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Service Marketing

Service Marketing






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    Service Marketing Service Marketing Document Transcript

    • Q.1) Write a brief sketch for developing a customer conscious frontline staff fora hotel business.
    • INTRODUCTIONFrom the beginning of the “customer service revolution” almost 20 years ago, a bodyof business research has focused on customer satisfaction and customer-focusedorganizations.1 Business consultants, corporations and others have worked to identify thecharacteristics of organizations that consistently please their customers, to develop toolsfor monitoring customer satisfaction, and to build continuous, quality improvementsystems that respond to consumer feedback.Although much of the research has been conducted by and for the corporate world,customer service and satisfaction is not limited to the private sector. Publicly fundedorganizations that are incorporating practices developed in the business world providea growing body of experience and study. Increasingly, federal, state and localgovernmentagencies are attempting to gauge their performance and the effect on those they directlyserve. Throughout the public sector, initiatives to “reinvent” government—includingeducation reform, privatization, and managed care—have elevated customer service andsatisfaction to new priorities. Within the European Union, a shift is underway to re-thinkand reform social services with social inclusion and “user involvement” as driving forcesin quality improvement.Service QualityMany characteristics that are associated with service quality.Business researchersBenjamin Schneider and David Bowen assert that “service organizations must meet threekey customer needs to deliver service excellence:security, esteem, and justice.9 Researchidentifies an array of service quality factors that are important for customers, including: • timeliness and convenience, • personal attention, • reliability and dependability, • employee competence and professionalism, • empathy, • responsiveness, • assurance, • availability, and • tangibles such as physical facilities and equipment and the appearance of the personnel.Organizations take different approaches to identifying customer service standards andthey vary in detail. Emanuel Medical Center uses “CARING” as an acronym for its sixcustomer service standards, which are printed on the back of ID badges, flashed acrosscomputers as screen savers, printed on T-shirts, and posted prominently throughout thehospital: • Customers first • Initiate contact • Accept responsibility • Nurture others • Reach out and help • Give attention to detail. 36
    • FRONTLINE STAFF: THE FACE OFCUSTOMER-ORIENTED ORGANIZATIONSIn many areas, customer satisfaction ultimately boils down to the customer’s contactwith frontline staff. Capable, empowered frontline staff put customer-focused missionstatements, standards and culture into practice.Thunderbird Samaritan Medical Center in the Phoenix suburb of Glendale improvedthe satisfaction of hospital patients from the 10th percentile nationally to the 90thpercentilein two years. Hospital leaders created the Service Excellence Initiative and shifted“from counting beans to caring for the fieldworkers.” Here is how they summed it up:“Of the lessons learned in this initiative, the most salient may be the importanceof staying focused on the most important asset: our people.The Golden Rule: Treat Employees WellResearch consistently shows that the way employees are treated by their management hasadirect impact on the way those employees treat the businesses’ customers.41 Thistranslatesin to a single principle that high performing customer service organizations share: Treatyour employees as you want them to treat your customers. As Bill Marriott, Jr., chairmanof Marriott Hotels, says: “Motivate employees, train them, care about them, and makewinners of them. At Marriott we know that if we treat our employees correctly, they’lltreat the customers right. And if the customers are treated right, they’ll come back.to satisfy customers, staff need tools, including thorough training, flexibility andempowerment to solve problems and satisfy customers. To know that the organizationvalues them, frontline staff also need recognition and rewards for strong performance.A. Selecting and Preparing Customer Service Staff • HiringThe first step for focusing staff on customer service is hiring the right people. For agrowing number of companies and government agencies, a pre-employment videonarrows the applicant pool to those who will help the organization accomplish itsmission of customer satisfaction. For example, the Emanuel Medical Center videomakes the organization’s mission and expectations clear by stressing the hospital’s“non-negotiable standards of patient care.” It encourages individuals to proceedwith the application process only if they share Emanuel’s philosophy and standards. • Orientation and TrainingCustomer service leaders place heavy emphasis on instilling a customer-first culturethroughout their organizations by training new employees and reinforcing a customerfocus with current employees.B. Empowering Employees to Satisfy CustomersHiring, orientation and training of staff are common ways of focusing employees
