easy car net

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SECTION 4

SUPPLEMENTARY MATERIALS FOR CASES

Tell me and Ill listen. Show me and Ill understand. Involve me and Ill learn.-- Teton Lakota Indians

INTRODUCTION TO CASE METHODOLOGY

Cases are an excellent tool for providing students with an opportunity to analyze actual business situations.The case study method is very effective in helping students apply and integrate key course concepts. It alsoprovides them with an opportunity to experiment with creativity in problem-solving. ome of the mostpopular reasons faculty give for using cases in a course are! "# to get students to apply key concepts to$real world% situations& '# to involve students actively in the class& (# to help students develop written andoral communication skills& )# to allow students an opportunity to develop teamwork skills& and *# toprovide a way for students to learn from past mistakes made by the companies in the case studies +from,ary L. icastro and avid C. /ones 0"11)#2 Cooperative Learning Guide for Marketing Teahing Tipsfor Marketing Instrutors! 3nglewood Cliffs2 /! 4rentice-5all6.

7ou can use cases in a variety of ways2 depending on your learning ob8ectives and course design. 9orexample2 cases provide opportunities for extensive in-class participation through whole class or informalsmall group discussions. In order to maximize the benefit of these discussions for the students2 you mustbe willing to act as a coach or a mentor 0and sometimes as a $devil:s advocate%# whose primary role is toget as many students as possible actively involved in the case discussion. hapiro 0"1;)# and ive students $ownership% of the case discussion. Involve them in the process so that they arewilling to state their own opinions2 listen to and challenge differing opinions of other students or theinstructor2 and draw their own conclusions about the case.

'. ?espect students: comments and ideas.

(. 5elp students accept the fact that cases do not have $right% or $wrong% answers2 and that theinformation may be ambiguous or incomplete 0similar to the data that is actually available inbusiness environments.#

). @se humor and role playing to help encourage creativity and to make the learning experience morefun.

*. ummarize key points at the end of the discussion.

09or more information2 see hapiro2 A. 4. +"1;)6. "ints for Case Teahing. Aoston2 ,


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In this section we present 0or refer the instructor to# materials to assist in the preparation and teaching ofeach of the eight cases included in the text. ome of these notes are the work of the case authors and 0if notpresented here# can be accessed via the Internet2 while others have been developed specifically for thismanual.

3ach teaching note includes a brief description of the case along with its ob8ectives2 a discussion ofpedagogy2 student preparation Buestions2 and 0for most cases# detailed answers to the Buestions. 3ach caseis also introduced by listing topicsissues addressed and the corresponding chapters in the Deithaml2 Aitner2and >remler text. The following table summarizes the chapters of the text that are appropriate for each

case.

MATCHING CASES WITH APPROPRIATE CHAPTERS IN THE TEXTBOOK

Case # Case Title Apprpriate C!apters i" t!e Tet$% "

" easyCar.com Chapters &2 '2 )2 '2 (2 ""2 "(2 ")2 &'2 "E

' 4eople2 ervice2 and 4rofit at /yske Aank Chapters &2 )2 *2 12 ""2 &)2 "F

( >iordano Chapters E2 12 &&2 "'2 &*

) The Guality Improvement Customers idn:t Hant Chapters (2 *2 F2 (2 "=2 "'2 &+2 &*

* Custom ?esearch Inc. 0eneral 3lectric ,edical ystems Chapters &2 ,2 -2 &+2 "E

E tarbucks! elivering Customer ervice Chapters "2 '2 .2 E2 "=2 ""2 &)2 ")2 &-

; houldice 5ospital Limited 0


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CASE 1:EASYCAR.COM

1EITHAML2 BITNER2 AND GREMLER TEACHING NOTES

INTRODUCTION

This case focuses on concepts relating to operations strategy and service system design. econdary issuesexamined include the application of production line approaches to service2 service Buality concepts2 and thevalue of demand management systems to the firm.


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the case authors2 /ohn Lawrence. It provides a suggested teaching plan for the case. The compact disc

provided with this manual also contains 4ower4ointslides for teaching.

In teaching this case2 we would suggest beginning in a similar manner to that suggested in /ohn Lawrence:steaching note 0attached#. Instructors can begin by asking Guestion " about the characteristics of the rentalcar industry. The discussion can be directed toward characteristics of services 0discussed in Chapter " ofDeithaml2 Aitner2 and >remler text#. The case discussion can then turn to easyCar:s operations strategy.He would recommend following the suggestions in the author:s teaching note. 9rom there the Buestionsbasically take the class through a discussion of different criteria a rental car company might choose to

compete on 0e.g.2 cost2 Buality2 or flexibility# and looks at easyCar:s processes2 policies2 and procedureswith respect to these criteria.


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CASE SYNOPSIS

This case describes the situation faced by easyCar.com at the start of '==(. 3asyCar is the low priced3uropean car rental business founded by easy/et pioneer telios 5a8i-Ioannou. 3asyCar had 8ust reachedbreakeven in '==' on sales of K'E million2 and had as its goals to reach sales of K"== million and profits ofK"= million by the end of fiscal year '==) in order to position itself for an initial public offering. To do thiswould reBuire opening new locations at a rate of two per week and expanding its fleet of rental cars fromE2=== to ')2===. The case describes the company:s processes and facilities as well as its pricing andpromotional strategies. It also describes a number of significant changes that the company made in theprevious year2 including a move to allow rentals for as little as an hour that was designed to positioneasyCar as a competitor to local taxis2 buses2 trains2 and even car ownership. The case also exploresseveral legal challenges the firm faced2 including a ruling that threatened one of the core elements of itsbusiness model. tudents are asked to evaluate easyCar:s operations strategy and assess the likelihood thateasyCar will be able to achieve its ambitious goals.

DETAILED LEARNING OB9ECTI?ES

The case has been written primarily to illustrate concepts relating to operations strategy and service processdesign& however2 a variety of services marketing issues are evident in this case. pecific issuesthat the case can be used to illustrate include!

". 5ow services differ from manufactured products 0i.e.2 intangibility2 perishability2 heterogeneity2 andsimultaneous production and consumption#2 how services differ from each other2 and how thecharacteristics of a given service influence the design of the service delivery process 0i.e.2 relativefocus given to physical facilities and policies2 employee behaviors2 and employee 8udgment#.

'. 5ow to apply production line approaches to a service through standardization2 the use oftechnology2 and the reduction of the discretionary actions of employees 0Levitt2 "1E'#.

(. Hhy a low cost service does not necessarily imply a low Buality service to the consumer. The caseprovides a good illustration of 4arasuraman2 Deithaml and Aerry:s 0"1;*# conceptualization ofservice Buality and the notion of service Buality relating to customer perceptions compared tocustomer expectations.

). 5ow to align a company:s operations strategy with its business strategy 0i.e.2 low price marketstrategy supported by processes2 procedures2 and systems totally focused on achieving low cost#2and how to use the concept of order winning criteria to facilitate linking process design decisions tothe firm:s operations strategy 05ill2 "111#.

*. 5ow the customer:s participation can be designed into the service delivery process 0i.e.2 so that thecustomer performs a portion of the service delivery#.

F. 5ow valuable sophisticated forecasting and demand management systems can be to a service firmand how process details can be designed to aid forecasting and capacity planning efforts 0e.g.2 earlybookings2 no cancellations#.

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DETAILED ANALYSIS O3 5UESTIONS

The student preparation Buestions that follow were written so that the instructor can simply walk the classthrough the Buestions in seBuence. The Buestions basically take the class through a discussionof different criteria a rental car company might choose to compete on 0e.g.2 cost2 Buality2 orflexibility# and looks at easyCar:s processes2 policies2 and procedures with respect to thesecriteria. Guestions * and F are designed to either further reinforce the lessons of Buestions "-)or to test students understanding of the ideas discussed in these earlier Buestions. omeinstructors may wish to assign only Buestions "-) and E and integrate the important discussion

points from Buestions * and F into Buestions ' and (. Guestion E is designed to help bringclosure to the discussion and emphasize to students that the success of easyCar:s strategy willdepend in part on how well it can implement the strategy during a period of rapid growth.

". &hat are the harateristis of the ar rental industr$' "ow do these harateristis influene thedesign of servie deliver$ proesses in this industr$ in general'

This first Buestion is intended to have students think about the nature of the industry that easyCarcompetes in and the nature of car rental services in general. This will help students better understandand distinguish between actions taken by easyCar that are related to the nature of the industry andservice and those related specifically to easyCar:s strategy. 4erhaps the best way to start the discussionis by looking at the general characteristics of services 0discussed in Chapter " of the Deithaml2 Aitner2

and >remler text# and which of these characteristics are most significant in the case of car rentals. Ingeneral2 services are characterized by their intangibility2 perishability2 heterogeneity2 and simultaneousproduction and consumption. 5owever2 as this case illustrates2 different services can vary significantlyin the extent to which these characteristics hold.

