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Service Management: Operations, Strategy, Information Technology, 1st Edition Solution Manual

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    Chapter 01 - The Service Economy 1 - 1 CHAPTER 1 THE SERVICE ECONOMY TEACHING NOTE This introductory chapter is intended to motivate students and arouse their interest in the importance of services in our economy and career opportunities in the 21 st Century. Material on the "experience economy" illustrates the current economic evolution beyond the postindustrial economy. The role of information technology, innovation, and changing demographics in service sector growth can lead to speculation about the future. The chapter continues by answering the question “why study services” with a discussion of the distinctive characteristics of service operations. The question of “what is a service” is answered with the service package and grouping services by delivery process using the "service process matrix." Service - dominant logic is presented as an alternative paradigm to the traditional goods - centered view of value creation. The open systems view of service management represents a departure from the traditional role of the operations management found in manufacturing . SUPPLEMENTARY MATERIALS “The Hitchhiker’s Guide to Cybernomics : A Survey of the World Economy ” , The Economist , September 28, 1996. A 46 page special insert loaded with figures and graphs that present the transformation from an industrial economy to a service economy driven by information technology. The article discusses new jobs, productivity, and the difficulty of measuring economic output when the metrics were designed for industrial production. Joseph Pine and James Gilmore, "Welcome to the Experience Economy," Harvard Business Review , July - August 1998, pp. 97 - 105. The authors describe the features of the emerging experience economy represented by firms such as the Rainforest Café that stage an experience rather than just deliver a service. James L. Heskett, " Lessons in the Service Sector”, Harvard Business Review , March - April 1987, pp. 118 - 129. This is a classic article articulating the need to integrate marketing and operations to achieve excellence in services. The author formulates a strategic service vision that is both internally directed (employees) and externally directed (customers). LECTURE OUTLINE 1. Service Definitions 2. Facilitating Role of Services in an Economy (Figure 1.1) 3. Economic Evolution (Figure 1.2 and 1.3) 4. Stages of Economic Development (Table 1.2) 5. Nature of the Service Sector (Figure 1.4 and Figure 1.5) 6. The Experience Economy (Table 1.3, Table 1.4, and Figure 1.6) 7. Distinctive Characteristics of Service Operations

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    Chapter 01 - The Service Economy 1 - 2 8. The Service Package (Figure 1.7 and Table 1.5) 9. Grouping Services by Delivery Process (Figure 1.8 and Figure 1.9) 10. Service - Domina nt Logic (Table 1.6) 11. Open - Systems View of Service Operations Management (Figure 1.10) TOPICS FOR DISCUSSION 1. Illustrate how the type of work that he or she does influences a person's lifestyle. For example, contrast a farmer, a factory worker, and a schoolteacher . A farmer's lifestyle is, to a certain extent, still influenced and conditioned by the elements, the weather, the quality of the soil, and the availability of water. Life is partly a game, but mostly it is a struggle against nature. The rhythm of life is shaped by nature and the pace of work varies with the season. In the case of the factory worker, the struggle is against a fabricated nature: a world of cities, factories and tenements. Life is machine - paced (or at least appears to be). Efficiency is the watchword and productivity is its measure. The standard of living is measured by the quantity of goods a person has. The worker becomes just a part, a person in the bureaucratic and faceless organizations that spring up to achieve the task of production and distribution of these goods. The individual is the unit of social life, with society considered as the sum of all the individual decisions being made in the marketplace. Protection from the organization is often sought through labor unions. A schoolteacher interacts on a face - to - face basis with his/her students in an intellectual environment. A career in teaching involves continual reading in the subjects taught and searching for innovative ways to motivate students. Life is reflective, ordinarily not physically demanding, and work is conducted in a pleasant campus environment. 2. Is it possible for an economy to be based entirely on services ? Economies based on services only are exceptions and rare ones at that, e.g., Andorra and Liechtenstein, resort islands in the South Pacific and the Caribbean, and Monte Carlo (gambling). Such countries must import their food, consumer goods, and durables. But as a rule, this cannot be done for larger economies where production of food and/or goods is essential. 3. What is the value of self - service in an economy? Measuring self - service is a problem in its own right and currently is not i ncluded in the GNP. A creative discussion of methods to measure self - service indirectly would include accounting for customer labor in transactions such as buying a meal at a fast - food restaurant where you are expected to bus your own table or the savings in pumping your own gas at a filling station. Self - service has additional value because the labor is present only when it is needed. In Chapter 5 “Technology in Services” the topic of self - service technology (SST) will be explored. 4. Determine if the U.S. service sector currently is expanding or contracting based upon the Non - Manufacturing Index (NMI) found at ISM Report on Business on the Institute of Supply Management website: http://www.ism.ws/pubs/ismmag/ .

