the internationalization of services

8/11/2019 The Internationalization of Services

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The internationalization of services: trends, obstacles and

issues

Abstract

The international market for services grew to $1.2 trillion in 1995 and has been growingat double-digit rates. The US !ossesses the lion"s share of the world"s services e#!ortsand stands to gain significantl from lower barriers to trade in services. %owever& des!itethe significant !rogress alread made& numerous barriers remain and man countries havenot 'oined the multilateral negotiations for eliminating or lowering e#isting barriers. Thisstud e#amines the histor of market access and trends& the obstacles to the internationalmarketing of services& and ke issues including classification methods and economic&regulator& and cultural im!ediments& and offers directions for future research.

The US has b far the largest net services trade sur!lus among ke industrial nations. (tsservices sectors reali)ed 'ust over $1** billion in trade sur!lus in 199+& com!ared to

about $,* billion in 199 Foreign Trade Outlook& 199/0. %owever& erman and a!ando not benefit from the same global com!etitiveness as the US in the services sectorsand& as a result& !roduce significant annual services trade deficits a!!ro#imatel $39billion and $5* billion in 199& res!ectivel0. This !oor showing is 4uite sur!rising giventhese nations" com!etitive strength and world-class !erformance in merchandise trade.Thus& from an international com!etitive strength and strateg view!oint& the US en'osan e#cellent !osition in global trade in services.

ccording to the orld Trade 6rgani)ation T60& the value of global trade in serviceswas estimated at $1.2 trillion in 1995 which constituted about 25 !ercent of globalmerchandise trade. The value of global trade in services has been growing at double-digit

rates and this trend is e#!ected to continue. 7or e#am!le& the volume of services tradegrew b 1 !ercent in 1995 over the !revious ear The Economist& 199+0. The servicesector has accounted for the highest !ortion of total economic activit in %ong 8ong& theUS& and 7rance since the earl 199*s. (n general& the shift towards a service-basedeconom in ke trading countries has been evident since 19+*. 6nl three countries i.e.hina& 8orea and Singa!ore0 !roduced a larger !ro!ortion of their :;s from themanufacturing sector in 1992 than in 19+* arket trends

The !ur!ose of this stud is to e#amine market trends and obstacles to theinternationali)ation of services and to offer !ros!ects for future develo!ment ininternational service marketing. (n the sections that follow& a brief histor of theinternational services trade and the obstacles to the international marketing of services are!resented. ?e#t& the issue of global com!etitiveness in services marketing is discussed.7inall& several im!ortant issues about international marketing of services and futureresearch directions are highlighted.


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Market access: a brief history

(n terms of absolute volume& the US is b far the largest e#!orter of services. (ts totalservices e#!orts were $2++ billion in 199+& re!resenting a growth rate of /.5 !ercent over199, Foreign Trade Outlook& 199/0. This dominant !osition was the main reason for the

leadershi! role assumed b the US in negotiating the Urugua =ound. (n Se!tember19/,& after the agenda for the ;uta del @ste& Urugua =ound of TT had alread beendrawn& the US took a hard-line !osition that services& foreign direct investment andintellectual !ro!ert restrictions had to be added to the agenda. The US ob'ective was tobring services trade under the same rules and governing bod as merchandise trade.

The US demand met with ob'ections from man develo!ing nations& notabl


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Obstacles to the international marketing of services


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and knowledge& which in turn enhance the com!etitive !osition of the firm. Cikewise& theca!abilities of a firm which set it a!art from the com!etition are based on intangiblebusiness !rocesses rather than ca!ital e4ui!ment. 7inall& the limited amount ofinformation available about international trade in services has assisted in themstification of this im!ortant and ra!idl growing line of business. Unlike merchandise

trade& the true volume of international services is not known. s a result& the managementof service industries from a !ublic !olic and international trade and marketing!ers!ectives remains com!le# and not well understood. ithout this basic information&governments are handica!!ed in their deliberations& !lanning and negotiations to im!rovethe global infrastructure for the marketing of services.

