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The services delivery is described best as a definite solution to a definite set of problems for a particular group of people at a set period in time. It is more complex than a product delivery, as no one service is the same as another, being composed of a mixture of product (tangibility) and customization (intangibility). The intangible component means that the marketing, sales and delivery processes are far more customer-focused than those of a product-based cycle. A services solution requires coordinated interaction between the selling company who provides the intangible component and the end customer, to ensure that the final deliverable completely satisfies each customer's individual requirements.
There are several discrete elements, unique to a services solution, that differentiate it from a product solution:
Intangibility
Inseparability of buyer and provider
Lack of inventory/ perishability
Sensitivity to time
Quality control
High degree of risk/ difficulty in experimentation
Customization requirements
Different distribution channels
Each of the above makes the services marketing/sales cycle more difficult to estimate and control, as they influence the planning process and the strategies for implementation of the plan, delivery of the service and post-implementation support. They also impact resource allocation, organizational focus and monitoring of progress, and they provide the catalysts that differentiate a successful services campaign from an unsuccessful one.
Finally, it is difficult to monitor and react to competitive activities, in terms of pricing and service differentiation, due to the above factors. Whilst a manufacturer has to simply 'look on the shelf' to determine the key marketing characteristics of other products, the services marketer has to resort to much more subversive and convoluted practices to obtain competitive information.
Specific Issues Relating to Export Marketing of Services
The exporting of services introduces extra dimensions of complexity. At a cursory level, the services export cycle appears to be not too dissimilar from that of a product. It typically commences when a company delivers a solution that satisfies a local niche opportunity, and in doing so, it gains recognition as having, or perceives that it has, expertise that can potentially be sold to overseas markets.
Although company size and management commitment to exporting are the two most important variables in both services and manufacturing exporting, there are many other factors that differentiate the two: these are best illustrated by using a commodity product marketing process as a contrast. An off-the-shelf product, especially one that is unique, likely to be easily accepted and therefore potentially in high demand, usually has a short ramp up cycle, has well-defined promotion channels and will have lower start-up and ongoing administration costs. It is a fairly straightforward exercise to set up country-specific distribution outlets, and once established, the marketing process becomes little more than an extension to the production chain. With services marketing, the sales cycle is 10-20 times greater, with cycles of 12 months or more the norm rather than the exception. In addition, product awareness must be achieved by direct representation, rather than by bulk media advertising and independent distribution outlets, and product/industry expertise (at least initially) must come from within the existing company infrastructure.
In addition to the tasks associated with the marketing of a commodity-style product, the export services marketer also has to consider:
The need to pre-qualify the customer base as well as identify the target market
The creation of country-specific "need to buy" strategies, sometimes on a client by client basis
Determination of the most cost-effective mechanism for supporting the pre-sales, sales and post sales activities
Estimation of the correct level of funding required to sustain an inevitably long sales cycle.
The uncertainty of the service offering therefore creates extra pressure on the service company's marketing department to produce detailed and accurate market research in order to reduce the risk of failure. The company may be further challenged by its inability to perform meaningful test marketing due to diversity of the service offering.
International services marketing is further complicated by foreign government interference, language barriers and cultural differences. The potential market is usually smaller in size and may be restricted to a vertical industry sector, which tends to narrow the available opportunities in any one country, providing the temptation for the exporter to simultaneously expand their activities into multiple countries. However, supporting multiple countries increases sales and support costs and makes it difficult for the company's executive management to maintain focus. This, and the fact that it is easier to export manufactured product than services, may be the primary reasons why service companies generally focus on fewer countries than manufacturing companies.