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    Chapter 01 - The Service Economy 1 - 3 The ISM Report of Business has a wealth of survey data from industry respondents on the current level of business activity for the month. The first table presents the ISM series index for the current and previous month for several measures (e.g., new orders, employment, inventories, etc.). An index value above 50 indicates an expanding service sector economy, below 50 a declining economy. The table also contains a measure of the index direction and rate of change. 5. What are some of the management problems associated with allowing service employees to exercise judgment in meeting customer needs ? Some consistency and, therefore, perceived quality of service might be lost when different employees handle situations in different ways. Much more training of customer contact personnel is required to develop their decision - making skills and to provide them with the confidence to use their own judgment. Service personnel also need to be trained in the limits of the service that should be provided 6. Critique the “Distinctive Characteristics of Service Operations” by arguing that the characteristics of, customer participation, simultaneity, perishablity, intangibility, and heterogeneity, may apply to goods as well. The following analysis is based upon the article “The Four Service Marketing Myths: Remnants of a Goods - Based, Manufacturing Model,” Journal of Service Research , 6, no. 4, (May 2004), pp. 324 - 335 by Stephen L. Largo and Robert F. Lushc. Note how the arguments are a precursor of Service - Domina nt Logic. Customer p articipation in the s ervice p rocess This characteristic was not one of the original four unique characteristics of services offered by our colleagues in marketing. In taking a process perspective customer participation should be expanded beyond a physical presence in the process , f or example, providing health history to a physician, investing savings in a bank, or e ntrusting one ’ s automobile to a repair shop. Customer participation in the service delivery process is the hallmark of all services but could be found in collaborative product design in manufacturing. Interestingly the attempt to reduce customer - employee interaction through the promotion of self - service just reinforces the customer role as co - producer. Simultaneity In an attempt to achieve manufacturing efficiencies, some services decouple part of the delivery process from the customer. The typical example is auto repair that involves processing a customer’s tangible possession in a factory setting that does not require the simultaneous presence of the customer. Most services such as restaurants , banks, and hotels have a front and back office operation with part of the service produced in the back office where customer demand can be batched and processed with manufacturing efficiency. Perishability The concept that services cannot be produced at one point in time, inventoried, and later sold upon demand led to the concept of service perishability. However, service capability can be stored in systems, databases, knowledge, and people to be used when called upon. In fact, service capacity as measured, for example, in hotel rooms or airline seats is routinely referred to as inventory to be sold at a later date. Unlike manufacturing, service capacity is inventoried prior to production rather than after. Finally, when customers form a queue waiting for service, one might consider this to be an inventory of raw material. Intangibility With few exceptions , essentially all goods have a service component, whereas all services have some facilitating goods in the service package. Thus, goods and services can be placed on a continuum according to the relative degree of tangibility. For example, in the purchase of a home entertainment center the financing offered by the store is a service. On a domestic airline flight, passengers in coach are offered a drink and peanuts.

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    Chapter 01 - The Service Economy 1 - 4 Heterogeneity Process variability destroys efficiency and consistency in quality both in manufacturing and services. S tandardization in services, such as limited menus at fast - food restaurants, is an attempt to reduce input variability. In the medical field, standardization of procedures has a major impact on reducing infection and recurrence. INTERACTIVE CLASS EXERCISE The class breaks into small groups. Each group identifies service firms that should be listed in the Fortune 100 and places them in rank order of estimated annual revenue. Post on the backboard the combined results of the student groups. Bring to class an PowerPoint slide or overhead of the most recent listing of the Fortune 100 to compare with the students ’ list s (see http:// www.fortune.com ). CASE: VILLAGE VOLVO 1. Describe Village Volvo's service package . The following descriptions address the four elements of Village Volvo's service package: supporting facility, facilitating goods, explicit services, and implicit service. Supporting facility The new Butler building with ample service bays (two bays per mechanic) and comfortable waiting room promotes the customer's positive perception of the organization. The suburban location could mean difficult access and the possible need for a shuttle. Facilitating goods Specialized tools and an inventory of select auto parts are obvious items in this element. Information The unique and possibly differentiating feature is the Custom Care Vehicle Dossier (CCVD), which serves as a powerful information tool for both mechanic and customer. The CCVD acts as a prompt to the customer to seek continuing service in a pattern ( based upon mileage or time). Analysis of customer patterns can assist Village Volvo in predicting demand and scheduling its operations to make full use of capacity. Explicit services The two owners of Village Volvo are former authorized Volvo dealer mechanics and have 22 years of combined experience between them. They have earned a respected reputation and satisfied customer following. Service availability is enhanced by the use of "express times" when customers can come in and get quick, routine jobs done while they wait. Implicit services The owners' attitudes and emphasis on customer satisfaction is illustrated by encouraging inspection of replaced parts. The policy of confirming work prior to commencement is essential to the customer's perception of reliability and participation in the service process. 2. How are the distinctive characteristics of a service firm illustrated by Village Volvo ? Village Volvo exemplifies many characteristics of a service firm, one of which is that the inputs are the customers themselves. Listed below are the distinguishing characteristics of a service firm and the specific attributes of Village Volvo, which exemplify those characteristics.

