Service Concept And The Significance To The Company

Published Date: 02 Nov 2017

This report firstly gives an introduction to what the definition of service concept and the significance to the company, especially applies this to Wal-Mart in the organisation idea, service experience, service outcome, service operation and the value of service. After that, it looks in to how the operation of Wal-Mart from service quality, capacity, supply chain and strategy contributes and ensures the service concept is correct and effectively for the success of Wal-Mart today. Besides, this report would also assess the operation of Wal-Mart and finally discusses any possible recommendation for Wal-Mart in order to make tem providing the best service quality and implementing the service concept.

Contents page

Summary 2

1. Introduction 4

1.1. Service Concept 4

1.2. Service Organisation: Wal-Mart 5

2. The Service Concept of Wal-Mart 6

2.1. The Organisation Idea of Wal-Mart 6

2.2. The Service Experience 6

2.3. The Service Outcome 7

2.4. The Service Operation 7

2.5. The Value of the Service 7

3. The Operational contribution of Wal-Mart to the functioning of the Service Concept 8

3.1. Plan and control low cost strategy and best service quality 8

3.2. Plan and control its service capacity 9

3.3. Plan and control its service supply chain 9

3.4. Develop its service strategy 10

4. Assessment of the Implementation of the Service Operations 11

5. Conclusion 13

6. Recommendation 14

Customer Feedback 15

Staff Feedback and Reward System 15

Free Transfer Bus Service 15

Third party logistics and Total Quality Management 16

7. Reference 16

8. Bibliography 18

9. Appendix 20

9.1. The Service Concept Page 20 20

9.1.1. The organisation idea Page 20 20

9.1.2. The service experience Page 20 20

9.1.3. The service outcome Page 20 20

9.1.4. The service operation Page 21 20

9.1.5. The value of the service Page 21 20

9.2. Wal-Mart’s Service Concept Page 23 20

9.3. The Logistics System of Wal-Mart Page 24 20

9.1. The Service Concept 21

9.1.1. The organisation idea 21

9.1.2. The service experience 21

9.1.3. The service outcome 21

9.1.4. The service operation 22

9.1.5. The value of the service 22

9.2. Wal-Mart’s Service Concept 24

9.3. The Logistics System of Wal-Mart 25

1. Introduction

1.1. Service Concept

Edvardsson and Olsson (1996, p. 148) state that

"The term service concept refers to the description of the customer’s needs and how they are to be satisfied in the form of the content of the service or the design of the service package."

Heskett (1986) also suggested that the service concept as the way in which the "organization would like to have its services perceived by its customers, employees, shareholders and lenders" or what Collier (1994) calls the "customer benefit package". Besides, according to Johnston and Clark (2008, p.40)

"It is some thing that is more emotional than a business model, deeper than a brand, more complex than a good idea and more solid than a vision and it also can unite employees and customers and create a business advantage."

Therefore, the service concept plays a significant and key role in the organisation and helping service operation managers enhance a variety of service operation process and mediate between customer needs and an organization’s strategic intent (Goldstein et al, 2002).

1.2. Service Organisation: Wal-Mart

Wal-Mart was first opened in 1962 in the United States (U.S.) and today it is the world’s third largest multinational retail corporation with 10700 stores in 15 countries. Attracting over 200 million customers and members visit under each week (Wal-Mart, 2013).

Today, Wal-Mart has proved to be the largest and success operation in present supermarket in the U.S. and it is on track to control 35 percent of the U.S. grocery market within the next few yeas. Their main competitive advantages are low cost and perfect customer service. These advantages drive to the success of Wal-Mart, with fiscal year 2013 sales of approximately $466 billion, Wal-Mart employs 2.2 million associates worldwide (Wal-Mart, 2013).

"Communicate with people and show you care and exceed expeceptions of customers and others." (Wal-Mart, 2013).

Nevertheless, the main issue for Wal-Mart is how they can attract the new customers, create their brand image, and make their operations contribute to the service concept with low cost and the best service quality.

The aim of this report is to apply the service concept to Wal-Mart.

2. The Service Concept of Wal-Mart

According to the Johnston and Clarke (2008), there are 5 key elements in the service concept (More concepts and details applied to Wal-Mart see Appendix 9.1. and Appendix 9.2.)

2.1. The Organisation Idea of Wal-Mart

Wal-Mart being a supermarket that serve all kinds of customers, it provides a wide range of products and also helps their customers around the world saving money, so they can use this money to do other things and live better. Moreover, it also provides the excellent service to their customers.

