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Samenvatting Service Management, international classroom
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Service management summary, of the international classroom profession. written in english.
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College 3 aantekeningen - H5 & H11 - International Classroom I - Service Management - ISBN: 9780273732037
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Summery service managementChapter 16: Developing Sustainable strategies
The nature of strategic management
Each firm must develop a strategy that requires decisions regarding four basic elements:
- The firm’s objectives (goals)
- Its environment (market)
- Its resources and patterns of resource allocation (toewijzing)
- Its corporate values, norms and ethics
The firm’s objectives: what do we want to do?
• Defining a desirable future (objectives, business definition, mission statement and vision on
the future).
• The service concept is a part of strategy definition.
• To develop a strategy → what are the mission, vision and long-term goals. What do we need
to do to get there?
The environment: what should we do?
• Consider what you want to do is in line with what is happening in the market (the
environment) and how that fits the customer’s needs.
Resources and resource allocation patterns: what can we do?
• The deployment of resources can determine what a firm can achieve.
• Tangible resources: buildings, facilities, plants etc.
• Intangible resources: knowledge, attitudes, aptitudes, reputation, image etc.
• Firm addressable resources: not legally owned, but used in processes of product design,
development, service delivery, marketing and sales.
Resources and their deployment (inzet) determine what the firm can achieve.
Corporate values: what are we allowed to do?
• Corporate norms and values (are a
core part of the firm’s identity and
thus mission, vision and strategy).
• Business ethics
This figure makes it easy to understand
what the vision of the organisation is.
There is a connection between the 4
elements. It can’t be seen separate.
,Addressing potential conflicts
Any strategy for any company needs to address four different issues:
- What is desirable
- What should be realized
- What can be realized
- In a manner that is in line with the organisation’s values
Conflict with the environment
One of the typical conflicts in defining the content of strategy is the tension between the objectives of
the firm and the value that the environment attaches to the services offered. Such as bringing a
service to the market where the price is too high, so it won’t sell.
Conflict with available resources
Another field of conflict arises out of the tension between what the available resources allow the firm
to do and the direction in which the company wants to go. Organisational structure a culture, the
routines and technology developed over time, are all element very resistant to change. Changing
direction to realize objectives is in practice a rough job compared to defining these objectives. This
type of strategic change remains one of the most difficult challenges managers face.
The key to long-term survival and profitability: competitive advantage
A competitive advantage refers to the ‘distinctive capability’ to the firm. A firm creates competitive
advantage if it succeeds in becoming different form its competitors in a way that is recognized and
appreciated by its clients.
A competitive advantage must be sustainable. It must create a ‘time window’ that lasts long enough to
allow the firm to harvest the benefits of the differences. In terms of both financial profit and
opportunities for building and leveraging resources to create a ‘new’ competitive advantage.
A firm pursue three types of strategy:
- A cost strategy
- A differentiation strategy
- A focus strategy
The cost strategy aims to minimize the costs of products or services delivered to the marketspace.
Policies such as limiting product range, offering non-branded goods or services and standardization fits
perfectly in this strategy.
The differentiation strategy aims to create a competitive advantage not by striving for the lowest costs
but by maximizing value created for the customers. The rationale behind the strategy is that the
higher value that had been created will be rewarded in the marketplace by means of a price premium
sufficiently large to cover the higher costs that may have been necessary to create the added value
and to bring this higher value to the attention of the customer.
If value is defined as the ratio between quality and price, it could be said that both above strategies
result in ‘similar’ value propositions. But cost leaders and differentiators work for different segments.
Being stuck in the middle means that for the same price someone else offers more quality or that the
same quality can be found elsewhere at a lower price. By introducing new ways of working a company
can get unstuck and decide on an objective, either low costs or differentiation.
, With a focus strategy the firm applies a cost-leadership or a differentiation strategy within a market
segment in a specialized way. With as a result gains competitive advantage over firms applying their
generic strategy on a wider market.
Blue ocean → you are
the first in the market.
No one can compete
with you.
Competition: eroding the competitive advantage to a competitive requirement
In almost every industry product and services become better, more fitted to the customer’s needs,
delivered in a more reliable way and even cheaper. All this is the result of competition that makes
competitive advantage erode to competitive requirements, definable as the minimal threshold that
companies must maintain in order to remain in business. The distinction between a competitive
advantage and a competitive requirement is like the distinction that some people make between
order winners and qualifiers. 4 mechanisms are used to erode or destroy competitive advantage.
- Imitation: is the best-known erosion mechanism and had become reinforces in the past by
practices such as benchmarking.
- Substitution: often involves product innovation whereby existing products or services are
replaced by new ones. The essence of substitution is that the same function with the same
customer group is fulfilled by a new product or service, based on a new or different
technology.
- Resource mobilization: the mechanism of resource mobilization is at work whenever
resources contributing to a competitive advantage start to move or when ownership over
them is changed. Resource mobilization can have different causes. It can result from an
internal loss, such as an employee with important knowledge leaves the firm. Or when an
employee leaves the firm to work by a competitor.
- Resource paralysis: is a direct attempt by competitors to reduce the value-creating potential
of the firm’s resources. Resource paralysis a frontal attach that takes the form of competitors
spreading rumours or provoking false complaints.
The quest for sustainability
The fundamental purpose of strategy is not to build competitive advantage, but to build sustainable
competitive advantage. Therefor one of the important issues in defining and implementing strategy is
to define actions that eliminate the erosion mechanisms or that it slows down their deployment or
effects.
Barriers to entry can be created by different means:
- Employing economies of scale
- Product differentiation
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