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    Chapter 01 - The Service Economy 1 - 5 Customer participation in the service process The client brings his or her car to Village Volvo for specific needs or routine services during scheduled times. There is continuous interaction between the client and the service manager and the assigned mechanic as evidenced by the discussion of problems and the test drive of the vehicle prior to the time when the repair work is done. Once the repair is complete, the client does the quality control inspection and is furnished with the worn parts. Simultaneity For routine repairs, customers can wait in the attractively furnished waiting area. In most cases the customers drop off their vehicles early in the morning and return for pickup at the end of the day. This allows Village Volvo some latitude in scheduling the daily work. For repair services, production and consumption of the service need not occur simultaneously, because the service is performed on the customer's property, which can be inventoried. Perishability Village Volvo is aware of this problem and has taken action to smooth demand, first by encouraging clients to make appointments for diagnosis and repair of specific problems and then by scheduling "drop in" times for Wednesday afternoon and Thursday morning. During peak hours, all mechanics are asked to deal with customers to reduce customer - waiting time. Intangibility Most customers are unable to judge the quality of an automobile repair service and thus, reputation becomes very important. If Village Volvo did not have such a good reputation, it would be difficult to persuade customers to use the private garage rather than the dealership. Village Volvo tries to reduce this intangibility by providing customers with their worn out parts. Heterogeneity Village Volvo is a service shop with the capability to handle a variety of auto repair problems. The mechanics treat each customer's problem individually by explaining to the customer exactly what has occurred and what will happen. 3. Characterize Village Volvo in regard to the nature of the service act, the relationship with customers, customization and judgment, the nature of demand and supply, and the method of service delivery. • Car repair represents a tangible action performed on an object and therefore, is a service directed at a physical possession. • By keeping a Custom Care Vehicle Dossier (CCVD) on customers’ vehicles, Village Volvo is attempting to develop a “membership” relationship. The repair service itself is a discrete transaction, but sending reminders for routine maintenance gives the appearance of continuous monitoring. • For routine maintenance (e.g., oil changes) customization and judgment are limited in scope. However, for major repairs the opposite is true. • Demand for emergency auto repairs can vary considerably, but reservations for work is common and a loaner car can be provided for extended repairs. Routine maintenance can be scheduled to fill low demand periods. • Village Volvo has a single site and requires customers to bring their cars (or have them towed) to the facility.

