Most other services automobile rentals, airline services, entertainment, hotels and tourism to name a few are inseparable and require production and consumption to occur almost simultaneously; thus exporting is not a viable entry method for them. The vast majority of services (some 85 percent) enter foreign markets by licensing, franchising or direct investment. Four kinds of barriers face consumer services marketers in this growing sector of the global marketplace: protectionism controls on trans-border data flows, protection of intellectual property, and cultural requirements for adaptations.
The European Union is making modest progress toward establishing a single market for services. However, exactly how foreign services providers will be treated as unification proceeds is not clear. Reciprocity and harmonization, key concepts in the Single European Act, possibly will be used to curtail the entrance of some service industries into Europe. The US film and entertainment industry seems to be a particularly difficult sector, although Vivendi’s (a French company) purchase of Universal Studios made things a bit more interesting. A directive regarding trans-frontier television broadcasting created a quota for European programs, requiring EU member states to ensure that at least 50 per cent of entertainment air tome is devoted to European works. The European Union argues that this set aside for domestic programming is necessary to preserve Europe’s cultural identity. The consequences for the US film industry are significant since over 40 percent of US film industry profits come from foreign revenues.
Restrictions on Trans-border data flows
She is intense concern about how to deal with the relatively new problem of trans-border data transfers. The European Commission is concerned that data on individuals (such as income spending preferences debt repayment histories, medical conditions and employment data) are being collected manipulated and transferred between companies with little regard to the privacy of the affected individuals. A proposed directive by the Commission would require the consent of the individual before data are collected or processed. A wide range of US service companies would be affected by such a directive – insurance underwriters, banks credit reporting firms, direct marketing companies and tour operators are a few examples. The directive would have broad effects on data processing and data analysis firms because it would prevent a firm from electronically transferring information about individual European consumers to the US for computer processing. Hidden in all the laws and directives are the unstated motives of most countries: a desire to inhibit the activities of multinationals and to protect local industry. As the global data transmission business continues to explode into the new century, regulators will focus increased attention in that direction.
Protection of intellectual Property
An important form of competition that is difficult to combat arises from pirated trademarks, processes copyrights and patents. Computer design and software trademarks, brand names and other intellectual properties re easy to duplicate and difficult to protect. The protection of intellectual properly rights is major problem in the services industries. Countries seldom have adequate – or any – legislation and any laws they do have are extremely difficult to enforce. The Trade Related Intellectual Property Rights (TRIPs) part of the GATT agreement obligates all members to provide strong protection for copyright and related, patents trademarks; trade secrets industrial designs, geographic indications and layout designs for integrate circuits. The TRIPs agreements are helpful, but the key issues are that enforcement is very difficult without the full cooperation of host countries.
The situation in China has been particularly bad because that country has not been active in combating piracy of intellectual property. The annual cost of pirated software, CDs books and moves in China alone is estimated to be more than $1 billion. Worldwide industry estimates are that US companies lose $ 60 billion annually on piracy of all types of intellectual property. Because duplicating software, electronically recorded music, and movies is so easy , pirated copies often are available within a few days of their release. In Thailand for example illegal copies of movies are available within 10 days of their release in the United States. In Russia pirated movies are sometimes available before their (legal) US debut!
Cultural Barriers and adaptation
Because trade in services frequently involves people to people contact, culture plays a much bigger role in services than in merchandise trade. Examples are many: Eastern Europeans are perplexed by Western expectations that unhappy workers put on a happy face when dealing with customers. But McDonald’s requires polish employees to smile whenever they interact with customers. Such a requirement strikes many employees as artificial and insincere. The company has learned to encourage managers in Poland to probe employee problem and to assign troubled workers to the kitchen rather than to the food counter. Japanese internet purchasers often prefer to pay in cash and in person rather than trust the internet transaction or pay high credit card fees.
As another example, notice if the Japanese student sitting next to you in class very verbally disagrees with your instructor Classroom interactions vary substantially around the world. Students in Japan listen to lectures, take notes and ask questions only after class if then. In Japan the idea of grading class participation is nonsense. Conversely because Spaniards are used to large undergraduate classes (hundreds rather than dozens), they tend to talk to their friends even when the instructor is talking. Like wise healthcare delivery systems and doctor patient interactions reflect cultural differences. Americans ask questions and get second opinions. Innovative healthcare services are developed on the basis of extensive marketing research. However, in Japan the social hierarchy is reflected heavily in the patient’s deference to their doctors. While Japanese patient compliance is excellent and longevity is the best in the world, the healthcare system there is relatively unresponsive to the expressed concerns of consumers.
Japanese also tend to take a few long vacations – 7 to 10 days is the norm. Thus vacation packages designed for them are packed with activities. Phoenix, Las Vegas and San Diego or Rome, Geneva, Paris and London in 10 days make sense to them. The Four Seasons hotel chain provides special pillows, kimonos, slippers and teas for Japanese guests. Virgin Atlantic Airways and other long haul carriers now have interactive screens available for each passenger allowing viewing of Japanese (or American, French etc) movies and TV.
Managing a global services workforce is certainly no simple task. Just ask the folks at UPS. Some of the surprises UPS ran into included indignation in France when drivers were told they couldn’t have wine with lunch, protests in Britain when drivers dogs were banned from delivery trucks, dismay in Spain when it was found that the brown UPS trucks resembled the local hearses, and sock in Germany when brown shirts were required for the first time since 1945.
And while tips of 10 to 15 per cent are an important part of services workers’ incentives in the United States, this is not the case in Germany where tips are rounded to the nearest deutsche mark. Thus closer management of service personnel is required in those countries to maintain high levels of customer satisfaction
Clearly, opportunities for the marketing of consumer services will continue to grow in the 21st century. International marketers will have to be quite creative in responding to the legal and cultural challenges of delivering high quality services in foreign markets and to foreign customers at domestic locales.