    • on customer service. Employee empowerment—giving employees the flexibility andleeway to satisfy customers—is less widely practiced. However, studies show that it canlead to improved customer service and increased customer satisfaction and that it isenergizing and highly motivating for employees.C. Recognizing and Rewarding Employee PerformanceA common practice among successful service organizations is constant recognition,reward and praise for employees who provide outstanding customer service. This cantake many forms; it does not always need to be expensive to be effective.Three different forms of commitment have been identified: instrumental, relational, andvalues-based.1. Instrumental commitment: this occurs when customers are convinced that no otheroffer or company could do a better job of meeting their needs. They are not just verysatisfied, but unbeatably satisfied. All expressed and latent needs have been met. When acustomer feels that his or her bank has the best products, the best access, the bestprocesses, the lowest interest rates on loans and the best reputation, he or she iscommitted.2. Relational commitment: customers can become highly attached to a companyspeople. An emotional tie may be formed with an individual person, a work group or thegeneralized company as a whole. Customers who talk about my banker or mymechanic or my builder are expressing this attachment. They feel a sense of personalidentification with that individual. Often, these are employees who break the rules or go the extra mile to completely satisfy customers.3. Values-based commitment: customers become committed when their values arealigned with those of the company. Values can be defined as follows:Values are core beliefs that transcend context and serve to organize and direct attitudesand behaviours.A number of companies benefit from values-based commitment: Body Shop, John Lewis,Harley Davidson, Co-operative Bank and Virgin.H Body Shop International, the health and beauty retailer, was founded by Anita andGordon Roddick. The companys values include a refusal to source products tested onanimals, and support for community trade, human rights and the environment. Asuccessful and influential business was developed on the back of these values. Body Shopinfluenced other retailers to become more sensitive to these issues.
    • Q-2) Describe the factors that influence the choice of location of service site?Ans:- These criteria - accessibility and availability - must be given priority in alldecisions about services distribution. In this section the idea of place will be consideredin terms of the location and time of the service delivery. This needs to be consideredbefore any decisions regarding the use and selection of channels of distribution (reviewedin the next section) can be made.There are several key factors to be considered in decisions about service location: • Service inseparability • Perish ability • The role of the consumer as co-producer of the service • Customer needs and wants • Importance of geographical location as part of the service • Target marketsService inseparabilitySome services are more inseparable than others; a hairdresser has to perform a service ona person-to-person basis with clients whereas credit card customers are happy to be ableto use the credit card for cash or payments at vast numbers of locations without directcontact with the credit card company on each occasion.The degree of direct access to the central service provider required will influence channeldecisions. Many services are now provided using telephone contact and other forms oftelecommunications and direct marketing: First Direct provide a complete telephonebanking service as" Direct Line does for insurance. Neither operation has actual branchoffices on the high street; all contact is remote.Direct mail is used to promote the services offered by many service organisations andservice exchanges can frequently be carried out by mail, such as applying for a loan orresponding to a charity appeal.Perish abilityThis is another area where service marketing differs quite distinctly from the marketingof physical goods. A key function traditionally performed by channel members is to holdinventory - stocks of physical goods held in ware houses for onward transportation tomarkets or, in the case of retailing, for example, stocks on the shelves for local customersto buy. Services cannot be stored in this way, so intermediary’s playa different role .infacilitating the service exchange and often form part of the service production anddelivery process.The role of the consumer as co-producer of the serviceThe role of intermediaries in the production and delivery of a service has already beennoted but there is another vital issue to be considered - the role of the consumer. Manyservices require extensive interaction on the part of the consumer in order for the serviceto have any value; the audience must go to the theatre, the customer must study the menuand place an order to eat at a restaurant. Customer needs must therefore be given prioritywhen making decisions about when and where the service will be available. Theatrical
