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CHAPTER 12
GLOBAL MARKETING OF SERVICES
Chapter Outline
A. Differences between Services and Goods
1. Linkage between Services and Goods
2. Stand-Alone Services
1. Data Collection Problems
2. Regulations and Service Trade Negotiations
F. Corporate Involvement in International Services Marketing
1. Services and E-Commerce
Chapter Objectives
The chapter begins by clearly bringing out the differences and linkages between goods and
Suggestions for Teaching
Students are usually aware of the importance of the service economy. However, it is very useful
in the classroom to stimulate thinking about how dependent many products are on services. This
can be done by picking selected industries, e.g., publishing, teaching, transportation, retailing and
Good discussion usually results when one focuses on the need for regulating services. Free
If the class has various international students willing to participate in the discussion, it is useful to
divide the class into several groups, each one of which is to write down a series of services which
they consider particularly unique and exportable. Comparing the lists drawn up by the various
groups often leads to very useful discussions of different cultures and different environmental
concerns.
Chapter Summary
A. Differences Between Services and Goods
One writer has contrasted services and products by stating that “a good is an object, a
1. Linkage between Services and Goods
Services may complement goods; at other times, goods may complement services.
Offering goods that are in need of substantial technological support and maintenance
2. Stand-Alone Services
Services do not always come in unison with goods. Increasingly, they compete against
goods and become an alternative offering. Services may also compete against each
other.
Services differ from goods most strongly in their intangibility: they are frequently
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For many service offerings, the time of production is very close to or even
simultaneous with the time of consumption. This fact points toward close customer
involvement in the production of services. Customers frequently either service
themselves or cooperate in the delivery of services. As a result, the service provider
often needs to be physically present when the service is delivered. Sensitivity to
culture, beliefs, and preferences is imperative in the services industry.
Errors can enter the system, and unpredictable individual influences can affect the
outcome of the service delivery. The issue of quality control affects the provider as
well as the recipient of services. Efforts to increase such control through uniformity
may sometimes be seen by customers as a reduction in service choices. The quality
perception of service customers is largely determined by the behavior of the
employees they contact.
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Because services are delivered directly to the user, they are frequently much more
sensitive to cultural factors than are products. Sometimes their influence on the
individual may even be considered with hostility abroad.
B. The Role of Services in the U.S. Economy
Infrastructure services are a significant component of the overall services trade and are
Exhibit 12.4 shows U.S. services exports.
Large international growth and cross-border transactions, however, are not confined to U.S.
service imports. The import of services into the U.S. is also high relative to other countries.
C. The Role of Services In The World Economy
The rise of the service sector is a global phenomenon. According to the WTO, cross-border
exports of services globally totaled $3.6 trillion in 2010. Exhibit 12.7 shows world exports
of merchandise and commercial services from 2005 to 2010. After declining precipitously
D. Global Transformations of Services
The rapid rise in international services marketing has been the result of major shifts in the
business environment and innovations in technology. One primary change in the past
Similarly, deregulatory efforts in the transportation sector have had international
repercussions. New air carriers have entered the market to compete against established
Technological advancement is another major factor in increasing service trade. Progress in
As a result, many service providers can become truly global marketers. To them, the
traditional international market barrier of distance no longer matters. Knowledge, the core
1. Data Collection Problems
The data collected on service trade are inadequate. Service transactions are often
invisible statistically as well as physically. Only recently have policymakers
recognized that the income generated and the jobs created through the sale of services
abroad are just as important as income and jobs resulting from the production and
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2. Regulations and Service Trade Negotiations
Typical obstacles to service trade can be categorized into two major types:
• Barriers to entry
• Problems in performing services
Governments often justify barriers to entry by referring to national security and
Even if barriers to entry are nonexistent or can be overcome, service companies have
difficulty in performing effectively abroad once they have achieved access to the local
market. One reason is that rules and regulations based on tradition may inhibit
innovation. A more important reason is that governments aim to pursue social or
cultural objectives through national regulations. Of primary importance here is the
distinction between discriminatory and nondiscriminatory regulations. Regulations
1. Services and E-commerce
Electronic commerce has opened up new horizons for global services reach and has
drastically reduced the meaning of distance. The Internet can help service firms
develop, and transitional economies overcome two of the biggest tasks they face:
Nonetheless, several notes of caution must be kept in mind:
• The penetration of the Internet has occurred at different rates in different countries.