External representation is also difficult, as an overseas representative must not only understand its role in delivering the service component of the solution, it must also be able to relate to the culture and philosophy of the originating company. There are many who are of the opinion that the main reason that exporting companies fail is due to incompatibility of business cultures in overseas alliances. A recent study of computer software exporters found that only a few companies surveyed had established overseas subsidiaries, joint ventures and partnerships. Those that had set up overseas operations reported that they were mainly sales and marketing outlets, rather than implementation and support infrastructures. The study presented three main reasons:
A possible alternative is to isolate the operational non-strategic components of the service, for example, project management, equipment selection and end user training, and outsource this to a respected in-country systems integrator. This means that the company's intellectual property is retained and the sales cycle remains under its full control. Many companies adopt this strategy, and use several integrators, sometimes within the same country, selecting them on a 'horses for courses' basis.
The services delivery process also creates some unique problems that tend to impact service quality and delivery timeframes, including:
Scarcity of internal technical resources with the willingness to travel or be relocated to a foreign country for long periods
Difficulty in customizing the service to meet another country's legal, financial and cultural requirements
Difficulty in establishing and maintaining overseas support infrastructures.
Many exporting services companies experience severe cash flow problems caused mainly by underestimating the cost and length of sales cycles and overestimating revenue and profits. The end result of these miscalculations is manifested by a failure to establish a profitable foothold, and many are forced by cash and/or funding shortages to curtail their activities, or abandon them completely. Those that have experienced some success have encountered post-sale problems, for example, project overruns due to end-user inexperience, unexpected costs and conflict in delivery versus expectations due to cultural differences in interpretation.
Summary and Recommendations
Despite all of these issues and problems, the services sector is generally recognized as the fastest growing in the world market, primarily due to the shift in the manufacturing industry towards low-wage economy and the promise of larger profit margins. Curiously, there has been very little research performed in this area, the majority of studies concentrating upon the manufacturing sector. The research that has been performed is at best sporadic and lacking in specific detail. This is partly due to the complexity of the services market, and partly due to the wide variation in the intangible component of the services delivery. However, this lack of empirical information has not deterred the world's multinationals, as a recent Gartner Group report estimated that over half of them would be involved in exporting services by 2001.
It can be concluded from the above that there is no established blueprint for the development of a successful services export campaign. Indeed, the diversity of the services marketplace dictates that the services marketing and sales campaign will vary markedly from one service category to another. However, here are some generic guidelines that can be followed by an intending exporter that will help to alleviate the inevitable stress on company resources when expanding into overseas markets. None of these recommendations could be described as rocket science, but if followed will dramatically improve a company's chances of achieving its export objectives.
The company managing director and senior executive must be committed to the export project. This involvement should not be just limited to management focus: it also includes regular overseas visits to prospects and potential partners and senior government officials in the target countries.
Establish a discrete export marketing department with dedicated technical personnel to perform sales support. The technical resource issue must be resolved before commencement, as the technical resources needed most are more than likely to be those that are also in strong demand to support the domestic market. Failure to separate these resources from the domestic market will result in the perennial problem of juggling scarce resources between sales demands and existing project schedules.
Research the target markets and the competition. The difficulty of achieving this with any degree of confidence has already been documented above; however, the internet, a local partner with complementary expertise in the same field or a reputable organization (Dun & Bradstreet, a government trade authority) are all good sources of information.
Concentrate on a few well-researched markets, rather than several ill-defined markets. The latter will have the effect of stretching both personnel and financial resources, resulting in a lack of objectivity and direction.
Concentrate on target markets that have characteristics that fit the company services profile. Use the standard '70/30 rule' to evaluate the suitability of a prospect: if the requirement is satisfied by around 70% of the base service offering, then the prospect is compatible and the risk of delivery is considerably mitigated.
Be 'leading edge' not 'bleeding edge'. Don't introduce new technology into a market that has yet to accept it.
Choose a strategic approach to enter a selected region. Examples are: acquisition of a local company or a non-exclusive teaming alliance with a company of similar size, either one preferably possessing compatible resources and track record in the same industry sector; or, an alliance with a major corporation/integrator who is seeking to fill a product/skills gap in order to provide a total market solution.