    • performances given in the mornings might be highly accomplished but would be of littlevalue if there were nobody watching.Customer needs and wantsAs stated, customer needs are a key factor influencing decisions about servicesdistribution. These are likely to differ between various customer segments using the sameservices and between different types of service offering:Some customers may be willing to collect their own take-away meals while others willalways choose an outlet which offers delivery.Elderly or housebound persons may require home visits from doctors or chiropodists andwill be the main consumers of specific home-based services such as meals on wheelsand home helps.Some consun1ers may rate convenience as the key benefit sought in selecting a servicewhereas others may seek exclusivity. The latter group will be prepared to travel and putmore effort into their participation in the service delivery by, for example, being preparedto queue to get into the best nightclub or to make a reservation weeks or months inadvance for seats at the opera or a table at a gourmet restaurant.Bank customers may be willing to visit their local branch to conduct day-to-daytransactions but may prefer a bank representative to visit them at home to discuss lifeinsurance, pensions or mortgages.Buyer behaviour and the factors influencing service choice between different targetsegments are essential considerations in location decisions.Target marketsLocation decisions are influenced by all the factors outlined above. The key criteria,however, is to make the service accessible and available to all target market segments.Service providers can choose where to locate their service outlets, or where to providetheir service in order to maximise their market opportunities, in all cases except thosewhere to service is location specific (tourist destinations and historic site for example).Factors influencing such decisions include: • Market size and structure by geographical region • Location of potentially attractive consumer segments • Organisational objectives • Level of market coverage desired • Number and type of competitors in region • Local infrastructure; good road access, facilities, public transport network • Distribution methodThe distribution methods selected will have an impact on location decisions:First Direct offers an innovative telephone banking service to all its consumersthroughout the UK with no branch offices and all transactions conducted by telephone.The service is made available to customers via a twenty-four-hour telephone line, staffedby highly trained customer service personnel. In order to make the service accessible,however, this type of distribution strategy relies on widespread promotion to attract andinform potential customers, rather than local branches.
    • Q-3 ) What are the various methods of pricing used for service products?Following are the various methods of pricing used in service products, which can bedescribed as follows:Competition-based pricing: Setting the price based upon prices of the similar competitor products.Competitive pricing is based on three types of competitive product: • Products have long distinctiveness from competitors product. Here we can assume o The product has low price elasticity. o The product has low cross elasticity. o The demand of the product will rise. • Products have perishable distinctiveness from competitors product, assuming the product features are medium distinctiveness. • Products have little distinctiveness from competitors product. assuming that: o The product has high price elasticity. o The product has some cross elasticity. o No expectation that demand of the product will rise.The pricing is done based on these three factors: 1. Cost-plus pricingCost-plus pricing is the simplest pricing method. The firm calculates the cost ofproducing the product and adds on a percentage (profit) to that price to give the sellingprice. This method although simple has two flaws; it takes no account of demand andthere is no way of determining if potential customers will purchase the product at thecalculated price.Price = Cost of Production + Margin of Profit. 2. Creaming or skimmingSelling a product at a high price, sacrificing high sales to gain a high profit, therefore‘skimming’ the market. Usually employed to reimburse the cost of investment of theoriginal research into the product - commonly used in electronic markets when a newrange, such as DVD players, are firstly dispatched into the market at a high price. Thisstrategy is often used to target "early adopters" of a product/service. These early adoptersare relatively less price sensitive because either their need for the product is more thanothers or they understand the value of the product better than others. This strategy isemployed only for a limited duration to recover most of investment made to build the
    • product. To gain further market share, a seller must use other pricing tactics such aseconomy or penetration.[1] 3. Limit pricingA limit price is the price set by a monopolist to discourage economic entry into a market,and is illegal in many countries. The limit price is the price that the entrant would faceupon entering as long as the incumbent firm did not decrease output. The limit price isoften lower than the average cost of production or just low enough to make entering notprofitable. The quantity produced by the incumbent firm to act as a deterrent to entry isusually larger than would be optimal for a monopolist, but might still produce highereconomic profits than would be earned under perfect competition. The problem with limitpricing as strategic behavior is that once the entrant has entered the market, the quantityused as a threat to deter entry is no longer the incumbent firms best response. This meansthat for limit pricing to be an effective deterrent to entry, the threat must in some way bemade credible. A way to achieve this is for the incumbent firm to constrain itself toproduce a certain quantity whether entry occurs or not. An