Strategies for globalizing service operations

Curtis P. McLaughlin
University of North Carolina, USA, and

Globalizing service operations 43

Received June 1995 Revised January 1996

James A. Fitzsimmons
University of Texas, USA
Introduction The literature of operations management has paid relatively little attention to the globalization of services while emphasizing the international nature of manufacturing. The implication is that domestic service firms are immune from international competition because of the customer contact involved in services. Collier (1985, p. 15) observed that If common languages and cultural norms are established in, say, 100 years, world services, like the world car, will dominate the global economy. In the meantime, some services are limited to their domestic markets and some are not. Service-firm managers must constantly evaluate the factors that affect the transportability of their service package. Quinn and Gagnon (1986) were in a minority when they stated that The threat to other services is real and immediate ... Many US markets for services are no safer from foreign competition than were domestic markets for manufactured goods. Roach (1991) documented the trend of direct foreign investment in services in the US market, ascribing this to the US service sectors hidden vulnerabilities: over-investment in information technology and chronic inefficiency. The steady declining US trade balance in private services (excluding government transactions and receipts and payments on investments) supports the latter view. Private service exports have stagnated as imports have continued to rise. The provision of services is important in its own right, but it is also important to the future of manufacturing. The South Koreans ability to provide design engineering cheaply and effectively has led them into international contracting, which in turn has opened up markets for their domesticallyproduced steel and other manufactured products. Steelcase, a US office furniture manufacturer that competes through the custom design of office interiors and delivery speed, realizes that it has to offer design services off-shore to support its overseas manufacturing operations at the same level as it does domestically. In addition, services are the basis of the infrastructure on which effective manufacturing competition depends in any country. Reich (1991) emphasizes this fact in his writings on the competition among nations. Services are becoming globalized Data on international trade in services are limited, but we can be sure that the delivery of services is increasingly becoming globalized both within the USA

International Journal of Service Industry Management, Vol. 7 No. 4, 1996, pp. 43-57. MCB University Press, 0956-4233

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and abroad (Dicken, 1991). While there are many barriers to international trade, especially in the provision of professional services, such trade is growing rapidly. Consumer service companies are crossing borders throughout the world. Germans own and manage A&P. Japanese banks are major players in the USA and elsewhere. Hong Kong interests are acquiring the Midland Bank in England to go with their Marine Midland holding in the USA. Hotel chains and international airlines reach all over the world. Recent publicity about the movement of back room service work overseas highlights the fact that we need a much stronger set of concepts to understand the factors affecting the globalization of services, a set of factors which analyses not just the movement of foreign capital into domestic service operations, but also the movement of once domestic service jobs, overseas. Apte and Mason (1992) argue that information-intensive services are more likely to go overseas in the current telecommunications environment. The software of many large US banks is maintained and modified regularly by computer programmers in Bangalore and other Indian cities. A North Carolina bank is having its loan record systems expanded and reprogrammed by an Indian firm. Indian personnel in the USA communicate daily with programmers in India via satellite. The bank management is delighted because the work progresses quickly, as workers at the Indian site attend to programming during one-half of the clock and workers at the North Carolina site undertake testing and debugging during the other half. There is more to globalization of services than simply chasing lower labour rates. Any manager who believes that his or her service is exempt from foreign competition should be awakened by current developments in services. Service managers can no longer ignore the international competition in services, especially the globalization of back room operations. A service manager needs a framework to develop strategies to compete in the global market of services. This paper outlines approaches to considering two questions that managers face when developing a global service strategy: (1) What are the factors that we can use to classify services in terms of their potential for moving globally?; (2) How do these factors translate into strategies for the globalization of specific services? Factors affecting globalization The most useful dimensions for classifying service operations draw on the work of Chase (1978), Haywood-Farmer (1988) and Schmenner (1986) : consumer involvement and customization; complexity of inputs and outputs; and labour intensity. These are also implicit within the array that Collier (1985) has suggested should be considered in determining international transportability such as legal

restrictions, advertisablility, standard or customized service package, technical capabilities, adequate channels of distribution, cultural and social norms, buyer behaviour, distance, language, political stability, and national synergism. McLaughlin (1992) suggested adding five key operations issues of international services: (1) level of cultural adaptation; (2) impact of telecommunications; (3) potential for unbundling service components; (4) approaches to teamwork; and (5) re-engineering opportunities. These factors and their literature sources are displayed in Table I.

