GLOBALIZATION OF SERVICES

The Growth in Global Service Markets

Globalization refers to the free movement of goods, services, people, capital and technology across various countries in the world WTO ( World Trade Organization) GATT ( General Agreement on Tariffs and Trade)

Services: Rules for growth and investment

The General Agreement on Trade in Services has few elements: General obligations and disciplines
Total coverage Most-favoured-nation (MFN) treatment Commitments on market access and national treatment Transparency International payments and transfers Progressive liberalization

GATT Agreement on services

The agreement covers all internationally-traded services for example, banking, telecommunications, tourism, professional services, etc. It also defines four ways (or modes) of trading services: Services supplied from one country to another (e.g. international telephone calls, Electronic fund Transfer), officially known as crossborder supply Consumers or firms making use of a service in another country (e.g. tourism), officially consumption abroad A foreign company setting up subsidiaries or branches to provide services in another country (e.g. foreign banks setting up operations in a country), officially commercial presence Individuals travelling from their own country to supply services in another (e.g. fashion models or consultants), officially presence of natural persons

Factors Influencing Globalization

Change in social factors Changes in technology Changes in political and legal conditions Competition in the market Competitive advantage Regulations in home country Lack of demand in home country

International Marketing of Services

Service firms are increasingly investing overseas on their own account, as they seek to serve new clients and explore their own unique competitive advantage. Such advantage takes several forms:

1. Producer Service 2. Consumer Service 3. Outward Expansion: Chinese e-commerce company

Alibaba announced that it plans to bring its PayPalpayment platform Alipay to Taiwan during the first half of next year.

Consumer Services:
The range of services provided to consumers of a product by the company that produces, markets, or supports the product. Consumer services may include technical support, warranty registration, problem notifications, account management, mediati on with other vendors, or other service depending on the nature of the product purchased by the customer.

Producer services:
In the older economic order most large firms produced all their services (such as: advertising, maintenance, sanitation, business consulting, auditing, and engineering) "in house". Most large firms in the 1970s began to "unbundled" these services in an effort to become more economically efficient. Large firms today buy (contract out) these services from smaller highly specialize firms. These highly specialized firms sell what economist call producer services. something necessary for a persons survival

Overseas Market Entry Decisions

Exporting:
Construction, design, and engineering Banking and financial services Insurance services Legal and accounting services Computer and data services Teaching services
design, construct and equip a manufacturing/ business/ service facility and turn the project over to the purchaser when it is ready for operation for a remuneration. Ex. Real Estate ,website)

Turnkey projects: It is a contract under which a firm agrees to fully

Licensing Franchising

Continue
Joint ventures Strategic alliance( Lenovo and Asiainfo) Wholly owned subsidiaries Mergers and acquisitions

Piggyback: A low cost market entry strategy in which two or more

firms represent one anothers complementary (but non-competing) products in their respective markets. Ex. A restaurant partners with a hotel to offer a special weekend package with dinner and an overnight stay and they share the cost of a mailer.

Recent Trends
Off-shoring Service Social Changes (e.g., affluence, lack of time, desire for experiences) Manufacturers offer service Advances in IT (e.g., speed, digitization, wireless, Internet) Growth of chains and franchising Pressures to improve productivity and quality More strategic alliances Innovative hiring practices

Create relational databases about customer needs and behavior for insights Leverage employee capabilities and enhance mobility Centralize customer service-faster and more responsive Develop national/global delivery systems Create new, Internet-based business models

Principal Driving Force in Global Marketing of Services

Several factor driven and influence the globalization of firms: Types of globalization drivers: 1. Market drivers:
Common customer needs Global customers Convergence of lifestyles and tastes Organizations beginning to behave as global consumers Growth of global and regional channels Establishment of world brands

2. Competition Drivers:
High two-way trade / cross-border FDI Global competitors Increased ownership of corporations by foreign acquirers

3.Technology Drivers 4. Cost Drivers:

Continuing push for economies of scale Accelerating technological innovation Advances in transportation Emergence of newly industrialized countries with productive capability and low labor costs Increasing cost of product development relative to market life

5. Government Drivers:
Reduction of tariff barriers Reduction of non-tariff barriers Decline in role of governments as producers and consumers Privatization in previously state-dominated economies Shift to open market economies from closed communist systems in eastern Europe

Assessing Globalization
Presence in strategic markets Location of value adding activities Achieving desirable balance between globalization and customization Consistency in quality and pricing of services Responding to changes in environment

Challenges in the Global Market

1. Legal barriers
Discriminating laws Subsidies Restrictions on foreign companies entry Infringement of copyrights and trademarks

Challenges in the Global Market

2. Cultural barriers
Language Customs Values and attitudes Lifestyle

3. Financial Barriers
Changes in currency exchange rates Problem with logistics

Service Strategy
Elements of Global service strategy : 1. Defining global vs. Multi local strategies a. Global market participation b. Delivering global products c. Global location d. Global marketing e. Global competitive moves

Factors Influencing Success of A Global Firm

Select the right entry mode Select the right marketing research methods Customize the service offering Train the service personnel Select the right promotion strategy