Globalization of Service
Tricon Global Restaurants, known for owning KFC, Pizza Hut, and Taco Bell, implements domestic and international expansion strategies by adapting to local tastes. Focused network accessibility and franchising concepts are essential for achieving growth and consistency in service delivery.
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Presentation Transcript
Globalization of Service Service Growth & Expansion Domestic & International Strategies
Tricon Global Restaurants Owns KFC, Pizza Hut, and Taco Bell Operate in more than 80 countries Open more than 1,000 stores overseas per year Believes business is local Adapt to local taste Teriyaki crispy stripe in Japan Gravy in northern England
Domestic Growth & Expansion Strategies
Focused service Service innovation begins At a single location With an initial service concept Fedex: hub and spoke network for overnight delivery Walmart: Save money, live better Success leads to increased demands Facility is expanded and personnel are added To win as many customers as possible To add peripheral services
Risks with a single service location Captive to the future economic growth of that area Competition move in Advantage Much simpler management and control Successful focused service Award-winning Chef Nationally recognized heart surgeon
Focused Network Readily accessible to customers is important to achieve growth Fast-food restaurants Retail banking Management must ensure consistency of service across all locations Service quality & costs
cookie-cutter concept of replicating service Franchising Facility construction Operating manuals Personnel training Managing network of service Communication and control Rationalized service concept to managers and staff Execute service consistently on a daily basis Nationally marketing efforts
Advantages Ability to reach mass market quickly Reduce the financial risk of localized economic downturns Risks Overexpansion Lost control The miles of franchise rows Homogenized the American landscape
Clustered service Service firm with large fix facilities Small colleges expanded into four years regional university USAA Automobile insurance for military officers Banking, mutual funds. Auto and homeowners insurance, Medical centers
Risks Potential loss of focus Neglect the core service Facility management becomes extremely complex Hotel serving tourist and business traveler Concentric diversification Synergistic logic around the core service Convenience stores Self-serve gasoline, microwave meals Economies of scope
Diversified Network Growth thru acquisition Multisite & multiservice Airlines Hotels, car rentals American airlines sold off peripheral service Japan Rails
Franchising Franchising Replicating a service geographically By attracting investors Who become independent owner Bound by contractual agreement
Nature of franchising Franchiser Guarantee a consistent service Standardized in design, operation, and price Right to dictate conditions Standard operating procedures must be followed Material must be purchased from approved suppliers Franchisee Own the business Assume responsibility of all normal operating activities
Benefits to the franchisee Management training McDonald s offer two weeks training at Hamburger University Franchisee become prepared to operate a business profitably McDonald s ensures all procedures will be followed Subsequent training Online or traveling consultants Brand name Gain immediate customer recognition Break-even is reached sooner
National advertising Impossible for small business to conduct Attract customers from outside the immediate geographical regions Acquisition of a proven business Entrepreneur face high rate of failure Franchiser has track record Selecting appropriate site Operating a reliable accounting system Delivery a service already accepted by the public
Economies of scale Benefit from centralized purchasing Material, equipment Issues for the franchiser To expand rapidly with minimal capital requirements Screening potential franchisee Necessary capital Competent to run a business
Franchisee autonomy Amount of freedom permitted in operation Uniform standard of quality Throughout the entire chain Franchiser specifications Day-to-day operations, price, menu items, Frequent inspections The right to purchase the outlet for noncompliance
Franchise contract Prevent misuse control and power of franchiser Specific obligations to franchisee Ambiguous obligation to franchiser Facilitate cooperative relationship Preserve competitive strength of the entire franchise Conflict resolution How should fees be established and profits distributed When should facilities be upgraded How are cost to be shared How far to saturate a single market
Globalization of Services Globalization is more than duplicating service overseas Federal express 1988 began international delivery First quarterly loss Face competitions from DHL, TNT Unprepared for government regulations Took 3 years to be permitted to fly Memphis to Tokyo directly No package weighing more than 70lbs allowed
Obsession with tight central control All shipping bills were printed in English Cut-off time for package pickup is 5pm Spain typically work until 8pm after a lengthy midday break Lack of supporting infrastructure McDonald s Moscow Teach local how to plant and harvest potatoes, tomato Most growth opportunities comes from overseas
Generic International Strategies Global integration Economies of scale (commodity) Opportunity to exploit certain assets (Google search) Competitive advantage globally Local responsiveness Customization Government control
Global strategy The world is one big market Doing business in a homogeneous way or integrated across countries Ikea Singapore airlines Citibank, global retail bank Do banking anywhere, anytime, anyway
Multidomestic strategy Professional service firm Law Consulting Overseas offices Autonomous units Serving the needs of local market
Transnational strategy Leveraging certain corporate assets R&D expertise Service delivery adapted to local needs Toy R us Formula store layout Centralized procurement Address local toys tastes
The nature of the borderless world Customers worldwide Aware of the best products and services Expect to purchase them with no concern over their national origin All firms compete in a interlinked world economy Five C for strategic planning
Customers People vote with their pocketbooks Price, quality, design, value, and personal appeal The availability of information Empowered customers Stimulated competition
Competition Nothing stays proprietary for long Rapid dispersion of the technology available to all firms Time & being the first move Critical to strategy Operating globally means operating with partners A single firm can not be on the cutting edge of all technology
Company Variable-cost vs. fixed-cost environment Service firms are fixed-cost activities Huge investments in facilities and equipment Airlines Increasing sales is more important than cost cutting Currency Becoming currency-neutral Fluctuating currency exchanges Hedging & options
Country Presence in all Triad regions North America, Europe, Asia Exposure offset Economy downturns in one region can be offset by others Neutralize competition Selling in competitor s domestic market
Planning transnational operations Internationalized the elements of strategic service vision Cultural transferability Labor market norms Host-government policy
Culture transferability Balance global standardization with local customization Muslim faith does not allow interest charges on loans Asian does not speak out for potential problems Labor market norms Power distance index Degree of equality between people in the society Individualism Degree of society reinforce individual or collective achievement
Masculinity Degree the society reinforce the traditional masculine work role model Uncertainty avoidance index The level of tolerance for uncertainty and ambiguity within the society Low: rule-oriented society High: accept changes, take more risks Long-term orientation Degree the society embrace long-term devotion to traditional, forward thinking values
Host-government policy Creative discrimination forms Banning the sales of insurance by foreign firms Preferential treatments to local shippers Restrictions on international flow of information Airlines landing rights
Multicountry expansion Franchising Cookie-cutter approach Service are routine Customer-contact operations Sensitive to local culture Hire and train locals to handle
Importing customers Multiservice single site strategy Prestigious college Medical center (Mayo Clinic) Disney world Customer-contact employee Foreigner language skills Cultural sensitivities Accommodation, logistics & transportation
Following your customers Follow corporate clients overseas Serve customers adequately wherever they go Weakness Ignore the vast local opportunities Competition is free to grow locally Straddle Might lost focus
Benefits Cost saving Costs Training Instill a cultural understanding Adverse employee morale Service offshoring A class of outsourcing Back-office operations overseas Customer-contact locally Dell Call center to India
Beating the clock Use time-zone shift to gain competitive advantages Able to provide 24-hours service despite the local work hours closed Time compression of the (software) development process Electronic means for 24/7 services
