Introduction to Services

By Agenda
Dr. Nripendra Singh
• Introduction
Jaypee Business School,
Noida • Characteristics
• Difference between
Goods & Services
• Services Marketing Mix
 What are Services?

Adam Smith: productive-unproductive labour…did not

contribute to wealth.
Jean Baptiste: Immaterial products…simultaneous
prod. & consumption.
Lovelock et. al.: performances, offering desired results
(expected value) to customers in exchange for their
money, time and efforts. The value comes from
access to a variety of value-creating elements rather
than from transfer of ownership.
 Examples of Service Industries
• Health Care
– hospital, medical practice, dentistry, eye care
• Professional Services
– accounting, legal, architectural
• Financial Services
– banking, investment advising, insurance
• Hospitality
– restaurant, hotel/motel, bed & breakfast,
– ski resort, rafting
• Travel
– airlines, travel agencies, theme park
• Others:
– hair styling, pest control, plumbing, lawn maintenance,
counseling services, health club
 Why Study Services?
India’s services sector has matured considerably during
the last few years and has been globally recognized for
its high growth and development. India ranks 15th in
Services output and provides 23% of total workforce.

There has been rapid growth in the services exports, up

from US $ 19.1 billion to US $ 73 billion in 2006-07.

Services sector account for about 56% of India’s GDP.

India’s share in worldwide service exports is expected to
almost triple itself from current 2.3 % to 6 % by 2012, if
the present annual growth rate of 28% has been
maintained.
 Tangibility Spectrum
Salt
 Soft Drinks
 Detergents
 Automobiles
 Cosmetics Fast-food
 Outlets
 Intangible
Dominant

Tangible

Dominant Fast-food
Outlets 
Advertising
Agencies

Airlines 
Investment
Management 
Consulting 
Teaching
Marketing Challenges: due to
following characteristics

Intangibility Heterogeneity

Simultaneous
Production Perishability
and
Consumption
 Services are Different
Goods Services Resulting Implications
Tangible Intangible Services cannot be inventoried.
Services cannot be patented.
Services cannot be readily displayed or communicated.
Pricing is difficult.
Standardized Heterogeneous Service delivery and customer satisfaction depend on
employee actions.
Service quality depends on many uncontrollable factors.
There is no sure knowledge that the service delivered
matches what was planned and promoted.
Production Simultaneous Customers participate in and affect the transaction.
separate from production and Customers affect each other.
consumption consumption Employees affect the service outcome.
Decentralization may be essential.
Mass production is difficult.
Nonperishable Perishable It is difficult to synchronize supply and demand with
services.
Services cannot be returned or resold.
Expanded Marketing Mix for Services

PRODUCT PLACE PROMOTION PRICE

Physical good Channel type Promotion Flexibility
features blend

Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms
Packaging Outlet location Sales Differentiation
promotion
Warranties Transportation Publicity Allowances
Product lines Storage
Branding
 Expanded Marketing Mix for Services
(contd.)

PEOPLE PHYSICAL PROCESS PRODUCTIVI

EVIDENCE TY &
Employees Facility design Flow of activities QUALITY
No org. can offer
one in isolation of
Customers Equipment Number of steps another

Communicating Signage Level of customer Reducing Cost

culture and values involvement

Employee research Employee dress

Customer
satisfaction &
Other tangibles Loyalty
 Thank You!
Discussions:

• Explain what services are and identify service

trends.
• Explain the need for special services marketing
concepts and practices.
• Outline the basic differences between goods and
services and the resulting challenges for service
businesses.
• Introduce the service marketing triangle.
 Consumer Evaluation Processes for Services

• Search Qualities
– attributes a consumer can determine prior to
purchase of a product
• Experience Qualities
– attributes a consumer can determine after purchase
(or during consumption) of a product
• Credence Qualities
– characteristics that may be impossible to evaluate
even after purchase and consumption
 Continuum of Evaluation for Different
Types of Products