Implementation is important, and should be resolved before commencing the export campaign. Local representation, although difficult, is mandatory for services marketing and requires more than just a sales presence in the region. The old story of 'we work while you sleep' does not carry any weight these days and clients are demanding evidence of strong local support teams. In a services context, this is considered to be more an indication of long-term commitment to the region rather than the need for a client to speak to someone in the same time zone.
Establish a market awareness campaign that best suits the service within the export region. For example, television advertising is ideal for the airline industry because it reached its target market, but is certainly not appropriate for a telecommunications network management solution. Advertising methods that work for industry sector-specific boutique solutions include articles in trade periodicals, brochure mail-outs, direct marketing, attendance at industry trade fairs and word-of-mouth.
Agree with Mr. Wasi Rahman perception. Thank you
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With an understanding of your business' internal strengths and weaknesses and the external opportunities and threats, you can develop a strategy that plays to your own strengths and matches them to the emerging opportunities. You can also identify your weaknesses and try to minimise them.
The next step is to draw up a detailed marketing plan that sets out the specific actions to put that strategy into practice.
Questions to ask when developing your strategy
Before looking at new markets, think about how you can get the most out of your existing customer base - it's usually more economical and quicker than finding new customers.
Consider whether you can sell more to your existing customers or look at ways of improving the retention of key customers.
Focus on the market
Your marketing strategy document should:
Don't forget the follow-up
Pitfalls to avoid
An effective marketing strategy will help you to define the overall direction and goals for your marketing. Your strategy should articulate how you are going to deliver your products or services in ways that will satisfy your customers. Once you have defined your customers or target market, you need to start developing and implementing tactics to reach them. The marketing mix will make up the tactical elements you will use to carry out your strategy and reach your target market.
Marketing mix tacticsIdentify the tactical action steps which will turn your strategy into a reality in your marketing plan, using the guide below. The seven tactics below are sometimes referred to as the 7Ps because they all start with the letter p.
What product or services are you going to offer? Discuss the branding, the packaging (where applicable), and ongoing product or development. You should consider the features and benefits you offer, your unique selling points (What makes your product/service different from everyone else's) and what potential spin-off products of services might be.
Price is a critical part of your marketing mix. Choosing the right price for your products or services will help you to maximise profits and also build strong relationships with your customers. By pricing effectively you will also avoid the serious financial consequences that can occur if you price too low (not enough profit) or too high (not enough sales).
Whether it's a retail store, online shop or on social media, 'place' refers to the channels and locations for distributing your product, related information and support services. This is how you will position your product in the marketplace, it's the location where a product can be purchased. Often referred to as the distribution channel, this can include any physical store (e.g supermarket) as well as virtual stores (e.g eBay) online.
Being in the right location can be a deciding factor in whether a customer buys from you or not. To find out where your ideal customer is buying from it's worth doing some market research.
How do you promote and market your business now (or intend to)? Regardless of how good your business is, if you don’t promote it and tell people you exist, it’s unlikely you will make many sales. Promotion is about attracting the right people to use and reuse your business. There are a number of techniques to use and they can be combined in various ways to create the most cost effective strategy for your needs. This can include online, branding, public relations and advertising.
If you have employees in your business, they can influence the marketing of your products and services. Knowledgeable and friendly staff can contribute to creating satisfied customers, and can provide the unique selling experience that an organisation is often seeking. If an outstanding team provides a competitive advantage, then the quality of recruitment and training becomes essential to achieving your marketing objectives. Make sure you have processes and training in place to get the most out of your team.
Process represents the buying experience the customer gets when they buy your product or service. For example, the way a fine bottle of wine is presented and served in a restaurant, the reaction of a business to a complaint or the speed of delivery in a fast food outlet.A poor process can undermine the other elements of the marketing mix. Budget airlines, for example, may offer very competitive headline prices, but if the final price is inflated by additional charges such as baggage charges and administrative fees, customers may begin to feel they have been taken advantage of.
