Service strategy selection and organizational performance

Abstract

This research examines how service firms choose and implement an appropriate service strategy to gain a competitive advantage. The existing literature suggests firms can either choose a service leadership strategy or a selective service investment strategy. However, there is a lack of empirical evidence with respect to how a firm's choice of an appropriate service strategy is affected by its operating environment, and the performance implications associated with implementing either of these two different service strategies. The objective of this study is to examine how retailers choose their service strategies, by examining the influence of their competitive positions in the industry and their managers' commitment to service quality. In addition, this study identifies the relationship between service strategy implemented and organisational performance. Data was collected from 351 retailers in Hong Kong by using a mailed survey. The findings supported a statistically significant relationships between management's commitment to service quality, competitive position of a firm, service strategy orientation, service performance and financial performance. The results supported the belief that the level of service strategy orientation depends on two factors -management's commitment to service quality and the firm's competitive position. A strong service strategy orientation results in higher levels of service quality for the firm, which eventually leads to better financial performance. Implications for managers were derived from the results that service quality improvement is important, as it is one of the elements that can impact a firm's financial performance. Service quality improvement should be initiated by management by developing a strong service strategy orientation. A firm's competitive position can also affect a firm's ability to develop a strong service strategy orientation that is focused on service performance improvement.