example of this would be ifthe firm signed a union contract to employ a certain (high) level of labor for a long periodof time.Loss Leader:In the majority of cases, this pricing strategy is illegal under EU and US Competitionrules. No market leader would wish to sell below cost unless this is part of its overallstrategy. The idea of selling at a loss may appear to be in the public interest and thereforenot often challenged. Only when the leader pushes up prices, it then becomes suspicious.Loss leadership can be similar to predatory pricing or cross subsidization; both seen asanticompetitive practices.Market-oriented pricing:Setting a price based upon analysis and research compiled from the targeted market.Penetration pricing:The price is deliberately set at low level to gain customers interest and establishing afoot-hold in the market.Price discrimination:Setting a different price for the same product in different segments to the market. Forexample, this can be for different ages or for different opening times, such as cinematickets. Market orientated pricing is also a very simple form of pricing used by very newbusinesses. What it involves is, setting the price of your product/service according toresearch conducted on your target market
    • Premium pricing:Premium pricing is the practice of keeping the price of a product or service artificiallyhigh in order to encourage favorable perceptions among buyers, based solely on the price.The practice is intended to exploit the (not necessarily justifiable) tendency for buyers toassume that expensive items enjoy an exceptional reputation or represent exceptionalquality and distinction.Predatory pricing:Aggressive pricing intended to drive out competitors from a market. It is illegal in someplaces.ive never been there but i read about it..... in a bookContribution margin-based pricing:Contribution margin-based pricing maximizes the profit derived from an individualproduct, based on the difference between the products price and variable costs (theproducts contribution margin per unit), and on one’s assumptions regarding therelationship between the product’s price and the number of units that can be sold at thatprice. The products contribution to total firm profit (i.e., to operating income) ismaximized when a price is chosen that maximizes the following: (contribution marginper unit) X (number of units sold).Psychological pricing:Pricing designed to have a positive psychological impact.For example, selling a product at £3.95 rather than £4.Dynamic pricing:A flexible pricing mechanism made possible by advances in information technology, andemployed mostly by Internet based companies. By responding to market fluctuations orlarge amounts of data gathered from customers - ranging from where they live to whatthey buy to how much they have spent on past purchases - dynamic pricing allows onlinecompanies to adjust the prices of identical goods to correspond to a customer’swillingness to pay. The airline industry is often cited as a dynamic pricing success story.In fact, it employs the technique so artfully that most of the passengers on any givenairplane have paid different ticket prices for the same flight.Price leadership:An observation made of oligopic business behavior in which one company, usually thedominant competitor among several, leads the way in determining prices, the others soonfollowing.
    • Target pricing:Pricing method whereby the selling price of a product is calculated to produce aparticular rate of return on investment for a specific volume of production. The targetpricing method is used most often by public utilities, like electric and gas companies, andcompanies whose capital investment is high, like automobile manufacturers.Target pricing is not useful for companies whose capital investment is low because,according to this formula, the selling price will be understated. Also the target pricingmethod is not keyed to the demand for the product, and if the entire volume is not sold, acompany might sustain an overall budgetary loss on the product.Absorption pricing:Method of pricing in which all costs are recovered. The price of the product includes thevariable cost of each item plus a proportionate amount of the fixed costs. A form of costplus pricing.Marginal-cost pricing:In business, the practice of setting the price of a product to equal the extra cost ofproducing an extra unit of output. By this policy, a producer charges, for each productunit sold, only the addition to total cost resulting from materials and direct labor.Businesses often set prices close to marginal cost during periods of poor sales. If, forexample, an item has a marginal cost of $1.00 and a normal selling price is $2.00, thefirm selling the item might wish to lower the price to $1.10 if demand has waned. Thebusiness would choose this approach because the incremental profit of 10 cents from thetransaction is better than no sale at all.Q-4 ) Explain briefly the conceptual model of service quality.Principles of service qualityReceiving a high level of service is important to consumers but understanding how toevaluate the service quality received is more difficult.When discussing the concept of service quality, three underlying principles should bekept in mind. 1. Service quality is more difficult for the consumer to evaluate than the quality of good. 2. Service quality is based on consumers’ perception of the outcome of the service & their evaluation of the process by which the service was performed.
