A Service Providing Business Report (Assessment)

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Updated: Feb 14th, 2024

“To determine how SERVQUAL can help Shanghai HUA FU improve their services by taking measures aimed at the improvement of its Services Value Chain”

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Context

There are many companies present today that deal with intangible services. These companies offer services which are not tangible, such as training lessons, banking, etc. It is easier for the manufacturing companies or companies dealing with tangible products to identify the beginning and ending point of their services. For instance, the Ford Company manufactures cars and they can specifically point out when and where they begin manufacturing their product and when and where it will be completed. For such companies, identifying the value chain becomes easy allowing them to improve their weak links.

But for companies that offer intangible services, such as tennis lessons, it is very difficult to identify the value chain. It becomes practically impossible for these companies to “apply the concept of supply and demand” because of the intangibility of their services, making it hard for them to identify the value of a particular service (Gabriel 2010). One such company is Shanghai HUA FU, which offers English training programs like IELTS, TOEFL, etc. Another problem with the service industry is that their services cannot be standardized, i.e. the concept of mass production cannot be applied here, because different clients have different needs and require services which suit them personally (Gabriel 2010).

It is because of these reasons that the mangement of these companies face more diffculties, compared to others, when providing services to their customers. For instance, Shanghai HUA FU company, has to indidvudually deal with their clients and understand their needs and capabilities before providing them training. People seeking the services provided by Shanghai HUA FU come from different backgrounds, have different intelligence and interest, and so they have to individually served accordingly. A training program which suits one client, may not suit the other and it is the job of the management to make sure that the serivces provided to the client are satifying the client.

Professor Michael Porter, the creator of Porter’s Value Chain, admitted that when he designed the model, he did not copnsider the whole business sector (Porter 1985), and so a number of Value Chain componenets, such as Inbound logistics and Outbound logistics, are not directly applicable to the services industry (Gabriel 2010, pp.11). According to Stabell and Fjeldstad (1998), intangible businesses, such as hospitals, insurance companies, English training programmes, find it hard to implement the value chain model in their company because Porter’s value chain lack the knowledge of these industries. They believe that one model is not enough to understand the complexity of different kinds of business (Stabell and Fjeldstad 1998).

It is evident from these findings that Porter’s value chain model canot be used to design value chain model for the service industry because of its strict nature which was speciafically designed to deal with tangible products. It is therefore required that new model be designed for the service industry which is specifically created to understand the complexity of intangible services. There are many aspects of the service industry which are ignored in Porter’s value chain model. It does provide any understanding of understanding the individual nature of its clients which is the most important part of the service industry.

Since the services are directly consumed by the client, the nature and requirement of the clinet needs to be understood before any services are delivered to the client. Another important factor which is not covered by the Porter’s Value Chain model is that of physical aspect of the service (Gabriel 2010), for instance, at Shanghai HUA FU, the physical apearance of the educational company will have a lot od influence on the client and if the company appears to be a bad condition or unorganized, the client may not want to use the services provided by the company. All these factors prove that there an increasing need for a service value chain model which can be applied by the serive industry to create more value.

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Purpose

Aim

To study the service value chain of a service providing business selected for this study that is of Shanghai HUA FU – a company based in Shanghai, China, offering English training programmes, such as IELTS and TOEFL. The basis for carrying out the analysis is based on the value chain model as suggested by Michael Porter that is modified to be more specific to the service industry. This model is depicted as follows:

Services Value Chain.
Figure 1: Services Value Chain.

Based on the above model the company’s analysis will be subject to the implementation of SERVQUAL for making suggestions as to how these tools can help the company in optimizing its service value chain.

Objectives

  1. To evaluate Shanghai HUA FU value chain in order to acquire a comprehensive understanding of the practical form of a Services value chain.
  2. To determine the quality level incorporated in Shanghai HUA FU’s services through a value chain analysis.
  3. To carry out a value chain analysis customized to the services industry; in order to go beyond that which would be available through Porter’s traditional value chain.
  4. To understand how the SERVQUAL analysis can help to optimize the service value chain.

These objectives comply with SMART criteria because the study carried out through the scope of these objectives will study a particular case of Shanghai HUA FU’s company in order to evaluate different elements of its value chain; hence the study will qualify as specific. Secondly, the research will conduct a survey of Shanghai HUA FU’s customers to carry out SERVQUAL to measure the level of quality in its customer service; thereby the study will be measurable.

Furthermore, the research will only focus on information provided by the customers who have used the services provided by Shanghai HUA FU, thereby qualifying as achievable. The research will be realistic and the responses will be collected through survey questionnaire increasing the reliability of the research. Additional information will be used for developing the background and literature review of the report and will be collected from reliable academic sources. The study will also be testable since the study will be carried out within a specific time period to describe and analyse service value chain model using the case of Shanghai HUA FU.

