Strongpreneur#Business Growth Strategies
May 11, 2019 200
Strongpreneur#Business Growth Strategies
May 11, 2019 200
This article highlights the unique features of service operations and explains techniques that can be profitably utilized in managing them.
The service sector is expected to continue to expand as the resource sector matures creating opportunities for new businesses and the expansion of existing ones. Due to the rare of their activities, most service operations use labor-intensive techniques and are usually dominated by small firms. Managing service operations pose different challenges from those encountered in managing manufacturing concerns.
Service can be defined as an intangible benefit provided to individuals, businesses, government establishments, and other organizations through the performance of a variety of activities or the provision of physical facilities, product or activity for another’s use.
To clarify the nature of services, it is useful to highlight the distinction between products and services.
A product is a tangible physical item which can be examined by inspection, handling, testing, smelling or tasting. It can be transported from where it was produced, has existence overtime, can be stored and consumed at a later date. A service is intangible cannot be transported and cannot be stored for use at a later date, unlike a product.
A service is said to be intangible because it has no physical properties. It cannot be seen, felt, tasted or tested before purchasing it. Because it is intangible, one can only experience it after purchasing it, by seeking the opinion of those who have used or experienced it, or by deduction from the physical items used in producing it.
For instance, the services of a barbing saloon cannot be seen, felt or tested without actually having one’s hair cut in the saloon. But one can rely on the opinion of others who have used the saloon or infer the nature of the service from what can be observed such as the personnel rendering the service, the types of customers using the service, and the type and quality of physical facilities being used.
In a situation where the personnel rendering the service are in a dirty shop and the building shows evidence of disrepair, hair dryers, and other facilities have picked up dust, it can be inferred that the nature of service is of low quality.
A service cannot be transported. This means that a service cannot be produced in one location and shipped to another for consumption. It is consumed as it is being produced even though the customer does not need to be physically present at the service site. The implication of this is that for a customer to use a service, he must go to a site where the service is rendered.
Alternatively, the organization rendering the service moves to where the customer is located. To enjoy the services of a hotel, one must physically move to the site of the hotel. However, the hotel can offer catering services to customers at a place of the customers’ choice by moving personnel and facilities to such a place.
Technological advancement in recent years has made it possible for some services to be rendered to customers through electronic media without either the customer or the service organization being involved in any movement. For instance, tracing–through the internet, e-commerce, e-mail makes it possible to enjoy services without leaving home. A student can receive lectures or instruction through the electronic media without the lecturer or the student leaving the places of their residence. In spite of this technological advancement, that services cannot be transported is a significant, feature of most services.
A service cannot be stored the way physical products are stored awaiting consumption at a different time or location. Services are consumed as they are being created or provided. The services of a doctor or a nurse in a health center are consumed by the patient and his relations as they are being provided. If the health center has the capacity to attend to one hundred patients a day but only forty patients turn up, the capacity that is unused is lost forever. The unused capacity cannot be stored for at a later time.
Another important characteristic of services is heterogeneity. This means that service standard has the tendency to vary from one firm to another and from time to time in the same firm. The services rendered to customers by a desk receptionist at a hotel tend to vary from customer to customer due to a variety of factors – the number of customers waiting to be served at a point in time, the behavior of the customer being served swings in the mood of the receptionist, etc., variability of service standard occur in the production and delivery of services largely because services are rendered by people who are able to exercise discretion in the course of rendering services.
Whereas the standard specifications of a product can be maintained through the standardized manufacturing process, inspection and rejection of products that are off-specification, this is not possible in the case of services. Careful selection and training of service personnel, specification or detailed procedures for rendering the service, supervision, and use of technology are techniques used in controlling variability in service standards but the problem of service heterogeneity remains a critical feature of services.
Service may be seen as consisting of two broad components – core service or substantive service and a range of peripheral services. The core service is the activity or set of activities which are directed at satisfying the primary need of consumers. For a restaurant, the core service which is the essence of the service is providing food. The peripheral services or associated services may include the service of wafers, provision of music, decoration of the restaurant, fruits or dessert, peripheral services enhance the value of the substantive service and involve additional cost to the service provider.
Designing a service involves carefully thinking through these three elements in order to create the concept of a service that can satisfy the expectations of the target market. Depending on the manager’s observation of the needs of the target market, the effort is made to balance the three variables.
A service firm is an organized system mainly involved in activities and providing facilities to meet the needs of individuals, businesses, government, and various nongovernmental non-profit organizations. Examples of service establishments are hotels, restaurants, laundry and dry cleaning health care, beauty saloons, repair and maintenance, amusement, communication, transportation, wholesale and retail, storage finance, insurance stock brokerage real estate, security, business service, veterinary, legal, engineering, accounting, and other professional services organizations.