2.2. The Service Experience

In order to provide the best service experience to their customers, Wal-Mart also has to make sure that:

Nice and helpful service staffs are ready and available to assist each customer when they need help.

Customers can shop at the clean and tidy environment with friendly atmosphere and courtesy and they can find their need convenient under the clear product sign

All their goods sold in their catalogues are in stock and cheaper than other supermarket and their customer can return.

All customers shopping in the Wal-mart have 2 hour free car parking and baggage locker.

2.3. The Service Outcome

At the same time, Wal-Mart has to make sure that during and after the services provided their customers should;

Feel satisfied and convenient with the goods and services they received.

Fell good value for money

Customers want to go Wal-Mart again when they want to buy something and save money and also will recommend Wal-Mart to their friends.

2.4. The Service Operation

In addition, the Resources and process that Wal-Mart provides are;

Free returns of many goods within a 30 day period

Different ways to pay such as cash, card and self-service checkouts

Paid delivery service

Advance logistics and replenishment system

2.5. The Value of the Service

Wal-Mart also adds values and promotes strategies by

Offer quality goods for cheaper prices

Some household electrical appliance can extend the warranty

Offer the discount, vouchers and gifts customers who pay more than a certain amount to make the customers feel valued

Few additional cost for some customers who require their goods to be delivered

3. The Operational contribution of Wal-Mart to the functioning of the Service Concept

In order to implement the service concept about always low price on everything and the best service of Wal-Mart, there are many things for them to do and coordinate, such as plan and control their goods and services quality, capacity and supply chain.

3.1. Plan and control low cost strategy and best service quality

Initially, Wal-Mart always tries to earn the biggest benefits from the suppliers based on their purchase rules. They would first full evaluate their suppliers’ qualification from the production size, funds, technology, quality, credit status, time and other ways to determine the range of choices in order to provide the best quality and the cheapest price to their customers. Moreover, due to Wal-Mart purchase a large number of products direct from the producers and centralized purchasing, it also can establish their cost structure by economies of scale and strengthen Wal-Mart’s advantage (Basker, 2007). This would also reduce the additional cost and contribute to their cheap price. In addition, after the distribution centre receiving the products from suppliers, the testing department of Wal-Mart would check and ensure the high quality by variety technical means. If the customers do not satisfied their goods, they can return them in the 30 days period.

Besides, Wal-Mart realized that as a retailing enterprise, only relying low cost can not build the perfect brand image in the customer’s perception, it should also provide the best service quality to customers at the same time. Therefore, Wal-Mart started some activities from the perspective of customers. They required that all staff must learn the knowledge for different products and how to serve different customers. They also make some rules to ensure the high satisfaction of customers. All the staff of Wal-Mart should always keep smile and friendly assist all customers.

"Customers are always right and strive to achieve, each item is guaranteed to your satisfaction" (Wal-Mart, 2013)

Moreover, in order to provide a clean, comfortable ideal environment for customer shopping and develop its service strategy, Wal-Mart would check their facilities every day and create the warm atmosphere by design the layout in order to make the customer fell satisfied and convenient.

3.2. Plan and control its service capacity

"Capacity planning is the process of evaluating the production capacity which are needed by an organization to accept the varying demands for its products" (Poonia, 2010) p. 142

There are 3 key essential for Wal-Mart capacity planning and controlling, facility, produce and services and its human resource. For examples: Wal-Mart had built their new shop average size 102,000 square feet, the new layout for customer experience based on their operation and built a large warehouse in U.S to cover all stores. Moreover, they also have partners with more than 2500, and also have 1.4 million both skilled and low skilled employees in U.S in order to serve their customers and make them feel satisfying.

3.3. Plan and control its service supply chain

In addition, Wal-Mart has established its own distribution centre and logistics distribution system. This could improve their service capacity and make contribution to the functioning of their service concept.

Due to Wal-Mart is a large supermarket and have many customers, they must control their stock, plan, forecast and replenish accurately and timely. There are some roles of the operation of the distribution centre. The distribution centre of Wal-Mart has an automatic replenishment system connecting their supermarkets. This would make them learning their stock at any time and the distribution centre also can learn when, how many and where they would sent different products.