Most Most
Goods Services

Easy to evaluate
Difficult to evaluate
Clothing

Jewelry

Furniture

Houses

Automobiles

Restaurant meals

Vacations

Haircuts

Child care

Television repair

Legal services

Root canals

Auto repair

Medical diagnosis
{
{
{
High in search High in experience High in credence
qualities qualities qualities
Stages in Consumer Decision Making and
Evaluation of Services
Categories in Consumer Decision-Making
and Evaluation of Services
Information Evaluation of
Search Alternatives
 Use of personal sources  Evoked set
 Perceived risk  Emotion and mood

Purchase and Post-Purchase

Consumption Evaluation
 Service provision as  Attribution of dissatisfaction
drama
 Service roles and scripts  Innovation diffusion
 Compatibility of  Brand loyalty
customers
Categories in Consumer Decision-Making and
Evaluation of Services

Information Evaluation of
Search Alternatives
 Use of personal sources  Evoked set
 Perceived risk  Emotion and mood

Culture
 Values and attitudes
 Manners and customs
 Material culture
 Aesthetics
 Educational and social
institutions

Purchase and Post-Purchase

Consumption Evaluation
 Service provision as  Attribution of dissatisfaction
drama
 Service roles and scripts  Innovation diffusion
 Compatibility of  Brand loyalty
customers
 Thank You!
Discussions:

• Services: Search versus Experience versus

Credence Properties?
• Services: Categories in the Decision-making
Process and Framework of the Chapter
• The Role of Culture in Services
Possible Levels of Customer Expectations
Dual Customer Expectation Levels

Desired Service

Adequate Service
The Zone of Tolerance

Desired Service

Zone of
Tolerance

Adequate Service
 Zones of Tolerance for
Different Service Dimensions

Desired Service

Level
of Zone of
Expectation Tolerance
Desired Service

Adequate Service
Zone
of
Tolerance

Adequate Service

Most Important Factors Least Important Factors

Source: Berry, Parasuraman, and Zeithaml (1993)
 Zones of Tolerance for
First-Time and Recovery Service

First-Time Service

Outcome

Process

Recovery Service

Outcome

Process

LOW HIGH
Expectations
Source: Parasuraman, Berry and Zeithaml (1991)
Factors That Influence Desired Service

Enduring Service
Intensifiers

Desired Service

Personal Needs
Zone
of
Tolerance

Adequate Service
Factors That Influence Adequate Service

Transitory Service
Intensifiers

Desired Service

Perceived Service
Alternatives Zone
of
Tolerance
Self-Perceived
Service Role
Adequate Service

Situational
Factors
 Factors That Influence
Desired and Predicted Service

Explicit Service
Promises

Implicit Service
Promises

Desired Service Word-of-Mouth

Zone Past Experience

of
Tolerance

Predicted
Adequate Service Service
 Thank You!
Discussions:
• Discuss controllable and uncontrollable sources
of customer expectations.
• Distinguish between customers’ global
expectations of their relationships and their
expectations of the service encounter.
• Acknowledge that expectations are similar for
many different types of customers.
 Customer Perceptions of
Service
• Provide you with definitions and
understanding of customer satisfaction
and service quality.
• Show that service encounters or the
“moments of truth” are the building blocks
of customer perceptions.
• Highlight strategies for managing
customer perceptions of service.
 Customer Perceptions of Service
Quality and Customer Satisfaction
 Factors Influencing
Customer Satisfaction
• Product/service quality
• Product/service attributes or features
• Consumer Emotions
• Attributions for product/service success or
failure
• Equity or fairness evaluations
 Outcomes of
Customer Satisfaction
• Increased customer retention
• Positive word-of-mouth communications
• Increased revenues
 ASCI and Annual Percentage Growth
in S&P 500 Earnings

