Globalisation of

Services
Chapter 10
Learning Objectives
In this chapter, we will
Introduce the subject of globalisation
Explore Indias status as a newly
globalising service economy
Discuss the mindset of globalising firms
Introduce the five stages of globalisation
according to Kenichi Ohmae
Discuss the standardisation versus
customisation issue
Explore possible issues in managing
employees/partners in globalisation
Provide an overview of the fast growing
business process outsourcing industry
(BPO)
Globalisation and India
Indias global ascendancy in
recent years has been driven by
the IT- based service industries.
McDonalds, Pizza Hut and
Thank God Its Friday already
operating here
Many Indian service brands may
now begin to think global.

Some Sunrise Areas
Indian movies are slowly beginning
to make inroads into foreign markets.
Animation studios in India are able to
do quality work for a fraction of the
costs that western outfits charge.
Corporate hospitals in India get
patients from abroad who cannot
afford the high cost of medical
treatment in their country. This is
termed as medical tourism

Key areas in the
Quest to go global
Value-Addition Should be Our
Mantra
One major flaw in our global
marketing effort Our value addition
is poor in whatever products or
services we export, thus giving us
few benefits.
How can we add value?
With unique characteristics or features,
or by adding something intangible to the
mix that cannot be imitated.
Brand-building has to be undertaken
vigorously and seriously in areas where
Indian companies are likely to become
leaders.

Role of Skills, Vision
Marketing skills, and long term global
vision (unlike the Japanese or Korean
goods manufacturers), have been weak
in Indian firms.
The American service companies, and
Asian manufacturing companies should
be the role models for strategic thinking
and vision, combined with hard work
that is needed to make a sustained
impact on the global scene.

Hard and Soft Services
Hard services (e.g. architectural design,
education, life insurance and music) and
soft services (e.g. food service, health
care, laundry and lodging). Hard services
require limited or no local presence by the
exporter and consumption can, to a large
extent, be separated from production.
But soft services production and
consumption are to a major extent
simultaneous processes, and such
services require major local presence by
the service firm or a representative that
acts on its behalf.
Market Services Internationally
Five main strategies are
Direct export;
Systems export;
Direct entry;
Indirect entry; and
Electronic marketing.
Direct export
Consultants and firms repairing
and maintaining valuable
equipment may have their base
on the domestic market and
whenever needed move the
resources and system required
to produce the service to the
client abroad.
Systems export
When a manufacturer delivers
equipment or turn-key factories
to international buyers, a need
for engineering services,
distribution, cleaning, security
and other services is often
present
Direct entry
Service firm establishes a service-
producing organization of its own on
the foreign market.
It may face problems with
production, human resource
management and consumer
behavior.
Can acquire a local firm operating on
the same service market to over
come those problems.
Indirect entry
Franchising is an often used
concept for indirect entry into a
foreign market.
franchisor gets the local
knowledge and franchisees get
an opportunity to grow with well-
established concept.
It is least risky of the
internationalization of services.
Electronic strategies
Internet provides firms with a way of
communicating its offerings and
putting them up for sale, and a way
of collecting data about the buying
habits and patterns of its customers
and using network partners to
arrange delivery and payment. The
electronic bookstore Amazon.com is
a good example of a firm
internationalizing its services using
electronic marketing.
Five Stages of Globalisation
The stages in globalisation usually
followed by a manufacturing company
according to Dr Kenichi Ohmae (Japan)
1. A strong product concept in the home
country
2. Export through agents or third parties
3. Opening of sales offices outside country
markets
4. Shifting production base
5. Complete integration, with sourcing from
best locations and production, R&D in
most viable locations anywhere in the
world.
Stages in Services
Usually a strong domestic market
position is the first stage.
Export through third parties can be in
the form of local partners (like
McDonalds in India) who are either
partners in a joint venture or
franchisees of the branded service.
Company offices can be opened
abroad to market the service directly
to the public, or to deal with the
franchisees.
Stages in Services cont..
The fourth stage may not happen in
services, if the production and consumption
are not separated, as there may be no
factory at all.
This may lead the service company to
directly proceed to stage 5, where it
reorganises and integrates its global
business, with expertise and resources
drawn from all over the world.
Eg: Many global ad agencies draw their
people from Indian affiliates. Similarly,
multinationals based in India, like ING
Vysya Bank, have expatriates at top levels.

Indias Record
Indian IT businesses have gone through the early
phases of globalisation, and are in the process of
consolidating their operations (TCS, WIPRO and
Infosys).
Other service brands from India are largely in
computer education (NIIT), or in banks (SBI,
Bank of Baroda) which have expanded to a few
Afro-Asian countries. Airtel,
In general, branded service companies have not
been able to establish themselves beyond Indian
shores.
In others , like the public sector banks, stiffer
accountability norms did the trick.

Indias Record Contd..
Some firms like L&T and Engineers India
are in large service businesses, and have
the financial muscle to reach out abroad.
Gas Authority of India Limited, ONGC,
Indian Oil are big oil and gas companies
with a lot of expertise in their fields, and
have the necessary financial power to
compete abroad
But in areas like food, general retailing,
education and so on, Indias global record
in service businesses is nothing to rave
about- yet.
Standardisation v/s
Customisation
Which is the correct strategy- Standardisation or
customisation ?
One useful approach is to think global, and act
local, as per the needs of the local markets.
Eg: McDonalds not serving beef hamburgers
in India
Some changes in products or practices are due
to environmental factors such as the law, or
local environment, or customer sentiment.
For example, hotels in India offer a lot of
personal services to guests, some of which
could be eliminated if they were to operate in
the U.S., where guests are comfortable doing
things on their own.

Summary- Standardisation v/s
Customisation
There may be faster growth
possibilities if a service business can
standardise its processes or product,
but frequently, it has to adapt to
differing expectations regarding
various service parameters.
The core processes, however, can
still be standardized, like McDonalds
has shown.

Managing Employees/Partners in
the Process of Globalisation
What kind of employees
should your company have
when it crosses the border?
Local, or exported from your
companys headquarters?

(Disney faced this dilemma
when it opened a new Disney
theme park in France.)
Managing Employees contd..
Everything, from salaries to housing
and education for children is a new
experience for expats.
A lot of western expats in the Middle
East send their children to schools
run by their own countrymen, such
as the American School or the British
School

Indian Employees Adjusting
Abroad
Indian employees generally fit
well into the English-speaking
world, and also a few of the Gulf
countries.
But other countries , such as
Japan, China are largely
untested waters for Indians.

Channel Partners or
Customers Abroad
On-time deliveries on promised
dates, and in general, professional
behaviour is an expected norm in
many advanced markets.
On the other hand, in less developed
countries, even mundane things like
collecting payments are sometimes
difficult to manage.
The difficulties could be many more
in service businesses because of
their intangibility.

Mindset of Globalising Firms
Most important in the process of
globalisation is the mindset of
companies that are globalising.
It usually means looking at the world,
rather than any one country as your
marketplace.
Eg: American service firms like
McDonalds, Citibank, Wal-Mart,
Morgan Stanley, Accenture and
Yahoo