At the same time, this system would also record the sales of each product and help Wal-mart predicting the sales in the future. More importantly, Wal-Mart also invested a great number of money to launch commercial satellites for monitoring the stock of each store and tracking their logistics. All these operation are in order to increase their efficiency. (See Appendix 9.3. on how Wal-Mart logistics system process)

Furthermore, Wal-Mart builds a supply chain system and makes their suppliers entering into the system of Wal-Mart to learn their products sales and other information at anywhere and anytime, such as expectation and feedback from the customers. This would help them improving their products with higher quality and lower price.

3.4. Develop its service strategy

Finally, Wal-Mart pays more attention to control their marketing cost, their advertising expenditure only take up 1.5% of sales, less than other competitors. At the same time, Wal-Mart will send their employee to compare their product price with their competitors in order to keep low price and attract customers. Moreover, they also promote One-Stop Shopping to their customer in order to satisfy the different need of customer. At the same time, they develop and promote the strategy of small profits but quick turnover. These strategy and operations also would enhance their strength of low coast and increase their service quality as well.

4. Assessment of the Implementation of the Service Operations

Nowadays, it is no doubt that the key factor in the success of Wal-Mart is providing all consumers the best products and services with guaranteed satisfaction under one roof. Many products in the Wal-Mart are cheaper than other supermarket. And Zheng and Ran (2011) also suggested that Wal-Mart provides a wide range of products at reasonable prices and their customer services are met the customer’s needs and wants.

At the same time, they have a good result from their advance technology in their logistics system and distribution centre in America. Wal-Mart is famous of its accurate market understanding, fast delivery, high satisfaction of customers (Chandran, 2003) and this also reduce a large number of money in order to achieve low price. "Wal-Mart’s technological edge is in its inventory control, logistics, and distribution" (Basker, 2007). Li (2011) also suggested that the cost of distribution and storage is a big part of the product’s selling price. Wal-Mart handles 80% of the purchases that are directly shipped in the warehouse in order to reduce the cost of logistics. The low costs of Wal-Mart in America are mainly comes from economies of scale, purchasing power, effective information systems and efficient supply chain logistics. Moreover, the distribution centre also provides the value added service such as packaging.

Furthermore, the sales performances reflect the success of the implementation of the Service Operations. The sales of Wal-Mart are more than its competitor Carrefour’s sales. This also means that Wal-Mart attracts more customers and satisfies their customers’ need.

However, even though Wal-Mart builds the service concept by low price and the best service more successful, there still have some negative and imperfect aspects. According to Zheng and Ran (2011) they are spending much money in training employees and update equipment in order to provider better service for their customers.

More significant, even though they do many things in order to provide the best service to the customers, there still a small part of customers considered that some services is not good. According to the research from Zheng and Ran (2011), the kids’ trolleys service and packing services are not satisfying the customers’ need. Moreover, there were 50% complaints about disabled parking abuse from those stores.

In addition, the location of Wal-Mart normally far from the city centre, many people argued that they do not implement their service operation better, because it should take much time and cost to do shopping in the Wal-Mart even though they are cheaper.

Furthermore, Wal-Mart takes fewer benefits by their effective logistics system in some countries. This is because there has the economies of scale only more than 100 shops. There are less f shops than America. Thus, in some countries, they cannot acquire the cost advantage in the logistics cost but also increase the cost. Moreover, some policy in some countries also limits the information transfer of its logistics distribution system. And low wages also cannot motivate their staff always do best, the service quality in other countries do not implement perfect and is worse than America.

5. Conclusion

In conclusion, all operations of Wal-Mart are in order for the service concept to be effective, it appears that Wal-Mart have carefully considered the service concept to ensure that the best possible service is provided to their customers. Wal-Mart develops many operations such as staff training, supplier selection, price comparing, comfortable environment, cost controlling and advanced technology in logistic system making contribution to the functioning of the service concept.

Wal-Mart is proving to be successful in these 10 years, and they will continue to offer the highest quality products at the lowest price to strive to be the best in the retail industry. Low price. Live better and the best quality together will be beneficial as Wal-Mart plan to increases their business in the retail industry and also are the competitive advantage for expansion in overseas market.

"Control your expenses better than your competition" (Wal-Mart, 2013)

However, there are still some complaints for Wal-Mart from the view of customers such as the location, kids’ trolleys service and packing services, they can do better to improve their service.

More importantly, they can take effective from its own logistics distribution system in other countries and also have some problems of different service quality in overseas market. For their employees, lacking of the motivation is also a noticeable issue.