    • 3. Service quality perceptions result from a comparison of what the consumer expected prior to the service & the perceived level of service received.Measuring service qualityWhen evaluating service quality, consumer examines five dimensions: • Tangibles, • Reliability • Responsiveness • Assurance • Empathy 1. Tangibles: It includes service provider’s physical facilities, their equipment and the appearance of employees. 2. Reliability: It is the ability of service firms to perform the service promised dependably and accurately. 3. Responsiveness: It is the willingness of firm staff to help costumers and to provide them with promotes service. 4. Assurance: It refers to the knowledge and courtesy of the companies’ employees and their ability to inspire trust and confidence in the costumer. 5. Empathy: It is caring individualized attention the service firm provides each costumerUSING SERVQUAL to Measure service qualityThe SERVQUAL model was developed by A. Parasuraman and colleges in the USA.Like SERVQUAL is based on the expectations disconfirmation approach known asdisconfirmation paradigm.A test instrument called SERVQUAL was developed to measure service quality. TheSERVQUAL instrument was based on the premise that service quality is the differencebetween customers’ expectation and their evaluation of the service they received. Thefirst part of questionnaire asks customers to indicate the level of service the would expectfrom a firm in a particular industry. The second part of questionnaire asks customers toevaluate the service performed by the specific service firm. GAP THRORY is the methodfor calculating service quality that involves subtracting a customer s perceived level ofservice received from what was expected.
    • The conceptual Model of service quality (The Gap Model) • Gap 1 is the gap between what the customer expects and what the company’s management thinks customers expect. • Gap 2 is the gap that occurs when management fails to design service standards that meet customer expectations. • Gap 3 occurs when the company’s service delivery systems – people, technology and processes – fail to deliver to the specified standard • Gap 4 occurs when the company’s communications with customers promise a level of service performance that people, technology and processes cannot deliver. • Gap 5 is the product of gaps 1, 2, 3 and 4. If these four gaps, that separates the customer from the company, are closed then gap 5 will close. The gaps are as follows.
    • Q-5 ) Discuss the role of service sector in the Indian economy.The economy of India, measured in USD exchange-rate terms, is the twelfth largest in theworld, with a GDP of $1.2 trillion (2008). Recently, Indias growth has moderated due tothe world recession, but before it recorded a GDP growth rate of 9.1% for the fiscal year2007–2008 which makes its growth the second fastest among emerging economies in theworld, after China At this rate of sustained growth many economists forecast that Indiawould, over the coming decades, have a more pronounced economic effect on the worldstage. Despite this phenomenal rate of growth, Indias large population has an estimatedper capita income of $3,963, measured by PPP, and $941, measured in nominal terms, asof 2007.Indias economy is diverse and consist of various activities including manufacturing,agriculture and services. Although most of the Indian workforce still earns its livelihooddirectly or indirectly through agriculture and manufacturing, high tech services are agrowing sector and play an increasingly important role in Indias economy. The advent ofthe digital age, and the large number of young and educated populace fluent in English, isgradually transforming India as an important back office destination for globaloutsourcing of customer services and technical support. India is a major exporter ofhighly-skilled workers in software and financial services, and software engineering.Other sectors like manufacturing, telecommunication, shipbuilding, aviation , tourismand retailing are showing strong potentials with higher growth rates.India followed a socialist-inspired approach for most of its independent history, withstrict government control over private sector participation, foreign trade, and foreigndirect investment. However, since the early 1990s, India has gradually opened up itsmarkets through economic reforms by reducing government controls on foreign trade andinvestment. The privatisation of publicly owned industries and the opening up of certainsectors to private and foreign interests has proceeded slowly amid political debate.India faces a fast-growing population and the challenge of reducing economic and socialinequality. Poverty remains a serious problem, although it has declined significantly sinceindependence.Sectors AgricultureTea plantation in Assam, eastern India. India is the largest producer and consumer ofblack tea in the world.[56]Farmers work inside a rice field in Andhra Pradesh. India is the second largest producerof rice in the world[57] and Andhra Pradesh is the 3rd largest rice producing state in India.[58]
