COMMERCIAL AND

EXPANSION STTRATEGIES
DISEÑO DE PROCESOS Y SERVICIOS
BASADOS EN INNOVACIÓN
TECNOLÓGICA
 EXPANSION STRATEGIES

SINGLE SERVICE MULTISERVICE

SINGLE LOCATION Focused Service Clustered Service (Diversification)
 Dental practice  Stanford University
 Retail Store  Mayo Clinic
 Family Restaurant  USAA Insurance
 Arroyo  Medica Sur

MULTISITE Focused Network Diversified Network

 Federal Express  Nations Bank
 McDonald’s  American Express
 Red Roof Inns  Accentur
 Taco Inn

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 FOCUSED SERVICE

• Limited to a single site, focused in a single service.

• A service innovation begins at a single location
with an initial service concept.
• With success, comes the facility expansion and
added personnel.
• Builds a preferred position among customers in
the area.
• Adds peripheral services but keeping the core
service as that.
• Risk of being captive of the economic
development of the area.
• Management and control are very simple.

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 FOCUSED NETWORK

• Adding Sites to reach mass market.

• Same products, Same prices, Multiple locations.
• For well focused businesses.
• Needs much planning.
• Replication of service units.
– Consistency of service across all locations.
– Rigorous control of service quality and costs.
– Standardized operating manuals and personnel training.
• Capturing premium locations in different geographic areas.
• Managerial control turns formal.
– Usage of sophisticated communications and control systems.
• Risk of overexpansion and loss of control.
• Reduces the financial risk.

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 CLUSTERED SERVICE
(DIVERSIFICATION)
– Many services in one location.
– Companies with large facilities can diversify their
service offer.
– Risk of potential loss of focus and neglect of the
core service.
– Risk of trying to satisfy many markets.
– Concentric diversification to avoid the risk of
losing focus.
• Limits expansion only to services with synergistic logic
around the core service.
• They create economies of scope because additional
services require only marginal increases in variable
costs.

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 DIVERSIFIED NETWORK

• Many Services, many locations.

• Managing a multiservice network is a very
complex task.
• Services are offered under one brand
name.

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EXPANSION STRATEGIES

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EXPANSION STRATEGIES

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 GENERIC INTERNATIONAL
STRATEGIES
• Global Strategy.
– The world is seen as one large market that can be approached
in an homogeneous way, or at least, integrated across the
countries.
– Firms with strong brand.
– Ikea, CitiBank, Singapore Airlines.
• Multidomestic Strategy.
– Overseas offices form a confederation of autonomous units that
serve the local market.
– Staffed and managed by locals.
– McGraw-Hill, Best Buy.
• Transnational Strategy.
– Leaves certain corporate issues are centralized, but leaving
some freedom to local management.
– McDonalds, Disney, Pfizer, Deloitte.

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 GENERIC INTERNATIONAL
Global integration STRATEGIES

Transnational
High

Global Strategy
Strategy

No International Multidomestic
Low

Strategy Strategy
Low High
Local Responsiveness
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 SERVICE PACKAGE INTERNATIONAL
SERVICE DELIVERY OPERATING TARGET MARKET
SERVICE CONCEPT
SYSTEM STRATEGY SEGMENTS
Available technology? Appropriate What are customer What are the market
Infrastructure? managerial practice? expectations? segments?
Utility service? Participative? Perception of value? Domestic?
Autocratic? Service ethic? Multinational?
Labor market norms Tourist?
and customs? Labor market Service encounter?
institutions? Language? What are important
Space availability? Government Acceptance of self- cultural differences?
regulations? serve? Language?
Interaction with Unions? Life style?
suppliers? What are the usage Disposable income?
Host government patterns?
Educating customers? policies? What are the
Cultural workforce
Language? transferability? demographics?
Front office? Skills?
Back office? Age distribution?
Attitudes?
Work ethic?
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 GLOBAL SERVICES STRATEGIES.
• Multicountry expansion.
– Clone service rapidly in multiple locations (franchises).
– Needed when customers have to travel physically to the service facility.
– Cultural adaptation often requires some modification of the service
concept (beer in German McDonald’s).
– Best accomplished with routine services.
– Front-office requires sensitivity to the local culture (hire locals).
– Customization, complexity and information intensity are not important
(except for professional services).
– Cultural adaptation is a major issue in service design (centralized or
managed country by country).
• Importing customers.
– Customer must be willing to travel long distances an stay for an
extended time (or telecommunications can substitute travel).
– Unique service (at a large facility).
– Service workers must develop language skills and cultural sensitivity.
– The unique features of the location will dictate the selection of strategy.
– Differentiation through customization and complexity of the service.
– Heavy logistics, transportation and accommodation infrastructure will be
required.
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 GLOBAL SERVICES STRATEGIES.
• Following your customers.
– Offices overseas that don’t serve local markets but their corporate customers
overseas.
– Attracting local business may require modifications in the service package.
– Usually for giving service for global customers.
– Risk of ignoring the potential of the local markets and depending on a single
customer.
– Usually management is conformed by expatriates  need to bring experienced
and flexible managers.
• Service Offshoring.
– Is a class of outsourcing that is distinguished by the foreign location of the
outsourced provider.
– Save labor costs sending back-office operations offshore and focusing on
customer contact activities locally (they go to countries with cheap labor).
– Risk of quality problems.
– Relies on telecommunications.
• Beating the clock.
– Based on the fact that one can bypass the constraints of the clock and domestic
time zones.
– Projects can be expedited by coordinated activities around the globe.
– Relies on telecommunications.

