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Internationalization strategies for services

Internationalization strategies for services - An executive...

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Internationalization strategies for services Christian Gro ¨nroos Professor of Marketing, CERS Center for Relationship Marketing and Service Management, Hanken Swedish School of Economics, Helsinki, Finland Keywords Services marketing, International marketing, Market entry, Marketing strategy Abstract Discusses some key challenges for service firms planning to go abroad and presents five different types of internationalization strategies for services, none of which are mutually exclusive. These are: direct export of services in terms of repairs and maintenance that are most appropriate to industrial markets; systems export that is a joint export effort by two or several firms whose solutions complement each other; direct entry mode which means that the service firm establishes a service-producing organization of its own on the foreign market; indirect entry which is used when the service firm wants to avoid establishing a local operation that is totally or partly owned by itself (common modes are through licensing agreements and franchising); and electronic marketing which does not bind a firm to a particular location. Introduction Traditionally, services have been thought of as locally produced solutions, and service firms have been considered local establishments. Although services still, to a large extent, are produced by small and local firms, service businesses have become more international. The service sector is expanding over national borders. The Uruguay Round and the 1993 General Agreement on Tariffs and Trade Agreement (GATT) have lowered barriers for international trade with services. A rapid globalization of the world economy during the 1990s, which probably will continue in the next millennium, has increased the opportunities for marketing services abroad (Hassan and Kaynak, 1994). Indeed, services are the fastest growing part of international trade (Bradley, 1995). However, for example, in the USA the export of services still accounts for an astonishingly small proportion of total service production, only around 6 percent in 1997, in spite of a growth of nearly 30 percent since the beginning of the decade (Winstead and Patterson, 1998). In the European Union between 10 and 20 percent of the service production was exported already almost ten years ago (cf. Dahringer, 1991). According to Winstead and Patterson (1998), the relatively slow growth of the internationalization of service, in spite of the improved free-trade conditions, depends on the existence of significant non-tariff barriers in many service industries and the complex nature of service production as well as on a belief among practitioners in service businesses that it is difficult to market services outside domestic markets. They also state that more general obstacles for internationalization, which are true for manufactured goods as well, keep service firms from going abroad. Such obstacles are a lack of resources, too little knowledge about exporting and a belief that linguistic and cultural differences will make internationalization too demanding. The
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