Literature Review

“Customers are not and will never be buying products by values” (Elisante Gabriel).

Michael Porter and the Value Chain

The term value chain was first used by Michael Porter in 1985, in his book The Competitive Advantage (Porter 1985). Porter believed that the performance of the whole organization depended on the parts of that organization. He proposed that in order to improve the system as a whole, one must improve the subsystems and their individual performance. The main purpose of value chain analysis was to create value for the customers by identifying the value chain (Crain 2008).

Porter divided all the activities which are performed in an organization in Primary and Support activities (Sheehan and Foss 2009). The value chain analysis was designed to help organizations maximize the value that they produce for the customer and deliver a product for which customers are willing to pay a certain amount of price. Value chain analysis is widely used in the manufacturing industry.

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Service Sector

Services may be defined as “intangible, invisible, and perishable requiring proximity between the provider and the customer, e.g. hotels, restaurants, hairdressings” (Kuznar 2010, pp.2). Services play a very important role in the economy of a country because they contribute a great deal to the growing gross domestic product (GDP) of a country regardless, especially in the developed countries (Kuznar 2010).

There has been much improvement in the global service sector over the past few years which is evident from the “growth of global service sector incoming new business improved in January (2010) to the fastest since 2007” (Williamson 2010, pp.2). The share of the service sector has been increasing in the GDP and employment in the developing countries, such as UK, France, Germany, Japan, and United States (Farrell, Remes and Kehoe 2010).

Service value Chain

Because of the success of value chain analysis in the manufacturing industry, the service industry is also making efforts to introduce value chain in the service sector to maintain the buyer seller relationship, which in turn can improve the sales and revenue for the organization. Introducing value chain to the services, the organization can grow by 20 per cent in effect without having to make any other costly changes (Field SVC 2005).

Customer satisfaction is essential for the growth of an organization as it increases customer loyalty (Griffin 2010). The service sector is the part of an organization that has a direct interaction with the customer having a lot of influence on the customer satisfaction (Anderson 2006) and so most of the successful organizations make sure that their employee-customer interaction is a good overall experience for the customer (Spence and Kale 2010).

Service value chain aims at building an ongoing relationship with the customer by satisfying the needs of the customer so that business and referrals can be repeated, increasing the number of satisfied customers who want to use the same services over and over again (Field SVC 2005). The service value chain helps and organization to identify the employee-customer interaction points along with the associated elements in the value chain (Spence and Kale 2010). The service value chain then aims at improving these interactions so that the customer is satisfied and has a good overall experience which can be repeated.

Research Questions

  1. How does the Services value chain differ from the traditional value chain?
  2. How does the services value chain apply to an organization offering English training programs?
  3. How can the SERVQUAL analysis help to optimize value chain operations for an English training providor?
  4. What role can the SERVQUAL analysis play in optimizing Shanghai HHUA FU’s value chain in China?

Research Methodology

Research methodology forms the basis of every research. It is basically steps which are adopted by the researcher to solve the problem. A typical research methodology consists of a variety of techniques thus giving a lot of option to the researcher to choose the one that he feels will best suit his research process. The main elements of research methodology are analyzing the problem, data collection, managing and analyzing the data till a conclusion is derived out of it. The conclusion can be either based entirely on the researcher’s personal view or it can even be supported by a numerical hypothesis (Kumar 2008).

Research Methodology Approaches

Quantitative Research

Quantitative research is based on positivistic paradigm. It is an empirical investigation done to derive valid conclusions by applying various mathematical models and other statistical theories on the stated problem. Quantitative research is basically used in physics or various subjects of social science such as political science, anthropology and sociology (Hunter and Leahey 2008).

Qualitative Research

Qualitative research is based on phenomenological paradigm and is done to analyze the behavior of an individual, group of people or series of events in a pre-decided situation (Denzin and Lincoln 2005). The conclusion of qualitative research is not supported by mathematical hypotheses rather it is based upon the observation of the researcher leading to his own opinion-based conclusion (Marshall and Rossman, 1998). There are various methods of collecting data under qualitative research. The method used most for data collection is survey questionnaire which became popular due to its many benefits such as easy to gather and large sample population can be included in the survey (Trochim 2006). However, qualitative research is very biased in nature this is why it is divided into two kinds:

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The Inductive Approach v/s The Deductive Approach

The inductive approach is used when large data has to be collected and analyzed (Thomas 2003). On the other hand, if the researcher feels that the conclusion derived using inductive method needs more analyses then deductive approach is used in which he uses various mathematical models to further strengthen his conclusion (McMurray, Pace and Scott 2004).

