The New

Global Marketing

Global Services

Chapter 10
 Outline
I. Characteristics of Services
II. Services as Products
III. Service Globalization Potential
IV. Foreign Entry Modes of Services
V. Service Quality and Cultural Differences
VI. Two Special Cases: Fast Food and
Professional Services
VII. Takeaways
 Many Service Industries
• Accounting • Health care insurance
• Advertising • Investment banking
• Banking • Leasing
• Broadcasting • Legal Services
• Computer services • Lodging
• Consulting • Media
• Data processing • Reservation systems
• Design and • Restaurants
engineering • Tourism
• Distribution • Telecommunications
• Education • Transportation
• Entertainment • Utilities
Fig. 10.3c: Source: https://pixabay.com/en/google-search-engine-browser-search-76517/. Fig. 10.3d: Copyright © 2009 by SPSS (IBM).
Fig. 10.3a: Copyright © by Denstsu. Fig. 10.3b: Copyright © 2011 by Accenture. Fig. 10.3e: Copyright © 2017 by Emslichter.
 Services as a Percentage of GDP
and Total Exports
• Important increases from emerging to
advanced economies.

[i] Source: International Trade Center, ITC Trade Map, 2014.

 I. Characteristics of Services
• Intangibility: Can’t be touched and difficult to monitor
at borders and assess customs duty
• Heterogeneity: Not exactly the same each time, esp.
personal service; less standardization
• Inseparability: Services are produced when they are
consumed; service quality depends on situation and
context
• Perishability: Cannot store a service unless it is
embodied in a product (e.g. video, ATM)
 Medical Tourism
Accreditation:
• Ensures adherence to
international medical
standards.
• Solves intangibility and
heterogeneity problems by Ex. 10.1: Copyright © by 123RF/svglass.

ensuring a consistent level of

quality.
This hospital is not accredited.

https://www.youtube.com/watch?v=V0wzsvIeMn4
https://www.youtube.com/watch?v=_w1cVLMt-4U
https://www.youtube.com/watch?v=HXwMxyMsg10
 Medical Tourism
• Traveling internationally to receive medical treatment.
• Over 600 international hospitals have been awarded U.S.
Joint Commission accreditation.
• About 8 to 11 million patients (1.2 million Americans).

Medical tourism Typical percentage

number of cost savings from
patients (000) U.S. prices

Mexico 1000 40% - 65%

India 250 65% - 90%
Thailand 1000 50% - 75%
Brazil 180 20% - 30%
Singapore 500 25% - 40%
Malaysia 650 65% - 80%
Ex. 10.2: Source: Healthy Travel Media.
 Services as Products
• A product is often an “embodied service.”
• Core service: What the buyer is really buying.
– Example: Not buying an oil change and tune-up
for your car; actually buying trouble-free
operation.
• Formal service package: Specific services offered
including price, service features, packaging, and
guarantees.
• Augmented service: The totality of the benefits a
customer receives when buying the product.
 The Service as a Product
Provider’s
behavior
Augmented
service
Features

Price Packaging
Physical Provider’s
surroundings Generic benefits appearance
Warranty After-sales
support
Quality

Formal
Core Brand image service package
service
 Call Center in India

• Employees are typically assigned easily understood names

such as “Peter” and “Mary” to make the service feel
local.
Ex. 10.6: Copyright © by Bigstock/Nosnibor137.
 Most Offerings Are Part Product
and Part Service

Lawn
PURE SERVICES Restaurant Buy PRODUCTS
Service
Juice

Exhibit 10.6. Most offerings exist somewhere on a scale between pure services
at one end and pure products at the other end, having characteristics of both.
 III. Service Globalization Potential
• Life cycle stage: Potential is highest during the mature
stage of PLC because the service is fully developed and
can be blueprinted.
• Infrastructure barriers: Service depends on availability
of infrastructure.
– Ex: IKEA requires customers to take home large items in
their own cars.
• Idiosyncratic home markets: Regulations induce
providers to develop practices only applicable locally.
– Ex: Advertising agencies in Japan produce television
programs whose sponsorship the agency controls.
 Successful Service Globalization:
Three Key Factors
1. Distill exactly what the key features of the service concept
are.
2. Make sure there is reasonable similarity to the home
country situation.
3. Localize key features to the new environment while still
maintaining the FSA's of the firm.