Try to document your key processes and procedures so your staff and suppliers know what to aim for.
This should include:
The physical environment where your products or services are sold and delivered can have a significant impact on how your customers' experience your business. The physical environment can be the quality of the furnishings in your consulting rooms, the design of your reception area or website. Creating a positive physical environment doesn’t have to be costly – a vase full of fresh flowers or a creative window display can make a big difference.
An organization's strategy combines all of its marketing goals into one comprehensive plan. A good marketing strategy should be drawn from market research and focus on the right product mix in order to achieve the maximum profit potential and sustain the business.
Define your marketing strategy
An effective marketing strategy will help you to define the overall direction and goals for your marketing. Your strategy should articulate how you are going to deliver your products or services in ways that will satisfy your customers. Once you have defined your customers or target market, you need to start developing and implementing tactics to reach them. The marketing mix will make up the tactical elements you will use to carry out your strategy and reach your target market.
Marketing mix tactics
Identify the tactical action steps which will turn your strategy into a reality in your marketing plan, using the guide below. The seven tactics below are sometimes referred to as the 7Ps because they all start with the letter p.
What product or services are you going to offer? Discuss the branding, the packaging (where applicable), and ongoing product or development. You should consider the features and benefits you offer, your unique selling points (What makes your product/service different from everyone else's) and what potential spin-off products of services might be.
Price is a critical part of your marketing mix. Choosing the right price for your products or services will help you to maximise profits and also build strong relationships with your customers. By pricing effectively you will also avoid the serious financial consequences that can occur if you price too low (not enough profit) or too high (not enough sales).
Whether it's a retail store, online shop or on social media, 'place' refers to the channels and locations for distributing your product, related information and support services. This is how you will position your product in the marketplace, it's the location where a product can be purchased. Often referred to as the distribution channel, this can include any physical store (e.g supermarket) as well as virtual stores (e.g eBay) online.
Being in the right location can be a deciding factor in whether a customer buys from you or not. To find out where your ideal customer is buying from it's worth doing some market research.
How do you promote and market your business now (or intend to)? Regardless of how good your business is, if you don’t promote it and tell people you exist, it’s unlikely you will make many sales. Promotion is about attracting the right people to use and reuse your business. There are a number of techniques to use and they can be combined in various ways to create the most cost effective strategy for your needs. This can include online, branding, public relations and advertising.
If you have employees in your business, they can influence the marketing of your products and services. Knowledgeable and friendly staff can contribute to creating satisfied customers, and can provide the unique selling experience that an organisation is often seeking. If an outstanding team provides a competitive advantage, then the quality of recruitment and training becomes essential to achieving your marketing objectives. Make sure you have processes and training in place to get the most out of your team.
Process represents the buying experience the customer gets when they buy your product or service. For example, the way a fine bottle of wine is presented and served in a restaurant, the reaction of a business to a complaint or the speed of delivery in a fast food outlet.A poor process can undermine the other elements of the marketing mix. Budget airlines, for example, may offer very competitive headline prices, but if the final price is inflated by additional charges such as baggage charges and administrative fees, customers may begin to feel they have been taken advantage of.
Try to document your key processes and procedures so your staff and suppliers know what to aim for.
This should include:
The physical environment where your products or services are sold and delivered can have a significant impact on how your customers' experience your business. The physical environment can be the quality of the furnishings in your consulting rooms, the design of your reception area or website. Creating a positive physical environment doesn’t have to be costly – a vase full of fresh flowers or a creative window display can make a big difference.
issues such as culture, language and local requirements were quickly brought up as potential arguments to prove the case that "globalization" would be impossible, or at least extremely difficult, to implement. However, after careful and objective consideration, this has not been the case.
