6. service strategy


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6. service strategy

  1. 1. Strategy: Introduction A strategy consists of a combination of competitive moves and business approaches that managers employ to please customers, compete successfully and achieve organisational objectives.
  2. 2. Strategic planning process There are at least eleven questions that need to be answered accurately to formulate strategies. These are:(I) What should be our business.(II) What is our business(III) How should the business be developed(IV) How should the customers be satisfied(V) How should competition be dealt with(VI) What should be the response to everchanging market conditions(VII) How should strategic and financial results be achieved(VIII) How should the functional units in the organization be managed and coordinated(IX) How should the relationship with customer suppliers and other influencers be managed(X) How can stakeholders be satisfied(XI) What is value to customer
  3. 3. Steps in strategic planning process(I) Business mission(II) SWOT analysis(III) Strategy formulation(IV) Strategy implementation(V) Strategy evaluation and control
  4. 4. Business mission It is a value statement around which the entire corporate strategy revolves. Peter F. Drucker said that defining the purpose and mission of business is difficult, painful and risky. But this alone enables a business to set objectives, develop strategies, concentrate its resources and go to work. A mission statement:(I) Should define What the organization is and what it aspires to be(II) Should be limited to exclude some ventures and broad enough to allow for creative growth(III) Should distinguish a given organization from all others(IV) Should serve as framework for evaluating both current and prospective activities(V) Should be stated in terms sufficiently clear to be widely understood throughout the future.
  5. 5. SWOT ANALYSIS Under SWOT analysis strengths are matched with opportunities and weaknesses are matched with threats and then measures are taken to overcome those threats.
  6. 6. Strategy formulation In formulation of strategy it is necessary to take into consideration the full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness. The SWOT analysis provides necessary strategic inputs for effective strategy formulation and implementation. In the words of Michael porter, competitive strategy is about being different. Porter suggested five distinct competitive strategies which will benefit service organisations.
  7. 7. (I) Low cost provider strategy(II) Differentiation strategy(III) Best cost provider strategy(IV) Focused strategy (niche market) based on lower cost(V) Focused strategy (niche market) based on differentiation
  8. 8. Market oriented service strategy In designing strategy, service firms need to differentiate themselves from manufacturing organisations. They have to take market sensitivities in relation to service characteristic into consideration in deciding the strategic approach to achieve organisational goals. The conventional market thinking provides three thumb rules for strengthening the competitive edge of a firm. These three rules are(I) Decrease in cost of production(II) Enhancement of promotional budget(III) Development of new products.
  9. 9. Strategic management trap Financial problems or increasing competition Decision Deteriorating concerning corporate internal image efficiency Deteriorati Unsatisfied customer ng service quality More traditional Unsatisfied marketing customer efforts Deteriorating Deteriorating internal service quality atmosphere
  10. 10.  Let us assume that service organization is facing either financial problem or increased competition. The first option for management is to achieve internal efficiency to reduce cost. The decision on internal efficiency often results in reduction of personnel, introduction of self service, increase in the work load of employees, automation and so on. In the manufacturing sector such decision may improve productive efficiency but in service organisations chances of such happening is rare.
  11. 11.  When a service organisation chooses the second strategy of spending heavily on promotion with an intention to attract the market, it may succeed in increasing the demand for services. However, the reduced internal efficiency dissatisfies the customers. As a result of all these activities, the corporate image of organisation weakens and the problems of company multiply. When the image of company is low, even the introduction of new product does not save the organisation. A vicious circle gets formed when once the organisation gets into the strategic management trap and it leads to multiple problems.
  12. 12. Service oriented approach Service organisations should develop a service- oriented strategic approach to tackle problems in marketing. The result of a service oriented strategic approach to handle the same problem will be different.
  13. 13. Financial problem 2.Improved 1. Improving perceived buyer seller service interaction quality 6.Increasing 3.More sales volume satisfied customer 5.improving 4.Improving corporate internal image atmosphere
  14. 14. The service triangle company(top management) Internal marketing external marketing Employees interactive marketing customers
  15. 15.  One of the most popular strategic models for service marketing was developed by Christian Gronross. The model is called service triangle. He has identified three different groups that play important role in successfully accomplishing organisational goals. They are company, employees and customers. The model calls for a special marketing program between the company and its employees which is termed as internal marketing. The second marketing program is between the company and its customers and is termed external marketing. The third marketing program is between employees and customers and is termed interactive marketing.
  16. 16. Three dimensions of servicestrategy As culture A basic set of values and belief about the central importance of customer guides the firm to formulate its corporate philosophy As strategy Concerned with market segmentation, targeting, positioning As tactics Design and implementation of marketing
  17. 17.  The basic set of values and beliefs of the customer should guide and organisation to formulate its corporate philosophy. An analysis of customer need must be the basic input material for designing market attractiveness strategies. The culture thus evolved from the market feedback should reflect the overall value proposition of the company.
  18. 18. Service oriented organisationstructure: OLD Top management Middle management Bottom line
  19. 19. Service oriented organisationstructure: NEW Front line Support personnel Top management
  20. 20. Strategy formulation andimplementation Strategy formulation requires good conceptual, integrative and analytical skills but strategy implementation requires special skills in motivating and managing others. Strategy formulation occurs at the corporate level of organisation, while strategy implementation permeates all hierarchical levels. Strategy formulation requires coordination among few individuals but strategy implementation require coordination among many.
  21. 21. Strategy evaluation and control To have an effective control following things has to be designed:(I) Establishment of evaluation criteria and standards(II) Measuring and comparing performance(III) Identification and analysis of performance gaps(IV) Initiating corrective measures