The historic em!hasis on merchandise trade along with the intangible nature of servicesare !robabl res!onsible for the lack of a reliable re!orting structure. overnments haveonl embarked on develo!ing classification and statistical data-gathering sstems tofacilitate services trade in the !ast decade. @ven in the absence of the variet of serviceswhich are marketed internationall toda& the inattention to statistics regarding services is

sur!rising. Services have been im!ortant com!onents of merchandise trade. 7or e#am!le&the merchandise cannot be distributed without the assistance of facilitating intermediariese.g. freight forwarders0& trans!ortation modes and channel intermediaries. This lack of&or limited& information has made it difficult for !ublic !olic officials to accommodateand !romote the marketing of services internationall in the wa the have su!!ortedmerchandise trade. Thus& man service firms with the !otential to e#!ort their servicesinternationall have remained strictl domestic. 7or e#am!le& three-4uarters ofengineering consulting firms surveed in one stud indicated that the are not engaged ine#!orting insted and ;atterson& 199/0.

Global competitiveness in services marketing

:es!ite the increasing de!endence of the US econom on the services sector and itssignificant service trade sur!lus& service e#!orts are relativel more im!ortant to someother nations. s shown inTable (& service e#!orts as a !ercentage of :; is nearl 23!ercent for The ?etherlands& making it the most active service e#!orting countr inrelative terms. ustria is the second most active e#!orter of services and 1+ !ercent of its:; consists of service e#!orts. ll other leading e#!orters of services e#!ort less than +!ercent of their :;. Service e#!ort activities in erman and a!an& in contrast&constitute about 3 !ercent and 2 !ercent of their :;s& res!ectivel. mong leadingindustrial nations& erman and a!an !roduce the largest services trade deficits.

hen service e#!orts are measured as a !ro!ortion of all e#!orts& both S!ain and The?etherlands rank ver high. bout , !ercent and 5 !ercent& res!ectivel& of thesenations" e#!orts consist of services. (n contrast& about 3/ !ercent of e#!orts from the USand 7rance consist of services. @#!orts of services from erman and a!an are thelowest among the leading nations. 6n aper capitabasis& The ?etherlands is the singlelargest e#!orter of services $&5/20& and it e#!orts about si# times as much in services asthe US


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active e#!orters of services. erman and a!an are the lowest service e#!orters on apercapitabasis.

Thus& even though US service e#!orts are over twice as much as the ne#t leading countr&i.e. 7rance& its relative standing is not as strong as ustria&


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have develo!ed highl s!eciali)ed skills& ca!abilities and knowledge over a !eriod oftime that enables them to com!ete internationall. lthough numerous classifications forservices trade have been offeredD2E& industr-based classifications have been commonlused. This is not im!ractical given the diversit of so man unrelated service sectors andthe commonalit of industr-based a!!roaches in the strateg literature. >eaningful

analses and a!!ro!riate strategies in services sectors can emerge when ver similarentities e.g. industr0 are grou!ed together. insted and ;atterson 199/0& for e#am!le&focus on the international market-entr strategies of engineering consulting firms.%owever& in the absence of a more integrative classification method& relevant servicestheories ma not emerge and this issue has been stated in the literature e.g. lark et al.&199,0.

Three grou!s

Covelock and Fi! 199,0 !ro!ose the classification of services into three grou!s.

1. 10People-processing servicesare those that involve tangible action to customerse.g. restaurants& health care0& thus necessitating a local !resence b theinternational marketer.

2. 20Possession-processing servicesinvolve intangible actions to merchandise inan effort to enhance the value of the merchandise to the customer e.g.trans!ortation& a!!liance re!air0& and the customer is not involved in the !rocess.

3. 30Information-based servicesare those that !rovide some value for the customeras a result of the collection& analsis and mani!ulation of data e.g. accounting&insurance0 and onl minimall involve the customer.

This classification method is articulate and thought !rovoking& but these categories are

not mutuall e#clusive and e#haustive for all services. 7or e#am!le& conventional retailtrade and custom tailor services are difficult to classif under this scheme. Store-t!eretailing is an action that involves the customer but the customer is not trans!orted&diagnosed with a disease or fed. The retail !rocess merel enables the customer to take!ossession of the goods or services. 6f course& there are social and entertainment as!ectsof store-t!e retailing& and if these were the !rimar motivations for !atronage& thenretailing might 4ualif as a !eo!le-!rocessing service.