Although all those arguments may have had some merit from certain perspectives and should not be totally ignored, it is too often that they are used primarily as excuses, for the wrong reasons, in a veiled effort to protect local business interests and prevent any possibility of otherwise avoidable power struggles between local and global management. For these reasons, we strongly suggest to our clients that they step back and allow us to help them take an "unbiased look" at all of the key issues.
The services industry is inevitably moving toward globalization It is inevitable that globalization will become the norm in the services industry. Globalization is a business trend that has been going on for quite some time now, first evidenced by a growing number of businesses that have historically operated in more than one country who have since "evolved" their business practices and, in many cases, their business model to embrace a global marketplace. The continuing advances in information and communication technology (ICT), and the integration between the two principal components, will lead to even faster market evolution because they will be responsible for opening new and expanding possibilities for services businesses to improve their service and support operations.
For example, as a result of this trend, we have seen a growing customer demand for global service agreements that result in uniformity in the delivery of service to customers all around the world. In many cases, the unique local or regional service and support needs are rapidly disappearing for many customers who no longer wish to deal with local organizations anymore but, instead, are looking for consistency in global service and support performance, as well as (relative) uniformity in pricing across regional territories based on single contract negotiation. Whether providers in the services like it or not, one thing has become increasingly clear - services vendors now must be able to define their value propositions on a global basis if they want to keep these customers. However, there are many key functions that will need to be consolidated into a global organization (Figure 1).
William K. Pollock, President of Strategies For GrowthSM, and a long-time consulting partner to Hands-on Management Consultants, Inc., has stated that, "Customer requirements for service and support will never be the same from one country to another, any more than they will be the same from one customer to another. However, one thing remains very clear - the requirements for service are becoming increasingly standardized, even on a global basis." We too have seen evidence that a growing number of businesses are going global each year in terms of sales, marketing and services capabilities, supported not only by the proliferation of new Internet-based tools and multinational strategic partnering, but also by the increasing demand for global services and support as evidenced by the market as a whole.
Another factor supporting the movement toward globalization is the ability to improve internal efficiency. In a typical decentralized organization, many functions are duplicated and performed independent from each other, which leads to increased communication efforts and differing ways of operating. We have seen organizations where product support documentation was developed by at least three different regional organizations, in some cases, providing conflicting information. For these organizations, operating on a more global basis would serve to both improve efficiency dramatically and, at the same time, provide a higher level of consistency in the way in which certain activities are performed. Through improved information and communication technology, new opportunities are also being created that allow services organizations to perform certain business functions more efficiently at a global level, while maintaining local control over their individual market segments.
A third factor supporting the case for globalization is the ability to reduce costs while maintaining or improving service level. The biggest area of opportunity involves the logistics operations where local policies have historically resulted in high investments in inventory, especially for slow moving items. Based on what we have seen in the industry, it makes sense to elevate certain of these functions to a global level in an effort to:
The details of each of these functions obviously will vary by company, but the basic functions do exist in virtually all of the companies in the services sector.
There are many functions that may be offered on a global basis The best way to determine which functions can be performed on a global basis is to evaluate them from both an efficiency and consistency point of view. However, this does not mean that all tasks must be performed at global level. Dependent on the individual situation, certain tasks may still be outsourced, or executed at the regional level. A good example is training, where the training programs and material should be consistent all around the world, although the courses can be given at regional or local training centers to reduce travel cost. Still, according to Pollock, "there will be increasing pressure on services providers to ramp up to their customers' increasing global needs by offering a full range of global service and support solutions". Among our client base, we have seen that happening already.
Among the principal functions that may be offered on a global basis are:
Business Development The Service and Support function is critical for all businesses and has to be an integral part of the overall business strategy. For this reason, it is important to be actively involved in the planning activities that result in the development of a Service and Support Business Development Plan that addresses:
This business function is most critical at the global level because it ties everything together and establishes a framework for setting the goals and objectives for the other parts of the organization.