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    Chapter 01 - The Service Economy 1 - 6 4. How could Village Volvo manage its back office (i.e., repair operations) like a factory ? After receiving the cars for repair at the beginning of the day, the scheduling of repairs can be planned in accordance with the availability of the mechanics and the promised delivery times. Thus, the back office can be run much like a manufacturing job shop. Routine work like brake pad replacement and minor tune - ups can be delegated to apprentice mechanics in order to achieve cost savings. 5. How can Village Volvo differentiate itself from Volvo dealers ? Dealers have traditionally neglected their service departments because more money was made in the sale of vehicles. The turnover of dealer mechanics also has been high because good mechanics leave to open their own shops such as Village Volvo. The appeal of the independent mechanic is the personal relationship and trust that develops between vehicle owner and mechanic. The Custom Care Vehicle Dossier is a method that Village Volvo uses to establish the customer's loyalty. CASE: XPRESSO LUBE [Students Robert Ferrell, Greg Miller, Neil Orman, and Trent Reynolds prepared this analysis.] 1. Describe Xpresso Lube’s service package? • Supporting facility : Xpresso Lube has a fixed amount of operational capacity because it has a limited number of service lifts – two to be exact. Other components of its supporting facility are tools and equipment, an equipment storage area, a spacious waiting room, chairs, a service counter, street access and parking. • Facilitating goods : oil, filters, auto parts, coffee, snacks, cups, napkins, sugar , and milk. • Information : for regular customers a reminder card could be sent for routine maintenance. • Explicit services : a car with new oil and filter, maintenance checks of the car, and a cup of coffee. • Implicit services : trust, a feeling of not “getting screwed,” a feeling of keeping the car maintained, the satisfaction that comes from taking care of one’s car, the good feeling that comes from recycling the old oil, a caffeine lift, and the satisfaction of drinking good coffee while you wait. 2. How are the distinctive characteristics of a service operation illustrated by Xpresso Lube? • Customer Participation in the Service Process : Customers bring their car s to Xpresso Lube and wait for the oil change. Customers are invited to inspect the car while on the lift to observe other needed repairs. • Simultaneity : Using the coffee shop as a pleasant diversion allows Xpresso Lube to reduce partially the need for working on arriving cars immediately . Providing a shuttle service to the nearby University and State Capital would allow scheduling of oil changes.

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    Chapter 01 - The Service Economy 1 - 7 • Perishability : T he number of car lifts at the shop limits Xpresso Lube’s capacity. This oil change business also owns an auto repair facility next door so the two businesses can deploy mechanics between them to utilize labor capacity in the most efficient way . • Intangibility : When an oil change is done in a typical pit, the customer cannot actually see the process and, after the service, the car’s performance probably will not be noticeably different. In this situation, customers rely on the word of the oil change service person. Xpresso Lube’s car lift design allows customers to watch its service, which gives customers more assurance that their needs are being met. • Heterogeneity : Different cars provide some variability in the oil change routine. Some customers even come only for the coffee. 3. Characterize Xpresso Lube in regard to nature of the service act, relationship with customers, customization and judgment, nature of demand and supply, and method of service delivery. • Changing the oil is the primary function of Xpresso Lube. This is a tangible action performed on the car, but the secondary service is serving coffee, which recognizes the personal needs of the owners. • Xpresso Lube’s service relationships consist of discrete, one - time transactions, but the company’s focus on fostering customer trust and a pleasant waiting environment might lead to more long - term customers. • Fairly low customization is possible, but the accessibility of the service area and the mechanics can lead to customization opportunities if there are problems with the cars. • There is a significant demand fluctuation based on the obvious convenience of having the service performed after work or during the weekend. This peaked demand pattern easily can exceed Xpresso Lube’s capacity. But Xpresso Lube’s service environment encourages people to accept longer waits and, by providing transportation, it enables customers to drop off their cars in the morning and retrieve them later in the day. The supply of the service cannot be altered very easily, given the company’s fixed number of two carports and lifts. 4. What elements of Xpresso Lube’s location contribute to its success? Xpresso Lube is located on the main thoroughfare leading to the University of Texas and , thus , provides excellent visibility. The immediate business area is bustling and diverse , and attracts a broad spectrum of visitors. It’s also an area where customers don’t mind waiting because they can walk to a variety of popular shops (e.g., Wheatville Co - Op and Half - Priced Books). 5. Given the example of Xpresso Lube, what other services could be combined to “add value” for the customer? Many examples exist in today’s business environment. One common service combination is selling concessions – candy, popcorn , or beer, for example – with showing movies, sports events , or concerts. Others include the combination of bookstores and coffeehouses, gaming activities such as pool or bowling with alcohol sales and prepared food (e.g., Dave & Busters), fast food and gasoline (e.g., Exxon and McDonald’s). All of these combinations support one another and marry related customer needs. In the case of gas and hamburgers, for example, customers are in a hurry and the service combination provides them additional reasons to stop. Other examples take advantage of unfilled waiting time. By locating in a shopping mall, a one - hour eyeglass store provides its customers something to do while they wait for their glasses (i.e., shop at other mall stores).