Fig. 10.13b: Copyright © 2006 by Wells Fargo. Fig. 10.13a: Copyright © 2008 by Citi Private Bank.

Fig. 10.13c: Copyright © 2015 by Miosotis Jade, (CC BY-SA 4.0) at

https://commons.wikimedia.org/wiki/File:Chase_Bank.JPG.
 Four Service Entry Modes
• Exporting: Services are transferred via
communications media or personal travel.
• Licensing: Local partnership is important and the
service can be standardized (e.g. franchising).
• Strategic alliances: A local partner is necessary
but government regulations restrict foreigners.
• Foreign direct investment: A local partner is not
available, entry barriers are high, and foreign
ownership is permitted.
 IV. Foreign Entry Modes of Services
• Tourism illustrates exporting services, as when Americans
visit France – export to America.
• Subway franchise expansion illustrates a licensing mode of
service entry.
• In marketing research, alliances with foreign research
firms provide global coverage to clients.
• In consulting, foreign direct
investment, as when
PriceWaterhouseCoopers
opens an office in Brussels.
Service entry modes An Excelsior “me-too”
coffee shop in Tokyo
have similar risks as
products.

Just enough tweaking of

the basic concept to
make the shops avoid a
legal challenge from
Starbucks for copyright
infringement.
 Service Entry Barriers
• Entry barriers for services are greater than for
goods:
– Local regulations vary across countries.
– Local service businesses are typically protected.
– Cultural barriers tend to be higher.
– Intangibility makes trade monitoring difficult.
– Free trade agreements hard to complete and enforce.
– Without trade agreements, governments have no
incentive to make regulations more homogeneous.
 Overcoming Service Barriers
Typical barriers
• Host country restrictions 21.6%
• Quality delivery 19.5%
• Cultural differences 13.8%
• Finding staff 13%
• Logistics in service delivery 8%
 Local Marketing of a Service
• Similar to traditional product marketing.
• Market segmentation: New services from abroad
target specific segments.
• Positioning: Clearly identify customer benefit to
position the service accordingly.
• Product line: A service provider that fits the local
infrastructure.
• Branding: Always important given the intangibility
of services.
 Local Marketing of a Service (cont’d)
• Pricing: Factor in competitive parity, costs, demand, and
value of time spent by customers.
• Promotion: Many services have restrictions on
promotional activities that differ across countries.
• Distribution: Delivery is identical to production because
they occur simultaneously. Consequently, distribution
depends on “servicescape,” “critical incidents” or
“moments of truth.”
• With the servicescape, three more “Ps” are added to the
4Ps: People, Physical evidence, and Process.
 Movies as Entertainment
• Movies are a product but the service provided
is “entertainment.”
 The Servicescape
• “The environment in which the service is
assembled and in which the seller and customer
interact, combined with tangible commodities that
facilitate performance or communication of the
service.”
– The Starbucks experience
• Cozy environment, music, free Wi-Fi, comfortable seating
• The importance of the servicescape creates two
more entry barriers:
– Transferring the servicescape is difficult due to cultural
differences.
– Local competition can create a “me-too” servicescape.
• Services have low entry and exit barriers.
What Determines Service Quality?
• Reliability: Ability to perform the service
dependably and accurately.
Functional • Assurance: Knowledge and courtesy of
Quality employees and their ability to inspire
trust.
• Tangibles: Physical facilities, equipment,
and appearance of personnel.
• Empathy: Caring, individualized attention
the firm provides its customers.
Emotional • Responsiveness. Willingness to help
Quality customers and provide prompt service.
Service and Product Quality Closely Tied
PRODUCT OR PERSONAL
“EMBODIED” SERVICE
SERVICE

FUNCTIONAL ZERO DEFECT COMPETENCE

QUALITY
(OBJECTIVE) (WHAT YOU DO)

EMOTIONAL
QUALITY
(SUBJECTIVE)
BRAND IMAGE MANNER (WHAT
YOU SAY AND HOW
YOU SAY IT)
Fig. 10.25a: Copyright © 2017 by BMW.
Fig. 10.25b: Source: https://pixabay.com/en/doctor-dentist-dental-clinic-1149149/.
 The Moment of Truth
THE MOMENT OF TRUTH: The period of time during which an
individual actually consumes the service.