Product Management The Product Management function is also critical at the global level. Historically this function has been highly technology-oriented, and tied very closely both to the business' development and manufacturing environment as well as its regional and local operations. With the implementation of global systems, this function can now be most efficiently managed at the global level. The function includes tasks such as:
As stated before, the information and communications systems presently available allow for a faster and more reliable information flow to be managed at a central point, thereby requiring the need for only minimal additional investments in research and communications tools to support a global operation.
Logistics The Logistics function is probably the biggest opportunity from a cost reduction point of view. Historically each segment of the organization was responsible for its own planning and execution, which generally led to the implementation of multiple independent logistics systems requiring additional safety stock and a huge risk for obsolescence. Based on our consulting experiences, and supported by information from many of our colleagues, creating a Global Logistics System, supported by the right automation systems, commonly reduces the inventory requirement by 20% - 30% without jeopardizing the customer service levels. At the same time, the risk for obsolescence is reduced which also creates additional cash for a company because of lower reserves in the books. Dependent on the situation, most of the specific operational aspects of the logistics function may be outsourced to logistics service providers, which ultimately changes the focus of this function from one of execution to basically managing the function. At a global level, the Logistics function should include:
The benefits of a global operation are obvious through the elimination of safety stock at all levels, automatic replenishment based on planning and forecasting, alliances with global parts and services vendors, etc.
Training Training needs to be consistent on a global basis. However, the development of good training programs and tools requires specific knowledge besides product knowledge. For this reason, it is most efficient to develop training programs at a global level, which will allow for specialization where required, and will improve the quality of the individual courses and material. This would be valid for:
The new developments in training techniques via automated systems and the Internet is just an extra motivation to centralize this function at a global level.
Regional and local functions must also be carefully integrated Because of key factors such as cultural differences, language barriers and local presence, certain functions may still be best performed on a regional or local level. Although the trend is typically more toward the centralization of certain functions at a regional level (e.g., Pan-European, ASEAN) some cultures still require a local presence to do business. The challenge is to determine which front-line functions are absolutely necessary at the local level, and which can be combined at a higher geographic level. Principal regional and/or local functions may include:
Sales Although some customers will do business on a global basis, the majority of Sales will still occur at the local level, dependent on the culture of the region or country. Some markets might even have local requirements that point to a local sales function. However, all local sales functions supporting the business' service and support products should be in line with the global programs.
Field Service The Field Service function should also be managed on a regional or local level. The principal reasons are that labor restrictions and language barriers are still important issues in many countries. The challenge is to determine what the appropriate service level should be from a management and support perspective (i.e., second/third line support). In most situations a hybrid model may be developed where first-line support is provided at the local level, while second- and third-line support are concentrated at the regional or global level. Dependent on the specific type of business, the availability of new technology and expanding Internet capabilities may offer opportunities to increase operational efficiency in an environment where the location of the actual support person becomes less important.
Customer Support The Customer Support function is a front-line function that is very dependent on the regional and local situation. Similar to the field service function, the level of centralization will be dependent on the local situation and culture. It remains important, however, to link all of these functions together via centralized automation systems and rolling out the appropriate communication systems to allow for local optimization.
How does your organization get there? Looking at each of these business functions and determining which can more effectively and efficiently performed at a global level is easy - you simply take a step back and apply some common sense, and the conclusion is almost the same for every business.
However, in most cases, managers have to deal with an existing organization that has historically grown to where it is now on a non-global basis, and the change to a global environment is likely to greatly impact both the organizational structure, and all of the people in the organization. In addition to these more tangible effects, there will also usually be many underlying issues that have to do with other, harder-to-define issues, such as emotional and political factors, changing roles and responsibilities, new reporting structures, etc. To address these issues, a careful approach will be necessary, and it might take some time.
Issues such as culture, language and local requirements were quickly brought up as potential arguments to prove the case that "globalization" would be impossible, or at least extremely difficult, to implement. However, after careful and objective consideration, this has not been the case.
