1. Strategic Positioning
Chapter 2

2. 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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3. 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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4. 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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5. Capacity Strategies Capacity issues in services are:
More complex than in manufacturing
Timing may be important, for example if there are peaks in demand at different times of day
More critical than in manufacturing
Often no backorders can occur
Excess capacity may be perishable
An imbalance in supply and demand can result in lost sales or idle employees
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6. Capacity Strategies Provide: Ensure sufficient capacity at all times
High quality/high cost; greater amount of idle time for employees
Match: Change capacity as needed
Balance quality/cost; part-time workers
Influence: Alter demand patterns to fit firm capacity
Pricing, marketing and appointment systems
Control: Maximize capacity utilization
Compete on cost by driving idle time to zero
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7. Techniques for managing capacity
Work-shift scheduling
Increased customer participation
Adjustable (surge) capacity
Shared capacity
Partitioned demand
Price incentives for and promotion of off-peak demand
Development of complementary services
Yield management
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8. Retail Design Strategies
Store sizes have been increasing over the last decade
Supermarkets:
50K sq. ft. now vs. 20K in the 1980s
40,000 SKUs vs. 6,000 in the 1980s
WalMarts
200K sq. ft. vs. 70K in the 1980s
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9. Why larger stores? Marketing Motivation Operational Motivation
Increased revenue/sq. ft. due to a greater pull of customers
“One stop shopping” for dual income families
Grocery stores have banks, pharmacies, flowers, etc.
Operational Motivation
Fewer employees per customer are required for a given service quality.
Lower inventory carrying costs and distribution costs
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10. An Alternative: A Small Store Strategy
Managing stores as a network is critical
Blanket a given geographical area
Multiple locations reduce travel time for customers
Small stores reduce shopping times
Distribution costs are low because stores are close to one another
Labor can move from location to location
Flexible job descriptions reduce idle time
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11. Managing for Growth Multi-site Service Firm Life Cycle Entrepreneurial
Multi-site Rationalization
Growth
Maturity
Decline/ Regeneration
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12. Managing Growth – Skill Sets
Entrepreneurial
Multi-site rationalization
Growth
Maturity
Decline/ Regeneration
Charismatic leader
Local marketing and PR
Innovation and development of service strategy
Employees typically underpaid with little stability
Selection of dominant paradigm for marketing, operations and HR
Standardization or procedures
Operations and design are already set
Sell concept to consumer and managerial audiences
Wider scale advertising
Maintaining market position and awareness and keeping concept “fresh”
Maintaining standards and operating control
Keeping employees motivated
Revising service concept and implementing revisions over a large network
Requires charismatic leader
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13. 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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14. 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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15. 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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16. Franchising Agreements
Passive ownership
Franchisees are not actively involved in the operations of the franchise
Master franchise agreements
Allows an individual or corporate group other than the firm to award franchises
Fee structure
Average of $20,000 fee + 7% royalties
Can affect the ability to monitor free-riders or brand shirkers
Geographic protection for franchisees
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