Strategic Positioning

Strategic Service Vision

Target market
May result in different treatment of different
customers
All employees must understand target market
Service concept
Why customers choose a particular firm

Operating strategy
How should the firm be structured to produce
the service concept?
How should resources be allocated?
Service delivery system
Specific decisions made by the firm regarding
personnel, procedures, equipment, capacity,
facilities, etc.

Strategic Service
Vision
Ideally, a service

Target Market

delivery system
should support the
Service Concept
operating strategy,
which should
support the service
Operating Strategy
concept, which
supports the target
market
Service Delivery System
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Capacity
Strategies

Capacity issues in services are:

More complex than in manufacturing
Timing may be important, for example if there are

peaks in demand at different times of day

More critical than in manufacturing

Often no backorders can occur
Excess capacity may be perishable
An imbalance in supply and demand can

result in lost sales or idle employees

Provide: Ensure sufficient capacity at all

times

High quality/high cost; greater amount of idle

time for employees

Influence: Alter demand patterns to fit

firm capacity

Pricing, marketing and appointment systems

Control: Maximize capacity utilization

Compete on cost by driving idle time to zero

Techniques for managing

capacity

Work-shift scheduling
Increased customer participation
Adjustable (surge) capacity
Partitioned demand
Price incentives for and promotion of off-

peak demand
Development of complementary
services

Retail Design
Strategies

Store sizes have been increasing over

the last decade

Supermarkets:
50K sq. ft. now vs. 20K in the 1980s

WalMarts
200K sq. ft. vs. 70K in the 1980s

Why larger
stores?

Marketing Motivation
Increased revenue/sq. ft. due to a greater

pull of customers
One stop shopping for dual income families
Grocery stores have banks, pharmacies, flowers,

etc.

Operational Motivation
Fewer employees per customer are required
for a given service quality.
Lower inventory carrying costs and
distribution costs
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An Alternative: A Small Store

Strategy

Managing stores as a network is critical

Blanket a given geographical area
Multiple locations reduce travel time for

customers
Small stores reduce shopping times
Distribution costs are low because stores are
close to one another
Labor can move from location to location
Flexible job descriptions reduce idle time

Growth Strategies
Franchising
A self-financing growth strategy
Franchisees pay an up-front fee and a
percentage of gross revenue
Can limit profitability because a large

portion of the profits go to the

franchisee

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Challenges of
Franchising
Channel conflict
For example, retail outlets may oppose the

introduction of on-line channels

Operational control issues
Franchisees may oppose changes initiated at
the firm level
Franchisers cannot dictate retail prices or
require that franchisees purchase supplies
from the franchiser

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Franchising
Agreements

Passive ownership
Franchisees are not actively involved in the

operations of the franchise

Fee structure
Average e.g 20,000/- fee + 7% royalties
Can affect the ability to monitor free-riders
Geographic protection for franchisees

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