Learning Objectives Examine the important role of services in international business. Understand why trade in services is more complex than trade in goods. Appreciate the heightened sensitivity required for international service success. Learn that stand-alone services are becoming more important to world trade. Examine the competitive advantage of firms in the service sector. 2
Differences Between Sales and Goods
“a good is an object, a device, a thing;” “a service is a deed, a performance, an effort.”
Links Between Services and Goods Services may complement goods; at other times, goods may complement services. 4
Stand-Alone Services Services Can Compete Against Goods Types of Offerings: Intangible
Communication services, reservations, car rentals, etc. Food and drink, cars, books, etc.
How Services Differ From Goods
Services are difficult to inventory. For services offerings, the time of production is close to the time of consumption. Services are more often intangible. Services are often custommade. Services often require new forms of distribution.
The Role of Services in the U.S. Since the Industrial Revolution, the United States has seen itself as a primary international competitor in:
The Production of Goods 7
The Role of Services in the U.S. In the past decades the U.S. economy has increasingly become a:
The Role of Global Services in the World Economy The rise of the service sector is a global phenomenon. Economies of developing countries generally first establish agricultural and manufacturing sectors before entering into the services sector. As more countries enter the sector, the global services business will become more competitive. 9
Global Transformations in the Services Sector
The rise in services trade is due to changes in the environment and in technology. 10
Global Transformations in the Services Sector Reduction of government regulation. Technological advancement.
Problems in Service Trade
New problems have emerged in the service sector together with the increase in the importance of service trade. 12
Problems in Service Trade Data Collection Problems. Data is often sketchy. Service transactions are often statistically invisible.
Global Regulations of Services. National and economic security issues result in barriers to entry. Additional problems in the performance of services abroad—tradition, regulation, etc.
Corporations and Services Trade Services and E-Commerce Easy access to global markets. Little-known firms can become known. Electronic business media occurs at different rates in different countries. 14
Corporations and Services Trade Typical International Services Banking and consulting services can become internationally competitive. Insurance services can be sold internationally. Communication services have excellent success in international operations. Institutions successfully offer international teaching services. Tourism is a major service export. 15
Starting to Offer Services Internationally Novices follow the path of the good, if the service is delivered in support of a good. New marketers search for similar market situations abroad if the service is independent from goods. 16
Strategic Indications Will the service be directed at people or things? Will the service act result in tangible or intangible actions?
Strategic Indications Services Aimed at People Directed at People’s Minds: Arts Religion Consulting
Directed at People’s Bodies: Healthcare Fitness Restaurants
Strategic Indications Services Aimed at Things Directed at physical possessions: Laundry Landscaping Refueling
Directed at intangible assets: Banking Research Investments
Strategic Indications Gaining Credibility Abroad Providing objective verification of their capabilities. Providing personal guarantees of performance. Cultivating a professional image.
The Role of Personnel in International Service Customer interface is intense. Proper provisions must be made for training of personnel. Major emphasis must be placed on appearance. The person delivering the service communicates the overall attitude/value of the service corporation. 21
Pricing and Financing in International Strategy Because services cannot be stored, there is greater responsiveness to demand fluctuations. Greater pricing flexibility must be maintained. The intangibility of services makes financing more difficult. 22