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Author

Customer contact

Information Customization Complexity intensity

Cultural adaptation

Labour intensity

Other

Haywood- Degree of Customization Farmer contact and (1988) interaction Collier (1985) Standardized or customized service package

Labour intensity Cultural social norms Buyer behaviour Language Technical capability Legal restrictions Distance *

McLaughlin (1992)

Telecommunication

Levels of cultural adaptation Unbundling Approach to Re-engineering teamwork Information intensity Language Labour intensity Strategic importance of IS function Relative efficiency of IS function Flexibility of social contract Lack of restrictions Public policy

Apte and Customer Mason contact (1992) need

Creativity

Wilson (1992)

Complexity Communications Attitudes Creativity towards work Language

Labour intensity

Note: * Also advertisability, adequate channels of distribution, political stability, and national synergism

Table I. Factors affecting service globalization

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Apte and Mason (1992) argue that customer contact and information intensity are the two primary dimensions that determine which service operations go overseas. For example, they suggest that operations research and computer programming are two prime candidates for transfer overseas because they involve little customer interaction, are information-intensive, and are labourintensive. They also suggest that cultural diversity can increase creativity, while language may tend to create problems in meeting customer requirements. Also, they point out the tendency of work to move to areas with labour surpluses of highly educated individuals who have a history of English proficiency, e.g. India, Ireland, and the Philippines. Finally, they observe that the stance that an individual firm takes with respect to making or buying an information-intensive service has to do with the firms strategic and core competence position with respect to the information technology involved. Reich (1991) went so far as to divide workers into three types: routine producers, in-person servers, and symbolic analysts. He argued that the routine producers (factory hands) are being replaced by automation or by shipping their tasks out to lower-wage countries. The elimination of routine producers creates pressure among in-person servers to stay close to their primary customers who are highly mobile, highly paid symbolic analysts. He notes that Routine producers and in-person servers are loath to do anything that might deter symbolic analysts from coming to their city or region, or even their nation;The lower, less mobile four-fifths of the population is prepared to provide symbolic analysts with generous inducements to come or to stay (p. 295). Wilson (1992), an economist who is interested in location theory, goes beyond information outsourcing, but makes a similar argument. He outlines the development of back-office operations of US firms in Asia, Europe and the Caribbean. He identifies many of these as an extension of the simplification and routinization of service work as it is unbundled and broken into simpler functions to facilitate the use of cheaper, more specialized labour. However, he notes that these steps often involve tapping flexible but less costly labour markets. This parallels US service firms behaviour in moving to the suburbs or to less developed areas of the country. He emphasizes the role of public policy through direct and indirect location subsidies through tax incentives, development of world-class telecommunications complexes, and employee training programmes. We therefore recommend that researchers and managers consider at least the following factors when analysing the potential of services for globalization: Customer contact The fact that so much recent reporting focuses on the export of back room operations indicates that one factor in globalization is the degree of customer contact. By definition, customer contact is not a factor where routine back room operations are involved, however, local workers will need to be trained in their native language. The globalization of front room operations with its verbal

customer contact still depends heavily on cultural adaptation of the service. The experience of The Walt Disney Company in its opening of Euro Disney outside Paris is an example of the problems of controlling the customer contact experience in a foreign culture (Euro Disney: The First 100 Days, 1992). Some concessions to French culture were made such as adopting both French and English languages for the park. However, a more troubling problem was training independently-minded French nationals to act out the roles of Disney characters and perform their duties in a courteous manner. When the service is defined by the customer contact experience, translating the required human behaviour of service personnel across national boundaries becomes a challenge. Customization One reason for communicating with the customer is to learn what the customer needs and to customize the service accordingly. When taking a high customer contact service overseas, language and culture can create barriers to effective communication. For example, when Coopers & Lybrand (1992) opened an office in Hungary, they discovered the need to hire local accountants to service domestic clients who felt more comfortable dealing with Hungarian auditors. In contract services such as computer software development, the ability to customize the work to meet customer needs is important. For example, when an Indian software group, which was developing a system for on-line billing of health care items, realized that its programmers had no concept of the US health system, it sent its programmers to the USA to learn first-hand how health care billing takes place. Complexity The globalization of back room services has really proceeded along two paths. One path makes existing work routine, the other path accepts mundane work but provides the opportunity to develop skills that ultimately lead to more interesting and complex work. OReilly (1992), writing in Fortune, describes how hotel reservation clerks in Jamaica perform routine data entry for wages that are competitive locally but are still low enough to offer a comparative advantage internationally. However, the more interesting phenomenon involves individuals who do intellectual work that is unattractive to educated American workers, such as routine reprogramming or file expansion, but that is acceptable to Irish or Indian individuals who do not have alternative employment opportunities. While mastering these mundane tasks and continuing to do them satisfactorily, such workers are reportedly responding to new, more complex tasks with great energy and creativity, and are achieving new levels of credibility with their international customers. At the North Carolina bank cited above, Indian on-site representatives have handled interactions between the customer representatives and the programmers successfully. However, bank management is thus far reluctant to contract out highly complex work in this manner because of the potential for communication problems.