• Customer satisfaction is determined by the

difference between expected and
perceived service quality at the moment of
truth.
• A service provider might be highly rated,
but the performance at each moment of
truth is what matters.
 The Zone of Tolerance
• A “customer gap” between expected and perceived quality
lowers customer satisfaction.
• Cross-cultural services usually have a zone of tolerance
because of uncertain expectations.
– “Maybe that is how they do service here.”
• Desired service: Highest • Adequate service: Lower limit
or ideal quality below which the quality is
• Predicted or expected unacceptable
service: Lies between • Perceived service: Must lie
desired and adequate between desired and adequate
service service levels to make sure
customer is satisfied
 Customer Satisfaction:
The Gap and the Zone of Tolerance
Surprise
Desired service
(Perceived service
high)
Predicted Zone of
expected tolerance
service Acceptable

Adequate
service

Dissatisfaction Performance
gap
Inadequate
service (Perceived service
low)
 V. Service Quality and Cultural
Differences
• Different cultures have unique
habits and preferences that define
service quality differently.
• Culture affects perceived service
quality and customer satisfaction.
• What is considered high service
quality in one country is not Sushi made from raw fish
necessarily high in another. Very popular, but perhaps
not for everyone?

Fig. 10.29a: Copyright © 2017 by Joe lopes, (CC BY-SA 4.0) at https://commons.wikimedia.org/wiki/File:Sushi_food_plate.jpeg.
 Personal Service Quality:
Differences in Complaint Handling
Americans Japanese

• Asking • Listening

• Expressing doubt • Expressing sympathy

• Explain what cannot be done • Explain what can be done

• Defending company policy • Apologize for company policy

• Responsibility of the buyer • Responsibility of the seller

• “We’ll fix it, but…” • “I’m very sorry”

• Low customer satisfaction • High customer satisfaction

 VI. Special Case: Fast Food Franchising
• Grown in the last two decades
• Mitigates risk of financial exposure in other country markets
• Penetrates new markets leveraging existing brand names
• Firms provide pre-planning tools to entice local investors

Advantages
• Allows franchisee to start a
business with limited
capital, benefiting from
local experience of
franchiser
Disadvantages
• Franchiser’s ability to
dictate many facets of the
business may seem overly
intrusive
 KFC restaurant on
Standardized colors Xa Dan street,
and design produces Hanoi, Vietnam
similarities in the
suburban landscape
of different countries,
sometimes
complained as “too
American.”
Ex. 10.12: Copyright © 2015 by Shutterstock/Hanoi Photography.
 Fast Food Franchising (cont’d)
• How do Americans define “good service” in a
fast food restaurant?

• How do Americans define “good service” in an

expensive restaurant?
VI. Special Case: Professional Services
• Expanding globally despite local regulations.
• A move toward homogeneous regulations benefits
expansion (Ex: EU certification of lawyers & doctors).
• Accounting standards are converging, allowing accounting
firms to go global.
• Creating sophisticated strategic alliances aids global
service expansion.

Fig. 10.34a: Copyright © 2017 by KPMG. Fig. 10.34b: Copyright © 2011 by Baker & McKenzie.
 VII. Takeaways
• Services have become an increasingly
important part of the economy, especially
in developing countries.
• Like manufacturers of products, service
providers are turning to foreign markets for
growth.
 Takeaways
• Services have characteristics that make
foreign expansion different from products.
Intangibility of many services makes the
mode of entry different from physical
goods.
 Takeaways
• Globalizing a service means identifying its
core advantages and whether they can be
reproduced in a foreign market.
• Foreign expansion of services typically
occurs in the mature life cycle stage.
 Takeaways
• The barriers to entry for services tend to be
greater than for goods because of restrictive
government regulation and the need for
localized delivery.
 Takeaways
• Because of the human factor, the way services
are marketed locally and the trade-off
between standardization and adaptation
hinge on cultural factors.