Intangibility. Hhile strictly speaking the $service% of car rental is intangible2 given the physical natureof the rented vehicle2 it really is not as intangible as many other services in the sense that the consumercan see and touch the rented vehicle. 9or the vast ma8ority of the period during which the customeruses the service of car rental2 access to the physical car is the service provided. 9or many services2intangibility makes it very difficult for the consumer to 8udge Buality and for the producer to controlBuality. This is not nearly as difficult a proposition in the case of car rental. The $convenience% factor0e.g.2 location2 speed of pick-up and drop-off# associated with rental is the most significant intangibleassociated with rental cars.

4erishability. Car rental is clearly a very perishable service. If a day goes by and a car is not rented2the opportunity to generate revenues from that unrented time is lost forever. 4erishability is a criticalfactor in the rental industry given the generally high fixed cost associated with the service 0i.e.2 a fleetof vehicles#.


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interactions are important2 they do not limit the ability to achieve economies of scale in the industry theway simultaneous production and consumption would in some other industries.

The second Buestion focuses on service design. ervice design has been characterized as having threebasic components! 0a# physical facilities2 processes2 and procedures2 0b# employee behaviors2 and 0c#employees: professional 8udgement. >iven that car rental service is a relatively tangible2 homogenousservice with fairly low levels of interaction with the customer2 rental companies tend to focus theirservice design on the physical facilities2 processes2 and procedures. Hhile employees: behaviors arenot unimportant2 they are of secondary importance to facilities2 processes2 and procedures in service

design in the car rental industry. This can be seen industry wide.

'. (as$Car o)viousl$ ompetes on the )asis of low prie. &hat does it do in operations to support thisstrateg$'

nce students understand the characteristics of the car rental industry from a service designperspective2 the discussion can move to how easyCar:s operational design allows it to compete on thebasis of price. >iven the extent to which easyCar has designed its process to reduce cost2 studentsshould not have a difficult time identifying the features of its process design that allow it to offer alower price. The key point to drive home is the extent to which easyCar has gone to align its operationsstrategy and process design with its business strategy. Clearly the $order winning% criteria in this caseis low price. 0ee Terry 5ill:sManufaturing Strateg$textbook for more on the concept of the orderwinning criteria in operations strategy.#

4erhaps the best way to make this point is to explicitly compare easyCar:s operations with theoperations of a traditional car rental company. 3xhibit T-" 0on the next page# shows thiscomparison.


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EXHIBIT TN@&C8paris" = Tra0iti"al Re"tal Car C8pa"ies a"0 eas6Car

Tra0iti"al Re"tal Car Pr


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(. "ow would $ou harateri*e the level of servie +ualit$ that eas$Car provides'


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trustworthy2 reliable2 large company alternative to customers seeking a low-priced car rental who arenervous about going to the smaller2 unknown companies operating out of only one or a few locations.

Resp"si


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companies charge by ')-hour periods and for a minimum of one day. 9urther2 easyCar chargescustomers for each individual service that they use 0e.g.2 cleaning the car2 extra kilometers#2 allowingcustomers to pay only for the services that they reBuire. This flexibility really revolves around prices.In two cities2 easyCar also offers flexibility in terms of location2 as half of easyCar:s rental sites are ineither London or 4aris.

The Buestion is whether these forms of flexibility are sufficient to make rentals of a couple of hoursappealing to customers. There are several significant limitations from the customer:s perspective thatwill likely limit easyCar:s ability to attract these customers.

9irst are the preparation fees or activities that the customer will have to pay andor engage

in to rent the car. There is a O) standard preparation charge and a O* charge if the customeruses a standard credit card to pay for the rental. Then the customer may have to wait oncearriving at the easyCar location to collect the car if there is a Bueue of other customers2 whichthe case indicates can occur2 particularly during peak times2 because of the minimum staffinglevels maintained at each location. nce the customer picks up the car2 he or she will thenhave to put gas in the car before it is ready to go. Hhen the customer returns the car2 he or sheneeds to wash the car or pay the O"F cleaning fee2 and must again potentially wait to return thecar. This all could amount to a significant investment in time or money to rent for a couple ofhours.

The second limitation is that easyCar:s prices typically increase as the time of the rental

period draws near2 particularly during peak periods. Hhile a few customers may know well inadvance that they need a vehicle for only a couple of hours on a given day2 it would seem thatthis market segment is more likely to buy at the last minute. This makes the price somewhatless competitive. bviously easyCar can factor this into their pricing model2 so that if acustomer does want a car for a short term period on short notice and the vehicle is availableand would likely go unrented2 then the system can Buote the customer a reasonable price.

5owever2 this raises a third limitation2 which is that freBuently easyCar will not have a

vehicle on such short notice2 as they currently achieve 1=M utilization of their fleet. If acustomer freBuently finds no vehicles available2 at some point he or she will stop bothering tocheck easyCar and simply use the alternatives.

The key point to make in this discussion is that most of easyCar:s processes are tailored much more tocustomers who know their travel plans well in advance and have the extra time to go to a secondarylocation and perform some of the traditional service themselves. This does not seem compatible withthe renter who might want to use an easyCar vehicle for an hour or two on short notice instead oftaking one or a couple of taxi rides. 9or easyCar to successfully compete for such customers mayreBuire changes to its service process. uch changes might include2 for example2 a relaxation ofcleaning policies 0e.g.2 the exterior is free from mud and grime rather than evidence that the car hasbeen washed# and some type of automated drop off system to reduce the time factor for customers.

5aving many locations in the same city also clearly makes easyCar a more viable competitor to taxis2buses and car ownership. This has significant implications to easyCar:s expansion strategy. If it trulywants to compete against taxis2 buses2 and car ownership2 it will have to focus its expansion onopening multiple locations in the ma8or 3uropean cities. If it sees itself more as competing for touristcustomer2 it will need to open more locations in tourist destination locations2 either near airports or

train and bus stations.

*. &hat are the operational impliations of the hanges made )$ (as$Car.om in the last $ear'

< total of five recent changes are identified in the text that easyCar has made in the last year.iscussing some or all of these is designed to reinforce some of the proceeding lessons as well asfurther highlight some of the trade-offs that the company must deal with in its efforts to compete basedon cost. The discussion can also be used to emphasize that all companies2 regardless of what theircompetitive priorities are2 must still seek continuous improvement in their methods.

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0i# ?ental by the 5our! This would have been discussed in detail in the preceding Buestion.

0ii# Introduction of Jehicles ther Than the ,ercedes


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policy2 the gas can be at any level as long as the low fuel indicator light is not on. ince mostdrivers are unlikely to allow the gas level in their vehicles to drop this low anyway2 the chancethat an easyCar employee would have to deal with putting gas in the car is small. Combinedwith the previous change2 this policy basically means the vast ma8ority of customers bring theircar back in a condition that allows it to be immediately re-rented.

0v# ?eBuiring Customers to 4urchase Insurance! This policy change probably has greaterimplications on the marketing side than on the operations side. perationally2 however2 itgreatly reduces the likelihood of conflict between customer and easyCar employee when a

customer returns a damaged car. 4reviously customers who did not purchase the optionalinsurance had some liability2 and the employee on duty would have to sort this out with thecustomer. This can be a time-consuming process2 and present difficulties particularly for alocation staffed by only one person. uch incidents would likely cause delays for othercustomers attempting to pick up or return cars at the same time.

F. "ow signifiant are the legal hallenges that eas$Car is faing'

Clearly the ffice of 9air Trading 09T# ruling against easyCar is much more significant than is theposting of the pictures of renters with overdue vehicles. < discussion of the 9T ruling againsteasyCar can be used to reinforce the cost benefits gained from easyCar:s demand management systemand its high utilization rates it achieves.


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operationally will be to continue to find ways to drive costs down while maintaining customersatisfaction so that it can realize profits at the same time.

USE O3 THE CASE IN A STRATEGIC MANAGEMENT CLASS

The case2 as written2 could also be used in a strategic management class to discuss or illustrate howfunctional strategies need to be aligned with corporate strategies2 how a low cost strategy is implemented2and what constitutes a durable competitive advantage. The following Buestions are suggested as possible

discussion Buestions for using the case in a strategic management class. Guestions "-) and E are verysimilar to those described above2 only broadened somewhat to better fit a strategic management course.Guestions * and F are uniBue and are intended to point students toward important strategic managementconcepts. In relation to a strategic management class2 the idea of strategic groups could be included in thediscussion of Guestion " 0with a strategic group map being built along dimensions of price andserviceBuality#. iscussion of Guestion ' can be broadened to include issues relating to finance 0e.g.2customers paying in advance has a big impact on cash management# and marketing 0e.g.2 advertising on theside of the car2 posters in subway2 bus2 and train stations#. Guestion * is intended to highlight that processinnovation can be as or more important than product innovation in creating competitive advantage.Guestion F allows for a discussion of how a company goes about achieving a sustainable competitiveadvantage and whether or not easyCar.com:s strategy and actions are consistent with creating such anadvantage. The strategy easyCar.com is pursuing is likely to be at least somewhat sustainable because the

rental car industry is not terribly dynamic2 the ma8or competitors are unlikely to try to imitate its strategybecause of prior strategic commitments2 and easyCar.com:s advantage is built around process innovation isnot always easy for a competitor to copy.

