Answer the following Questions Each Question is of 5 marks 1.

Explain At least four differences between goods and services

2.

Explain customer organization.

contact

model

for

classifying

service

3. In 1986 Schmenner proposed Service Process Matrix as another way to view services. He differentiates service processes according to two major differentiating factors; explain them in your own words:
4.

What are the differential Cost Drivers of online and offline Firms? Give Example to support your answer.

ANS no 1 : Goods 1) A good or commodity in economics is any object or service that increases utility, directly or indirectly, not to be confused with good in a moral or ethical sense 2) A good that cannot be used by consumers directly, such as an office building or capital equipment, can also be referred to as a good as an indirect source of utility through resale value or as a source of income 3) A 'good' in economic usage does not imply moral acceptance or even legality. 4) A good is tangible object used either once or repeatedly. Services 1) A service is the non-material equivalent of a good. 2) A service provision is an economic activity that does not result in ownership, and this is what differentiates it from providing physical goods 3) A service is claimed to be a process that creates benefits by facilitating a change in customers, a change in their physical possessions, or a change in their intangible assets. 4) Services are often jobs or work that contributes to an overall goal. ANS NO 2: designing the service encounter to deliver high level of customer satisfactions one of major issues facing service organizations today. Unfortunately our state of knowledge of how to go about such designs in manufacturing. In latter the specifications of the product in terms of functionality are precisely prescribed. The designer knows the fundamental building blocks of the product and hence specifies the actions required to create it. The customer satisfaction with product and quality maybe problematical, but at least the designer can use a physical principle performance. Tings are of course less clear when we discuss product aesthetics or when for various reasons product form cannot follow function. Nevertheless the fundamental building blocks of services and their relationship to service quality are generally far less obvious than for
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manufacturing goods. Services are not only intangible processes, but must also include some link with customer to be complete. These are the characteristics that clearly distinguish the design requirements of the service quality. While much work needs to be done to further validate the contact dimensions themselves they can used in an explanatory sense to link to the highly researched dimensions of service quality. ANS 3: The Service Process Matrix is a classification matrix of service industry firms based on the characteristics of the individual firm's service processes. The matrix was derived by Roger Schmenner and first appeared in 1986. Although considerably different, the Service Process Matrix can be seen somewhat as a service industry version of Wheelwright and Hayes' Product-Process Matrix. The Service Process Matrix can be useful when investigating the strategic changes in service operations. In addition, there are unique managerial challenges associated with each quadrant of the matrix. By paying close attention to the challenges associated with their related classification, service firms may improve their performance. The classification characteristics include the degree of labor intensity and a jointly measured degree of customer interaction and customization. Labor intensity can be defined as the ratio of labor cost to plant and equipment. A firm whose product, or in this case service, requires a high content of time and effort with comparatively little plant and equipment cost would be said to be labor intense. Customer interaction represents the degree to which the customer can intervene in the service process. For example, a high degree of interaction would imply that the customer can demand more or less of some aspects of the service. Customization refers to the need and ability to alter the service in order to satisfy the individual customer's particular preferences. The vertical axis on the matrix, as shown in Figure 1, is a continuum with high degree of labor intensity on one end (bottom) and low degree of labor intensity on the other end (top). The horizontal axis is a continuum with high degree of customer interaction and customization on one ends (right) and low degree of customer interaction and customization on the other end (left). This results in a matrix with four quadrants, each with a unique combination of degrees of labor intensity, customer interaction and customization

ANS 4: The Internet has created a new economic ecosystem, the e-commerce marketplace, and it
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has become the virtual main street of the world. Providing a quick and convenient way of exchanging goods and services both regionally and globally, e-commerce has boomed. Today, ecommerce has grown into a huge industry with US online retail generating $175B in revenues in 2007,[1] with consumer-driven (B2C) online transactions impacting industries from travel services to consumer electronics, from books and media distribution to sports & fitness. With more than 70% of Americans using the Internet on a daily basis for private and/or business use and the rest of the world also beginning to catch on, e-commerce's global growth curve is not likely to taper off anytime soon. However, the US recession has taken its toll on online sales. Although early 2008 estimates by Forrester Research were very strong with 2008 revenues upwards of $204B (a 17% growth rate),[2] 2008 holiday sales showed the first decrease in the last 7 years. Research by ComScore shows sales declining by 1% for the first 49 days of the holiday season.[3] In the last decade, many startup e-commerce companies have rapidly stolen market share from traditional retailers and service providers, pressuring these established traditional players to deploy their own commerce websites or to alter company strategy in retaliation. This effect is most pronounced in travel services and consumer electronics. According to COM Score, online leisure travel bookings reached about $51B in 2005, or 44% of all online sales, which were around $122B in the same year. Roughly 30% of all travel bookings currently occur online. Consumer electronics, which includes the purchase of digital cameras, mobile phones, and home PC's, accounted for nearly $26B of worldwide e-commerce sales occurring in 2006, according to the NPD Group. As traditional brick and mortar firms continue to lose market share to e-commerce players, they will likely see continued declines in their revenues, operating margins, and profits. It is important to note that most e-commerce players are at a competitive advantage to retailers. They have lower operating expenses and better inventory management due to operating in a virtual commerce environment. For example, Amazon.com (AMZN) has revenue per employee of nearly $850k while its retail counterpart, Best Buy (BBY), generates revenue per employee of only $270k. Clearly, e-commerce vendors will have the most to gain if they successfully disrupt retail customer acquisition, disintermediation distributors/resellers, and under-price retail establishments. As a consequence of e-commerce vendor gains, financial transaction processors and parcel shipping companies are among ancillary vendors who will gain.

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