Service Quality Standard Determination

This report analyzes the determination of service quality standards at Caterpillar, a leading heavy mining machinery company. It examines Caterpillar's current challenges in customer service, particularly in the Latin American market, where competitors offer more cost-effective services. The report identifies key stakeholders (customers, distributors, employees, dealers) and analyzes the company's service portfolio, including refurbishing, financing, and insurance services. A micro and macro analysis reveals challenges such as geographical distances, lack of service quality standards, and cultural diversity. The report proposes solutions to improve service quality, focusing on emotional contagion, employee training, and effective communication. It concludes that while Caterpillar excels in product provision, improvements in service quality are crucial for maintaining a competitive edge.

Running head: DETERMINATION OF SERVICE QUALITY STANDARD
Determination of service quality standard
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1DETERMINATION OF SERVICE QUALITY STANDARD
Determination of service quality standard
In the present business scenario, contemporary business organizations have to provide
effective customer service in order to maintain the retention rate of the customers as well as
enhance the level of loyalty of the existing customers (Jahanshani et al. 2014). This concept is
not only applicable for the service sectors, but also for the manufacturing sectors. This is due to
the reason that, in the case of the manufacturing sector, providing tangible products to the
customers will not enhance the customer experience but also they have to provide effective after
sales service and various schemes related to the customer relationship in order to provide
effective customer service (Wong et al. 2015).
Current business scenario of Caterpillar
Caterpillar is one of the leading organizations in offering diverse range of heavy mining
machineries. They have their operations around the world and are having more than 100 years of
experience in this field. However, in the recent years they are facing issues related to the
customer service (Wilson et al. 2012). Various competitors are being emerged in the market,
which are offering more cost effective service to the customers. Thus, the business potentiality of
Caterpillar is being adversely affected. Thus, the Latin American wing of Caterpillar has initiated
a scheme of customer service agreements. It is being projected that the initiation of the customer
service agreements will help to gain competitive success factors and will provide effective
customer service.
The major stakeholders of Caterpillar include the customers, distributors, employees and
the dealers. The proposed customer service agreements will involve all the stakeholders and it
will be implemented in a holistic approach. The dealers and distributors will be involved to

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enhance the distribution networks and to provide effective and efficient customer service in the
service centers. The industry where caterpillar is currently operating is having the core product
of the tangible item, but the augmented product is of the service being provided to the customers
(Beltagui et al. 2012). In the case of caterpillar, they provide mining machineries to their
customers. However, it is being seen that a major portion of the existing customers are opting for
other service providers for the after sale service or for the mid life services. Thus, providing
effective customer service will not only retain the existing customers, but also increase their
revenue generation (Khan and Inamullah 2012).
Service characteristics
The service portfolio of caterpillar includes refurbishing the old products for the existing
customers, financing services and insurance services. In this case, all of the above stated services
will have their own significance in providing effective customer service. The refurbishing of the
old machinery will help the existing customers in extending their life span of the machineries
(Caixeta et al. 2013). Moreover, the refurbishing technologies being involved in the service of
the caterpillar is more superior than that of the services being provided by the third party
vendors. Thus, the loyalty of the customers will be increased if they can maintain their products
as new one. The second service being provided by them is the financing service (Bernel et al.
2014). By providing this service, they will be able to provide the customers financial assistance
in buying new products. Customers will have the options of paying in installment schemes. Thus,
the customer convenience and customer experience will be more in this case.
The last service being provided by them is the insurance service. The machineries being
offered by caterpillar is more vulnerable to the wear and tear and thus, there is more chance of

