ServiceMaster's international expansion strategy and market entry challenges

Microeconomics

Service Master Pro-is a Company that concerns itself with the provision of a wide variety of services to both firms and residences. The company's flagship brands include but are not limited to TruGreen, AmeriSpec as well as Terminix.

International operations

Currently, Service Master has operations in 14 countries through its vast network of more than 4000 locations. Through its convenient franchise arrangements, the company has continued to expand throughout the world within a relatively short period of time. Though the company's headquarters remain in the U.S.A., ServiceMaster is present (through franchise and company-owned locations) in countries including but not limited to Malaysia, Lebanon, Saudi Arabia, Japan, Spain etc.

The possibilities for further expansion in regard to ServiceMaster seem endless. This assertion is essentially based on the Company's strategy for expansion where it seeks to develop through the issuance of master licenses. This arrangement allows the license owners to not only develop but also to undertake ServiceMaster sublicensing within a specified territory.

Challenges Faced by U.S. Based Firms when setting up in Other Countries

High set-up costs

U.S firms setting up in other countries could face high set-up costs. Typically, these costs are largely made up of sunk costs. By definition, sunk costs include all those costs which are essentially impossible to recover in the event that a firm leaves a given country. Examples in this case include fixed costs, costs of advertising and marketing etc.

Actions by competitors

Incumbent firms fearing the loss of a significant share of the market may erect barriers so as to force potential competitors out of the market. Hence in that regard, limit and predatory pricing are some of the challenges U.S. firms may face when setting-up in another country. In predatory pricing, incumbent firms may deliberately slash prices to ensure rivals do not make a profit.

Customer loyalty

This is another veritable challenge U.S. firms could face when seeking to set-up in other countries. In most cases, we have incumbent firms having products that are relatively well established and hence have a significant customer base. In such a case, competing directly with such strong brands could end up being an uphill task for U.S. Firms.

How ServiceMaster can Benefit from Outsourcing

Burkholder (2006) simply defines outsourcing as the act of delegating to an external entity the various operations of a business that are considered non-core. In my opinion, ServiceMaster could benefit in a large way from outsourcing. To begin with, the company could make significant efficiency and cost savings as a result of outsourcing. For instance, there are some functions the firm could not be performing based on their unreasonable costs in terms of labor etc. Such a function could include the collection of customer feedback. By outsourcing, ServiceMaster could undertake the same in a more efficient and cost effective manner. It can hence be noted that by outsourcing its supportive services the company could attain more efficient output combinations as a result of the better utilization of factors of production. In this regard, we could have a positive production possibilities curve as according to Rittenberg and Tregarthen (2009), capital and labor scarcity is reflected by a negative slope of the production possibilities curve.

Further, by outsourcing, ServiceMaster will be able to concentrate on its core undertakings. This will in turn have a positive impact on the firm's continuous improvement of its services as its focus will be only on those business activities it considers important. According to Flat World Solutions (2011), a firm is able to strengthen its business processes that are considered core simply by outsourcing supportive processes.

Next, outsourcing could also benefit the internal employees of the firm. The reasoning here is based on the fact that ServiceMaster could be having some undertakings which require a certain level of skill not available amongst the internal staff of the firm. By outsourcing such undertakings, employees of ServiceMaster could work alongside people brought to handle such services and hence in the process acquire the necessary skills.

Conclusion

In conclusion, it is important to note that in a global marketplace that is increasingly becoming competitive, businesses with international operations like service master must embrace new practices i.e. outsourcing so as to remain relevant. It is such practices as well as other cost cutting measures that also go a long way to enhance the growth and expansion efforts of firms in the light of the various challenges involved when setting-up operations in other countries.