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    Chapter 02 - Service Strategy 2 - 1 CHAPTER 2 SERVICE STRATEGY TEACHING NOTE This chapter sets forth the strategic theme of the book that the operations function is central to the competitive strength of a service firm. The chapter begins with the strategic service vision that relates the service delivery system to the target market segments via an operating strategy and service concept using Southwest Airlines as an example. The application of the three generic competitive strategies — cost leadership, differentiation, and focus — to service firms is explored with examples. Porter’s five forces model and SWOT analysis are applied to service firms. Taking a page from manufacturing strategy, we apply the concept of service winners, qualifiers, and service losers to the dimensions of service competition. The important role that information plays in a firm's competitive strategy is captured in a two - by - two matrix that uses the dimensions of strategic focus (external or internal) and competitive use of information (online or offline). The concept of a virtual value chain that can create competitive advantage in the "marketspace" is illustrated with examples from USAA. Privacy questions and anticompetitive behavior are issues that limit the use of information. The chapter concludes with a discussion of the stages in service firm competitiveness and a “whodunit” Case about two niche - market banks. SUPPLEMENTARY MATERIALS James L. Heskett, W. Earl Sasser, Jr. and Christopher W.L. Hart, Service Breakthroughs , Free Press, New York, 1990. The authors describe how breakthrough managers develop counterintuitive strategic service visions and a service concept that focuses on achieving results for their customers. Case: Southwest Airlines (A) (HBS case 575 - 060) Southwest Airlines began as a small intrastate Texas airline, operating commuter - length routes between Dallas (Love Field), Houston, and San Antonio. In June 1971, having overcome legal hurdles raised by entrenched Braniff and Texas International, Southwest inaugurated service with a massive promotional campaign and many innovations designed to attract passengers. On February 1, 1973, Southwest must decide how to respond to Braniff's "Half Price Sale." Case: Zipcar: Refining the Business Model (HBS Case: 9 - 803 - 096) The expense of owning or leasing a modest car in urban locations can exceed $500 per month when insurance and parking expenses are included. Using a website for reservations and wireless communication, the concept of car sharing has become a reality with Zipcar and its tag line, “wheels when you want.” Case: British Airways: Using Information Systems to Better Serve the Customer (HBS case 9 - 395 - 065) British Airways developed an information system, Customer Analysis and Retention System (CARESS) to ensure rapid response to customer complaints. The case explores how this system is

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    Chapter 02 - Service Strategy 2 - 2 able to melt the complaint iceberg in order to resolve customer complaints quickly and improve retention as well as to provide data for root - cause - analysis of problems. Case: Ritz Carlton: Using Information Systems to Better Serve the Customer (HBS Case 9 - 395 - 064) Ritz - Carlton, a Malcolm Baldrige National Quality Award winner, relies on two information systems to promote customer loyalty: COVIA to handle centralized reservations and Encore, a local system that keeps track of guest preferences. Note: Service in E - Commerce: Findings from Exploratory Research (HBS Module Note N9 - 800 - 418). This note explores the concept of scalability in the context of customer support and logistics. The authors also discuss the E - commerce customer experience cycle that includes navigation, information, customer support, and logistics leading to loyalty when well executed. LECTURE OUTLINE 1. The Strategic Service Vision (Table 2.1 and 2.2) 2. Understanding the Competitive Environment of Services 3. Competitive Service Strategies Overall cost leadership, Differentiation, Focus 4. Strategic Analysis Porter’s Five Forces Analysis (Figure 2.1) SWOT Analysis: Strengths, Weaknesses, Opportunities, Threats (Table 2.3) 5. Winning Customers in the Marketplace Qualifiers, Service winners, Service losers 6. Sustainability (Figure 2.2) 7. The Competitive Role of Information in Services (Figure 2.3) Creation of Barriers to Entry, Revenue Generation, Database Asset, Productivity Enhancement 8. The Virtual Value Chain (Figure 2.4) 9. Economics of Scalability (Table 2.4 and 2.5) 10. Limits in the Use of Information Anticompetitive, Fairness, Invasion of Privacy, Data Security, Reliability