". Hhat were the characteristics of the car rental industry that made it attractive to teliosN'. 3asyCar obviously competes on the basis of low price. Hhat does it do across the business to

support this strategyN

(. 5ow would you characterize the level of Buality that easyCar providesN 5ow would youcharacterize the level of customer responsiveness that easyCar providesN

). Is easyCar a viable competitor to taxis2 buses and trains as telios claimsN 5ow does the design of

its operations currently support this form of competitionN 5ow notN

*. It has been argued that innovation is the single most important building block of competitiveadvantage. oes that appear to be the case for easyCarN Hhy or why notN

F. Is easyCar:s competitive advantage sustainableN Hhy or why notN

E. Hhat is your assessment of the likelihood that easyCar will be able to realize its goals for'==)N

EPILOGUE

In ,arch of '==(2 easyCar had announced that it was going to make as many as "'2=== vehicles availablefrom unmanned pick up points by the end of '==) through the use of car clubs. 3asyCar had startedtesting the technology at one of its locations in London in the spring of '==(. Customers would stillreserve a car via the Internet2 then call on their mobile phone when they arrived at the vehicle. 3asyCaroperators would then unlock the car remotely using mobile technology connected to the vehicle:s lockingsystem. Customers would then get the keys from the glove box and be on their way. 3asyCar was going to

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allow only customers who proved trustworthy through the hire of cars from ordinary locations to use theclub vehicles2 and there would be no preparation fee associated with the club vehicles.0

Ay /une of '==( easyCar had *( locations open 0up from )F in /anuary2 '==(# and had reached a fleet sizeof ;=== vehicles. This was well off its desired pace of opening two new locations a week. In /uly of '==(2easyCar admitted that its expansion and profitability goals were not being achieved. It cut its workforcefrom "*= to F= and reduced its operating hours to save costs. It also began closing some unprofitablelocations. It had closed its operations in the etherlands and was looking for franchisees to take overoperations of facilities in 9rance2 pain2 and witzerland. 4lans for an I4 were put off until '==* or

later.- everal of the other easy>roup businesses 0easyInternetcafe in particular# were also still struggling2and telios had to sell K"E million of his stock in easy/et.com to keep the various easy>roup businessesgoing.1uring the fall of '==(2 easyCar received bad press because of complaints from customers aboutcars not being available as promised and not being able to find easyCar staff at certain locations. /

Ay 9ebruary2 '==)2 easyCar had operations in only (1 locations2 (= of which were in the @S. In /une2'==)2 easyCar undertook a ma8or shift in strategy and signed a brokerage account with arvin2 .


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CASE 2:PEOPLE, SERVICE, AND PROFIT AT JYSKE BANK


INTRODUCTION

The /yske Aank case provides an excellent opportunity to focus on strategic change2 market positioning2service Bualityexcellence initiatives2 and the >aps ,odel of ervice Guality.

The /yske Aank case describes the change process the bank underwent over an approximately ; yearperiod. Aeginning as a typical2 prudent2 conservative2 and largel$9undifferentiated organization2 /yskeAank turned itself into the enfant terri)le of the anish banking market2 having a strong and distinctpersonalitycompetitive position and delivering exceptional value to its 0"# customersUhighest customersatisfaction of any ma8or bank in enmark2 0'# employeesUhighest employee satisfaction of any ma8orbank in enmark2 and 0(# shareholdersUdelivering a "E.1M return to shareholders over a ten-year periodbefore a dramatic rise in its price earnings ratio at the conclusion of the case 0source! attached Teachingote by case author2 ?oger 5allowell#.

He have used this case as a concluding case for the course2 as a final exam2 and as an introductory case. It

works well for all of these purposes.

ur notes are adapted from the original case notes and provide a guide for using the /yske Aank case in thecontext of market positioning2 service Buality 0illustration of implementation of the >aps ,odel of erviceGuality#2 and service excellence. He have also attached a set of notes provided by case author2 ?oger5allowell2 that focus more on strategic change2 culture2 and communication.

SUGGESTED USES O3 CASE WITH 1EITHAML2 BITNER2 AND GREMLER TEXT

Tpi4s A00resse0

trategic change

Corporate culture and values

,arket re-positioning around values

ervice Buality

3mployees: roles in service delivery

3mpowerment of employees

The power of tangibles in communicating service positioning

Apprpriate C!apters

Chapter "! Introduction to ervices

Chapter '! Conceptual 9ramework for the Aook! The >aps ,odel of ervice Guality

Chapter *! Customer 4erceptions of ervice

Chapter 1! ervice evelopment and esign

Chapter ""! 4hysical 3vidence and the ervicescape

Chapter "'! 3mployees: ?oles in ervice elivery

Chapter "F! Integrated ervices ,arketing Communication

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PEDAGOGY

In teaching this case2 we begin in a similar manner to that suggested in ?oger 5allowell:s note 0attached#.He begin by asking the Buestion $Hould you invest in /yske AankN% This generates a good discussion ofstrengths and weaknesses and Buickly brings out the positive data on customer satisfaction2 employeesatisfaction2 and shareholder returns. This discussion is brief about five minutes.

The case discussion can then turn to what the bank did 0re-positioning around values# and why and howthese results were achieved 0tangible and intangible changes2 plus communication#2 using discussion

Guestions " and ' 0see tudent 4repartion Buestions below#. ap " - The Snowledge >ap

o >ap ' - The ervice esign and tandards >ap

o >ap ( - The ervice 4erformance >ap

o >ap ) - The Communication >ap

3xamine strategies for sustaining growth and success following a ma8or change initiative.

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http://www.ecch.cranfield.ac.uk/mailto:[email protected]:[email protected]://www.ecchatbabson.org/mailto:[email protected]://www.ecch.cranfield.ac.uk/mailto:[email protected]://www.ecchatbabson.org/mailto:[email protected]


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STUDENT PREPARATION 5UESTIONS

0. &hat is :$ske 6anks new positioning or ompetitive differentiation strateg$'

-. &hat hanges did the )ank make to get to its new position' &hat effet did these hanges have'

1. #nal$*e :$ske 6anks suess using the Servie ;ualit$ Gaps Model found in Chapter -. &hatare :$ske 6anks strategies for losing the 2 gaps in the model'

/. In $our opinion an :$ske 6ank sustain its growth and suess' &ould $ou invest in :$ske6ank'


". &hat is :$ske 6anks new positioning or ompetitive differentiation strateg$'

To be $the most customer-oriented bank% in enmark

9ocused on $/yske ifferences% 0based on the bank:s core values# 0ee 3xhibit ) in the case for

details#!o 5ave common sense

o Ae open and honesto Ae different and unpretentious

o 5ave genuine interest in and eBual respect for people

o Ae efficient and persevering

'. &hat hanges did the )ank make to get to its new position' &hat effet did these hanges have'

Jalues drove changes specific practices that distinguish /yske Aank are based on their values0see Guestion " above#

They focused everything around the customerhifted from a product focus to a customer solution approach

Tangible Changes?e-design of branches 0modernwarmoriginal art#Coffee availablecafW8uice for kids4lay area for kidsAusiness cards with photosLarge round tables where (-) bankers are seatedCustomers sit next to bankers

Intangible Changes?eorganization around account teams primary point of contactTraining in team building and customer service 0caring2 asking2 listening#3mpowerment of employees 0decisions2 spending#,anagers who think strategically and lead change through coaching

elect for social abilities2 values2 and attitudes/yske $way of life% strong cultureIT tools

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(. #nal$*e :$ske 6anks suess using the Servie ;ualit$ Gaps Model found in Chapter -. &hat are:$ske 6anks strategies for losing the 2 gaps in the model'

The ervice Guality >aps ,odel suggests that the Customer >apUthe difference between whatcustomers expect and what they perceive they are receivingUis caused by the presence of one or moreervice 4rovider >aps. That is2

Customer >ap Q f0>ap "2 >ap '2 >ap (2 >ap )#

Thus2 the customer gap is closed by ensuring that all four of the provider gaps are closed. trategies toclose 0or eliminate# these provider gaps are as follows.

>ap " trategies!