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 GLOBAL SERVICE STRATEGIES
Global Service Strategies
Globalization Multicountry Importing Following your Service offshoring Beating the clock
factors expansion customers customers
Customer Train localDevelop foreign Develop foreign Specialize in back- Provide extended
contact workers language and customers office service hours of service
cultural sensitivity components
skills
Customization Usually a Strategic Re-prototype Quality and More needed for
standard opportunity locally coordination reliability and
service coordination
Complexity Usually Strategic Modify operations Opportunity for Time compression
routine opportunity focus
Information Satellite On-site advantageMove experienced Training Exploit opportunity
intensity network managers investments
Cultural Modify service Accommodate Could be Cultural Common language
adaptation foreign guests necessary to understanding necessary
achieve scale
Labor Reduce labor Increased labor Hire local Reduced labor Reduced labor
intensity costs costs personnel costs costs
Other Government Logistics Inadequate Home office Capital investments
restrictions management infrastructure employee morale
Examples McDonald’s Disney, Universities, Call centers Software 14
 FRANCHISING
• Is an alternative to expanding by the replication of
a service by attracting investors who become
independent owner-operators.
• Is a system by which a firm (i.e. the franchiser)
grants to others (i.e. the franchisees) the rights
and license (i.e. the franchise) to sell a product or
service and possibly the business system
developed by the firm.

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 CHARACTERISTICS OF FRANCHISES

• The franchisee owns the business through the

payment of a franchise fee and purchase of the facility
and equipment.
• The franchisee assumes responsibility of all normal
operating activities and compromises to follow all the
procedures and conditions dictated by the franchiser.
• Usually they come with geographical restrictions (to
avoid cannibalization of the brand).
• Materials must be purchased from the franchiser or
from an approved supplier.
• No deviation from the product is permitted, training
sessions must be attended, and continuing royalty
fees must be paid.
• They can cost from $5,000 USD to $500,000 USD.
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FRANCHISE WORKING WAY

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 BENEFITS FOR THE FRANCHISER

• Franchises allow rapid expansion with

minimal capital requirements.
• Relies heavily on the motivation of investor-
owners.
• Allows grow without the cost of developing
key managers.
• The process of screening potential
franchisees must go beyond the minimum
requirement of simply having the necessary
capital.

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 BENEFITS FOR THE FRANCHISEE
• Management Training.
– They are extensive and intensive.
– To prepare the franchisee to operate the business
profitably.
– To assure the procedures will be followed to
guarantee consistency.
– Many training is offered online.
• Brand Name.
– Immediate customer recognition.
• Corporate Advertising.
– The franchisee must contribute for the corporate
advertising (a percentage% of gross sales often).
– Let people from outside your geographic region to
know you.