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    Chapter 02 - Service Strategy 2 - 3 11. Using Information to Categorize Customers 12. Stages in Service Firm Competitiveness (Table 2.6) Available for Service, Journeyman, Distinctive Competence, World - Class Service Delivery TOPICS FOR DISCUSSION 1. Give examples of service firms that use the strategy of focus and differentiation and the strategy of focus and overall cost leadership . Reed College in Portland, Oregon, is a small private college that is focused primarily on an undergraduate education in liberal arts and sciences. The school differentiates itself from most other higher education institutions in such areas as the selectivity of its admissions requirements, the rigorousness of its courses, and the requirement of a research thesis for an undergraduate degree. Another firm that exemplifies the strategies of focus and differentiation is Amy's Ice Cream in Austin, Texas. Amy's is focused on kneading various condiments into the ice cream, a service that also is provided by a number of other firms. But, the servers at Amy's are accorded extraordinary freedom to interact with customers and it is the nature of this service encounter that differentiates Amy's from other ice creameries. Southwest Airlines is an example of firms that employ the strategies of focus and overall cost leadership. Southwest concentrates on serving a select geographic region at low cost. The airline achieves low cost by providing “no - frills” service, and it maximizes utilization of its assets by maintaining a quick turnaround practice at airports. United Services Automobile Association (USAA) is another example of an organization that has a well - defined focus, primarily that of providing insurance and financial services for American military officers and their families. The company is able to provide the lowest possible rates in the industry to its customers, in part, by doing business over the phone instead of using field agents. 2. What ethical issues are associated with micromarketing ? The ethical issue associated with micromarketing involves the customer's right to privacy. Scanner data and other personal information that target specific customers might be very beneficial for businesses, but the inappropriate use of the information can allow businesses to mislead or manipulate their customers. From an ethical standpoint, there must be some limits to the nature and amount of information a business can obtain from its customers. 3. For each of the three generic strategies (i.e., cost leadership, differentiation, and focus), which of the four competitive uses of information is most powerful ? Productivity enhancement is the most powerful use of information for achieving cost leadership , because it allows firms to reduce inventory, reduce waste, and eliminate paperwork, all of which save money. Improved productivity allows companies to make more efficient use of their assets, such as retail shelf space.

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    Chapter 02 - Service Strategy 2 - 4 Creating barriers to entry is the most powerful use of information for protecting a differentiation strategy. When customer loyalty is high, cost cutting by competitors is less effective. Switching costs can also create barriers to entry, for example, when suppliers use a computer order - entry network to establish a direct link to customers. Database assets are the most powerful use of information for building a focus strategy. These assets allow a company to develop profiles of their customers and their buying habits. This information allows the firm to develop new services and to be seen as responsive to its customers' needs. Advertising and distribution economies can be realized. 4. Give an example of a firm that began as world - class and has remained in that category. Federal Express and Disney come to mind. 5. Could firms in the “world - class service delivery” stage of competitiveness be described as “learning organizations’? Learning in organizations means the continuous testing of experience and the transformation of that experience into knowledge that is accessible to the whole organization and relevant to its purpose (see Senge, et.al., The Fifth Discipline Field Book , Doubleday, New York, pg. 49). Table 2.6 in the text shows that this definition is illustrated by the world - class service delivery category. Consider the following example comments: • Learning organizations raise customer expectations, seek challenges, and improve continuously. • A learning organization is proactive, develops its own capabilities, and generates opportunities • The learning organization regards the customer as a source of stimulation, ideas, and opportunities. • The workforce of a learning organization is innovative and creates new procedures. • Top management of a learning organization looks to front - line management as a source of ideas. 6. Compare and contrast sustainability efforts in service operations and manufacturing . At the outset, certain environmental wastes such as pollution generated by manufacturing plants are glaring problems in industrialized nations. Therefore, it is easy for most people to relate the physical nature of sustainability efforts to manufacturing. Such efforts include emission control and other measures to protect our air and water from contamination. Waste reduction through lean management and value recovery apply to service and manufacturing firms alike, however. Regulations by agencies such as EPA, WEEE, and RoHS apply equally to service firms. Beyond those regulations, service firms must build an image of responsible organizations that are committed to sustainability by cultivating a culture that eliminates negative impacts on environmental and social issues. S ervice firms have a responsibility equal to that of the manufacturing sector in achieving sustainability, especially for long - term viability of the firm.