9ocused on a specific targeted segment price premiumnon-credit risk2 families2 and mid-

sized businesses

$ot for 3veryone% so they know their market segment well

?esearch by utch consultants revealed customers were interested in and responsive to a

$/yske% type bank2 and that they were also interested in softer attributes of serviceUnot 8ustprice and location

Listen to customers via customer satisfaction surveys

3mpower account teams to be able to customize solutions to fit needs

9ocused on retaining customers and building relationships

>ood communication up2 down2 and horizontal customer information flows easily

>ap ' trategies!

ew IT systems helped employees take customer through a process to determine their needs

and the right solutions

ervices are designed around /yske values so they are consistent with positioning

Computers are visible to customers so they participate and are aware of process and decisions

ew branch design warm2 friendly2 family-oriented

hortened and streamlined loan process meets customer expectations

>ap ( trategies! upport systems and technology for employees

3mpowerment in decision making

Training in customer service listening2 caring2 asking

,anagement coaching and leadership

,easuring employee satisfaction

Internal communication video on /yske ifferences

$/yske 9un% reinforces values Aattle at Je8le

,anagers discuss values with employees

?ewarded for service and modeling values

>ap ) trategies!


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/yske Aank can sustain growth and success by!

ticking with positioning and basic service-profit chain strategy

,ay need to expand to other market segments to continue growth2 or work on getting people to

switch

trategy is hard to imitate

Hould you invest in /yskeN3arly in the case discussion2 students can be asked whether they would invest in /yske bank. ,ostwill say yes2 citing the results listed below. ome may disagree citing concerns that the bank cansustain its position and continue to grow.

?esults 0supporting a decision to invest in /yske Aank#


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Peple2 Ser


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I often open the discussion by asking the Buestion2 $


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someone points out that when you do the conversion from SS 0anish Sronor# to either @.. dollars oreuros2 you realize that these are tiny incentives. Clearly2 no one gets rich as a result of working at /yskeAank. 5ow then did the change occurN

To some degree whatwas done served as a catalyst for change 0empowerment2 flattening the organization2streamlining processes#. 5owever2 ommuniation also played a significant role in driving change at thebank.


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CASE 3:GIORDANO

1EITHAML2 BITNER2 AND GREMLER TEACHING NOTES"

INTRODUCTION

>iordano is one of iordano maintain its competitive advantage in the futureN

iordano had to criticallyevaluate its sources of competitive advantage and key success factors2 and perhaps consider repositioningitself in current and new markets. 9urthermore2 >iordano needed to examine which key success factorscould be maintained or even strengthened2 and which of its key success factors were likely to be erodedover the coming years. 9urthermore2 >iordano had to consider if its key success factors could betransferred to international markets that it planned to enter.

SUGGESTED USES O3 CASES WITH 1EITHAML2 BITNER2 AND GREMLER TEXT

Tpi4s A00resse0

4ositioning and expansion choices for a company

International retailing

uccessful integration of a service strategy

4ositioning based both on value-for-money and service

Identification and perpetuation of key success factors

Apprpriate C!apters

Chapter E! Auilding Customer ?elationships


Chapter ""! 4hysical 3vidence and the ervicescape


Chapter ")! elivering ervice through Intermediaries and 3lectronic Channels

1The >iordano teaching note was prepared by /ochen Hirtz2 the case author2 and edited for inclusion inthis Instructor:s ,anual.

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PEDAGOGY

This case is well-suited for a retailing or services marketingmanagement course. It demonstrates thepower of a tight integration of marketing2 operations2 and human resource management to deliver $value-for-money.% pecifically2 it can be used for the following teaching ob8ectives!

9rom a marketing perspective2 this case can be used to demonstrate the successful integration of a

strategy based on service-orientation2 value-for-money positioning2 and aggressive advertising andpromotions.

9rom a management perspective2 the case can be used to highlight how the marketing strategy is

being delivered through a clear focus on service staff 0selection2 training2 and motivation# andoperations 0logistics2 IT2 and communications#2 combined with an organizational culture thatencourages staff to try new things.

The case is suitable for analyzing current competitive advantages2 and carving out potential future

competitive advantages in a servicesretailing context. 9or example2 strategic analysis models suchas 4orter:s industry analysis and value-chain models can be applied to examine the sources andsustainability of >iordano:s competitive advantages.

9inally2 the case can be used to explore the transferability of key success factors and strategic

advantages to new markets. trategic and tactical adaptations that may be necessary tosuccessfully transfer a proven formula to a new geographical market can be examined. 5ere2 itmight be useful to discuss >iordano:s strategy in the context of the country of instruction to allowstudents to more easily identify with the case.

STUDENT PREPARATION 5UESTIONS

The following Buestions can be provided to students in advance of the discussion of the case in class thatwill focus their learning!

". >isuss and evaluate Giordanos produt! )usiness! and orporate strategies.

'. >esri)e and evaluate Giordanos urrent positioning strateg$. Should Giordano reposition itselfagainst its ompetitors in its urrent and new markets! and should it have different positioningstrategies for different markets'

(. &hat are Giordanos ?e$ Suess 7ators @?S7sA and soures of ompetitive advantage' #re itsompetitive advantages sustaina)le! and how would the$ develop in the future'

). Can Giordano transfer its ke$ suess fators to new markets as it e,pands )oth in #sia and the restof the world'

*. "ow do $ou think Giordano would have to adapt its marketing and operations strategies and tatiswhen entering and penetrating $our ountr$'

F. &hat general lessons an )e learned from Giordano for maBor lothing retailers in $our ountr$'

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". >esri)e and evaluate Giordanos produt! )usiness! and orporate strategies.

iordano sees itself as being more than 8ust a retailer of casual apparel. It was ableto successfully incorporate customer service as part of its product. Aesides its brand name2 logo2 style2and Buality2 excellent service has become part of the tangible products sold at >iordano stores. 9orinstance2 >iordano:s $no-Buestions-asked and no-time-limit% exchange policy can be seen as anaugmented product offered by >iordano. Customers have come to associate service excellence as an

integral component of >iordano:s merchandise. >iordano is able to provide a high level of customerservice through a concerted effort2 which involved every employee of the company. 5owever2 it is alsoessential to recognize the importance of the management and leadership:s commitment to be customer-oriented and to provide high Buality service.

Aesides incorporating service as part of its product2 >iordano focuses on the concept of value-for-money. >iordano is constantly aiming to improve the value of the product. Aeing customer-orientedallows >iordano to focus on what the company:s products mean to the consumer. Customers are oftenencouraged to reBuest certain product adaptations if current products fail to meet their expectations.9or instance2 >iordano removed its logo from some shirts. iordano:s invitation tocustomers to set the price of its 8eans.

>iordano:s other product strategy is to sell a small number of core products in its stores. Hhile otherretailers have '==-(== items2 >iordano has only "E core items. 9lexibility and speed is essential in theretailing industry2 especially when the fashion trend is evolving constantly. ,aintaining a restrictedrange of core products has allowed >iordano to respond to market changes faster than its competitors2and to keep costs down.

6usiness Strateg$. There are three generic strategies advanced as business strategies 04orter#! costleadership2 differentiation2 and focus2 and combinations of these three pure strategies. >iordano seemsto pursue a combination& that is2 a focused differentiation strategy. The primary source ofdifferentiation comes from >iordano:s commitment to Buality2 in terms of the products it sells and theservice it provides to customers. This can be illustrated by its dedication to training and motivating itsfront-line staff as well as its no-Buestions-asked return policy. >iordano:s strategy is focused oncustomer responsiveness 0understanding what its customers want and putting their interests first#2 as

well as on a specific niche! value-conscious consumers who want affordable yet trendy casual apparelwith reasonable Buality.

tudents may argue that >iordano is changing its focus to expand the market niche that it has beenserving to include a more upscale market segment. 5owever2 this is done carefully to prevent a loss ofexisting customers who may become confused by the value proposition that >iordano provides to them.9or instance2 its launch of the Aluestar 3xchange line clearly indicates its commitment to the existingvalue-for-money segment2 but at the same time it is upgrading its core brand:s position so thatcustomers may eventually perceive that >iordano stands for more than 8ust Xlow priced: apparel. Hiththe successful launch of the new product line and re-launching of >iordano Ladies and /unior2>iordano appears to have overcome the main problem that niche strategies faceUthat is2 the inabilityto move to new niches. This is elaborated further in the next Buestion.

Corporate Strateg$. >iordano initially adopted a tapered vertical integration 0backward# strategy2 as ithad manufacturing plants in the 4hilippines and ,ainland China2 while also sourcing from externalsuppliers. This was deemed necessary to allow better cost and Buality control2 and the strategy workeduntil the currency crisis hit iordano:s own manufacturing division for supplies. There could be other reasons2 such asrising operating costs2 putting pressure on the firm to look for alternative sources of supply. In fact2 in"1112 the 4hilippines plant was closed down2 and >iordano concentrated on their core business in

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retailingdistribution. This can also be evident in their allocation of investments to expand its retailoutlets. tudents can argue that this strategy is risky but consistent with >iordano:s core competency2that of customer responsiveness2 as opposed to operational efficiency.

