Understanding the nature of international services first
Services now account for approximately 30% of total trade world-wide. There is a few factors that drive an organization to serve in international markets. While the mix and proportion of export services varies from one country to another.
The main categories include;
- Professional services (including, for example, legal, accounting, management consulting, architectural design, engineering and construction)
- Technical services (including computer services, technical engineering and equipment maintenance)
- Travel, tourism and hospitality management (including airlines, tour operators and hotels)
- Primary industry services (appertaining to agriculture and mining)
- Educational Services
Some of these are embedded in, or directly related to manufactured goods and what they require in the way of support, but most exist as pure services.
There is no export service that is not provided domestically in some form or another. Therefore, what makes the marketing and management of an international service different lies in the geographic and socio-cultural context in which it is provided, and the implications of this.
Drivers of the Decision to Internationalize
Figure 14.3 in the text provides a summary of factors that, singly or jointly, serve to drive an organization to provide its services internationally.
These influential factors or “drivers” include:
- The desire or need to seek new market and additional business growth opportunities, with accompanying economies of scale, beyond the boundaries, constraints and competitive intensity of one’s domestic market.
- Global customers who want their service suppliers to follow and support them in their international expansionary activities.
- Governmental deregulation which permits international expansion where in the past it may not have been possible.
- Multiculturalism and the ever-increasing incidence of international travel and relocation.
- Increased opportunities to standardize service offerings for target markets whose fundamental and common characteristics transcend national boundaries.
- Government incentives and assistance programs.
It is also important to recognize that in many circumstances the impetus to internationalize is provided not so much from within an organization as it is by factors or considerations external to it. This is to say that increasingly more organizations are being faced with not only the opportunity to internationalize but also the need or demand to do so.
Therefore, more and more organizations must also learn how to deal with this in a manner whereby the likelihood of success will be enhanced, and the risk of failure minimized.
Drivers influencing services to grow internationally
The article identifies several reasons for international service growth under two broad categories:
Firm Level Drivers
- Seeking new markets
- Following a client overseas
- Domestic market saturation
- Getting unsolicited orders from overseas
Industry Level Drivers
- International markets having common needs
- To achieve economies of scale
- To take advantage of government incentives or avoid government obstacles
- Following competitors
- Increasing use of information technology