the service be
directed at people or
things?
Will the service act
result in tangible or
intangible actions?
17
Strategic Indications
Services Aimed at People
Directed at People’s Minds:
Arts
Religion
Consulting
Directed at People’s Bodies:
Healthcare
Fitness
Restaurants
18
Strategic Indications
Services Aimed at Things
Directed at physical possessions:
Laundry
Landscaping
Refueling
Directed at intangible assets:
Banking
Research
Investments
19
Strategic Indications
Gaining Credibility Abroad
Providing objective verification
of their capabilities.
Providing personal guarantees of
performance.
Cultivating a professional image.
20
The Role of Personnel in International
Service
Customer interface is intense.
Proper provisions must be
made for training of personnel.
Major emphasis must be placed
on appearance.
The person delivering the
service communicates the
overall attitude/value of the
service corporation.
21
Pricing and Financing in
International Strategy
Because services cannot
be stored, there is greater
responsiveness to demand
fluctuations.
Greater pricing flexibility
must be maintained.
The intangibility of
services makes financing
more difficult.
22