'. >esri)e and evaluate Giordanos urrent positioning strateg$. Should Giordano reposition itselfagainst its ompetitors in its urrent and new markets! and should it have different positioningstrategies for different markets'

In evaluating >iordano:s positioning strategy2 students should comment on whether >iordano:s

strategies are distinctive enough to create a clear image in the minds of the consumer. In addition tothat2 students should discuss the superiority and visibility of the differentiating advantages utilized bythe company.

tudents should not have problems in identifying >iordano:s current positioning to be that of $value-for-money% or $Buality merchandise at affordable prices% +produt differentiation6. tudents may alsoidentify the positioning strategy to be that of the high level of service provided to customers +serviedifferentiation62 or that >iordano:s sales staff are dedicated2 ever-smiling2 well-mannered2 and helpful+personnel differentiation6. tudents could also be asked to identify the reasons for the success of thispositioning2 such as filling a gap in the market for trendy2 yet reasonably-priced unisex apparel2reinforcing the positioning with the appropriate marketing communications2 and the delivery of Bualityservice.

The possibility of changing current positioning in the light of developments in the industry2 particularlywith respect to consumers: desire for trendier fashion2 as well as the increase in the number andstrength of competitors2 should also be discussed. 9or instance2 students could critiBue the firm:sinterpretation of these trends and its subseBuent decision to upgrade its image and capture the up-scalesegment. bviously2 this move may cause problems with its current core target segments. This wasapparent from the failure of its >iordano Ladies: venture2 because the positioning strategy failed todifferentiate the up-scale segment from the value-conscious segment. >iordano has fought hard toestablish its brand name for its value-for-money proposition2 but it is also because of its establishedbranding that >iordano cannot easily change its positioning. 5owever2 it can be seen that >iordanotook measures to avoid the problems of brand dilution2 and to overcome its apparent difficulty inmoving consumers: perceptions of >iordano toward a high-end positioning. 9or instance2 it establisheda new product line2 Aluestar 3xchange2 to cater to the needs of its existing value-for-money segment2

and revamped the core brand with extensive marketing communications and gave its stores a $newlook.% >iordano initially tried to acBuire Theme International in ovember "111 to carry its line ofupscale ladies apparel2 but its take-over bid was re8ected by Theme:s management and stockholders.Instead of giving up entering the upscale market segment2 it re-launched >iordano Ladies and >iordano/unior to carry a trendier line of apparel2 with encouraging results. iordano stands for2 and this inconsistency makes effective

service strategy implementation difficult2 particularly as consumers are becoming increasingly mobileand travel more freBuently between >iordano:s core markets. In addition2 economies of scale inapparel purchase2 design2 and market communications may be diluted2 if different strategies arefollowed across markets. If this trend persists2 >iordano may dilute its brand name and might possiblyweaken its competitive advantage in other areas as well. 4erhaps >iordano would do better to keep aconsistent positioning2 keep its management focused on its core strengths2 and send a clear message toall its staff and customers. tudents may recommend that >iordano gradually and slowly move itspositioning upwards to meet the rising affluence2 and hence the resulting desire for high-end apparel2 ofits core target segment 0see 3xhibit "#.

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iordano enters into new markets and faces strong and similarly positioned competitors in thesemarkets 0e.g.2 The >ap in the @..2 /apan2 and most 3uropean markets#2 the pressure to adopt a slightlydifferent position that suits the uniBue market situation of a particular country may increase. In thiscase2 students could suggest that >iordano acBuire another existing brand or start up a new businessentity under a different brand2 with its own positioning strategy. In fact2 this is illustrated by>iordano:s recent venture2 Aluestar 3xchange2 which caters to a more price-conscious2 mass-marketsegment. 5owever2 this strategy is extremely risky due to the costs involved in building a newmarketing strategy and brand2 and students may come to the conclusion that having a consistent

positioning may be the better option even if it means competing head-on with established brands.

In conclusion2 a potential strategy for >iordano could be to maintain its positioning in 5ong Song andover time slowly and gradually shift its position in other slightly more upscale markets to follow its5ong Song positioning. This strategy would have the added advantage that it would move upwardstogether with its core target segments2 which is also developing upwards in terms of education andincreasing disposable income 0most of >iordano:s iordano to maintain a consistent positioning across all markets2 even when >iordano decides toenter countries with entrenched competitors with similar positioning. hould these competitors be toostrong2 perhaps it would be better not to enter this market rather than try to establish a new brand andstrategy. The main reason is that this would be expensive and high risk as less of >iordano:s corestrengths could be transferred to this new market2 and benefits from economies of scale could not fullybe reaped 0e.g.2 in terms of manufacturing volumes2 marketing2 training#.

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EXHIBIT 1: Proposed Relative Positioning Map

EXHIBIT 2: Porters Five Forces in the Retail Apparel Indstr!

201

?(BA AalenoBS Aossini

E 3spritG Cr >iordano currentGL >iordano LadiesG Ne: new2 aspired position for all itscountry operationsHT 5ang TenTH Theme

Up-market

Value-for-money

Specific

sement

!eneral

appeal

!"

#

$%

5T

! &e'

!(ur)*

)S

8ote4 (,hi)it 0 shows that Giordanos international operations @as shown here for its South9(ast #sian operationsA ouldmove to position G 8ew to regain a onsistent positioning aross its various geographial markets! and to onverge withGiordanos urrent positioning in "ong ?ong.

RIVALRY AMONG

ESTABLISHED FIRMS

+ %,!% rice an.

non-price competitionincreasin in intensity/slo'er .eman. ro't

BARGAINING POWER OF

SUPPLIERS

+ " Suppliers can e

replace. easily

BARGAINING POWER OF

BUYERS

+ #*$# "o' s'itcin

costs ut no collectie araininpo'er

RISK OF ENTRY BY POTENTIAL

COMPETITORS

+ #*$# ,nestments in

ran. uil.in/ an. retail outletsnee.e.

THREAT OF SUBSTITUTE

PRODUCTS+ ""ack of sustitutes for

casual clotes


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(. &hat are Giordanos ?e$ Suess 7ators @?S7sA and soures of ompetitive advantage' #re itsompetitive advantages sustaina)le! and how would the$ develop in the future'

This Buestion can be approached from a service strategy perspective. 9irst2 the apparel retail industry>iordano is operating in can be analyzed using 4orter:s 9ive 9orces framework. 9urther insight can bederived from an industry value-chain analysis to examine how >iordano currently captures value.econd2 >iordano:s sources of competitive advantage and S9s could be identified and theirsustainability evaluated. In addition2 recommendations on how its S9s could be developed or erodedcan be presented.

@sing 4orter:s 0"1E1# five forces framework2 it can be shown that the retail apparel industry iscurrently attractive to incumbents like >iordano2 but with competition being the main threat2 theimportance of maintaining and developing sustainable advantages becomes apparent. This issummarized in 3xhibit '.

The impact of the five forces on the retail apparel industry could be discussed as follows!

Suppliershave low )argaining power2 as >iordano owns the brand name of the end product as

well as the customer interface. 4roduction can also be easily switched from one manufacturerto another.

Customershave little to no collective )argaining power. 5owever2 customers seeking value-for-money can easily switch from one retailer to another2 compared to customers who seekspecific apparel brands.

Competitive rivalr$ is high and increasing in intensity in the casual apparel industry. This

seems to be caused by lower growth rates2 and the aggressive behavior of incumbents whocurrently focus relatively more heavily on non-price competition.

Threat of potential new entrantsis moderate as substantial investments in brand building and

a network of outlets would be reBuired. 5owever2 large international chains such as The >apwould have the reBuired resources to enter should the markets appear sufficiently attractive.

Threat of su)stitutes for casual apparel is low because of the lack of good substitutes&probably the cheaper imitation brands and unbranded products serve as the nearest substitutes2but the target market is likely to be different.

@sing 4orter:s 0"1;*# value-chain analysis 03xhibit (# it can be shown that as an apparel retailer2>iordano captures much of the value in the marketing2 sales2 and service stages of the industry valuechain. 9urthermore2 most of the value in this chain can be extracted by the brand owner and theretailer 03xhibit )#. Aoth value-generators are owned by >iordano2 which gives it a high value-extraction power relative to other market players.

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EXHIBIT ": Porters #ale $hain Anal!sis

ource! iordano2 Aaleno2 5ang Ten2

Aossini2 etc.Arands not exclusively retailed 0e.g.2

Three ?ifles2


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>iordano:s Sey uccess 9actors 0S9s#4

>iordano:s competitive advantage over players in the same value-capture position as shown in 3xhibit) 0e.g.2 Aaleno2 5ang Ten2 and Aossini# has been summarized in 3xhibit *. >iordano:s S9s andsources of competitive advantage could include!

(,ellene in design! fast and market-driven new product development2 due to flat

organizational structure2 excellent organizational communication2 and dedication to the needsof customers 0e.g.2 style2 fabrics#.

(,ellene in management of operations! logistis and information tehnolog$ s$stems! this

includes effective supply chain management2 inventory control2 distribution2 and integration ofpurchasing and selling functions. Cost savings from efficient operations are transferred tocustomers2 thus delivering $value-for-money.%

(,ellene in marketing and )randing! strong positioning2 brand eBuity for excellent service

and ability to deliver $value-for-money2% consistent execution of advertising and promotion tostrengthen brand image.