    • Composition of Indias total production (million tonnes) of foodgrains and commercialcrops, in 2003–04.India ranks second worldwide in farm output. Agriculture and allied sectors like forestry,logging and fishing accounted for 16.6% of the GDP in 2007, employed 60% of the totalworkforce[48] and despite a steady decline of its share in the GDP, is still the largesteconomic sector and plays a significant role in the overall socio-economic developmentof India. Yields per unit area of all crops have grown since 1950, due to the specialemphasis placed on agriculture in the five-year plans and steady improvements inirrigation, technology, application of modern agricultural practices and provision ofagricultural credit and subsidies since Green revolution in India. However, internationalcomparisons reveal that the average yield in India is generally 30% to 50% of the highestaverage yield in the world.[59]The low productivity in India is a result of the following factors: • Illiteracy, general socio-economic backwardness, slow progress in implementing land reforms and inadequate or inefficient finance and marketing services for farm produce. • The average size of land holdings is very small (less than 20,000 m²) and is subject to fragmentation, due to land ceiling acts and in some cases, family disputes. Such small holdings are often over-manned, resulting in disguised unemployment and low productivity of labour. • Adoption of modern agricultural practices and use of technology is inadequate, hampered by ignorance of such practices, high costs and impracticality in the case of small land holdings. • Irrigation facilities are inadequate, as revealed by the fact that only 52.6% of the land was irrigated in 2003–04,[60] which result in farmers still being dependent on rainfall, specifically the Monsoon season. A good monsoon results in a robust growth for the economy as a whole, while a poor monsoon leads to a sluggish growth.[61] Farm credit is regulated by NABARD, which is the statutory apex agent for rural development in the subcontinent.India does have multiple farm insurance companies that insure wheat, fruit, rice andrubber farmers in the event of natural disasters or catastrophic crop failure. One notiblecompany that provides all of these insurance policies is agriculture insurance company ofindia and it alone insures almost 20 million farmers. India has more than 500 farminsurance companies of various size that operate under the supervision of the Ministry ofAgriculture.Industry
    • India has one of the worlds fastest growing automobile industries[62][63] and is hope to beglobal leader of auto industry.[64] Shown here is Tata Motors Nano, worlds leastexpensive car in production.[65]India is fourteenth in the world in factory output. They together account for 27.6% of theGDP and employ 17% of the total workforce.[48] However, about one-third of theindustrial labour force is engaged in simple household manufacturing only.[67]Economic reforms brought foreign competition, led to privatisation of certain publicsector industries, opened up sectors hitherto reserved for the public sector and led to anexpansion in the production of fast-moving consumer goods.[68]34 Indian companies have been listed in the Forbes Global 2000 ranking for 2008.[70] The10 leading companies are: Market Revenue Profits Assets World Value Company Logo Industry (billion (billion (billionRank (billion $) $) $) $) Reliance Oil & Gas 193 26.07 2.79 30.67 89.29 Industries Operations Oil and Natural align="left" | Oil & 198 align="left" 18.90 4.11 33.79 54.11 Gas Corporation Gas Operations State Bank of 219 Banking 15.77 1.47 188.56 33.29 India Indian Oil Oil & Gas 303 42.68 1.82 25.39 16.36 Corporation Operations 374 ICICI Bank Banking 9.84 0.64 91.07 29.85 align="left" | 411 NTPC align="left" 7.84 1.60 20.34 41.57 Utilities Steel Authority 647 Materials 7.88 1.45 8.05 26.37 of India Limited 738 Tata Steel Materials 5.83 0.97 11.48 14.63 Telecommunications 826 Bharti Airtel 4.26 0.94 6.61 39.16 Services Reliance Telecommunications 846 File:Relcomm.gif 3.13 0.65 13.08 29.63 Communications ServicesServicesInfosys headquarters in Bangalore, one of the largest software companies in India.