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Information intensity There is little doubt that new telecommunications modes have helped the globalization of services. Information-intensive services, such as financial services, travel reservations, and technical publishing, have led the way in globalization. Once information is digitized, it is globalized. Financial markets are now completely globalized. Stock exchanges everywhere can be accessed virtually 24 hours a day. In much of the world the domestic communications infrastructure is deplorable, but international communication, using satellites, need not rely on a countrys communications infrastructure. For example, two colleagues (Fischer, 1991) tell about an experience with an entrepreneur in San Jose, Costa Rica, who provides high tech consulting services to major US corporations. As their taxi approached the gate, it was blocked by a FedEx truck attempting to leave and a DHL truck attempting to enter, and neither driver was willing to give way. Once inside, the two visitors were ushered into the office of the owner who was on two telephones, speaking Spanish into one and English into another. The teletype and FAX machines were printing away and an Internet browser was on the computer screen. As the interview got underway, one colleague asked him, How do you manage to run this high-tech business in a developing country? Shhh! the owner replied, by not letting on that we are in a developing country. Telecommunications coupled with air freight is a key to much of the globalization of information-intensive services. Cultural adaptation American service companies are faced with the problem whether or not to adapt their services to the users culture or to deliver the product that made their reputation in the USA. Benihana restaurants show a front room adaptation in terms of the menu available, but they retain many original Japanese elements in the decor and the personnel system. Brazilian and Venezuelan banks are highly automated in the back room because rampant inflation has heightened the timerelated value of money. They do not necessarily have up-to-date front rooms and loan management practices, but they do have telecommunications and computers. Wilson (1992) cites local attitudes towards work as a key attribute involved in the decision to relocate services. Because services relocate back room operations to small towns and cities, workers may accept low wage structures, if they are in line with that of the surrounding community. One US travel agency reports that when it relocated part of its data entry and telemarketing activity to a small rural town, the workers elected to take wages lower than the company was willing to offer in order not to affect the fabric of the community (Miller et al., 1993). Telecommunications and data entry jobs at the Jamaican Digiport (a free trade zone specializing in digital information) do not pay more than the community wage, but people seek out the reliable employment. In many areas of the world these jobs are the only ones available and are vastly preferable to out-migration.

Labour intensity Labour intensity is currently a factor in the globalization of services. Many of the back room operations moving offshore are doing so to acquire less expensive, but well-educated labour. Labour intensity and capital intensity are not offsetting entities in services. Labour intensive activities can be supported by major investments in communications and computer systems that facilitate the transfer of information into and out of the process. Apte and Mason (1992) report wages of $400 per month for information professionals overseas. Professional wages in the Philippines are about one-tenth of those in Europe and the USA, and in China they are almost one-hundredth. No wonder, then, that Asia is the focus for much of the offshore movement of information services based on labour savings. New price competitors in areas such as software development are now appearing in Eastern Europe. Other factors The factors cited by Collier (1985), i.e. technical capability, legal restrictions and distance, are becoming less and less important. Technology moves rapidly in todays world and has made distance much less of a factor. However, other factors noted by Apte and Mason (1992) and by Wilson (1992) are important, namely, flexibility and public policy. These authors emphasize the importance of new pools of flexible workers and policies of governments that want to create employment opportunities. Governments are likely to provide the same inducements to recruit services that they have been providing for manufacturers, i.e. they will provide infrastructure, tax rebates, and trained workers. The factors involved in luring hotel reservation services to Jamaica are little different from those of luring German car manufacturers to Alabama and South Carolina. Global service strategies Firms and industries need to pay attention to the need for global competitive strategies for their services. Wright and Pauli (1988) argue that the Japanese have successfully used essentially the same strategy in their entry into the banking industry that they used to gain a dominant position in the microchip market. The biggest factor in a service operations globalization decision should be whether it fits with the firms global strategy. Roach (1991) makes this point strongly when he argues that ... the challenge facing services is primarily managerial. The service company that responds to heightened competition will look very different from its predecessors. Strategically focused, it will have an efficient delivery system, a high-quality product, and a flexible cost structure. Five basic globalization strategies are identified: (1) multi-country expansion; (2) importing customers; (3) following your customers;