(,ellene in servie! continual commitment to providing excellent customer service and

response. This is the result of integration of the corporate philosophy and leadership2 service

orientation of supporting functions like human resource policies 0e.g.2 selection2 training andremuneration of frontline staff# and information systems2 and performance monitoring 0e.g.2regular evaluations of service standards at store level and mystery shopping#.

Good site seletion! >iordano:s location strategy provides a competitive advantage because of

its direct impact on ability to generate high volume customer traffic while keeping low margins.

In other words2 it is the superior implementation of core and support activities that brought part of thesuccess to >iordano. 4orter termed this as $operational effectiveness% 04orter2 "11F2 pp. F"-E;#& thatis2 performing similar activities better than rivals perform them. 9rom another perspective2 >iordanooperates in the Cycle of uccess 0chlesinger and 5eskett2 "11"2 pp. "E-';#2 which is discussed furtherin Guestion F.

tudents should attempt to evaluate the sustainability of these key success factors in existing countrymarkets2 and suggestions on how >iordano could maintain these are provided in columns two and threeof 3xhibit *2 respectively. 3ssentially2 the basic criteria of sustainability should be identified& that is2 itmust be difficult for competitors to copy andor it must take time to copy2 to allow >iordano tomaintain its advantage at least for some time. Hith continuous investment in human resources andorganizational commitment to service orientation& constant improvement in design and in the efficiencyof operations& and efforts in increasing marketing muscle by promoting its brand& most of the keysuccess factors2 except site selection2 are somewhat sustainable in the medium to long term.

9or instance2 excellence in design and service comes from the integration of many activities in the valuechain& it involves intangible elements such as organizational culture and it does not reside in anyparticular individual. Thus2 it is more difficult for competitors to $poach% this source of advantage andovertake >iordano2 as compared to simply acBuiring superior technology or poaching good managers.,oreover2 even if competitors were to obtain this source of advantage2 it might be difficult for them toimplement it as successfully2 because many factors such as the type of organizational culture andleadership would vary from company to company. evertheless2 >iordano should never rest on itslaurels. ?ather2 it should look into new ways of improving and strengthening its advantage. neimportant way of doing so is to continually invest in its human resources& as 9ung 0Chief perationfficer2 3


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In the long term2 sustainability depends on the management of >iordano being able to make >iordano acustomer-2 logistics-2 and technology-driven learning organization. iordano:s success is the integration of its primary functions 0e.g.2 logisticsand marketing# and support functions 0e.g.2 5? and IT# in its value chain. This is largely sustainable inthe medium to long term2 provided that >iordano continues 0"# to invest in its human resources2 0'# tocommit to its service philosophy and customer orientation2 and 0(# to monitor the industry andcompetition for threats and opportunities.

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EXHIBIT ): (**ar! o+ ,iordanos -e! (ccess Factors

,iordanos -e! (ccess Factors .-(F/(staina0ilit! in Eisting $ontr!Marets

3iel!4Potential Ftre 5evelop*entso+ -(F

5esign9ast and market-driven 4!- ystematically collects ideas from

customers2 front line andexperienced designers.

-

9ast turnaround from marketimpulse2 design2 manufacturing todistribution to the shops.

omewhat sustainable- ?elies on effective organizational

communications and otherintangible sources of advantage2

which are difficult for competitorsto copy and implement effectively.

- Competitors could increasingly usetechnology to assist in their design

process.- n >iordano:s part2 effort must

continually be made to obtain andutilize feedback from targetcustomers.

- iordano:s efficiency in logistics

and operations may be copied oreven exceeded with an acBuisitionof superior systems. 5owever2there are not many competitorswho would be able to copy the

implementation and integration ofthe systems on the scale that>iordano has done.

- ther competitors would be likelyto try to emulate >iordano.

- eeds to continually look for newways to improve and build itsadvantage inside and outside itsindustry.

- Aenchmarking against retailers like

The >ap and Liz Claiborne2 whichare well-known for theirintegration of IT systems andefficient operations.

Branding and Mareting>iordano:s Arand!- 4ositioning - helps instant transfer

of key values >iordano offers0value-for-money2 good Buali tycasual wear2 excellent service#.

- 3xcellent brand recognition due tohigh advertising budget.

omewhat sustainable- Arand eBuity helps to build

customer loyalty.- 5owever2 >iordano faces threat of

strong competitors with similarpositioning and also from branddilution 0e.g.2 $cheap image%# asthe market in general shifts upwardalong with increasing incomes.

- Aiggest threat comes fromreputable players like The >ap.

- >iordano should continue to investin strengthening its brand eBuitythrough heavy advertising andexcellent customer service.

- It could acBuire another brand toserve the higher-end segment.

$sto*er (ervice9antastic customer service!- ervice orientation is pervasive in

many of its activities.- ?ecruitment2 selection and training

of staff.- 3mpowerment and motivation of

staff.

omewhat sustainable- < service culture is one source of

advantage that competitors wouldfind difficult to copy.

- 5owever2 >iordano needs toensure that this culture can bemaintained as it expands rapidly inexisting and new markets.

- ther competitors have not yetattempted to follow >iordano:sservice strategy.

3ocation

>ood2 high traffic shopping and

convenience locations!- 5igh contributions allow

aggressive retail locationacBuisitions

ifficult to sustain-

>iordano:s sites are an importantsource of advantage2 but othercompetitors could also do the same

- Competitors and new entrants will

successfully compete for goodlocations

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). Can Giordano transfer its ke$ suess fators to new markets as it e,pands )oth in #sia and the restof the world'

tudents could first identify the factors that need to be considered as >iordano tries to expandinternationally. < possible framework is Lovelock:s ervice ,anagement Trinity 0Lovelock2 "11F2 p.*"=#2 which clearly communicates the interdependence of marketing2 operations2 and human resources.Therefore2 this framework suggests that many of >iordano:s key success factors2 which resulted fromthe sound integration of many primary and support activities in its value chain2 could be transferred tonew country markets in iordano should do to achieve success is summarized in 3xhibit F. The transferability of keysuccess factors to new markets could be discussed as follows!

>esign! The organization infrastructure 0e.g.2 flat structure2 good communication2 use of IT

and customer orientation# facilitates the transfer of this S9 to new markets.

Dperations! logistis! and IT! The complexities of the operations2 logistics2 and IT systems

would increase as >iordano expands geographically2 and achieving efficiency and leanprocesses in inventory management and distribution may become more difficult. 5owever2>iordano currently has the capability to implement systems2 and it only needs to fine-tune andupgrade its systems to deal with the local complexity. To transfer this S9 to new markets2 theexisting IT system and integrative processes between the purchasing and selling functions must

be upgraded 0e.g.2 through the use of Heb-based Intranet systems2 which facilitate real-timeinformation flow and inventory control across geographical boundaries#.

6randing and marketing! Hhile the positioning of >iordano:s brand should remain consistent

across markets2 the marketing mix could be varied to tailor to the specific market conditions.This is not difficult considering >iordano:s policy of empowering local managers 0who havemore experience and knowledge of the local market# to make implementation decisions likeadvertising and promotion. 5ence2 this S9 may be transferable to new markets in ap#. Thus2 it is moredifficult for >iordano to differentiate itself in these markets 0e.g.2 /apan2 3urope2 and Latiniordano has to consider carefully whether it can achieve thenecessary market share and volume to obtain economies of scale needed 0for advertising2 etc.#.evertheless2 there is little evidence to suggest that global presence is needed in its targetmarkets and for the positioning >iordano operates in. This situation differs for luxury brands0e.g.2 >ucci or Chanel#2 which clearly benefit from a global presence and economics of scale inbuilding their brand eBuity on a global level.

Customer servie4 The key to good customer service lies in its philosophy2 which is manifested

in various 5? policies 0e.g.2 recruitment and training#. Thus2 it may be possible for >iordanoto transfer this to new markets to the extent that it can maintain service levels by providingtraining to local staff2 monitoring performance2 etc. ,ore importantly2 as the >aps ,odel ofervice Guality suggests2 it should evaluate service expectations from the customer:sperspective rather than its own2 and formulate standards accordingly. 9or instance2 >iordano

should develop a greater understanding of the different service needs of its internationalcustomers by gathering feedback from customers and utilizing it to fine-tune its servicestandard for those markets. espite >iordano:s efforts in ensuring high Buality service in newmarkets2 it may face some difficulty in positioning itself on service in some countries outside ofiordano to differentiate itself from those competitors with high Bualityservice. This is in contrast to much of


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Loation4>iordano could continue to obtain prime locations for its retail operations with its

current cash hoard.

In conclusion2 >iordano may be able to transfer many sources of competitive advantage to newmarkets in iordano may be ableto achieve high volume through brand awareness and thus succeed in new markets.