    • India is fifteenth in services output. It provides employment to 23% of work force, and itis growing fast, growth rate 7.5% in 1991–2000 up from 4.5% in 1951–80. It has thelargest share in the GDP, accounting for 55% in 2007 up from 15% in 1950.[48] Businessservices (information technology, information technology enabled services, businessprocess outsourcing) are among the fastest growing sectors contributing to one third ofthe total output of services in 2000. The growth in the IT sector is attributed to increasedspecialization, and an availability of a large pool of low cost, but highly skilled, educatedand fluent English-speaking workers, on the supply side, matched on the demand side byan increased demand from foreign consumers interested in Indias service exports, orthose looking to outsource their operations. Indias IT industry, despite contributingsignificantly to its balance of payments, accounted for only about 1% of the total GDP or1/50th of the total services in 2001[71] However the contribution of IT to GDP increased to4.8 % in 2005-06 and is projected to increase to 7% of GDP in 2008[72][73]Banking and financeStructure of the organised banking sector in India. Number of banks are in brackets.[74]The Indian money market is classified into: the organised sector (comprising private,public and foreign owned commercial banks and cooperative banks, together known asscheduled banks); and the unorganised sector (comprising individual or family ownedindigenous bankers or money lenders and non-banking financial companies (NBFCs)).The unorganised sector and microcredit are still preferred over traditional banks in ruraland sub-urban areas, especially for non-productive purposes, like ceremonies and shortduration loans.[75]Since liberalisation, the government has approved significant banking reforms. Whilesome of these relate to nationalised banks (like encouraging mergers, reducinggovernment interference and increasing profitability and competitiveness), other reformshave opened up the banking and insurance sectors to private and foreign players.External trade and investmentGlobal trade relationsIncreasing foreign trade has resulted in rapid expansion of Indias shipping industry.Shown here is the newly constructed Mundra Port in Gujarat.India currently accounts for 1.2% of World trade as of 2006 according to the WTO. Untilthe liberalisation of 1991, India was largely and intentionally isolated from the worldmarkets, to protect its fledging economy and to achieve self-reliance. Foreign trade wassubject to import tariffs, export taxes and quantitative restrictions, while foreign directinvestment was restricted by upper-limit equity participation, restrictions on technologytransfer, export obligations and government approvals; these approvals were needed fornearly 60% of new FDI in the industrial sector. The restrictions ensured that FDIaveraged only around $200M annually between 1985 and 1991; a large percentage of the
    • capital flows consisted of foreign aid, commercial borrowing and deposits of non-residentIndians.Q-6) Discuss the strategies for managing demand and supply? Also discuss the fourcommon types of constraints faced by service businesses?Managing Supply and Demand  Most services cannot place output in inventory. Sometimes this creates tremendous problems matching supply with demand.Managing Supply and Demand  Two options: – Manage supply (capacity management) • time, labor, equipment, facility constraints • watch carefully: employee satisfaction – Manage demand • market needs constraints • watch carefully: customer satisfactionConstraints on Capacity  Time – legal, consulting, accounting, medical  Labor – legal, consulting, accounting, medical  Equipment – delivery services, telecommunication, health club  Facilities – hotels, restaurants, hospitals, airlines, schools, theaters, churchesCapacity Management (matching supply to demand)
    • The obvious goals are to:(1) Reduce demand in peak periods(2) Increase demand when there is excess capacityReservations systemFormalized queuing systemsQueuing Strategy: Market Segmentation  Essence: divide the market into segments according to (a) customer needs and/or (b) business priorities.  urgency of the job  payment of premium price  duration of service transaction  importance of customer • (customers are not all created equal)Balancing Demand and Productive Capacity • Fluctuations in Demand Threaten Service Productivity • Capacity-Constrained Service Organizations • Patterns and Determinant of Demand • Managing Demand Levels • Inventory Demand through Waiting Lines and Reservations • Minimize Perceptions of Waiting Time • Create an Effective Reservations SystemFluctuations in Demand: From Excess Demand to Excess CapacityFour conditions potentially faced by fixed-capacity services: • Excess demand – Too much demand relative to capacity at a given time • Demand exceeds optimum capacity – Upper limit to a firm’s ability to meet demand at a given time • Optimum capacity