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(4) service unbundling; and (5) beating the clock. Note that these strategies are not all mutually exclusive. One can think of a number of ways of combining strategies, for example, combining multi-country expansion with beating the clock. The extensive list of factors affecting globalization decisions in services will affect global service strategies in different ways. We have prepared Table II to help managers consider how these factors affect the implementation of various candidate strategies and their likelihood of success for a specific business in a target country or region. Table II contains a summary of key opportunities and potential problems that each globalization factor contributes to each of the five global service strategies. The service strategy and management implications for service globalization are discussed below, beginning with the multi-country expansion strategy.
Global service strategies Importing Follow your customers customers

Globalization Multi-country factors expansion

Service unbundling

Beating the clock

Customer contact

Develop foreign language and cultural sensitivity skills Customization Usually a Strategic standard service opportunity Complexity Information intensity Cultural adaptation Labour intensity Other Usually routine Strategic opportunity Satellite network Modify service On-site advantage Accommodate foreign guests

Train local workers

Develop foreign customers

Re-prototype locally Modify operations

Specialize in front- or back room service components Meet segments needs better Opportunity for focus

Provide extended hours of service

More need for reliability and co-ordination Time compression

Move experienced May require heavy Exploit managers capital investments opportunity Manage worker diversity Reduced labour costs Merchandise unbundled component Common language necessary Reduced labour costs Capital investments

Table II. Considerations in selecting a global service strategy

Could be necessary to achieve scale Reduced labour Increased labour Hire local costs costs personnel Government restrictions Logistics management Inadequate infrastructure

Multi-country expansion In a chapter on growth and expansion strategies for service firms, Fitzsimmons and Fitzsimmons (1994) identify multi-site expansion and multi-service development at a single site as the logical growth vectors for a successful service firm. Multi-site expansion has commonly been accomplished using

franchising to attract investors and a cookie cutter approach to clone the service rapidly in multiple locations. This expansion strategy is necessary when the service market is defined by the need for customers to travel physically to the service facility. Exporting a successful service to another country without modification can capitalize on the selling of a countrys cultural experience as illustrated by the success of McDonalds in Europe, especially its experience in Moscow. However, cultural adaptation often requires some modification to the service concept as seen in the availability of beer in German McDonalds. Federal Express faced a different cultural adaptation problem in Spain where the standard 5.00 p.m. pickup was not workable because of the mid-day siesta and business hours that extended into the evening. Many strategic issues are involved in moving a service operation out and around the world. However, the current literature does not yet provide much guidance on what the role of the operations management function should be in this process. Duplicating a service worldwide is best accomplished when routine services are involved such as we see in the example of McDonalds. However, the customer contact or front room operations require sensitivity to the local culture. The best approach would appear to be to hire and train locals to handle that part of the process in consultation with those who know successful approaches which have worked in other countries. With the exception of professional services, customization and complexity are not important issues with the routine nature of many multi-site consumer services such as fast foods. Information intensity is not an important consideration, but managing a global network of service sites may require communication by satellite. However, cultural adaptation is a major service design issue. We know that the service package design is a multifunctional task (Grnroos, 1992; McLaughlin et al., 1991). Should it be centralized or should it to be managed country by country? These questions were addressed by Kentucky Fried Chicken (1993) as noted by the following quote, which explains the situation in the late 1960s with which successive sets of professional managers at Heublein and RJR struggled for another 20 years:
The country managers were like Roman governors sent to govern distant provinces with nothing more than an exhortation to maintain Romes imperial power and reputation. Few had any operating expertise, they were offered little staff support and the only attention paid to operations was Colonel Sanders personal efforts to maintain the quality of his original product. Each country manager was on his own to make a success of his venture, and most had to learn the business from scratch.

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Unfortunately, the corporate staff seemed to have had little to offer except to try to get the foreign operation to conform to the US template. After all, the raison dtre of franchising collapses in the face of local cultural adaptation. The country managers were well aware, however, that the cookie cutter approach would not work either.