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EXHIBIT 8: Trans+era0ilit! o+ ,iordanos -e! (ccess Factors to 9e International Marets

Gir0a"s Ke6 S44ess 3a4trs;KS3s>

Tra"s=era$ilit6 t Ne: I"ter"ati"alMar%ets

A4ti"s reire0 t all: a S44ess=lTra"s=er = KS3

5esign9ast and market-driven 4.

9ast turnaround from market impulse2design2 manufacturing to distribution

to the shops.

Likely

- 9lat structure- >ood communication-

@se of IT- Listening to customers and

observing trends

- Increase knowledge base ofcustomer preferences2 local andinternational fashion trends2 etc.

- Constant upgrading of IT systems to

improve organization coordinationand communication in real time andacross geographical boundaries.

- >ood design staff is needed for eachdistinct market.

6perations7 3ogistics7 and IT3xcellent management of systems andintegration of activities.

Likely

- Inventory management and logisticsdistribution increases in complexity.

- 5owever2 >iordano:s capability inmanaging IT systems can be

utilized.

- @pgrading and adapting systems tothe specific market context e.g.2using web-based systems for realtime information management andcoordination.

- 5igh volume is needed to obtain

sufficient scale economies to 8ustifyhigh initial investment.

Branding and Mareting ood2 high traffic shopping andconvenience locations.

Likely

- >iordano has the necessaryresources and the contribution-per-

sBuare foot needed to acBuire goodretail sites.

- >iordano should continue to seekgood locations and take advantageof opportunities to expand in orderto achieve high volume and become

more accessible to customers.

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*. "ow do $ou think Giordano would have to adapt its marketing and operations strategies and tatiswhen entering and penetrating $our ountr$'

trategy differs from tactics2 with greater emphasis on planning2 focusing on long-term issues2 andbeing future oriented. ,ore importantly2 an assessment of core competencies and sustainablecompetitive advantages2 which are primary considerations for strategy formulation2 is reBuired. iordano:s strategy should be maintained when entering anycountry. This is the way to ensure a consistency in service and merchandise Buality2 which strengthensbrand eBuity and positioning2 and facilitates the achievement of marketing communications ob8ectives.

In this respect2 strategy should be seen as something to remain intact in any country. Hhat could bechanged are the tactics of implementationwhich are discussed subseBuently.

The two dimensions of marketing and operations need to be addressed separately. It would bedetrimental to ignore potential differences in implementation in various countries2 even within


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The first and foremost lesson ought to be the way >iordano managed to deliver a high level of service.To begin with2 the company:s leadership has to recognize the importance of providing high Bualityservice to its customers. electing and recruiting the right kind of people is essential! $3ven the mostsophisticated training program won:t guarantee the best customer service. 4eople are the key. Theymake exceptional service possible.% To attract the right kind of peoplepeople who are dedicated tomaking customers feel satisfiedthe company must be willing to offer attractive remuneration. Thereis a saying2 $Hhen you pay peanuts2 you get monkeys.% Ay offering attractive remuneration2employees are motivated to stay2 thus reducing the staff turnover rate2 which is important in an industrywhere employee turnover tends to be high.


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RE3ERENCES

5ill2 Charles H. L. and >areth ?. /ones 0"11;#2 Strategi Management E #n Integrated #pproah2 )th

edition2 5oughton ,ifflin Co.

Sotler2 4hilip and >ary


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213


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CASE 4:THE QUALITY IMPROVEMENT CUSTOMERS DIDNT !ANT


INTRODUCTION

The primary focus of the case is on the introduction of technology as a means of delivering servicespreviously delivered by humans. The Guality Improvement case examines the potential introduction of anautomated patient check-in system being contemplated in a health care clinic.

The case provides a nice look into the role of technology2 how it is implemented2 and issues to consider.This case could be used to illustrate and discuss issues related to new service development andintroduction. ome pricing and promotion issues are also raised in the 37 case.

+ote! In previous editions of the textbook2 we suggested teaching this case along with the 3rnst 7oungLL4& it was included in the third edition of this text! Deithaml and Aitner 0'==(# Servies Marketing4Integrating Customer 7ous #ross the 7irm2 ew 7ork2 7! ,c>raw-5ill Companies. The Instructor:s,anual for the third edition of the text includes suggestions of how these two cases might be used together.6

SUGGESTED USES O3 CASE WITH 1EITHAML2 BITNER2 AND GREMLER TEXT

Tpi4s A00resse0

Innovation in services

elivering services through technology

ew service development and implementation

Customer acceptance of new technologies

3mployee acceptance of new technology services

4romotion and customer education for new services

Apprpriate C!apters

Chapter (! Consumer Aehavior in ervices

Chapter )! Customer 3xpectations of ervice

Chapter F! Listening to Customers Through ?esearch


Chapter "=! Customer-efined ervice tandards


Chapter "(! Customers: ?oles in ervice elivery

Chapter ")! elivering ervice Through Intermediaries and 3lectronic Channels

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PEDAGOGY

Typically we begin discussion of this case with a short lecturette 0additional time reBuired for this# on howtechnology is changing the nature of services. There are examples of the impact of technology throughoutthe text in the Technology potlights and Chapter ") is heavily focused on these types of examples.?eferring back to Chapter " and the section on ervices and Technology is another way to introduce andframe the discussion.

esri)e the )asi situation in the ;ualit$ Improvement ase. &hat deision is #llan Moulterfaing' &hat are the issues! hallenges and tradeoffs'

'. Information tehnolog$ is a powerful fore in shaping servie strategies. Fsed appropriatel$ it aninrease ustomer satisfation! improve effiien$! redue osts! support front line staff! and evenradiall$ hange how servies are delivered.

&hih @if an$A of these strategi purposes do $ou)elieve would )e served )$ ;ualit$ Care introduing the proposed registration s$stem' "ow would$ou ompare this proposed SST to other SSTs in the marketplae'

(. &hat would $ou do if $ou were #llan Moulter in the ;ualit$ Improvement ase'


". >esri)e the )asi situation in the ;ualit$ Improvement ase. &hat deision is #llan Moulterfaing' &hat are the issues! hallenges and tradeoffs'


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4otential benefits include!

3mployees like it and want the system

Competitors are either doing it already or contemplating it

Increased customer retention 0according to the consultant#

@p-to-date image

Improved efficiency

Aetter use of employee time

eeded for later insurance and government reporting reBuirements

4otential costs include!

Large dollar investment in the technology

3mployee training

Customer education

4atients may perceive it as $impersonal.% o patients really want this kind of automated

service in a healthcare contextN

Is it neededN 4atients are already happy with Guality Care. Hould this new technology

increase or decrease their current level of satisfactionN

'. Information tehnolog$ is a powerful fore in shaping servie strategies. Fsed appropriatel$ it aninrease ustomer satisfation! improve effiien$! redue osts! support front line staff! and evenradiall$ hange how servies are delivered. Hhih @if an$A of these strategi purposes do $ou)elieve would )e served )$ ;ualit$ Care introduing the proposed registration s$stem' "ow would$ou ompare this proposed SST to other SSTs in the marketplae'

Aefore turning to the actual case decision2 this is a good point to pause and discuss the ways theproposed technology is being used in this case. This discussion can be introduced by writing on theboard 0or having a 4ower4oint slide# with the following overview statements.

>eneral trategic 4urposes@ses f Technology in ervices!

improving efficiency and reducing costs

innovation providing new2 innovative services

improving customer satisfaction and service Buality

providing new access and channels for acBuiring services

nce these general strategic purposes have been discussed2 the issue can be raised of 8ust how GualityCare intends to use the new T registration system. It will become obvious Guality Care does nothave a clear idea why it should introduce the technologyUthe strategic purpose is unclear.

trategic 4urposes@ses of Technology in Guality Care!

system ,


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this is not an easy or straightforward decision. The ideas provided in the expert opinions provide goodfood for discussion. ?eviewing the steps in the ew ervice evelopment 4rocess 09igure 1.'# canalso provide a frame for this discussion.

,ost students will eventually come to the conclusion that more information is needed2 that a prototypetest might be in order2 and that further patient research is needed before adopting the system.?esearching the success of the competitors: systems might also be a good idea. The costs and benefitsalso need to be more carefully assessed prior to implementation. 9inally2 even if the system iseventually introduced2 it will be necessary to continue to provide choices to patients since not all will be

willing or able to use the computerized system.

ADDENDUM

The Guality Care case is a hypothetical case prepared for the "arvard 6usienss %eview in "11F.Technology applications have come a long way since that time2 and there are now a few real situationswhere such technology kiosks have been introduced within healthcare settings. < notable example is Aaylor5ealth Care ystem in Texas. Information about this application and a video of a case application in theammons Areast Cancer Center can be found on the web site of >alvanon2 a company that specializes inthese types of applications. ee!

http!www.galvanon.comhealthcareproductsmedikiosk.htmorhttp!www.galvanon.comhealthcareclients

ACCOMPANYING EXPERT OPINIONS

The expert opinions included on the following pages are reprinted with permission of "arvard 6usiness%eview2 from $The Guality Improvement Customers idn:t Hant2% by awn Iacobucci2 /anuary9ebruary"11F2 [ "11F by the 4resident and 9ellows of 5arvard College2 all rights reserved.