As we have explained earlier, services may contain physical items and depending on the target market of interest, the physical item may constitute the prime benefit offered to the customer. In this situation, the primary concern of the firm is to produce the physical item and very little time or resources are devoted to providing explicit or implicit services. So, is it possible to call such a firm a service operation?
Consider the case of a firm to manufactures and distributes a product. The firm provides facilitating services such as an after-sales service, warranty, opportunity to return unwanted items earlier purchased, credit facilities and psychological benefits promised by the brand name or image created in the advertisement of the product. Is this firm a service firm or a manufacturing concern? Clearly, most business enterprises provide a mixture of goods and services. There are opportunities to provide services with facilitating goods or to produce goods with facilitating services.
Service firm is the one in which the dominant set of activities is providing services rather than that the production of physical items. In a service operation, the physical item and facilitating goods are ancillary to the benefits purchased by the customer. They are not the prime purpose of seeking to use the service.
A service concept is the idea of the bundle of benefits expected to be delivered to the customer. Very service organization must clearly define the bundle of services and the facilitating goods that it intends to offer to me, the customer. This is a difficult process because we are dealing with intangibles.
In most cases, the entrepreneur does not make any effort to carefully define and communicate the service concept that he has in mind to offer to the target market. What then emerges as the service concept of the enterprise is what evolves as the consumer traces with the workforce of the enterprise.
The service that a given customer gets depends on what he demands and is able to get. Therefore, the service is subject to a high degree of variability, which may lead to the satisfaction of some customers and lack of satisfaction of others.
To be successful, a service enterprise must carefully select, define and maintain the service concept it desires to offer to the target market. This is similar to a manufacturing enterprise offering to its customers a product whose features it has carefully selected and built into the product.
The service concept of an enterprise is the bundle of benefits conceived by the entrepreneur based on his understanding of the needs and behavior of prospective customers. The service concept is defined by decisions in three areas:
A combination of these variables offers several different alternative bundles of benefits from which to choose. One alternative is different from the other on the basis of the relative importance or weight attached to one variable or the other.
Therefore, based on an analysis of the needs and behavior of prospective customers, one alternative service concept or bundle of benefits to the customer is selected.
The service delivery system is the stage-by-stage process by which the service is rendered to the customer. It begins from the point he enters the facility (for instance, parks his vehicle at the car park) up to the point he leaves the system.
As we have noted, a consumer may not be present and involved in service delivery. For example, a customer may simply call a workshop to pick up a faulty computer for repairs. Even in such a case, the service delivery system involves the processes beginning from the receipt of the order to the point at which the repaired equipment is delivered and payment made for services rendered.
A series delivery system may be equipment-based (capital intensive) or people based (labor intensive). An equipment-based service delivery system relies on machines manned by skilled or unskilled personnel to render the service. For example, laundry and dry cleaning operation may depend on the use of machines to clean materials. A people-based service delivery system, on the other hand, depends on unskilled, skilled or professional personnel to render the service.
Visualizing the stages of the service delivery and identification of the activities involved in each stage. A flowchart diagram is an important tool that enables the manager to depict the various stages of rendering the services. Visualizing the stages of the service delivery must take into account not only the requirements of service delivery from the point of view of the firm but also the needs and behavior of customers patronizing the system.
Arrangement of the delivery process in a logical sequence such that people and materials flow through the system easily and conveniently. This involves the careful layout of equipment with careful attention to the needs and convenience of the customer and the elimination of bottlenecks in the process.
Determination of the process capacities at each stage. Capacity is defined as the maximum output capability of the system in terms of the number of customers served. Determining process capacity is to ensure that people and equipment are being fully utilized and that the waiting time of customers is minimized. The demand for most services often fluctuates between seasons. The demand for custom-made garments for example, usually peak at Christmas time. Restaurants in central business districts are usually full during lunch breaks and virtually empty afterward. Business centers in Universities and polytechnics providing photocopying and typesetting services to students are generally jam-packed toward the end of the semester but empty during holidays.
The pattern of demand for service hash implications for capacity design and utilization. The entrepreneur may seek to alter the pattern of demand by charging lower prices during off-peak periods developing other services to utilize capacity during off-peak periods/seasons introducing a system of reservation such that customers book for services in advance. However, the entrepreneur may seek to cope with the peak demand by using part-time employees, working over-time, temporarily re-deploying staff from other areas to service delivery or by renting additional facilities during the peak seasons.
