Internationalization of Services – Factors to consider when making services international

Discover the critical factors to consider when expanding services internationally. Explore the impact of location, culture, technology, and the balance between standardization and customization.

In today’s globalized world, a large share of services is internationalized. Services such as car rentals, banking or various online services are standardized for a global target group. In the internationalization of services, several factors need to be considered.

Factors to consider in the Internationalization of Services

Geographic LocationsWhere to locate the service?
Cultural IssuesHow to adjust to cultural differences?
Information TechnologiesHow to improve international services using IT?
Standardization vs. CustomizationGlobalized standard services or locally individualized offerings?
Factors in the Internationalization of Services

Geographic Locations

In the internationalization of services, the first question to be answered is where to locate the service. This does of course depend on the type of service. An online service, for instance, can be provided without a specific location attached to it. In the hospitality industry, on the contrary, different conditions apply. Here, the strategic issue of location in the internationalization of services can be divided into two main aspects: that of where to generally locate a hospitality operation and secondly the specific issue of selecting suitable sites. The key factor in the location decision is of course demand. Simply put, operations are located where demand is highest, and on sites that can easily be accessed by the targeted customers. In this, the type and size of the business and service offering needs to be matched with the location decision. In the internationalization of services, the factors that influence location decisions vary along the different types of services. For instance, the factors that influence location in the accommodation and food service sectors: Hotels are primarily located near where people are traveling or at places that require them to stay away from home.

Cultural Issues

Cultural issues play a major role in the internationalization of services. Clearly, cultural issues have a significant impact on the acceptability and adoption of services. By nature, services involve some degree of human interaction. Consequently, the likelihood of cultural incompatibility is given by nature. To illustrate: Nations that culturally define the housewife’s role as the family caretaker will probably not be very keen to use day-care centers.

Thus, there is a need to adjust to local cultural preferences in the internationalization of services. Some means of internationalization, such as franchising, provide an easier way to deliver culturally sensitive services: local management knowledge aids in this. In general, consumer services are likely to require greater cultural adaptation than B2B services. However, also in the case of B2B services, cultural differences must not be ignored. Therefore, all firms providing services internationally have to consider the provision of appropriate cultural training to the staff, the use of local employees, and even changes to the service offering itself. If this is not done, the company runs the risk of losing business to local companies or global competitors that are more culturally aware.

Of course, services do not always require a physical presence. In the case of online services, less cultural adaption may be necessary. On the other side, confronting local competitors as a company trading via the internet presents a major challenge in the adaptation to cultural differences.

Information Technologies

In the internationalization of services, IT plays an increasingly important role. Through information technologies, service marketers can interact with customers to both anticipate and serve their needs. IT allows to improve the service offering, provide alternative service delivery choices and to communicate with the customer – internationally. In addition, the advancement of IT over the last decades has made it possible for international service providers to serve customers 24 hours a day and seven days a week (24/7). As a result, information technologies change the scale and the economics of service organizations. For instance, home-based service organizations are now able to serve the needs of clients all over the world. This will, in the future, with ever increasing advancement of IT, provide even greater opportunities for firms in the internationalization of services.

Standardization vs Customization

A critical question that needs to be answered in the internationalization of services is to what extent a service might be standardized. Globalization or localization? Globalized standard services or locally individualized offerings? A localized service offering, tailored entirely to local needs, may mean maximum customer value: Common customer needs for services vary more widely across nations than is the case for products, and addressing them requires localized solutions. Yet, a standardized service may mean greater efficiencies. The firm must consider, however, that several factors may make the standardization of services cumbersome. For instance, the necessity for customer contact for many service categories, government regulations in numerous service sectors and financial rules can make standardization very difficult. Retailing provides an excellent example of a service business that is difficult to standardize. Local retailing regulations still vary considerably, not only across countries (including within the European Union), but also within the provinces of each country.

The firm must find the right balance in the standardization and internationalization of services.

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