217
http://www.galvanon.com/healthcare/products/medikiosk.htmhttp://www.galvanon.com/healthcare/products/medikiosk.htmhttp://www.galvanon.com/healthcare/clients/http://www.galvanon.com/healthcare/products/medikiosk.htmhttp://www.galvanon.com/healthcare/clients/


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SHOULD 5UALITY CARE INSTALL THE NEW SYSTEM

Si, e,perts e,amine the effet of new tehnolog$ on ustomer satisfation.

THOMAS O7 9ONES is president o+ El* (


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5ow should Guality Care move aheadN ona (tate ?niversit! in Te*pe7 Ari>ona= (he is the co'athor o+ Ser


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It is well known that for many services2 a customer:s first encounter with an organization can be the mostcritical. ,oulter needs to think about how an automated reception encounter would affect his customers2who may be arriving for their appointments sick2 unsure of themselves2 and emotionally vulnerable. HouldGuality Care retain its aura of intimacy and personal concern in an automated environmentN In addition2,oulter should be aware that a computerized system would place new demands on customers2 forcing themto become2 essentially2 part-time employees of the company. The customers would be providing part oftheir heath care service for themselvesUand they may not want to do that.

,oulter must ask himself if it should be emplo$eesperceptions of Buality service that dictate how the

system is designed and implemented. It would be far better to start with ustomersperceptions and needsand then to work back into the system to determine the operating standards. Hould the new system reallymeet customers: needsN The answer isn:t clear.

There are two primary reasons to consider this investment! 3ither it should represent considerable costsavings 0without sacrificing customer-defined Buality#2 or it should significantly improve levels of customersatisfaction and retention. The big payoff for installing this particular system is stated as $increasedcustomer retention over the long term.% Aut since no one has had this type of system for very long2 howwas the potential benefit of long-term retention determinedN 5as ,oulter truly calculated the costs andexpected benefits in terms of retentionN 5as he pushed the consultant to determine the return on BualityN5ave the decision makers in this case factored in the costs of educating their customers2 training theiremployees2 and implementing the systemN


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If the customers enter data2 who is going to check the information that is enteredN That sort of potential forerror must be addressed early on.

Then they need to reevaluate the image factor. They seem to be concerned that the company will appearoutdated if it doesn:t install the new system. The automated reception service would certainly have enoughIT glitz to make any technophiles among the customers or employees drool. Aut how valid is the concernabout appearancesN o far2 the customer surveys have not revealed a desire for a high-tech image.


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clipboard. Checking off boxes on a form is much more friendly than punching keys at a computer station.


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nce he does address the problem2 he must be sure to close the loop and let customers know how thecompany has responded to their feedback. 4erhaps Guality Care could include the information in anewsletter for customers! $ur computer systems now allow us to track your care and your satisfactionwith our service more effectively. 5ere:s what you:re saying and here:s what we:re doingUthroughtechnologyUto address your concerns. ix months ago2 EFM of you let us know that you would be willingto wait up to ten minutes for an answer to a telephone Buery. He:ve since introduced a telephonemonitoring system. Today F;M of our customers report that our response time has been cut to ten minutes.If you find that your experience with Guality Care:s phone service has improved2 we:re delighted. If it has

not2 we want to know. 4lease call ?osie mith in our customer service office at '''-""""2 extension "'(.He:ll be sure to update you as we continue to improve.%

In considering what technology can do for his customers2 ,oulter should ask what kinds of benefits theywould perceive as valuable. Thinking again about the possibilities opened up by an automated receptionsystem2 perhaps ,oulter could find out if patients would like to receive a monthly statement of theiraccounts. r he could ask if they would value updates from their health records2 including information onrecent treatments and future appointments. The customers might say that they would find such informationa reassuring indication that the company knows them personally and keeps track of their particularsituations. If ,oulter finds that such updates would be perceived as valuable2 Guality Care couldintroduce them by saying! $5ere:s what technology can do for you. Ay using this new membership card2you:ll help us generate complete and accurate reports on your health care2 which will be sent to you on amonthly basis.%

4utting in technology for its own sakeUor solely for the sake of the companyUmisses the point. In 3u-rope2 airport concourses are littered with automatic ticket machines that you rarely see being used. Thesemachines represent state-of-the-art technology that links into various airlines: central reservations systemsand departure-control systems. They offer an extremely cost-effective way to sell tickets and checkpassengers in for flights. o why do customers avoid them2 preferring instead to see a representative at acheck-in deskN Aecause the customers see no personal benefit in using the technology. Hhat:s more2 if acustomer wants to have a particular seat and is unable to get it2 or wants to make sure that a special mealor some other service reBuirement has been attended to2 he or she has to go to the airline:s customer servicedesk anyway.

,oulter has long understood that listening to customers and responding directly to their needs is a big part

of what makes a company successful. 5e shouldn:t abandon that practice now. Ay all means2 GualityCare should avail itself of any back-office efficiencies that it can2 but the company should not be pushedinto cutting back on customer careUor looking as if it is doing soUsimply because competitors are doingso for reasons of their own. Guality Care should adopt the technological improvements only if researchshows that customers will come along because they want to2 not because they have to.

223


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TERESA A7 SWART1 is a pro+essor o+ *areting and the *areting area coordinator at $ali+orniaPol!technic (tate ?niversit! in (an 3is 60ispo7 $ali+ornia=

Hhen ,oulter 8oined Guality Care nine years ago2 he brought with him a passion for customer service. Inpart2 that passion is responsible for the company:s current success. Guality Care has a track record ofmonitoring customer feedback and responding to it2 as exhibited by the recent additions of the newsletterfor pregnant members and the toll-free hotline offering advice and information. Current retention rates arestrong2 and customers seem satisfied& they stay with Guality Care by choice2 not because they feel trapped.o why2 at this critical 8uncture2 would ,oulter even consider disregarding his customers: inputN Hhere

has his passion goneN ,oulter needs to be careful not to lose sight of his customers. ow is not the timeto stop listening.

To help him decide whether to install the new reception system2 ,oulter should first consider the realmotivation behind the idea. If Buality improvement lies behind the investment2 ,oulter should determinethe pro8ect:s potential return on Buality. Guality Care:s customers don:t have a problem with the currentreception process2 and past research indicates that they prefer $high touch% over high tech. There is littlereason to believe that the return will be there for this particular investment.

There is2 however2 ample indication that improved information technology will become the new standard forthe industry. Guality Care does not want to be left behind. 4erhaps that is the true motivation behind thisidea. If that is the case2 fine& but then ,oulter must approach the pro8ect from a different angle. This isnot an all-or-nothing dilemma. Guality Care does not have to follow the competition blindly in determiningwhat the new standards will entail.

Indeed2 because ,oulter has input from both internal customers 0employees# and external customers0patients#2 he is in a wonderful position to forge a win-win solution to his problem.


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less risk. Contrary to what 4enstone thinks2 people do not need to be told what they want. The voice of thecustomer needs to be heard.

TERRI CAPATOSTO is an assistant vice president o+ co**nications at Mc5onalds $orporation70ased in 6a Broo7 Illinois= (he oversees the csto*er satis+action and *edia relations depart*ents=

The top-level managers at Guality Care have spent a good deal of money investigating the merits of a newautomated reception system and the possible reactions of customers2 but they need to do more research to

determine if installing such a system would be a good strategic move for their business. verall2 they don:tyet have a solid understanding of the system:s potential effect on profitability and efficiency. Therefore2 Iwould recommend that they invest 8ust a little more money on a trial test before making a choice one way oranother.

9irst2 ,oulter should select a test location and resurvey the customers there2 making sure that the surveyBuestions clearly isolate the reception function from the rest of the health care experience. ?ight now2 itseems that Guality Care:s customers have been confronted with the whole range of possibilities 0$it willcheck you in2 and it will take your blood pressure2 and it will weigh$ou! and it will schedule your nextappointment%#. Hhat:s more2 the survey Buestions are probably too broad. The customers are confused2and that confusion is generating vague survey results.

ext2 ,oulter should install a model of the system at the test location. < $live test% will provide him withnew information on several fronts. 9irst2 he:ll find out whetherhis customers behave as they have said theywould in previous surveys. econd2 he can measure whether an automated reception process will affectusageUthat is2 whether customers will choose Guality Care over another provider. Third2 he:ll spotpotential problems2 such as inaccurate data entry2 that can be more easily addressed early on. 5as anyonethought of how such a system would handle illiterate customersN r language barriersN r people withpoor vision or dexterityN

Throughout the test2 ,oulter should keep his customers informed and continue to solicit their input. Theyshould know why he is surveying them2 what their feedback has indicated2 and how the company intends touse the information. The more informed customers are2 the more they:ll feel that the company wants themto be involved in issues that affect them2 and the happier they will be with whatever d

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