Two levels of GtangibilitH and Gface-to-faceH contact

;atterson and icic 19950 offer a useful classification based on two levels of

GtangibilitH of the service and two levels of Gface-to-faceHcontact with the client inservice deliver. The resultant cells are thus labeledB

1. 10 low face-to-face and low tangibilit I location-free !rofessional servicesA2. 20 high face-to-face and low tangibilit I location-bound customi)ed !ro'ectsA3. 30 low face-to-face and high tangibilit I standardi)ed services !ackagesA and. 0 high face-to-face and high tangibilit I value-added customi)ed services.


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Cikewise& lark et al.199,0 offer a classification method based on four categoriesB

1. 10 contact-based servicesA2. 20 vehicle-based servicesA3. 30 asset-based servicesA and

. 0 ob'ect-based services.

>ost services have the !otential of being internationall marketed. list of services withthe !otential for internationali)ation is shown inTable ((. Cike !roducts& the develo!mentof ca!abilities and com!etencies drives com!etitiveness in services trade. (t is evidentfrom the list of industries in Table (( that the nature of services varies widel. @achservice industr has its own infrastructure& re4uires s!ecific com!etencies and ma begoverned b a com!rehensive set of regulations and laws e.g. banking& health care&insurance0. The firm"s com!etitive advantage within a service sector& on the other hand&ma be through the develo!ment of !ro!rietar e4ui!ment& !atented !rocesses& andJortrademarks.

Regulatory impediments

s noted earlier& regulator im!ediments are controlled b the government and in somenations& notabl the 6@: members& are being removed through bilateral andmultilateral negotiations e.g. TS& @U& ?7T0. Some markets will be ver slow toagree to o!ening their services markets& !articularl financial and telecommunications.Structural changes within the global services industr cou!led with technological changewill serve as the main change agents for these countries.

Economic impediments.lthough a significant !ro!ortion of ever nation"s :; is

derived from services& international market entr for a broad arra of services is largellimited to highl develo!ed nations whose famil units on average !ossess a high level ofdiscretionar dis!osable income. Thus& relativel low famil income in most countries islikel to im!ede successful international market entr and growth for man servicesectors. 7or e#am!le& average e#!enditures for restaurants is much lower in develo!ingeconomies than in develo!ed markets. 7urthermore& as income grows& !otential targetgrou!s are likel to ta! into the available local low-cost labor to !erform human-resourceintensive services cleaning services& most re!air0 rather than to rel on services offeredthrough commerciall organi)ed services firms.

Cultural impediments

ultural incom!atibilit

ultural im!eratives will necessaril have a significant im!act on the acce!tabilit andado!tion !attern of services. Since services inherentl involve some level of humanresources& the likelihood of cultural incom!atibilit is greater. 7or e#am!le& nationswhich culturall define the housewife"s role as the famil caretaker will !robabl not be
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ver keen on using da-care centers. Cikewise& for-!rofit funeral services in (slamicnations will !robabl not be well-received.

Standardization versus customization

n im!ortant strategic issue in marketing services internationall is the e#tent to whicheach service might be standardi)ed. (n addition to the necessit for customer contact forman service categories& mriad host government regulations in numerous servicessectors make standardi)ation ver difficult. ccounting and financial services markets aregoverned b ver different rules around the world. lthough regional markets such as the@uro!ean ommunit are succeeding in lowering such host market regulator !roblems&these are minor accom!lishments at best.

=etailing difficult to standardi)e

=etailing !rovides an e#cellent e#am!le of a service business that is difficult to

standardi)e. :es!ite much talk about the internationali)ation of retail trade& local retailingregulations var considerabl& not onl across countries including within the @U0& butalso within the !rovinces of each countr Samiee& 19950. @ven if regulations wereentirel removed& retail trade is inherentl culture bound and influences merchandise t!eand merchandise mi#.