Source: C. Fornell “Customer Satisfaction and Corporate Earnings,“ commentary appearing on ACSI website, May 1, 2001,
http://www.bus.umich.edu/research/nqre/Q1-01c.html.
Relationship between Customer Satisfaction
and Loyalty in Competitive Industries

Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.
 Service Quality
• The customer’s judgment of overall
excellence of the service provided in
relation to the quality that was expected.
• Service quality assessments are formed
on judgments of:
– Outcome quality
– Process quality
– Physical environment quality
 The Five Dimensions of
Service Quality
Reliability Ability to perform the promised
service dependably and accurately.
Knowledge and courtesy of
Assurance employees and their ability to
convey trust and confidence.
Physical facilities, equipment, and
Tangibles appearance of personnel.
Caring, individualized attention the
Empathy firm provides its customers.
Willingness to help customers and
Responsiveness provide prompt service.
 Exercise to
Identify Service Attributes
In groups of five, choose a services industry and spend 10 minutes
brainstorming specific requirements of customers in each of the five
service quality dimensions. Be certain the requirements reflect the
customer’s point of view.

Reliability:

Assurance:

Tangibles:

Empathy:

Responsiveness
:
 SERVQUAL Attributes
RELIABILITY
■ Providing service as promised
■ Dependability in handling customers’
service problems
■ Performing services right the first time
■ Providing services at the promised time
■ Maintaining error-free records
RESPONSIVENESS
■ Keeping customers informed as to
when services will be performed
■ Prompt service to customers
■ Willingness to help customers
■ Readiness to respond to customers’
requests
ASSURANCE
■ Employees who instill confidence in
customers
■ Making customers feel safe in their
transactions
■ Employees who are consistently courteous
■ Employees who have the knowledge to
answer customer questions
EMPATHY
■ Giving customers individual attention
■ Employees who deal with customers in a
caring fashion
■ Having the customer’s best interest at heart
■ Employees who understand the needs of
their customers
■ Convenient business hours
TANGIBLES
■ Modern equipment
■ Visually appealing facilities
■ Employees who have a
neat, professional
appearance
■ Visually appealing materials
associated with the service
 The Service Encounter
• is the “moment of truth”
• occurs any time the customer interacts with the firm
• can potentially be critical in determining customer
satisfaction and loyalty
• types of encounters:
– remote encounters, phone encounters, face-to-face
encounters
• is an opportunity to:
– build trust
– reinforce quality
– build brand identity
– increase loyalty
 Service Encounter
Cascade for a Hotel Visit

Check-In
Check-In

Bellboy
BellboyTakes
Takesto
toRoom
Room

Restaurant
RestaurantMeal
Meal

Request
RequestWake-Up
Wake-UpCall
Call

Checkout
Checkout
 A Service Encounter
Cascade for an Industrial Purchase

Sales
SalesCall
Call

Delivery
Deliveryand
andInstallation
Installation

Servicing
Servicing

Ordering
OrderingSupplies
Supplies

Billing
Billing
 Critical Service Encounters
Research
• GOAL - understanding actual events and
behaviors that cause customer
dis/satisfaction in service encounters
• METHOD - Critical Incident Technique
• DATA - stories from customers and
employees
• OUTPUT - identification of themes underlying
satisfaction and dissatisfaction with service
encounters
 Sample Questions for Critical
Incidents Technique Study
• Think of a time when, as a customer, you had
a particularly satisfying (dissatisfying)
interaction with an employee of .
• When did the incident happen?
• What specific circumstances led up to this
situation?
• Exactly what was said and done?
• What resulted that made you feel the
interaction was satisfying (dissatisfying)?
 Common Themes in Critical
Service Encounters Research

Recovery: Adaptability:
Employee Response Employee Response
to Service Delivery to Customer Needs
System Failure and Requests

Coping: Spontaneity:
Employee Response Unprompted and
to Problem Customers Unsolicited Employee
Actions and Attitudes
 Recovery