Adopted Methodology

The study will employ a two-pronged approach. The first part of the study will constitute an in-depth secondary analysis of literature. Peer-reviewed publications shall be considered a very important component in this part of the study. The literature analysis will not only directly engage the subject of the study but will also facilitate in the development of an understanding of the research objectives. Yet another purpose of the secondary research will be to acquire a clear understanding into research variables. This part of the secondary research is most important since it will assist in the primary research.

The research methodology will proceed to the second stage by acquiring primary data through the survey questionnaire approach. A carefully designed survey questionnaire shall be put together to explore the research objectives and research variables.

Furthermore special attention shall be given to precautionary measures designed to take a proactive approach towards potential research limitations. The paper will take this proactive approach in order to ensure that the analysis procedure does not fall victim to any research limitations in the later stages of the research.

Managing your Dissertation

Roadblocks

The research shall have to give special attention to ensure that the focus remains on the services value chain. This is because a large body of literature is available on the traditional value chain model and a relatively limited body of literature is available on the services value chain. As a result, all primary research elements will have to be customized. In addition, the research will face the challenge of establishing a sound primary research approach. The challenge of primary research holds significant relevance because while it is possible to develop a sound foundation for the research through in-depth literature analysis, this research will have very little guidance in the development of the primary study since there is a deficiency of studies in this area that incorporate primary research.

Roadblocks

Roadblocks

Discussion

This study will aim at designing solutions for the problems which are currently being faced by Shanghai HUA FU with the help of value chain analysis as it has helped many manufacturing industries to deal with similar problems in the past. This can significantly improve the suffering market of Shanghai HUA FU in Shanghai.

The study will not only include information that previously exists but will also attempt to gather first hand information to address these issues and perform a service value chain analysis to ensure that the outcome of the research is useful and meaningful. With the implementation of SERVQUAL the proposed study will form basis for improving customer service that could eventually yield in higher level of customer satisfaction. Drawn from important findings of the study recommendations will be made for the company and the service industry in order to meet customer expectations in a more responsive manner.

List of References

Anderson, J.R., 2006. Managing employees in the service sector: A literature review and ceonceptual development. Journal of Business and Psychology, pp.501-23.

Crain, D.W., 2008. Using value-chain analysis to discover customers’ strategic needs. Strategy & Leadership, pp.29-30.

Denzin, N.K. and Lincoln, Y.S., 2005. The SAGE Handbook of Qualitative Research. CA: SAGE Publications Inc.

Farrell, D., Remes, J. and Kehoe, C., 2010. Service Sector Productivity: The Tiger’s Next Challenge. Web.

Field SVC, 2005. Ther Service Value Chain. Web.

Griffin, J., 2010. . Web.

Hunter, L. and Leahey, E., 2008. Collaborative Research in Sociology: Trends and Contributing Factors. The American Sociologist, 39.

Gabriel, E.O., 2010. Value Chain for Servies. Web.

Kumar, R., 2008. Research Methodology. Darya Ganj: APH Publishing Company.

Kuznar, A., 2010. . Web.

Marshall, C. and Rossman, G.B., 1998. Designing Qualitative Research. CA: Sage Publications.

McMurray, A., Pace, R.W. and Scott, D., 2004. Research: a commonsense approach. Southbank Victoria: Thomson Social Science Press.

Porter, M., 1985. Competitive advantage: creating and sustaining superior performance. New York: The Free Press.

Sheehan, N.T. and Foss, N.J., 2009. Exploring the roots of Porter’s activity-based view. JSMA, pp. 240-60.

Spence, M.T. and Kale, S.H., 2010. Optimising the Internal Value Chain: Principles and practices. Journal of Management and Organization, pp.193-206.

Stabell, C.B. and Fjeldstad, O. D., 1998. Configuring Value For Competitive Advantage: On Chains, Shops, and Networks. Strategic Management Journal, Vol 19, pp.413-37.

Thomas, D., 2003. A general inductive approach for qualitative data analysis. New Zealand: University of Auckland.

Trochim, W.M.K., 2001. The Research Methods Knowledge Base. Natorp Boulevard Mason, United States : Atomic Dog Publishing.

Trochim, W., 2006. . Web.

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IvyPanda. (2024) 'A Service Providing Business'. 14 February.

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IvyPanda. 2024. "A Service Providing Business." February 14, 2024. https://ivypanda.com/essays/a-service-providing-business/.

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IvyPanda. "A Service Providing Business." February 14, 2024. https://ivypanda.com/essays/a-service-providing-business/.

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