Therefore& the level of !roduct and marketing standardi)ation observed in theinternational marketing of goods is unlikel to be matched b services. >cCaughlin and7it)simmons 199,0 have also arrived at this conclusion in their analsis of serviceindustries. (t is thus !lausible that relativel more service businesses must be ada!ted tohost countr environments and& as such& the global marketing of services ma not be a

realistic goal for man sectors. That is& common customer needs for services var morewidel across nations than is the case for !roducts& and addressing them re4uireslocali)ed solutions. %ence& it is likel that a multidomestic or multilocal0 !attern ofinternationali)ation might be the most a!!ro!riate in man sectors of services& and thisview is im!licitl echoed b others Covelock and Fi!& 199,& !. /10.

These ke differences set the international marketing of services a!art from theinternational marketing of tangible goods. hereas an increasing number of consumerand industrial goods are being marketed globall& for reasons outlined above& the same isnot true of services. ke issue in the globali)ation of markets is the convergence ofmarkets which is not occurring with sufficient s!eed to accommodate international

growth in man services sectors. 7or some services& it will never occur.

Concluding remarks

(t is evident from the issues raised in this stud that the internationali)ation of servicesoffers tremendous !otential for growth des!ite the slow !rogress in multilateralnegotiations aimed at market access. lthough !rogress has been slow& it is of criticalim!ortance that much !rogress has been made to bring services graduall under the


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aus!ices of T6 and& therefore& the future seems !romising. s the largest net e#!orterof services& the US stands to gain a great deal. %owever& the data in Table ( indicate thatsome other nations e.g. ustria and The ?etherlands0 are better !ositioned in relativeterms than the US.

(nformation limited

(n general& information regarding service marketing internationall is limited. Severalresearch o!!ortunities are thus !lausible. 7irst& em!irical research aimed at validating the!ractical utilit of e#isting services classification a!!roaches for international use isa!!ro!riate. Second& a broadl acce!ted classification method ma assist in determiningwhether the global industr conce!t can be e#tended to certain classes of services. Such adetermination ma go a long wa in studing the com!etitive strategies of internationalservices firms. Third& an e#amination of the trends in the international marketing ofservices in other leading nations either single countr or cross-nationall0 ma !ermit abetter understanding of strategic forces behind their success. 7ourth& domestic

e#!eriences in services indicate that successful services are based on !rocesses thatcannot be easil du!licated e.g. al->art"s cross-docking& >arriott"s em!lomentscreening and guest-room !re!aration0. (nformation technolog is fre4uentl thebackbone of these success stories. %owever& market !enetration and the a!!lication ofcom!uters across markets var widel. Thus& it is useful to investigate the e#tent to which!rocesses can be e#!orted to host nations. 7inall& onl limited effort for develo!ingreliable measurement scales for use with international marketing of services is evident. (n!articular& for certain segments and service industries& the (nternet is bound to makecustomer-!rovider interaction ver different than the traditional models of servicee#change. Therefore& !rogress in scale develo!ment in these areas and their cross-national validation are also encouraged.

Notes

1. The im!ortance of this issue is reflected in the em!loment of foreign workers inthe services sectors. 7or e#am!le& with a foreign worker em!loment figure of 2million collectivel& the US services sectors constitute one of the four to!em!loers of foreign nationals oreover& the rate of growth in services trade e#ceeds that for traditionalmerchandise trade b a considerable margin. Samiee indicates that trade in services nowre!resents around a fifth of total international trade volumes I insofar as we can trust thefigures.


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( 4uestion the figures" trustworthiness because trade in services is more difficult tomeasure than trade in goods. lark and =a'aratnam observe that the intangibilit of manservices make them hard to identif. (ntangibilit !resents a !roblem for overnmentbecause service im!orts G... elude normal customs !rocedures and cannot be controlled oraccounted for using methods develo!ed for merchandiseH.