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Importing customers As noted above, multi-service development represents an alternative growth vector for a successful service firm. For the multi-service single-site strategy to be successful internationally, customers must be willing to travel a long distance and stay for an extended time or telecommunications must be substituted for physical travel. Many services such as prestigious colleges and universities, medical centres (e.g. Mayo Clinic), and tourist attractions (e.g. Disney World) meet these stipulations. Because of a unique tourist attraction at a particular location (e.g. Mt Crested Butte in Colorado), a service evolves that is focused on that attraction such as catering to skiers in the winter and mountain bikers in the summer. Club Med has combined both the multi-site and multiservice strategies by creating a network of varied vacation sites around the world. Rather than exporting the service as in a multi-site strategy, the multiservice strategy imports the customers. A service that decides to retain its location and attract customers from around the world will be faced with developing the foreign language skill and cultural sensitivity of its customer contact employees. It may have to pay more to get those skills. The unique features of the location (e.g. tourist attraction or reputation of service personnel) will dictate the selection of this strategy. Differentiation will occur through customization and complexity of the service. Transportation infrastructure and logistics management will be required to accommodate the visiting customers. For example, the Netherlands island of Bonaire off the coast of Venezuela caters to scuba divers and is served once a week by a direct KLM flight from Amsterdam. Follow your customers Fischer (1991) observes that most foreign service companies entering China are not there to serve the local Chinese markets so much as to follow their corporate clients overseas and continue to serve them. They are in China to meet the needs of visiting and expatriate Europeans, Japanese and North Americans. Any local business would just be gravy. However, as Cooper & Lybrand (1992) discovered, attracting local business many require modifications in the service package and employment of people familiar with the local business practices. To implement this strategy, one of the largest business travel agencies has formed partnerships in almost every part of the world. Its corporate customers want their people served adequately wherever they go. For example, the local representative on the Arabian peninsula was able to extricate travellers out of Kuwait in the midst of the Iraqi invasion. Just as law firms expanded into multiple cities in an attempt to align themselves with their corporate accounts, service companies are pushed by their customers to operate in the same countries as their clients. The truly global company wants and demands truly global service of its travel agents, its auditors, its consultants, and others. The weakness of this strategy for a company already committed to overseas operations is that it ignores the vast markets represented by the rapidly

growing middle classes of many countries and it leaves the companies that serve these populations free to grow without competition until they reach sufficient quality and scale to become a threat internationally. Usually the sales volume available from visitors or expatriates in a foreign country is small. This leaves the service manager with interesting choices should I design my service to follow my customers and their needs, should I design it to adapt to the local culture, or should I make a compromise between the two, hoping to have a successful straddle? Everything that operations managers know about services would seem to argue against the likelihood of a successful straddle. Therefore, managers have interesting focus and scale issues to contend with in terms of whether to serve expatriates and visitors or to cater to local customers. Where expatriate markets are small and the local market requires considerable adaptation, partnering with local organizations would seem an attractive alternative. Even when a new service prototype is not needed for the front room, it may be necessary to adapt operations to the local environment and to bring in experienced and flexible managers to make the transplantation work in the face of local infrastructure and social system complexities. Service unbundling Chase (1978) discussed the advantages of viewing service operations as a dichotomy between the front room where customer contact (e.g. waiter taking meal order) is observed and the back room where additional processing is accomplished (e.g. cooking the meal at a restaurant). He suggests that back room operations need not be located on the site. Dry-cleaners and photo processors create processing plants far from their retail sites. These processing plants are usually in an industrial location that involves minimal real estate investment. Moving off-shore to seek savings in labour costs is a natural extension of this opportunity to divorce the front and back rooms. A related type of service unbundling involves separating out pieces of the value-added chain and focusing on those parts not requiring face-to-face interactions. Discount brokerage is an example in which the routinized market transaction activities in the back room were separated from customized professional advising activities and made into a distinct and viable business. Service unbundling is similar to the factory focus strategy and plant-withina-plant notions found in manufacturing (Yang et al., 1992). The benefits from focused operations may be, in part, the reason why many of the unbundling experiments in services cited above have been so successful. When setting up global service operations, unbundling can lead to many of the benefits of a focused factory. Complexity seems to be less and less of a problem as managers find more and more ways of unbundling components of services and moving those that are information-intensive globally. It seems a safe bet that in the long run complexity will prove to be no more of a barrier to globalization in services than it has been in manufacturing. Many countries have large pools of unemployed

