SBP 5e: Service Exporting

This principle occurs because production cannot begin without customer inputs, as per the Unified Services Theory. The customer inputs either need to be delivered to the process, or the process needs to be delivered to the location of the inputs. Customer inputs to a production process in one culture may be fundamentally different from customer inputs to an identical process in a different culture.

In some situations, foreign customers are happy to send their inputs and be served in a different country. For example, the hospitality industry (hotels, resorts, restaurants, etc.) cater to many foreign guests. Is having foreign guests exporting? It is in a big way, as reported by James Everett:¹⁾

“Spending by international visitors reached a record level of $90 billion in 1996. With just under $21 billion for passenger fare receipts, almost $70 billion was injected directly in the U.S. economy, demonstrating that international travel to the United States is an export, just like the sale of agriculture products, automobiles or consumer goods.”

Serving foreign guests who deliver their inputs (their selves, in this case) is a form of exporting the service. I call this “Exporting by Importing,” since the foreign customers “import” their inputs. A New York City hotel that is full of European visitors is as valuable to the company as having a hotel in Europe full of the same people, and even more valuable to the New York economy.

Another example of Exporting by Importing is medical facilities that attract patients from neighboring countries. Some countries restrict experimental medical treatments or have insurance systems that ration some major procedures. Patients may choose to take their self-inputs to other countries where the treatments and procedures are offered. By serving foreign patients, the medical facilities that attract those patients are in a sense exporting their medical services to other countries.

In other cases, exporting a service involves exporting the service process, so that the process will be near the location of customer inputs. This often means setting up an office or production facility in the foreign country. The reason exporting the production process can limit the amount of operating profits is that the foreign countries may not recognize that anything was actually “exported” to their country (since production, labor, the production facility, etc., are all located on their ground, and taxed accordingly). This contrasts with the “importing customers” approach, in which it is quite easy to keep all operating profits in the service provider's home country.

When exporting a service process, the issue of “cultural specificity” needs to be considered. Cultural specificity is a fundamental characteristic of many service businesses. Cultural specificity is the idea that a given service process may need to be adjusted from one culture to the next. Because the customers can vary dramatically across cultures, the inputs they provide and the expectations for the service can also vary. Customer inputs means that customers can influence the production process, forcing the process to comply with local cultural norms.

For example, in the United States there tends to be an expectation that the customer being served not be rushed, and that time is taken to meet the customer's needs. When discussing waiting lines in class one year, a student from Europe (or Australia, I cannot remember exactly) made a comment to the effect of, “What is it with you Americans, who are always standing in line!” The point was that in his country they do not put up with commonly waiting in lines, and that service providers are under obligation to eliminate lines. What was implied was that if necessary, service providers should hurry the customer being served to keep waiting customers from waiting longer than necessary. North Americans might perceive this as impolite, just as people from that student's country might perceive not rushing customers as inappropriate. Multinational service companies need to have policies and training in place to meet the expectations of local cultures.

Related to cultural specificity is language issues. The presence of customer inputs causes the service exporter to consider language proficiency. With manufactured exports, product information and instructions merely need to be translated (a process which is called “localization” in some industries). For many exported services, either the service process needs to be adapted to customer language, or the customer needs to adapt to the service provider language²⁾. An example of the former is resorts which attract many foreign tourists who can be served in various languages. An example of the latter is education, where foreign students are usually required to learn the language of instruction.

Service providers who decide to export the production process must determine if there are ways the process should differ based on cultural differences.

Service providers who expand to international markets need to understand the differences in culture of expansion regions. One way to gain this information is employ citizens of that culture in the design and management of the service process. Service providers may choose to partner with a firm that is from that country and is familiar with local customer expectations.

Universities can “export” by two primary means: First, they often “import” students from other countries, thus exporting by importing. Second, they may send faculty to other countries to offer courses, which is to export the production process. So-called “distance learning” uses communication technology to do both-faculty lectures are transmitted to the foreign location, and student questions and assignments (their inputs) are transmitted to the faculty location. Although distance learning is in its infancy, education exporting is a major economic activity, particularly in the U.S. In 1996, U.S. exports of training and education reached $8.2 billion!³⁾

Consulting firms export by opening foreign offices or taking production employees to the foreign client's site. It is less likely that a consulting firm would require customer inputs to be delivered across borders to the consulting firm's home country, although with communication technologies this is becoming more and more practical.

Disney® learned the lesson of cultural specificity the hard way. Their theme parks have been extremely successful in Anaheim, California, and in Orlando, Florida. Even the park in Tokyo, Japan has been very popular. They clearly had a formula for success. When Disney opened Euro-Disney near Paris they found their formula for success was taking them down the path to failure. The park experienced huge financial losses and required major financial infusions to keep operating. What went wrong? For one thing, customer inputs in Europe were quite different from what they were at the other Disney parks. Disney makes much of their profits from food sales within the park, but Europeans were more likely to bring food or eat outside of the park. Also, customer expectations for the park experience differed. Europeans visiting Disney World in Florida view that as an American vacation, and thus expect an American experience. Europeans visiting a park in Europe may expect an American experience, since it is an American company, or may expect a European experience, since the park is in Europe. This makes it very difficult to meet customers expectations and avoid customer disappointment.

Airlines “export” by taking the production process and facilities (airplanes) to the foreign location. Then they may bring customers to the airline's home country, which is sort of importing customers. International airlines are an interesting example of exporting, since their facilities continually move from country to country.

With manufacturing, exporting can be accomplished by simply setting up distribution channels in foreign countries. The production process can be located at any remote location deemed appropriate.

1. How might a customer in a foreign market purchase our service product?
2. Could domestic production facilities meet the needs of foreign customers?
3. Is it more practical to export production facilities? What are some cultural specificity issues? In other words, how might foreign cultures expect the service be different from that which is provided in the company's home country?

Imagine that your service company was going to expand into a country which has a very different culture from the company's home country. Try to choose a country in which you know something about the cultural differences. List that country and a few of the significant cultural differences. For each of the differences listed, indicate how the service process may differ from the home country to the foreign country. You might list a procedural difference or a policy that would be different.