Page 290 - DMGT522_SERVICES MANAGEMENT

Unit 14: Yield Management in Services

Notes

Did u know? If customer contact employees do not have adequate training to handle the
technology, it would be difficult to deliver the service.

Caselet Case: Will the Expansion Strategies of Tata Steel Pay

off?

ata Steel had been a flagship company of Indian conglomerate Tata Group. By 2006,
TTata Steel was the world’s 55th largest steel company with production capacity of 9
million tones (MT). Though it had been exporting to various countries for the past 25
years, it had yet to prove itself on the global scale. Tata Steel had an objective to increase
its production capacity to more than 30 MT and become a global company by 2015. Starting
its journey on the global growth path, Tata Steel made two major acquisitions namely,
Singapore based NatSteel in 2004 and Thailand based Millennium Steel in 2005. In October
2006, Tata Steel made a bid to acquire the world’s 9th largest steel company, UK based
Corus Group. If approved by Corus shareholders, the deal would create the world’s fifth-
largest steel firm and the largest Indian takeover of a foreign company. Besides, Tata Steel
had plans of capacity expansion in various countries through various projects. However,
the deal to acquire Corus was not finalised yet, as it took a new turn when Brazil’s CSN
(Companhia Siderugica Nacional) approached Corus’ board with a higher offer than Tata
Steel. Critics of Tata Group’s globalisation spree argued that the group had intended to
overpay for overseas acquisitions. Moreover, Ratan Tata, who had been leading Tata Steel
for more than 12 years, would retire in 2007 at the age of 70. The case highlights the
globalization aspirations of Tata Steel and the challenges ahead. It traces the journey of
Tata Steel from domestic company to global entity. The case presents a dilemma; would
Tata Steel be able to realise its ambitions of putting its brand name on the world map in
the volatile steel industry? How successful would its expansion strategies be?
Source: http://www.ibscdc.org/case-catalogues/Strategy_Case_Studies(Catalogue_II).pdf

Customer Interaction

Involving the customer in the service delivery process in place of your own employees can
enhance the productivity, e.g. a self service restaurant. However, there could be situations
where the customer is willing to pay more rather than ‘waitering’ himself. Hospitals are such
examples where customers don’t want to participate in the production of services but want to
leave everything on the hospital staff.

Note One has to understand consumer behaviour and the causes of such a behaviour
before educating and expecting the customer to participate in the production process.
Lovelock and Young in an article, “Look to Consumers to Increase Productivity” observed that
in many services, attempts to improve productivity are likely to fail unless the support of
consumers can be secured. On the contrary, many service organisations, in their search for
operating efficiency, see consumers as a nuisance, a constraint and a barrier to productivity.
Taking five different examples where service organisations tried to improve productivity by
automation, self-service operations, uniform product code, uniform postal code and promoting

LOVELY PROFESSIONAL UNIVERSITY 285