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International Marketing of Services Chapter IX International Marketing of Services Chapter IX

Nature of Services are capable of delivering satisfaction from needs and wants to consumers Nature of Services are capable of delivering satisfaction from needs and wants to consumers like products. Services are defined as intangible and identifiable activity transacted to provide satisfaction to consumers. Characteristics of Services : 1. Intangibility -- Services possess no physical attributes , so it is not possible to feel, taste, smell or see services. 2. Inconsistency -- Service is mostly provided by people, as human beings do the same act differently, quality of service also tends to vary. 3. Inseparability -- Services cannot be separated from service provider or customer. 2/8/2018 4. Perishability -- Services are highly perishable, so no inventory can be made of services. Presentation by Prof. H. Ganguly. 2

“When customers buy service, they pay for time, knowledge, skill and resources of service “When customers buy service, they pay for time, knowledge, skill and resources of service providers unlike products”. “American Marketing Association defines services as activities, benefits or satisfaction which is offered for sale or are provided in connection to sale of products”. Major Challenges in International Marketing of Services 1. Standardization of services -- Difference in quality 2. Mismatch of demand supply 3. High fixed cost 4. High attrition rate 5. Building service-brand is more complex 6. Difference in ‘cultural environment’ influences customerbehavior more than products 7. Increased Govt. intervention etc. 2/8/2018 Presentation by Prof. H. Ganguly. 3

Growth in Service Sector Services are growing consistently @ 7% p. a. globally. Now Growth in Service Sector Services are growing consistently @ 7% p. a. globally. Now more than 50% of India’s GDP is accrued by services. World trade in commercial services* in 2007 was $6320 bn. growing @ 17% p. a. India’s foreign trade in commercial services was $164 bn. growing @ 24% p. a. . India’s share of foreign trade in services was 2. 6%. [* Commercial Services -- Services where payment is received in foreign exchange are called Commercial Service. ] Prominent Commercial Services 1. Business Services -- Professional services, Computer related service, Domestic service, Consultancy and advisory, Real estates, Leasing, Rental services etc. 2/8/2018 Presentation by Prof. H. Ganguly. 4

2. Communication Services -- Courier , Telecom, Postal services etc. 3. Construction & Engineering 2. Communication Services -- Courier , Telecom, Postal services etc. 3. Construction & Engineering Services 4. Financial Services -- Accounting, Insurance, Banking, Equity research and related services 5. IT & IT-related services -- e-marketing, BPOs, Medical transcription etc. 6. Health & Social Services 7. Transport Services -- Air, Rail, Road, Ships, Pipelines etc. 8. Tourism and Travel related Services -- Travel Agencies, Tour Operators, Tourist Guides, Hotels, Restaurants etc. 9. Educationan and R & D Services -- Academic, Contract research, KPOs etc. 10. Entertainment, Cultural & Sports Services -- Movies, Music albums, Cable TV, Prof. H. Ganguly. Athletics etc. Games, 2/8/2018 Presentation by 5

GOI Supports in International Marketing of Service 1. Service Export Promotion Council (SEPC) -- GOI Supports in International Marketing of Service 1. Service Export Promotion Council (SEPC) -- Service exporters are known as Service Providers who are to get registered with SEPC for benefits from Govt. 2. Recognition as Service Status Houses -- Based upon foreign exchange earnings, service-exporters are recognized as Service Status House grade I, II…V, upon which depend their export incentives. 3. Duty Credit Entitlement Service Providers are entitled to Duty Credit Benefits depending on their foreign exchange earnings. 4. EOU & SEZ Benefits -- Service Providers are entitled to same benefits as allowed 2/8/2018 Presentation by Prof. H. Ganguly. 6 to other 100% EOU & SEZs.