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Trade in goods is eas to understand. e can see the goods as the travel from the !laceof manufacture into international markets. These goods can be weighed& counted andvalued. 7irm in one countr sells a GthingH to 7irm < in another countr or GthingsH toconsumers in that second countr. Such sim!licit is not reall !ossible with the e#!ort ofservices.

ust one e#am!le will illustrate this !oint. (f ( sta in a 7rench hotel in 7rance& does thatre!resents a 7rench Ge#!ortHK This would be the case if the hotel was in the U8 and7rench-owned. . %oulier where westaed on our holida is I in the real sense of the word I an e#!orterK Technicall >.%oulier is indulging in international trade since the mone and that is what reallmatters0 is international.

e can see from this e#am!le where the management headaches start. Since no actualGthingsH change hands& we find it difficult to com!rehend that e#!orting occurs. Theanswer lies in looking at the flow of mone rather than the actual movement of goods and

services. (f ( engage a 7rench market research com!an to do a stud for m U8 firm onmarket o!!ortunities in 7rance& that firm becomes involved in international trade. Fettrade figures are unlikel to !ick u! all the instances of this sort of transaction.

There are a number of areas I a!art from this ve#ed 4uestion of intangibilit I whereinternational services differ from trade in goods. Some of these are inherent to the natureof services& whereas other are e#ternal and relate to the attitude of governments&international trade regulations and the im!act or e#tent of Gculture clashesH. (n additionthere e#ists a further grou! of barriers to internationali)ation shared with goods e#!orters.

The main e#ternal difference from trade in goods is in the area of trade treat !rovisions

and the attitude of governments. The eneral greement on Trade in Services TS0re!resents the first ste! in multinational endeavours to reduce barriers tointernationali)ing services. s lark and =a'aratnam e#!lain& this 199 treat& com!aredto the treaties on trade in goods& G... is far more limited& with individual countriesretaining the right to s!ecif which services the want to e#em!tH. enuine free trade inservices remains a long wa off and we should antici!ate it being some while before suchtrade o!erates on a !ar with merchandise trade.

onnected to the slow !rogress towards free trade treaties covering services are the!roblems created b governments. Samiee identifies a series of barriers to trade inservicesB

lack of com!lete and reliable data for man service sectorsA

domestic !reference !olicies introduced to !rotect local services from

international com!etitionA the involvement of government de!artments such as immigration and labour0 that

lack an international focusA unfavourable ta# treatment of services income and the lack of bilateral ta#

agreementsA


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constraints on international data flow im!licit in man data !rotection and

telecommunications regulationsA and the lack of agreed accounting standards for the treatment of intangible assets

(f& as ( have alread stated& international trade in services is vital to the economic

!ros!erit of western economies then there is a clear im!erative for governments to acton the issues identified b Samiee. There is no doubt that& as Samiee sas& G... much!rogress has been made to graduall bring services under the aus!ices of the orld Trade6rgani)ation T60H& but this remains e#tremel limited with !rotection of services bnational government more the rule than the e#ce!tion. hile !roclaiming the need forfree trade in services& governments are acting to !ut u! barriers to such free trade.

(t is worthwhile listing some of the measures used b governments to constrain trade inservicesB

6wnershi! restrictions on overseas firms. @ven the US I the biggest enthusiast

for traded services I acts to restrict foreign involvement in markets such as airtrans!ort& financial services and health care. (n less laisse) faire !laces& such asthe @uro!ean Union& restrictions abound I even between member states.

:omestic !reference !olicies. (n the !ast& giving !reference to domestic su!!liers

!rovided a hand and !o!ular means of !reventing foreign businesses gaining afoothold in the home market. Such !olicies are often e#cused on the grounds ofnational interest des!ite being I in most cases I blatant !rotectionism.

Unbalanced em!loment rules. (t is not uncommon for !articular rules on

em!loment in certain services to be used to !rotect the home market. 7ore#am!le& an countries restrict the numbers of licenses for certain

services and can use this to restrict the o!!ortunit for non-domestic businesses toenter the market even where the controls were introduced for the !ur!oses ofregulating home service industries

ensorshi! and data controls. 7or information-based services& !ublishers and

broadcasters the use of controls over data and the censorshi! of !ublishedmaterials& while introduced for the !ur!ose of domestic !olitical control& can beand are used to restrict market entr b foreign businesses.

overnments face domestic !olitical !ressures to !rotect indigenous businesses. >osttrade unions and man !oliticians remain unconvinced b the benefits of free trade. TheGgiant sucking soundH argument of =oss ;erot ma not have come to !ass& but this does


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not sto! !rotectionist !undits and isolationist !oliticians cam!aigning against tradeliberali)ation.

