Page 94 - DMGT522_SERVICES MANAGEMENT

Unit 4: Service Strategies

Overall ratings are calculated for all SBUs/products Notes
Each SBU/product is then rated as high, medium or low according to market attractiveness
and then business position/SBU strength.

Different service firms in actuality have different criteria, which can be incorporated in
their analytical process.
After the ratings, the SBUs or the products are plotted on a 3 × 3 grid. The location on the GE
business screen will indicate to the service marketer the evaluation of the SBU or the product
and accordingly resources can be allocated. Given below are the location and the appropriate
strategy:

Upper left cells and Invest strategy: Any SBU in this cell is in the most advantageous position of
having high market attractiveness in terms of market opportunity and high business strengths,
capability, etc. and who are likely to seize market opportunities. These SBUs or products should
receive resource support from the service firm to strengthen and build them.

Three cells running diagonally from lower left to the upper right of the screen represent a Protect
strategy: The SBUs and products in these cells generate cash for the service firm which can be
channeled to other SBUs/products. Therefore, it is essential to follow a defensive strategy of
protecting a cash generator. These SBUs should also be duly supported with selective investments.
Two cells just below the diagonal cells represent the Harvest strategy: SBUs or products in these
two cells are not very strong in their competencies and neither do they possess attractive markets,
forcing decision makers to deny those additional resources, while electing to maximise returns
with the present allocation. If there is an opportunity for a profitable sell off, it should be seized
with both hands.
Lower right cell and the Divest strategy: SBUs or products in this cell are poor performers,
having no attractive market nor possessing enough resistance to enable a turnaround. They are
to be disposed of from the portfolio of the service organisation.
Normally, service firms do not get hemmed in by any one strategy, usually choosing to follow
a combination of them as far as resource allocation is concerned.

Did u know? The House of Tatas bolstered and reinforced their information technology
SBUs with resources and marketing supports and also successfully participated in the
disinvestments of CMC and VSNL (Invest). They have selectively invested in steel,
infrastructure, telecommunication and automobiles (Protect). Lakme and TOMCO have
been profitably sold to FMCG major Hindustan Lever Limited (Harvest), while Tata
Textiles has been liquidated (Divest). The resources generated from the sell offs through
Harvest and Divest have been utilized in acquiring companies like VSNL and CMC and
investing in new areas of retailing through Tata Retail Enterprise (TRENT)/Westside.

4.1.3 Michael Porter’s Strategies for Competitive Advantage

For strategies at the SBU level, Michael Porter urges service firms to first assess scope of target
market and differential advantage(s) and then choose the appropriate strategies. He has propounded
three approaches to give a service firm a decisive “competitive advantage”: cost leadership,
differentiation and focus. Cost Leadership is a competitive strategy where a service firm seeks to be
a low cost producer, satisfying a broad market base with a standard service product. This does so
by aggressively pursuing operating efficiencies and then under-pricing the competition. Porter
recommends efficient facilities, systems and processes, tight cost and overhead controls,
minimization of costs in R&D, advertising, sales and distribution, service etc.

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