Although all those arguments may have had some merit from certain perspectives and should not be totally ignored, it is too often that they are used primarily as excuses, for the wrong reasons, in a veiled effort to protect local business interests and prevent any possibility of otherwise avoidable power struggles between local and global management. For these reasons, we strongly suggest to our clients that they step back and allow us to help them take an "unbiased look" at all of the key issues.
The services industry is inevitably moving toward globalization It is inevitable that globalization will become the norm in the services industry. Globalization is a business trend that has been going on for quite some time now, first evidenced by a growing number of businesses that have historically operated in more than one country who have since "evolved" their business practices and, in many cases, their business model to embrace a global marketplace. The continuing advances in information and communication technology (ICT), and the integration between the two principal components, will lead to even faster market evolution because they will be responsible for opening new and expanding possibilities for services businesses to improve their service and support operations.
For example, as a result of this trend, we have seen a growing customer demand for global service agreements that result in uniformity in the delivery of service to customers all around the world. In many cases, the unique local or regional service and support needs are rapidly disappearing for many customers who no longer wish to deal with local organizations anymore but, instead, are looking for consistency in global service and support performance, as well as (relative) uniformity in pricing across regional territories based on single contract negotiation. Whether providers in the services like it or not, one thing has become increasingly clear - services vendors now must be able to define their value propositions on a global basis if they want to keep these customers. However, there are many key functions that will need to be consolidated into a global organization (Figure 1).
William K. Pollock, President of Strategies For GrowthSM, and a long-time consulting partner to Hands-on Management Consultants, Inc., has stated that, "Customer requirements for service and support will never be the same from one country to another, any more than they will be the same from one customer to another. However, one thing remains very clear - the requirements for service are becoming increasingly standardized, even on a global basis." We too have seen evidence that a growing number of businesses are going global each year in terms of sales, marketing and services capabilities, supported not only by the proliferation of new Internet-based tools and multinational strategic partnering, but also by the increasing demand for global services and support as evidenced by the market as a whole.
Another factor supporting the movement toward globalization is the ability to improve internal efficiency. In a typical decentralized organization, many functions are duplicated and performed independent from each other, which leads to increased communication efforts and differing ways of operating. We have seen organizations where product support documentation was developed by at least three different regional organizations, in some cases, providing conflicting information. For these organizations, operating on a more global basis would serve to both improve efficiency dramatically and, at the same time, provide a higher level of consistency in the way in which certain activities are performed. Through improved information and communication technology, new opportunities are also being created that allow services organizations to perform certain business functions more efficiently at a global level, while maintaining local control over their individual market segments.
A third factor supporting the case for globalization is the ability to reduce costs while maintaining or improving service level. The biggest area of opportunity involves the logistics operations where local policies have historically resulted in high investments in inventory, especially for slow moving items. Based on what we have seen in the industry, it makes sense to elevate certain of these functions to a global level in an effort to:
The details of each of these functions obviously will vary by company, but the basic functions do exist in virtually all of the companies in the services sector.
There are many functions that may be offered on a global basis The best way to determine which functions can be performed on a global basis is to evaluate them from both an efficiency and consistency point of view. However, this does not mean that all tasks must be performed at global level. Dependent on the individual situation, certain tasks may still be outsourced, or executed at the regional level. A good example is training, where the training programs and material should be consistent all around the world, although the courses can be given at regional or local training centers to reduce travel cost. Still, according to Pollock, "there will be increasing pressure on services providers to ramp up to their customers' increasing global needs by offering a full range of global service and support solutions". Among our client base, we have seen that happening already.
Among the principal functions that may be offered on a global basis are:
Business Development The Service and Support function is critical for all businesses and has to be an integral part of the overall business strategy. For this reason, it is important to be actively involved in the planning activities that result in the development of a Service and Support Business Development Plan that addresses:
This business function is most critical at the global level because it ties everything together and establishes a framework for setting the goals and objectives for the other parts of the organization.