7urthermore& the motivation of man o!!onents of free trade is not economic. The areless concerned about the issue of 'obs and businesses than about su!!osed Gcultural

im!erialismH or small is beautiful environmentalism. Since the !rotectionists have lostthe economic argument so far as academic and !rofessional economics is concerned0the have moved onto other matters. 6ne of these concerns is covered e#tensivel in thiss!ecial issue I the issue of culture.

Sorr to go on about 7rance& but this nation re!resents a !owerful econom where the!olitical and business consensus differs significantl from that !ertaining in the US andother nglo-Sa#on economies. 7rench stalling on GculturalH issues almost killed theUrugua =ound of TT negotiations.

;ut sim!l& the 7rench I and several other nations I see the liberation of trade in services

as serving the interests of US cor!orations in areas such as entertainment& fast food andtelecommunications. Such countries do not !erceive free trade in services as the same asfree trade in goods.

This is not& however& the !lace to enter into the debate as to the rights and wrongs of the7rench !osition on GcultureH. Suffice it to sa that the 7rench and man other !eo!letoo0 see the success of US GculturalH e#!orts as a threat to national identit. (t is notsim!l a 4uestion of !rotecting local service industries& but whether US !roducts andservices will Gswam!H national culture !roducing an anodne and distant GglobalHculture.

7or service businesses the issue of culture is& in man was& more !rofound than formanufacturers. The need for !ersonal interaction and differing cultural e#!ectations ofservice !roduce the risk of Gculture shockH and resulting business !roblems.

!he clash of cultures: a service management issue)

Stauss and >ang !resent interesting findings from a critical incident stud of airtravellers from the US& a!an and erman. The most interesting discover is that intra-cultural conflicts are as significant as inter-cultural !roblems. Stauss and >ang suggestthat consumers allow for cultural differences b widening the ga! between e#!ected andacce!table service I the )one of tolerance. (n short& customers make allowance for the

fact that the are dealing with a foreigner.

%owever& this tolerance will not last. Stauss and >ang acknowledge that their findingsrelate to a !articular t!e of service air travel for leisure0 t!ified b intensive customercontact but a short-term relationshi!. e are willing to make allowance for cultureclashes in our first few encounters with a firm"s em!loees& but then e#!ect the foreignerto have a better a!!reciation of our idiosncratic was. :es!ite the significance of Stauss


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and >ang"s findings& we cannot afford to sideline the im!ortance of culture to theinternationali)ation of services.

The accommodation of national differences receives attention from Covelock whoconcludes that the G... combination of a globall standardi)ed core !roduct and

customi)ed su!!lementar services ma offer service firms the o!!ortunit to achieve thebenefits of both sstem-wide efficienc and local market a!!ealH. @ven suchmultinational service monoliths as >c:onald"s incor!orate variations to accommodatelocal !references I the launch of GcurrH burgers in the U8 being a case in !oint.

%owever we design our service and whatever means of serving the market we choose&there will remain a need to ad'ust to local cultural !references. Some means ofinternationali)ation I franchising& for e#am!le I !rovide an easier route to deliveringculturall sensitive services b drawing on local management knowledge. onsumerservices are likel to re4uire greater cultural ada!tation than do business-to-businessservices.

>attila& in looking at the different !erce!tions of sian and estern leisure travellers&concludes that service managers need to be aware of cultural issues. attilaacknowledges that G... a service firm"s degree of need for cultural customi)ation willde!end on the customer"s !urchase motivation& the length and t!e of customer contactand the com!le#it of the service taskH. The degree to which em!loees need sensitivitto cultural nuances de!ends ver much on the t!e of service received.