DO DON’T
• Acknowledge • Ignore customer
problem • Blame customer
• Explain causes • Leave customer to
• Apologize fend for him/herself
• Compensate/upgra • Downgrade
de • Act as if nothing is
• Lay out options wrong
• Take responsibility
 Adaptability

DO DON’T
• Recognize the • Promise, then fail to
seriousness of the follow through
need
• Ignore
• Acknowledge
• Show unwillingness
• Anticipate
to try
• Attempt to
accommodate • Embarrass the
• Explain rules/policies customer
• Take responsibility • Laugh at the
• Exert effort to customer
accommodate • Avoid responsibility
 Spontaneity

DO DON’T
• Take time • Exhibit impatience
• Be attentive • Ignore
• Anticipate needs • Yell/laugh/swear
• Listen • Steal from or cheat a
• Provide information customer
(even if not asked)
• Discriminate
• Treat customers fairly
• Treat impersonally
• Show empathy
• Acknowledge by name
 Coping

DO DON’T
• Listen • Take customer’s
• Try to dissatisfaction
accommodate personally
• Explain • Let customer’s
• Let go of the dissatisfaction affect
customer others
 Evidence of Service from the
Customer’s Point of View
 Contact employees
 Customer
 Operational flow of him/herself
activities  Other customers
People
 Steps in process
 Flexibility vs.
standard
 Technology vs. Physical  Tangible
Process
human Evidence communication
 Servicescape
 Guarantees
 Technology
 Website
Gaps Model of Service Quality
CUSTOMER Expected
Service

Customer
Gap
Perceived
Service

External
COMPANY Service Delivery Communications
GAP 4 to Customers
GAP 1 GAP 3
Customer-Driven Service
Designs and Standards

GAP 2
Company Perceptions of
Consumer Expectations
 Gaps Model of Service Quality
• Customer Gap:
– difference between expectations and
perceptions
• Provider Gap 1: Between customer
expectations & company perceptions of
customer expectations
– not knowing what customers expect
- Inadequate mktg research orientation
- Lack of upward communication
- Insufficient relationship focus
- Inadequate service recovery
 Gaps Model of Service Quality
• Provider Gap 2:
Between cust-driven service designs
and standards & Mgmt. perceptions of
cust. expectations
– not having the right service designs and
standards
- Poor service design
- Absence of customer-driven standards
- Inappropriate physical evidence and
servicescape.
 Gaps Model of Service Quality
• Provider Gap 3:
Between cust-driven service designs and
standards & service delivery
– not delivering to service standards
- Deficiencies in human resource policies
- Customers who do not fulfill roles
- Problems with service intermediaries
- Failure to match supply and demand
 Gaps Model of Service Quality
• Provider Gap 4:
Between service delivery & external
communications to customers
– not matching performance to promises
- Lack of integrated services marketing communications
- Ineffective management of customer expectations
- Over-promising
- Inadequate horizontal communications
The Customer Gap

Expected
Service

GAP

Perceived
Service
 Thank You!
Discussions:

• Difference between customer expectations and

perceptions.
• How to minimize the 4-GAP’s in Entertainment
Sector like Movie Theater.
• Can Provider gap 4 be closed before closing rest
three provider gaps.
 Service Processes

By Agenda
Dr. Nripendra Singh • Nature and Importance
• Engineering Service Processes
Jaypee Business School,
Noida • Controlling Service Processes
• Case Studies
Simplified service processes
Operation Back office
processes
SERVICE OPERATION
Front office
processes
INPUTS
Information
OUTCOMES
Staff Value
Emotions
Materials Judgements
Customers Intentions

The customer
also has a role
in front office SERVICE PRODUCT
processes
Customer
Changing front office and back office activities
Moving more Moving more
tasks to the back tasks to the
office customer
Operation

SERVICE OPERATION

INPUTS
Materials
Equipment OUTCOMES
Customers PROCESS Value
Staff Emotions
Technology EXPERIENCE Judgements
Facilities Intentions