6. Recommendation

Although Wal-Mart is proving to be successful in these 10 years in providing a low price and the best service quality supermarket experience to their customers, there are some areas of improvement which can make them implementing and enhancing their service concept.

Customer Feedback

Due to different customers have different needs. Wal-Mart can take some activities researching and collecting their customer feedback regularly. Survey and questionnaire from their customers in order to learn their need and experience, improve and provide a better service quality. Besides, they could give some cash vouchers or gifts to customers who provide beneficial ideas and experience in order to motivate them suggesting.

Staff Feedback and Reward System

Similarly, the feedback and suggestions from employees are also significant for Wal-Mart. If they work unhappy, it is very difficult to require them providing the best customer service. Thus, Wal-Mart should also pay attention to their employees and enhance the communication among all staffs in order to learn their true views and suggestions. Besides, Wal-Mart can establish the reward system and employee benefits for their excellent staffs. This should large increasing their motivation and always keeping enthusiastic to assist customers and increase their service quality.

More important, they must establish a shared view between customers, staff perception to make their customer clearly understand what Wal- Mart is providing and also make their employee aware of any that are currently available to customers.

Free Transfer Bus Service

Moreover, due to the locations normally far from city centre and it is difficult to get to. Wal-Mart could provide the free transfer buses 2 times a day from the city centre to their shop. Even though this would increase the cost, but more important, it not only attracts some new customers, but also build a good brand image, gain the competitive advantage and contribute to the functioning of the service concept.

Third party logistics and Total Quality Management

The Last but not the least, Wal-Mart can pay more attention building the strategy partner relationship with the third party logistics company. Maybe find the third partly logistics company can achieve the high efficiency rather than its own logistics system in some countries. Moreover, in order to keep their service concept with low price and the best quality all over the world, they should also use the total quality management to control all shops in the world.

All these suggestion would make Wal-Mart increase and implement the service concept better and make customer satisfying and have a better experience.

7. Reference

Basker, E. (2007) The Causes and Consequences of Wal-Mart’s Growth, Journal of Economic Perspectives, Vol 21, No 3, pp177-198

Chandran, P.M. (2003) Wal-Mart’S SUPPLY CHAIN MANAGEMENT PRACTICES, ICFAI Center for Management Research, available from http://mohanchandran.files.wordpress.com/2008/01/wal-mart.pdf, accessed 1 March 2013

Collier, D.A. (1994) The Service/Quality Solution: Using Service

Management to Gain Competitive Advantage, Irwin and ASQC Quality Press, New York

Edvardsson, B. and Olsson, J. (1996) Key concepts for new service development, The Service Industries Journal, Vol 16, No 2, pp140–164

Goldstein, S.M., Johnston, R., Duffy, J. and Rao, J. (2002) The service concept: the missing link in service design research?, Journal of Operations Management, Vol 20, No 2, pp121-134

Heskett, J.L. (1986) Managing in the Service Economy, Harvard

Business School Press, Boston, MA

Johnston, R. Clark, G and Shulver, M (2012) Service Operations Management: Improving Service Delivery, 4th edition, Harlow: Financial Times Prentice Hall

Johnston, R. and Clark, G (2008) Service Operations Management: Improving Service Delivery, 3rd edition, Harlow: Financial Times Prentice Hall

Kotler, P. (2000) Principles of Marketing, The Millennium Edition, New Jersey: Prentice Hall

Li, Y.S. (2011) Walmart Business Model Study, INTERNATIONAL JOURNAL OF ADVANCED ECONOMICS AND BUSINESS MANAGEMENT, Vol 1, No 2, pp93-97

McDougall, G.H. and Levesque, T. (2000) Customer satisfaction with service: Putting perceived value into the equation, Journal of Services Marketing, Vol 14, No 5, pp392–410

Poonia, V.S. (2010) Production And Operations Management, Gyan Publishing House, p142

Wal-Mart (2013) Our Story, available from http://corporate.walmart.com/our-story/, accessed from 28 February 2013

Wal-Mart (2013) 10 Rules for Building a Business, available from http://corporate.walmart.com/our-story/heritage/10-rules, accessed from 28 February 2013

Zhang, W. and Ran, W. (2011) Performance Assessment of Customer Service Strategy in Wal-Mart, Journal of System and Management Sciences, Vol 1, No 1, pp82-90

8. Bibliography

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