%owever& we cannot ignore culture and all firms !roviding services internationall shouldconsider the !rovision of a!!ro!riate cultural training to staff& the use of local em!loeesand& where needed& changes to the service offering itself. ithout these !rovisions the

com!an runs the risk of losing business to local com!anies or more culturall awareinternational service !roviders.

%owever& cultural considerations and the vagaries of government actions are not the onlconsiderations for the international services marketer. Service businesses ma be Gabout!eo!leH but the technolog and sstems remain im!ortant. @ven the best !eo!le struggleto deliver when sstems are not in !lace to facilitate deliver. s 7isk e#!lains&businesses need to concern themselves with G... wiring and growing the technolog ofinternational services marketingH.

ultural as!ects I and other human resources issues I relate to the GgrowingH !art of

7isk"s meta!hor. s he !uts it& G... the need to create international service sstems that areres!onsive to the human needs of organi)ations& em!loees and customersH.


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Coping &ith technological competition: the *nternet and all its &orks

s recentl as five ears ago it would have been a !rescient !erson who identifiedGelectronic marketingH as one of the three !rinci!le entr modes for international servicesmarketing. Fet when rLnroos does this we do not ste! back in ama)ement but& instead&

nod sagel and agree. (n 'ust a few short ears the (nternet and the digitaltelecommunications revolution have changed international marketing forever. Toda ourcom!etitor could be a huge multinational or a small start-u! com!an.


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hat ever service business must remember& however& is that& as lark and =a'aratnamsuggest G... it is !ossible for unso!histicated strangers& from different countries& to interacteasil without crossing national boundariesH. hatever kind of service business ou run&the (nternet will change our business I for good or ill. s ever with these technologicalchanges& the result is a ver different set of !ossible strategies for international services

marketing.

+eeing the &orld: international service strategies

e have discussed the im!act of international trade !olicies and agreements. e can addthe effects of regional trade agreements I ?7T& >ercosur& the @U& etc. I and theim!ortance of a !ositive attitude to trading services from governments. 7ollowing this wehave looked at the issues of culture and technolog.


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The stage of technical develo!ment within the industr I to what e#tent is the

service deliverable via electronic mediaK %ow do com!etitors deliver the serviceK%ow so!histicated are the services alread in the target marketK

The degree of international homogeneit in the service I does the service re4uire

huge changes to work in the target marketK 6r is it a fairl standard !roductK To

what e#tent can we e#tend the service internationall without un!rofitableada!tationK

These factors are general to an service but the t!e of service will affect the degree towhich internationali)ation is !ossible. lark and =a'aratnam describe four t!es ofservice and discuss how each t!e re4uires different a!!roaches to strateg.

The four t!es described areB

10 ontact services I these are services where direct contact between service

!rovider and client is re4uired but no !ermanent !hsical !resence is established

e.g. consulting& accountanc& tem!orar labour0. 20 Oehicle services I a service delivered via an GinternationalH vehicle e.g. TO

broadcasting& telecommunications0. 30 sset services I services !hsicall located in the overseas market e.g. bank

branches& hotels& restaurants0. 0 6b'ect-based services I services embedded in a !hsical ob'ect e.g. :s&

machiner re!airs& etc.0.

learl there are overla!s& since one firm ma offer services falling into two categories.7or e#am!le a firm ma offer an Gob'ect-basedH service in the form of com!uter software!lus a contact service in the form of a hel! line. (n this case a third o!tion of deliver via

the (nternet I a vehicle service I is also !ossible.

:es!ite this overla!& we need to a!!reciate that different t!es of service im!l differentstrategies. e can cross-reference the t!e of service with the five strategies to identifwhich strategies are a!!licable to the different t!es.