SERVICE PRODUCT

Moving more Customer Customer as an

tasks to the front operational
office resource
Customer perceived risk and social interaction

High
Personal development programme

Adventure holiday

Social Family restaurant meal

interaction
International flight
Used-car purchase
Supermarket visit
Low
Low High
Perceived risk
Volume–variety matrix
Decreasing unit costs

High
Capability Complexity
M
ca any
pa p
bi roc
lity e
-c ss
om es
m lie Increasing
od c
PROCESS ity los process
VARIETY sp e t definition
ec o t
tru his
m

Simplicity Commodity
Low

Low High
VOLUME PER UNIT
 Capability Broker Direct Commodity processes
processes operations operations
High process variety Low process variety

Low volume of customer transactions High volume of customer transactions

Focus on capability, flexibility and Focus on quality, consistency, availability

providing customer solutions and efficiency

Customer transactions are lengthy and Customer transactions are short,

unpredictable in length and volume standard in content and predictable

Process flows are unpredictable – Rigid processes, with opportunity for

designed to meet individual customer automation to reduce cost and variability
requirements

Process capability primarily based on Process capability primarily based on

individual's skill and knowledge careful design of processes and
resources, minimising reliance on
individuals

Flexible people and control systems People and systems dedicated to a

narrow range of tasks

Customer-facing employee is designer Customer-facing employee is part

and deliverer deliverer, order taker and complaint
handler

Customer is often a key member of the

service ‘team’ and a significant Customer is primarily order giver. May be
resource a resource for the final delivery process

Motor insurance process profile

 Decreasing unit costs

High
Pioneer surgery (first
Capability heart surgery)

Heart surgery today

complex but routine

Increasing
PROCESS process
VARIETY definition
Learning from Hernia
pioneers translated operations
into medical
procedures to
facilitate increases in
volume and Commodity
consistency
Low

Low High
VOLUME PER UNIT

Depicting different surgery processes

 Decreasing unit costs

High
Capability Co
Complexity
st
of
fle
x ibi
Ef lity
fe
ct Increasing
PROCESS ive process
VARIETY Co ar definition
st ea
of
low
Can also be vo
lum
an incubator e
for innovation Simplicity Commodity
Low

Low VOLUME PER UNIT High

Off-diagonal processes
Key decision area matrix (KDAM)

SERVICE PROJECTS SERVICE

PARTNERSHIP
Strangers/ C–F–B C–F–B
repeaters

SERVICE FACTORY DIY SERVICE

Runners/
repeaters C–F–B C–F–B

Low High

Customer involvement
Changing task allocation

SERVICE PROJECTS SERVICE

PARTNERSHIP
Strangers/ C–F–B C–F–B
repeaters Systems
supplier Reinsurance firm
SERVICE FACTORY DIY SERVICE
Runners/
repeaters C–F–B C–F–B
Retailer

Low High

Customer involvement
Traditional operations process mapping symbols

An operation, task or activity

A movement of information,
people or materials

A check, examination or
inspection

A delay in the process

A queue of people or
inventory of materials
 CUSTOMER CSA COMPUTER
Ring loan Answer call Assess call
company queue length

Provide status Initial screening Screening

information questions

Provide credit Credit Online credit

information assessment check

Size of loan Assess risk,

required Size of borrowing calculate rate

Assess offer Explain costs and

terms

Accept or reject Agree release/ Set up payment

offer payment details instructions

Simplified process map for a loan application

 No spaces Plenty of spaces
1. How easy was it
to park the car? 1 2 3 4 5

Disgraceful Very clean/tidy

2. How did the store
look? 1 2 3 4 5

Uninviting Very attractive

3. How attractive
were the displays? 1 2 3 4 5

15 mins+ 10 –15 mins 0 – 5 mins

4. How soon were
you assisted? 1 2 3 4 5

Walk-through audit of an electrical store

 Action limit
3σ
x
x
x Warning limit
2σ x
x
x
x
x
x x
2σ
Warning limit
x
3σ
Action limit