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and underemployed educated persons, many of whom have high levels of technical training. They are looking for any level of work, but are readily adaptable to higher levels of work, especially those who have quantitative skills. All managers should be aware of the distinction between the parts of a process that are physical and those which are informational and they should also recognize that today the informational work can be done almost anywhere in the world. New overseas operations may offer opportunities to install prototype re-engineered systems without concern for existing capital investments or for existing employee work rules or habit patterns. This phenomenon is important, for example, in international banking where newcomers have major advantages over existing, and often over-staffed domestic financial services firms. This is especially true for new competitors in countries where automation may have taken place to offset inflationary uncertainties, but where labour laws or labour syndicates have restricted downsizing. Labour intensity is often a factor in the choices that are made in the globalization of services, but it is not always the same labour intensity issue that the operations management literature has emphasized. Labour intensity has tended to be associated with customer contact. Apte and Mason (1992) point out that, so far, it is the association of labour intensity and information intensity in the back room which has led the way in globalization. Managers should examine the labour intensity of an operation when considering alternatives for globalization, but they should also study the interaction of labour intensity with information intensity. If management should choose to unbundle the service and focus on only part of the former value-added chain, then the customer segments involved will have to buy into the new service concept. The unbundled operations must meet those segments better than before, which may require heavy capital investments in information processing and telecommunications facilities to upgrade and enhance the service globally. Beating the clock Beating the clock describes the competitive advantages gained owing to the fact that one can bypass the constraints of the clock and the constraints of domestic time zones, including time-based domestic work rules and regulations. Companies in the USA have long known that combining the demand from multiple time zones could improve the productivity of reservation clerks and telemarketers. Quarterdeck, a Californian software company, provides technical support to its more easterly US customers by transferring their early morning telephone enquires to Quarterdecks European technical support centre in Ireland. The advantage derives from supplying service to East Coast customers at hours when the Californian office would be closed. The advantage of being able to give 24-hour service despite local work norms or government regulations on market closings has helped lead to the true globalization of securities markets.

The advantages seen in the time compression of the software development process in the North Carolina bank example are not likely to go unnoticed in a number of settings. Time-based competition is a widely accepted strategy in manufacturing. In the real-time world of services there is every reason to expect new innovations to use the speed of light to beat the clock around the world and gain a competitive advantage. Managers should be looking at their service processes to find ways that electronic means can be used to beat the clock. Once these are identified, managers should begin to develop either offensive or defensive strategies. This analysis should include consideration of the potential impact of time zone shifts on marketing, operations, or human resources aspects of the service. Can such shifts: result in economies of operation; provide better access for foreign and domestic customers; support time-based competition in operations; or add to the creativity available in the process without slowing it down? Defensive strategies would involve forming strategic alliances in other time zones. Offensive activities might involve moving to, or modifying, operations in non-domestic time zones to tap new markets or improving existing ones to beat the competition by beating the clock. The need for greater reliability and co-ordination among locations and time zones may require substantial additional investments in training, methods of operation, and telecommunications. Telecommunications will certainly be necessary to make the location shift transparent to the customer and to realize the full value from the time advantage. Conclusions The back room is already on the move. If it is information-intensive and has low customer contact, the issues involved in its movement are little different from the issue of moving a factory to Mexico or Thailand, except that the movement of information is even better facilitated by modern technology than is the movement of goods. It is up to managers and management scholars to study this phenomenon and to provide useful analyses of it. There exists an interesting array of factors to study, including the degree of customer contact, degree of customization, complexity of the service, its information intensity, its requirements for cultural adaptation, its labour intensity, its strategic requirements, its flexibility, and the related public policy issues. Among the flexibility elements are the education and creativity levels of newly tapped labour pools, the ability to use the juxtaposition of time zones to create competitive advantages, and front room service adaptation. Within these factors there is great potential for managerial creativity and for new research topics and research hypotheses, especially for

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understanding better the issues pertaining to the cultural adaptation of front room service operations. With globalization, the impact of cultural adaptation will need to be central to our study of operational topic areas such as joint venturing, materials management, purchasing, new product development, layout and process design, supervision and motivation, training, work force scheduling, environmental management, and labour-management relations. These are all key areas of front room and back room management that are likely to require adaptation from country to country as services are globalized. Just as managers have been concerned about the availability of a level playing field in terms of trade in manufacturing, those who produce services must have similar concerns. One cannot use the term dumping, because there is no supply of goods to make that analogy effective. However, one does have to worry about unfair subsidization of service competition by host countries to lure components (bundles) of service activities. The service factory can move much like the smokestack factory. The inducements are cheap, educated and skilled labour and an excellent international informational infrastructure. The benefits of globalization for domestic service managers include tapping overseas markets with large populations of rapidly expanding middle classes and retarding the growth rate of potential foreign competitors.
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