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    Chapter 02 - Service Strategy 2 - 5 7. Conduct a triple bottom line evaluation for a hospital by identifying its social, economic, and environmental attributes that enhance the sustainability movement. Social: • Proper health education for all constituencies. • Free screening for essential medical issues. • Appropriate medical outsourcing. • Linking health and wellness programs for a holistic approach to health care. Economic: • Use of lean management for cost savings – e.g., process control, better materials management, better record - keeping, elimination of unnecessary tests. • Cost - efficient payment structure for medical access and health insurance Environmental: • Managing medical wastes – e.g., biodegradable products such as contaminated dressings. • Responsible medical disposals – e.g., used syringes. Overall, i n promoting health , hospitals need to use fewer resources (economic), provide support f or employee self esteem (social), and become bet ter stewards of their medical resources and products (environmental). INTERACTIVE CLASS EXERCISE The class divides and debates the proposition “Frequent flyer award programs are or are not anticompetitive.” The statement “Frequent flyer award programs are anticompetitive” was voiced following airline deregulation. The frequent flyer award is an attempt by airlines to create customer loyalty in a commodity market and to avoid price competition. Priceline.com and other Internet ticket sellers have reintroduced price competition making frequent flyer awards less effective.

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    Chapter 02 - Service Strategy 2 - 6 CASE: UNITED COMMERCIAL BANK AND EL BANCO 1. Compare and contrast the strategic vision of El Banco and United Commercial Bank. Service Delivery System Operating Strategy Service Concept Target Market Segments El Banco Spanish spoken Hispanic physical setting Franchise Low cost informal store fronts Fee based services Attract first time bank customers Latinos United Commercial Bank Chinese spoken Conservative Import - export services Branches in Chinese - American communities Offices in China, Taiwan, Hong Kong Loans to businesses High interest CDs Low fees Chinese - Americans 2. Identify the service winners, qualifiers, and service losers for El Banco and United Commercial Bank . Service Winners Qualifiers Service Losers El Banco Check cashing Money transfers Spanish spoken Informal location Lack of sophisticated services United Commercial Bank Low fees Import - export services Chinese spoken Soundness and safety Lowering interest rate on CDs 3. What are the differentiating features of banks that target ethnic communities ? • Products that match unique customer needs (trade finance, check cashing) • Well articulated cultural focus on target community (language, physical setting) • Convenient location accessible to community (ethnic population centers, places frequently visited by community members)

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    Chapter 02 - Service Strategy 2 - 7 CASE: THE ALAMO DRAFTHOUSE 1. Marketing analysts use market position maps to display visually the customers’ perceptions of a firm in relation to its competitors regarding two attributes. Prepare a market position map for Alamo Drafthouse using “food quality” and “movie selection” as axes. Movie Selection (+) Multiplex ( - ) Food Quality (+) Alamo ( - ) 2. Use the “Strategic Service Vision” framework to describe Alamo Drafthouse in terms of target market segments, service concept, operating strategy, and service delivery system. Target Market Service Concept Operating Strategy Service Delivery · 18 - 30 year old, male, alcohol consumers, cult film appeal · 25 - 40 year olds with sophisticated taste in films · Meal and 2 nd run or cult films · Single screen theater with every other row replaced with narrow tables · Low cost old theater · Inexpensive 2 nd run movies · Food made to order with less waste · Unobtrusive wait people · Acceptable sound and projection equipment · Excess capacity mid - day 3. Identify the service qualifiers, winners, and service losers for Alamo Drafthouse. Are the Alamo purchase decision criteria appropriate for the multiplex movie theater market? What do you conclude? Qualifiers include good sound system, reasonable prices for the meals, availability of beer and wine, and menu selection. A service winner is the unique “date” experience including the special events and film showing. Service losers include movie projection and sound that do not meeting minimal standards. For the multiplex movie theater market the qualifier is the desired movie showing, a winner would be convenient location and available time of showing, and the loser would be a long waiting line at the box office. The difference in the criteria would lead us to conclude that Alamo does not compete in the multiplex movie market . 4. Use Porter’s Five Forces Model to assess the strategic position of Alamo Drafthouse in the “entertainment industry.”

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    Chapter 02 - Service Strategy 2 - 8 5. Conduct a SWOT analysis to identify internal strengths and weaknesses as well as threats and opportunities in the external environment . Strengths • Small theater with kitchen is unique. • People in your market see dinning and movie combination as your strength. Weaknesses • Projection and sound quality could be improve d. • Attracting mid - week audience. Opportunities Threats Potential New Entrants - Availability of small theaters - First mover brand equity Competitive Rivalry within Industry - Restaurants, bars, live theater, live music - Only existing theater/restaurant Threat of Substitutes - Netflix and pizza delivered to home - All other entertainment options Bargaining Power of Suppliers - Second - run movies easy to obtain - Low volume food needs Bargaining Power of Customers - Price sensitivity - Movie selection - Food selection Porter’s Five Forces A ssessment of Alamo Drafthouse

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