    • – Point beyond which service quality declines as more customers are serviced • Excess capacity – Too much capacity relative to demand at a given timeCapacity Constrained: Defining Productive Capacity in Services • Physical facilities to contain customers • Physical facilities to store or process goods • Physical equipment to process people, possessions, or information • Labor used for physical or mental work • Public/private infrastructureAlternative Capacity Management Strategies • Level capacity (fixed level at all times) • Stretch and shrink – Offer inferior extra capacity at peaks (e.g., bus/train standees) – Vary seated space per customer (e.g., elbow room, leg room) – Extend/cut hours of service • Chase demand (adjust capacity to match demand) • Flexible capacity (vary mix by segment)The four common types of constraints faced by service business are:-  . Customers are active, not passive  . Lack of control of the electronic environment  . Price competition  . Inability to customize with highly standardized servicesCustomers Are Active, Not Passive, and Must Be Enticed Traditional advertisingmedia such as magazines and television consider the customer a passive receiver of theirmessages. If the customer is reading an article or watching a television program, he willmost likely see the advertisement. While we know that not all customers stay in the roomfor a television advertisement, most of us see hundreds of ads a day and accept this as an
    • inevitable by-product of consuming entertainment and informational media. The user ofthe Web, however, is different:Lack of Control of the Electronic Environment It did not take long for the Internet toface the challenges of unregulated media. As soon as the network became popular,pornographic and other controversial material started to appear. When a servicesadvertising or information appears in proximity to such material, the result can be anegative spill over effect. It is similar to the challenge advertisers face in using printmedia such as TV Guide-the advertiser has to be careful to separate its advertising forbanking from the ever-present ads on balding-concealment devices and quick weight-lossprograms. With the TV Guide, however, the advertiser could request or pay for the rightpositioning, something not possible on the Internet at this time.Price Competition One of the traditional differences between goods and services hasbeen the difficulty of directly comparing features and prices of services with each other.Whereas goods can typically be compared in retail settings, few retail settings exist thatoffer services from multiple sources. The Internet has changed all that. Services such asCompareNet and Priceline.com make it simple for customers to compare prices for awide variety of services. Compare Net is a broker that will compare products and servicesfeature for feature and price for price in an online version of information similar toConsumer Reports. Priceline.com is even more revolutionary. It allows customers toname their price for a service such as an airline ticket, wait until Priceline.com finds anairline willing to accept it, then purchase the ticket. Never has the customer has suchability to bid on prices for services. In a later chapter, we describe another type. of pricecompetition spawned by the Internet: the Internet auction as presented by such companiesas eBay, which sells more than one million products and services in more than 1,000categories.Inability to Customize with Highly Standardized Electronic Services- Some of youhave experienced learning basic college courses through large, video-transmitted courses.If you consider what you missed in learning that way compared with learning directlyfrom a professor, you will understand this challenge. In mass sections, you cannotinteract directly with the professor, ask questions, raise points for clarification, orexperience the connection that you receive in person. In electronic classes-as invideoconferences that are springing up in many businesses-the quality of the service canalso be impeded by the way the audience reacts (or doesnt react) in those situations.People talk among themselves, leave, laugh, and criticize, among other behaviours.