5. EPCG Scheme Benefits -- Import of capital goods for service exports is allowed 5. EPCG Scheme Benefits -- Import of capital goods for service exports is allowed at 5% customs duty against usual export obligation. 6. Served From India Scheme -- Through participation in exhibitions, trade fairs etc. GOI undertakes promotion of services from India. 7. Common Facility Centers -- Benefits of CFCs located at major cities in India are available to service providers for export. Major foreign exchange earning Services of India are : IT & IT-enabled services, BPO, Tourism & Travel related services, Telecommunication, e-commerce etc. 2/8/2018 Presentation by Prof. H. Ganguly. 7

General Agreement in Trade of Services In Uruguay Round of discussion, member nations of General Agreement in Trade of Services In Uruguay Round of discussion, member nations of GATT arrived at this agreement called GATS for smoother world trade in services. Salient clauses of GATS as agreed by WTO are : 1. Modes of Service -- GATS classifies all internationally traded services in following FOUR modes * Cross-border services : Services which are generated in one country and consumed in another country e. g. telecom, money transfer, foreign market research etc. * Consumption abroad services : When service-customers move to foreign countries to avail of service, e. g. tourism, hospitality, treatment, education etc. * Commercial presence abroad services : Companies set up subsidiaries and branches abroad to provide service e. g. TCS sets up branches abroad to provide service to clients 2/8/2018 Presentation by Prof. 8 called ‘offshore services’. H. Ganguly.

* Service by Natural persons : Individual persons moving to countries abroad to provide * Service by Natural persons : Individual persons moving to countries abroad to provide services e. g. doctors, dentists, nurses, teachers etc. to carry out free-lance practice or jobs. 2. Market Access : GATS provides discretion to all WTO member nations to open their market segments for other member nations or not. 3. Most Favoured Nation [MFN] Treatment : When a member nation opens any of its sector to foreign competition, it has to provide equal opportunity to all WTO nations. 4. Transparency : All member nations should keep WTO posted about trade related rules, regulations and changes therein immediately for information to all member nations. 2/8/2018 Presentation by Prof. H. Ganguly. 9

5. Movement of Natural Persons : WTO member nations should allow temporary stay to 5. Movement of Natural Persons : WTO member nations should allow temporary stay to individuals from other member nations to provide services. 6. Natural Treatment : Service providers from other WTO member nations in opened service segments should be treated at par with local service providers without any discrimination. Mangement Contract Services in International Marketing : 2/8/2018 Some companies contract out various non-core (also core) services on long term basis to outsider firms to help in achieving higher shareholder value for the company called Management Contract Services, like Business Process Outsourcing, Contract Research, Contract Manufacture, IT 10 Outsourcing etc. Presentation by Prof. H. Ganguly.

1. Business Process Outsourcing Awarding critical and non-critical, non-core (also core) business processes or 1. Business Process Outsourcing Awarding critical and non-critical, non-core (also core) business processes or functions of an organisation to external vendors for long periods of time on a set of predefined performance parameters is called Business Process Outsourcing. BPOs generally comprise of highly qualified pool of skilled professionals who can adopt business processes fast to provide higher productivity gains without sacrificing on quality. Companies hire BPOs mainly : i) to enable company employees to focus on strategy and customers more for greater results, ii) to improve processes and save money, iii) to increase organisational efficiency. 2/8/2018 Presentation by Prof. H. Ganguly. 11

BPOs in India Many Indian and international companies are outsourcing various business services from BPOs in India Many Indian and international companies are outsourcing various business services from India. It is expanding at a very fast pace mainly because a) India has largest population of English-speaking population after US. b) Every year India produces more than 100, 000 engineers who find application in various BPO jobs at salaries substantially lower than in US and Europe. c) GOI recognises potential of BPOs and provides numerous incentives. d) Information Technology Act 2000, permits e-commerce under specified cyber laws (1 among 12 nations of world). e) 100% foreign ownership is permitted in ITes industry unlike other sectors, STPs have been established. f) From 23000 employees & $10 mill. revenue in 1998, it has 2/8/2018 Presentation by Prof. H. Ganguly. 12 grown to a million employees and $ 20 bl. revenue by 2008.

Medical Tourism Because of skilled and atrociously economical (by worldstandards) doctors and surgeons in Medical Tourism Because of skilled and atrociously economical (by worldstandards) doctors and surgeons in India, major private hospitals at Delhi, Mumbai etc. are attracting patients from outside India in increasing numbers. It is giving rise to more numbers of “Five-starred Hospitals” That is giving rise to greater employability of skilled and unskilled labour in India in addition to earning of foreign exchange and boosting image of the nation. Contract Research International Pharmaceutical companies of repute are creating “Strategic Allince” with Indian companies to establish research-centres in India to make use of Indian scientists and researchers who are at par in quality but less than one-third costly. Thus cost of research of ‘New Chemical Entities’ are 2/8/2018 Presentation by Prof. H. Ganguly. 13 substantially getting reduced.