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depreciation and breakdowns. Thus, the insurance service being provided by them will be helpful
for the customers due to the fact that it will be provide the customers of supports in case of any
breakdowns. Providing this service will also enhance the customer convenience and will increase
the customer loyalty and retention (Kaura et al. 2015).
Micro and macro analysis
In the case of the macro environment of caterpillar, the competitive scenario for them is
rapidly changing. This is due to the emergence of the third party service providers is leading to
the outsourcing of the fleet by the customers. Thus, due to this reason, the caterpillar dealers
cannot get involved and the organization is getting deprived from providing service to their
customers. In addition, the emergence of the various small workshops for servicing the mining
machineries are also posing challenge for the service being offered by caterpillar. This is due to
the reason that, these small workshops are offering similar level of expertise to their customers at
more cost effective prices. Several equipment distributors have entered in the market of Latin
America, which are offering equipments at lower cost than that of the caterpillar.
The microenvironment of caterpillar includes the relationship between the caterpillar and
dealers network. The internal environment and structure of the organization is feasible enough to
provide effective customer service. However, there are several issues being identified, which is
reducing the effectiveness of the service quality being provided by them to their customers (Zhao
et al. 2012). One of the key issues being identified is the less information about the customer
service agreements by the sales people. Moreover, the sales persons are not being provided for
extra selling of the customer service agreements. Thus, the motive of increasing the customer
service agreements is not being fulfilled.

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Another issue in the dealership network of caterpillar being identified is the lack of
customer oriented focus of the dealership. It is being seen that the dealership of caterpillar is
more concentrated on the effectiveness of the work being done rather than determining the
effectiveness in providing the customer satisfaction (Jhandir and Saif Ullah 2012). Thus, though
the dealership network of caterpillar is effective enough in providing effective and efficient
service for their products but the customer satisfaction is not being taken care of. This should
also be rectified in order to enhance the effectiveness of the service quality and the level of
satisfaction of the customers.
Constraints and obstacles
One of the key barriers that are being identified is the geographical distance between
customers and the dealers. Thus, the time being consumed by the customers in availing the
services is more and it have negative impact on the customer assumption. Another obstacle being
identified is the lack of any particular standards being set by the organization to define the
service quality (del Mar Alonso-Almeida et al. 2013). Thus, it is difficult for the dealership to
maintain the service quality standard. Moreover, the diversity in culture in the Latin American
region is also posing challenge for the effective maintenance of the service quality standard.
Service quality standard
The customers of caterpillar are actually the machineries from them but they are also
expected to be given the good and effective service quality. The after sales services and other
related augmented services is required and expected by them. However, emotional contagion can
be an issue in providing the effective service quality due to the reason that, the customer will get
influenced by the emotional labor being possessed by the employees. Thus, it should be

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considered that the emotional influence by the employees will have positive influence on the
customers. For the successful service interaction, the emotional connectivity between the
employees and the customers should be positive and effective.
Organizational effectiveness
In the present scenario, caterpillar is performing positive in the Latin American market.
However, the issues being identified may pose challenges in future. The issues they are facing in
providing the customers service effectively. Thus, it should be well coordinated and
implemented effectively in order to enhance the customer service. The back stage service being
provided by them, consist of the employees in charge of servicing and repairing the machineries.
On the other hand, front stage employees are the one who are responsible for enhancing the
augmented service quality for the customers. They look after the emotional labor being provided
to the customers and to effectively determine the requirement of the customers and offering
services accordingly.
The staffs are being trained effectively according to the job requirement. However, it
should also be considered that the service requirement of the customers is rapidly changing and it
is important for them to train and equip their employees accordingly (Elnaga, Amir and Amen
Imran 2013). Effective implementation of the service marketing mix will help the organization in
effectively providing the services to their customers. According to the service marketing mix, the
service to be provided along with the place, promotion and pricing should be effectively
managed and coordinated. Effective coordination of all the elements will help the organization in
providing holistic service to the customers.

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The communication process in providing the service to the customers by caterpillar is not
effective and it is been seen that employees are not been properly trained in promoting the CSA
to the customers. Thus, in this case, caterpillar as an organization is failing to effectively
marketing their services. Thus, it is being recommended that, initiation of an effective
communication channel, preferably extensive will help to promote their services to the
customers. It can be concluded that, caterpillar is effective in providing the products to their
customers. However, in the case of the service quality, they should improve to gain competitive
advantages from the market.

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