Consumers perceive the quality of a service in terms of the various attributes possessed by the service. In the case of a restaurant, the attributes may include the quality of the food, the variety of items on the menu price, convenience of location, neatness of the restaurant friendliness of the workers, speed of service, availability of parking space, security, etc. But the attributes of interest to the target customers can only be ascertained from the customers themselves rather than being assumed by the service provider.
Consumers may not consider the possible attributes as equally important in their decision-making process. One attribute may overshadow all the other attributes. On the other hand, even though more weight may be attached to one specific attribute, yet the service must possess a minimum level of the other attributes to satisfy the customer’s expectations.
The service level is a standard to be attained by the firm with respect to the service attributes that will meet the quality expectations of the customer. Determining this standard is the entrepreneur’s decision, given his understanding of the quality expectations of the customer.
For example, what is the standard service time that can meet the expectations of the customer and that is achievable by the firm? What is the price that consumers can pay that also reflects the cost of operation and profit expectations of the entrepreneur? What variety in the menu is sustainable and which will meet the demands customers? How much skill do the personnel who provide the service demonstrate? How many different peripheral services should be offered to the customers by the firm? Clearly, the higher the overall service level, the greater the cost of producing service, hence the higher the price. This implies that a realistic approach is to offer a service level that meets the expectations of customers and yet is affordable by the target market and sustainable by the firm.
It is important that the service level is clearly defined and communicated to customers and to employees.
First, the customer knows what to expect and may only be dissatisfied when the proclaimed service level is not attained.
Second, the service level is an important competitive strategy to win and retain customers. Establishing a competitive but sustainable service level, the firm establishes an image of consistency which is attractive to customers.
Third defining service levels and communicating them to service personnel establishes the standard of performance on the basis of which they are evaluated. This is particularly important when the organization is large and the performance of service personnel cannot be supervised directly.
Location and Site Selection
This subject has been discussed in detail in an earlier chapter. It was acted that a key strategy of successful small businesses is the choice of location and site given that they have a relatively weak capacity to compete both in the product market and resource market.
For service operations in a particular location and site selection is critical to success. This is due to the fact that for most service operations, customers have to be physically present at the service site since services can neither be transported nor stored.
Controlling quality in service organizations is different from what obtains on manufacturing enterprises. Since services are consumed as they are being produced, some of the quality control techniques used in manufacturing systems are not applicable to service organizations. Also, because services are intangible, customers of service organizations used certain clues such as price, physical facilities, and service personnel to assess the quality of service.
If the price of a service is low relative to that of competing services, then the quality of that service is regarded as low. The aspects of physical facilities that customers consider include architectural attractiveness and neatness of the building, the general environment, the arrangement of service facilities, orderliness, the standard and quality of equipment, state of repair of equipment, etc. With respect to service personnel, customers depend on what they see and hear to make a judgment of the capability of the firm to reader quality service. In particular, customers assess service by the dress of service personnel their state of well-being, courtesy, skill careful analysis of all possible cues that customers might depend upon to make a careful analysis of all possible cues that customers might depend upon to make a judgment and building them into the service delivery system.
Of critical importance is to ensure that the different sources of cues (price, physical facilities and service personnel) yield quality perceptions that are consistent with each other. If price and physical facilities suggest high-quality service but service personnel suggest low-quality service, inconsistency exists and customers likely perceive the quality of the service as low.
A useful technique for ensuring the reliability of service delivery establishment of a procedure for delivering the service which all service personnel must adhere to. Consider a common activity in educational institutions – registration of students for their programmes. If every registration official was left to adopt his own devices to register students, some would obtain a great deal of data from students, most of which are needed while other would obtain a little omit some vital data. To generate reliable data, a procedure for registration must be devised which all registration officials should adopt.
A second technique is the careful selection and training of service personnel. All service personnel must be carefully selected and trained in the routine of service delivery. Particularly, they must be trained to have adequate knowledge of the service and of the organization, to understand and adopt the approved procedure for delivering the service and to handle customer complaints when they arise.
A third technique is to “industrialize” the service delivery system. This means that whenever it is possible, machines can be used to carry out certain routine procedures that are usually carried out by people. This helps to reduce the variability of service and customer complaints.
Controlling the quality of service operations requires that the entrepreneur has a system of monitoring and analyzing customer complaints and responding to them quickly. But what is more important is to achieve an error-free service delivery system. This requires continuous monitoring of customers’ perceptions of the quality of the service, anticipation of possible shifts in the perception and adjustment of service levels to meet the new expectations.
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