There are still many businesses and consumers who do not have access to
2. Services and Academia
Academia has staunchly resisted accepting the notion of being part of any services
sector. University presidents, deans, and professors from around the world
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3. Typical International Services
Financial institutions can offer some functions very competitively in the international
field of banking services. Increased mergers and acquisitions on a global basis have
led to the emergence of financial giants in Europe, Japan, and the United States.
Many opportunities exist in the field of teaching services. Both the academic and the
corporate education sectors have concentrated their work in the domestic market. Yet
the teaching of knowledge is in high global demand and offers new opportunities for
growth. Technology allows teachers to go global via video conferences, e-mail office
hours, and Internet-relayed teaching materials.
4. Starting to Market Services Internationally
For many firms, participation on the Internet will offer the most attractive starting
point in marketing services internationally. Setting up a website will allow visitors
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5. Strategic Implications of International Services Marketing
To be successful, the international service marketer must first determine the nature
and the aim of the service offering—that is, whether the service will be aimed at
people or at things, and whether the service act in itself will result in tangible or
This close interaction with the consumer will also have organizational implications.
Whereas tight control over personnel may be desired, the individual interaction that is
required points toward the need for an international decentralization of service
delivery. This, in turn, requires both delegation of large amounts of responsibility to
individuals and service “subsidiaries” and a great deal of trust in all organizational
units. This trust can be greatly enhanced through proper methods of training and
supervision. Sole ownership also helps strengthen trust.
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Key Terms
Intangibility: It refers to that characteristic of services by virtue of which services are frequently
consumed rather than possessed. It is a primary differentiating criterion between goods and
services.
Service consistency: Uniformity or standardization in the offering of a service. Unlike products,
services are often subject to individual influences and are needed to be customized to satisfy
unique customer interactions.
Quality perception: An intuitive judgment based on personal experience, heuristics and
available information.
Market transparency: Availability of clear and comparable details of a service to all interested
parties. Transparency in service delivery is often difficult to ensure, because services may be
customized to individual needs.
Infant industry: Relatively new firms which are sometimes seen as deserving protection in order
to allow them to “grow up” before having to compete with “adult” global industries.
Discriminatory regulations: Rules and laws that impose larger operating costs on foreign firms
than on local competitors, that provide subsidies to local firms only, or that deny competitive
opportunities to foreign suppliers.
Nondiscriminatory regulations: Rules and laws that may be inconvenient and hamper business
operations, but that are imposed in an even-handed manner, without discriminating between local
and foreign suppliers.
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1. Should electronic commerce be considered a good or a service?
Student answers may vary.
2. What percentage of your books do you purchase via e–commerce? How will that change in
the next few years?
3. Discuss the major reasons for the growth of international services.
The rapid rise in international services can be attributed to major shifts in the business
environment and innovations in technology. The growth of international services can also be
4. How does the international sale of services differ from the sale of goods?
A service transaction is not terminated with the initial sale as most product transactions are.
It is just starting because the sale of services is an ongoing process. Service trade differs
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5. What are some of the international marketing implications of service intangibility?
The international marketing implications of service intangibility are numerous. In the first
place, greater pricing flexibility is required. Consumers may need to be mentally or
6. Discuss the effects of cultural sensitivity on international services.
Since services often need to be custom-made and delivered in person they are more sensitive
to cultural variations than products. A greater understanding of and emphasis on the cultural
7. What are some ways for a firm to expand its services internationally?
Participation in the Internet offers the most attractive starting point in marketing services
internationally. Setting up a website allows visitors from any place on the globe to view the
offering. Traditional advertising and communication approaches can be used for
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8. How can a firm in a developing country participate in the international services boom?
A firm in a developing country can participate in the international services boom by focusing
9. Which services would be expected to migrate globally in the next decade? Why?
The service sector will witness increased global competition in transportation due to
deregulatory efforts by governments. Deregulation offers opportunities for firms to enter
10. How will increased use of cloud computing affect the global technology services industry?
Which firms are likely to benefit or suffer?
Increased use of cloud computing will have a positive effect on global technology services
Internet Exercises
1. Find the most current data on the five leading export and import countries for commercial
2. What are the key U.S. services exports and imports? What is the current services trade
balance? (See the Bureau of Economic Analysis website at www.bea.gov).
By going through the international services site, students can learn about the different
3. How do Indian government regulations affect the ability of global banks to offer services
there? (Consult the latest India report on the U.S. Trade Representative site at