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 BENEFITS FOR THE FRANCHISEE
• Acquisition of Proven Business.
– Lower rate of failure than a traditional business.
• According to the mexican Secretaría de Economía, an
independent business has a success probability of 23% on
it’s first 5 years, meanwhile a franchise has a success
probability between 90 and 95%.
– The break-even point is reached sooner than a
traditional business.
– The franchisee can rely on the experience, expertise
and knowledge of the franchiser.
– The service concept is already accepted by the
public.
• Economics of Scale.
– The franchisee can take advantage of centralized
purchasing.
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 ISSUES TO THE FRANCHISER
• Franchisee Autonomy.
– Amount of freedom permitted by contract.
– Must guarantee compliance.
– Programmed operation.
• Franchiser specifications: day-to-day operations, procedures,
site selection, facility design, accounting system, supplies
and sources of them, pricing, etc.
• Frequent inspections of the facility.
• The right of repurchase the outlet for noncompliance.
• Franchise Contract.
– The idea is that the contract should be fair for both
parties but:
– Control and power tend to concentrate in the hands of
the franchiser.
– Include specific obligations of the franchisee, but
ambiguous regarding the franchiser responsibilities.
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 HOW TO BE A FRANCHISER

LEGAL
EVALUATE DECISIONS TEAM SALE SUPPORT
REQS.

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 WHAT TO DO TO MAKE A FRANCHISE
(STEP 1: EVALUATE IF YOUR BUSINESS IS READY)
• Determine if your business can work with this scheme.
• Your concept must be familiar but different. It also
must be attractive for customers and investors.
• Your business must be replicable by others.
• Your business must be profitable (some say that you
have to have at least 2 profitable units before
franchising.
• Make your market research.
• Make detailed manuals for each procedure of your
business.
• Hire an expert.
• Be aware that this should bring changes and you will
not have the same amount of control of your business.

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 WHAT TO DO TO MAKE A FRANCHISE
(STEP 2: KNOW THE LEGAL REQUIREMENTS)

• You have to develop a document (franchise

offer). This document must include business
information like: financial analysis, operation
manuals and description of your experience
and expertise.
• Look for help of a lawyer to develop a
contract suited for local laws.
• Learn about the local regulations and
procedures where you are going to export
your franchise.

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 WHAT TO DO TO MAKE A FRANCHISE
(STEP 3:TAKE DESICIONS ABOUT YOUR MODEL)

• Decisions:
– How should fees be established and profits distributed.
– Franchise contract.
– The size of the territory for each franchisee.
– Geographic zone to attack.
– Training program.
– Franchisees profile.
– If the franchisees should purchase to you the equipment or
the supplies.
– When should facilities be upgrades, and how the costs to
be shared.
– Commercial strategy for the franchise.
– Will you offer master franchises.

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 WHAT TO DO TO MAKE A FRANCHISE
(STEP 4:HIRE A TEAM AND A CONSULTANT)

• You will need a team to manage the

franchise system. It will support the
franchisees as well.
• Probably you’ll have to contract personnel
for:
– Training.
– Marketing.
– Software programmer.
– Creative.
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 WHAT TO DO TO MAKE A FRANCHISE
(STEP 5: SALE FRANCHISES)

• Now that you’re in the franchise business,

you have to find franchisees.
• You can hire sales people, present your
concept in franchises fairs and expos, hire
agencies to find investors.
• Most of all, you have to have a reputation
and a recognizable image.

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 WHAT TO DO TO MAKE A FRANCHISE
(STEP 6: SUPPORT THE FRANCHISEES)

• Support your franchisees network.

• This is where you will succeed or fail.
• You have to control the network closely.
• Track training programs.
• Supervise operations.
• Have an aggressive marketing and
promotion.

• Your goal is that your franchisees

succeed.

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BECOMING A FRANCHISOR PROCESS

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 FRANCHISEE REQUIREMENTS

• Each franchise has its own requeriments but

there are some that are common:
• Wanted characteristics of the franchisee:
– Person or company.
– Nacionality.
– Should live near the location for at least some
time.
– Positive attitude.
– Sales driven.
– High customer service orientation.
– Allways willing to follow the franchise politics and
procedures.

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 HAVE IN MIND IF YOU’RE GOING TO
BUY A FRANCHISE
• Steps to be a franchisee:
– Look for a suitable franchise.
– Contact the franchise (by yourself or throuhg an agency).
– Get all the information available.
– Veify the information given.
– Look for a facility.
– Sign the contract.
– Training.
– Operating.

• Franchises costs:
– Initial investment
• Facility (depends on the nature of the franchise)
• Equipment.
• Franchise fee.
– Royalties (usually a percentage of the sales)
– Corporate marketing fee (also a percentage of the sales)
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SOME EXAMPLES OF FRANCHISES

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 EPILOGUE

• Before you think about expanding your

business, you have to consolidate it in the
first hand.

THINK BIG,
START SMALL,
MOVE FAST!
(SUCCESS LOVES SPEED)
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