Page 95 - DMGT522_SERVICES MANAGEMENT

Services Management

Notes
Example: Wal-Mart has made a virtue of being a low cost retailer, aggressively seeking
operating efficiencies in logistics, supply chain and driving down the prices of its merchandise
that were sourced from its vendors. The low costs enable the giant US retailer to get a competitive
advantage by offering lower prices, driving the competition out of business and posting
handsome profits derived from volume business.
Differentiation strategy for a service firm involves developing offerings which are perceived as
unique by all the six markets in the industry. The creation of a distinctive image of the firm’s
service products requires meticulous planning, usage of high quality processes, innovative
designs, or leveraging on unique product attributes and features. This uniqueness would make
the service firm to charge a premium price and target a broad or a very narrow market.

Example: Dilip Chhabria, CEO and chairman of DC cars, the supplier of innovative and
uniquely designed cars (on existing platforms), can charge a premium on designs and execution
service. The construction and housing firms of Hiranandanis, and architect Hafeez Contractor
demand (and get) a premium for their homes and designs which boast of high and consistent
quality (the former are amongst some of the few construction firms who as a policy do not have
‘sample flats’ to convince customers). Nordstrom’s is always associated with high quality service
while Bose Corporation is famous for its high fidelity and high technology audio systems.
Focus strategy is adopted by a service firm or the SBU when it concentrates its entire attention on
a very specific customer segment and their needs. The service firm then services this segment
with uniquely designed offers. The target segment can be specific by:

geographical location (FM radio services, newspaper services, Bank of Madura which was
predominantly in South India before being merged with ICICI Bank, etc.),

specialised needs of the customers (a not-for-profit service organisation managing an old
age home, Monginis franchising system to cater to life-style foods like cakes, pastries,
patties, croissants, etc. prosthesis and medical aids like Jaipur Foot marketing company,
ICICI starting a subsidiary only for shipping needs through SCICI which got swallowed
in the reverse merger, RBI hiving off its Agricultural and Rural Development Cell, ARDC,
into a full-fledged institution National Bank for Agriculture and Rural Development,
NABARD),

A segment can be a customer group by age (teenagers), mother and child market (Johnson
& Johnson), outdoor and sporty types (Countryside, the adventure sports company).
Figure 4.3: Porter’s Competitive Advantage Strategies Model

High
Cost Leadership
Focus

Differentiation

Profitability
(Return on

Investment)
No Cost Leadership
No Focus
No Differentiation

Low
Broad

Scope of target market
Narrow
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