Time
Statistical process control chart
Pressures to change
Decreasing unit costs

High
Capability Drive for increase
in volume and
cost reduction

Increasing
PROCESS process
VARIETY definition

Drive for flexibility

and customisation
Commodity
Low

Low High
VOLUME PER UNIT
Strategies for change
Decreasing unit costs

High
Capability
1 Invest in systems
and training
Develop 2
incremental Increasing
PROCESS capability Constrain process
VARIETY flexible definition
3 resources

Invest in 4
process
capability Commodity
Low

Low High
VOLUME PER UNIT
Start-up to starburst
Decreasing unit costs

High
Capability

Increasing
PROCESS 3 process
VARIETY 4 definition
2
1a

1 Commodity
Low

Low High
VOLUME PER UNIT
The market–operations gap
Decreasing unit costs

High

Market flexibility and

personalised solutions

Increasing
PROCESS Gap process
VARIETY definition

Operate efficiently and

consistently

Low

Low High
VOLUME PER UNIT
 Decreasing unit costs

High
Capability

3
Increasing
PROCESS ? process
3a 2
VARIETY definition

1a
1
Commodity
Low

Low VOLUME PER UNIT High

 Thank You!

Discussions:

• What examples can you give of capability and commodity operations?

What are the operations management challenges of each type?

• Undertake a service transaction analysis of a service operation,

identifying the critical points for management attention.

• Analyse the servicescape of your favourite restaurant/eating place.

What aspects encourage the ‘right’ behaviours in the customers and
employees? Are there any aspects of the servicescape that you would
change?
 Service People

By Agenda
Dr. Nripendra Singh • Pressures on Service Providers
• Managing Service Providers
Jaypee Business School,
Noida • Motivating Service Providers
• Case Studies
Pressures on service providers

Organisational pressures
• Nature of the task
• Service design, processes and resources
• Performance objectives and targets
• Reward and appraisal systems

Customer pressures
• Customer expectations
• Intensity of contact
• Mood and anxiety
• Customer competence
Effects of organisational and customer pressure

Organisational pressures
• Nature of the task
• Service design, processes and resources
• Performance objectives and targets
• Reward and appraisal systems
Potential outcomes
• Increased costs
Issues • Poor industrial
• Motivation relationships
• Role clarity and fit • Low morale
• Relationships • Ill health
• Risk • Psychological damage
• Stress • Learned helplessness
• Poor service
Customer pressures
• Customer expectations
• Intensity of contact
• Mood and anxiety
• Customer competence
Protecting providers from the pressures
Managing providers
• Providing inspirational
leadership
• Harnessing the power of
teams and teamwork across
the organisation
• Clarifying the roles of service
providers
• The appropriate use of
scripts
• Defining and enabling
appropriate levels of
employee discretion
• Establishing effective
communication to
employees
• Involving employees in
performance improvement
• Encouraging service
employees to ‘own’
processes and customers
Organisational pressures
• Nature of the task
• Service design, processes and
resources
• Performance objectives and targets
• Reward and appraisal systems
Potential results
• Inspired and involved
employees
• Responsive and
responsible employees
• Process and customer
ownership
• Employee commitment
and retention
• Enjoyable work
• Effective and efficient
delivery systems
• Business improvement
Customer pressures
• Customer expectations
• Intensity of contact
• Mood and anxiety
• Customer competence
Growth in membership
Number of cell
Adults in cell groups groups
200
Adults in cell groups
Number of cell groups
20
150

100
10

50

0 0
1995 1996 1997 1998 1999 2000 2001 2002 2003
2004
 Thank You!

