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Notes:
Services are conceived in the entrepreneurial stage. Services generally offer a single service at a single location. Many services such as small groceries, specialty stores, and restaurants never grow out of this stage. Capacity expansion consists of the addition of equipment and personnel at the current site to meet a growing demand for the service. Planning issues revolve around (1) equipment cost and (2) how the addition of equipment and personnel into a normally already cramped facility will affect service delivery.
Two strategies are commonly used by a single-site firm to cope with the highly volatile demand typical of services. The first is cultivating the ability to shift resources from other tasks to where they are needed. Services will commonly cross-train personnel to fill in at other positions when they are needed, such as training a bank clerk to fill in as a teller during the lunch-hour rush or teaching a salesperson to run a register whenever a line forms.
The second strategy is the use of customer coproduction. Coproduction takes place when the customer does some or all of the work required in a service transaction, as with self-serve drink fountains or self-bussing tables in restaurants. Coproduction tends to smooth the demands on the system because whenever demand increases, these additional customers also provide labor to help meet this demand.