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The Strategic Management Trap

May 12, 2008

When the rules of thumb outlined in the previous post are followed, the consequences for a service provider may be those illustrated in Figure below. We may assume, for example, that the service firm or service operation either has financial problems, is facing increasing competition, or both. Or the firm may for some other reason, for example in order to please shareholders, want to improve its internal efficiency. Irrespective of the impact of technology, labor costs are high in most service operations. In order to control costs, strategic decisions concerning personnel are often made: personnel reductions, a hiring freeze, a greater degree of customer self-service, people being replaced by machines, and so on.

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