Product Management The Product Management function is also critical at the global level. Historically this function has been highly technology-oriented, and tied very closely both to the business' development and manufacturing environment as well as its regional and local operations. With the implementation of global systems, this function can now be most efficiently managed at the global level. The function includes tasks such as:
As stated before, the information and communications systems presently available allow for a faster and more reliable information flow to be managed at a central point, thereby requiring the need for only minimal additional investments in research and communications tools to support a global operation.
Logistics The Logistics function is probably the biggest opportunity from a cost reduction point of view. Historically each segment of the organization was responsible for its own planning and execution, which generally led to the implementation of multiple independent logistics systems requiring additional safety stock and a huge risk for obsolescence. Based on our consulting experiences, and supported by information from many of our colleagues, creating a Global Logistics System, supported by the right automation systems, commonly reduces the inventory requirement by 20% - 30% without jeopardizing the customer service levels. At the same time, the risk for obsolescence is reduced which also creates additional cash for a company because of lower reserves in the books. Dependent on the situation, most of the specific operational aspects of the logistics function may be outsourced to logistics service providers, which ultimately changes the focus of this function from one of execution to basically managing the function. At a global level, the Logistics function should include:
The benefits of a global operation are obvious through the elimination of safety stock at all levels, automatic replenishment based on planning and forecasting, alliances with global parts and services vendors, etc.
Training Training needs to be consistent on a global basis. However, the development of good training programs and tools requires specific knowledge besides product knowledge. For this reason, it is most efficient to develop training programs at a global level, which will allow for specialization where required, and will improve the quality of the individual courses and material. This would be valid for:
The new developments in training techniques via automated systems and the Internet is just an extra motivation to centralize this function at a global level.
Regional and local functions must also be carefully integrated Because of key factors such as cultural differences, language barriers and local presence, certain functions may still be best performed on a regional or local level. Although the trend is typically more toward the centralization of certain functions at a regional level (e.g., Pan-European, ASEAN) some cultures still require a local presence to do business. The challenge is to determine which front-line functions are absolutely necessary at the local level, and which can be combined at a higher geographic level. Principal regional and/or local functions may include:
Sales Although some customers will do business on a global basis, the majority of Sales will still occur at the local level, dependent on the culture of the region or country. Some markets might even have local requirements that point to a local sales function. However, all local sales functions supporting the business' service and support products should be in line with the global programs.
Field Service The Field Service function should also be managed on a regional or local level. The principal reasons are that labor restrictions and language barriers are still important issues in many countries. The challenge is to determine what the appropriate service level should be from a management and support perspective (i.e., second/third line support). In most situations a hybrid model may be developed where first-line support is provided at the local level, while second- and third-line support are concentrated at the regional or global level. Dependent on the specific type of business, the availability of new technology and expanding Internet capabilities may offer opportunities to increase operational efficiency in an environment where the location of the actual support person becomes less important.
Customer Support The Customer Support function is a front-line function that is very dependent on the regional and local situation. Similar to the field service function, the level of centralization will be dependent on the local situation and culture. It remains important, however, to link all of these functions together via centralized automation systems and rolling out the appropriate communication systems to allow for local optimization.
How does your organization get there? Looking at each of these business functions and determining which can more effectively and efficiently performed at a global level is easy - you simply take a step back and apply some common sense, and the conclusion is almost the same for every business.
However, in most cases, managers have to deal with an existing organization that has historically grown to where it is now on a non-global basis, and the change to a global environment is likely to greatly impact both the organizational structure, and all of the people in the organization. In addition to these more tangible effects, there will also usually be many underlying issues that have to do with other, harder-to-define issues, such as emotional and political factors, changing roles and responsibilities, new reporting structures, etc. To address these issues, a careful approach will be necessary, and it might take some time.
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