Table (e!resents something of a blunt instrument but does show how analsis ofinternational service strategies might !roceed at least so far as entr strategies areconcerned. %owever& it remains for us to decide the details of how we make that entrstrateg work and what the !riorities are for our attention.

e have alread noted the !otential benefits from well-managed investment intechnolog and the sstems and !eo!le that go with it. 7isk"s five areasB !roductivit&service 4ualit& customer relations& service develo!ment& and ada!tabilit give us thebasis for managing services regardless of the technolog issue.
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Making service internationali,ation &ork

The remaining articles in this s!ecial issue bring us down from the rarefied atmos!here oftrade treat negotiations and grand strateg to a more !ragmatic level. Puestions aboutservice 4ualit and relationshi!s @riksson et al.0& advertising a!!roach lbers->iller

and Stafford0& effectiveness and efficienc hang et al.0 are im!ortant since the broadstrategic decision outlined above onl takes us the first ste! towards successfullinternationali)ing our service.

e need to relate the ke issues arising from this !ractical focus to the wider issues ofstrateg and !ublic !olic. (nternational services remain an area where there is a lack ofdee! understanding. (ndeed& 8night"s review of the literature reveals the ga!s that e#ist inacademic thinking and he !oints out that !ractitioners have been develo!ing a!!roachesto international services marketing without reference to an detailed academic theorising.

Fet we see from these articles that the returns from !articular actions differ between

countries. Cevels of economic develo!ment are shown to influence the degree to whichmarket orientation affects service 4ualit and o!erational effectiveness hang et al.0.?orms in terms of advertising !ractice lbers->iller and Stafford0 need carefulconsideration if the international service strateg is not to fall foul of !oor e#ecution.

7or managers in service businesses the develo!ment of consistent strategies that can bemanaged from the centre makes a vital contribution to a firm"s abilit to o!erateinternationall. iven the disadvantages inherent in marketing services overseascom!ared to man domestic services0 managers need to be able to derive advantagesfrom the strateg as well as from good tactics and efficient e#ecution.

s with goods e#!orting& the crucial element needed at the start is the commitment ofsenior management to the !ro'ect and the willingness to invest in creating markets a longwa from home. t the same time& managers need to a!!reciate the !itfalls of o!erating aservice overseas& not least in the reluctance of man countries to acce!t that internationaltrade in services is a valuable !art of the world econom and to everone"s benefit. Thesebarriers are I on the whole I surmountable& given creativit and careful !lanning.


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restrain growth in traded services.


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Table I.Top ten service export markets and import origins for the USA

Table II.A list of international service sectors


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Table Ie.Available strategies for different service types

References

Baker, S, Johnston, M., Echikson, W (1998), "Europes privacy cops", BusinessWeek, pp.9!#..

$Manua% re&uest' $notrieve'

B%aine, M (199*), "+rae, -, an the o%%ar/ e0p%ainin the 2S trae eicit", Sloan ManagementRevie, 3o%. 48 5o.1, pp.81!1#1.


6%ark, +, 7aaratna, , Sith, + (199*), "+o:ar a theory o internationa% services/ arketinintani;%es in a :or% o nations", !ournal of "nternational Marketing, 3o%. 5o.


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>ove%ock, 6., Cip, @.S (199*), "eve%opin %o;a% strateies or service ;usinesses", (aliforniaManagement Revie, 3o%. 48 5o.auh%in, 6., -itDsions, J (199*), "Strateies or %o;a%iDation serviceoperations", "nternational !ournal of Service "ndustry Management, 3o%. 5o., pp.4!..


FE6 (199*), Science) Technology) and "ndustry 'utlook, FE6 Au;%ications, Aaris, .


Aatterson, A.@., 6icic, M. (199), "? typo%oy o service irs in internationa% arkets/ anepirica% investiation", !ournal of "nternational Marketing, 3o%. 4 5o., pp.!8.


Saiee, S. (199), "Strateic consierations in European retai%in", !ournal of "nternationalMarketing, 3o%. 4 5o.4, pp.9!.


Saiee, S (198), "+ransnationa% ata %o: constraints/ a ne: cha%%ene or u%tinationa%corporations", !ournal of "nternational Business Studies, pp.11!#.


Siun, J.E. (1998), "Services in W+F/ recent eve%opents an overvie:", Business America,3o%. 119 5o., pp.1


Winste, G.-, Aatterson, A.@ (1998), "nternationa%iDation o services/ the service e0portecision", The !ournal of Services Marketing, 3o%. 1< 5o.!, pp.


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the internationalization of services

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