Discussions:

• Provide an example of a ‘scripted’ response. Describe and discuss the

advantages in using this script.
• What are the advantages and disadvantages of using teamwork in
student assignments?
• Evaluate and assess your role as a customer in a supermarket,
internetbased travel agency, and university/college course.
• From your observation of managers in shops and restaurants, what
• behaviours assist their staff in dealing more effectively with the
pressures they experience, and what actions increase this pressure?
 Resource Utilisation

By Agenda
Dr. Nripendra Singh • Capacity Management
• Planning & Control
Jaypee Business School,
Noida • Bottlenecks and Queues
• Case Studies
Original flow
Proposal input
(25/hr)

Risk analysis –
actuary (15/hr)

Inform customer of
decision (30/hr)
Revised flow
Proposal input and
credit score (22/hr)

Needs analysis
Definite (50%)
yes/no
(50%) Risk analysis –
actuary (15/hr)

Inform customer of
decision (30/hr)
 600

Administration
time
500
Load Capacity
(minutes)
400

300

Time on phones
200

100

00.00 01.00 02.00 03.00 04.00 05.00 06.00 07.00 08.00 09.00 10.00 11.00 12.00
 Managing the Coping Zone

• Proactive customer management

• Build employee flexibility

• Communicate to staff and customers

• Understand the difference between ‘Must do’s’

and ‘Nice to do’s’

• Recruit ‘resilient’ staff for high-stress situations

 Beyond the Coping Zone!
• Short-term ‘Coping’ is usually
survivable – ‘Coping’ that
seems to have no hope of
ending is potentially disastrous
• ‘Coping’ provides a trade-off of
short-term survival against
longer-term success
• Many managers report that
‘Coping’ is now the norm – and
that they spend too much time
Beyond the ‘Coping Zone’
 Thank You!

Discussions:

• Select four service organisations and suggest how they might

measure capacity and the problems in so doing.
• What capacity strategies might be used by an insurance broker, an
internet retailer, and cruise ship company? Explain why they are
appropriate.
• Describe the last time you were in a queue. Apply the principles of
queuing to assess the waiting experience.
• What is meant by the coping zone? What are the implications for staff
and customers of a supermarket when the supermarket enters this
zone?
 Networks, Technology &
Information

By Agenda
Dr. Nripendra Singh •Transforming Service
• Physical and Virtual Networks
Jaypee Business School,
Noida • Integration
• Case Studies
Hub and spoke network
Ring network
Hierarchical network
Passenger numbers: Baltimore Providence market

20,000
Passengers carried per quarter

15,000

10,000

Total passengers
5,000
Southwest passengers

0
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
1996 1997 1998 1999 2000
Global network strategy
Potential opportunity benefits of Set in strategic
extending global reach of the business context

Market-seeking Resources-seeking Strategic asset-seeking Efficiency-seeking

motives motives motives motives

GLOBAL NETWORK STRATEGY

Role of
Cultural operations
Operations task in Location of Selection
Influences Transfer of locality
organisational operations of partners/
of different technology and
structure facilities subcontractors
localities configuration
of network

Monitor/review performance of operations

 Supplier Retailer

Service Logistics Customer

Design Manufacture Sales support
Component National Regional National
Networks manufacture store engineering distribution Website
in China network territories centre

Machines Call monitor

Technology CAD system CAM Diagnostic
PDAs equipment
system
Customer Service
Schedules Customer history Schedules Support
and
Information competitor Quality database Routes diagnostics
systems Call racking
information

Production Drivers Engineers

People Designers Sales staff Engineers Warehouse Support staff
staff
staff
Raw
materials Product in Spares Product
Materials Drawings Work-in- Spares
store
progress

Strong links Missing links Missing resource

Resource activity map for a domestic appliance retailer

 Thank You!

Discussions:

• Describe the network structure of two organisations of your choice

and discuss the differences between the two.
• Assess the physical and virtual networks of the university/college in
terms of its location, capacity, capability and flexibility.
• Select an e-service provider and assess its website and service.
• Select a major service provider in your locality, such as an airport or
supermarket. Explain the reasons for the location and assess its
capability.