Although issues related to dealing with current and potential competitors are similar for service and manufacturing operations, the unique characteristics of services require paying special attention to certain aspects of competitive strategy. The internal environment means just that: the environment internal to the firm, with no customer contact. Because the customer is not present, the processing of information, paperwork, or articles belonging to customers can be done with efficiency as the major performance measure. Designing systems to efficiently deliver services entails planning human and physical resources, infrastructure, and operations control. Smoothing supply and demand is a critical task in efficiently managing the internal environment of service operations. The interface is the segment in which the service is delivered to the customer. This service delivery is known as the moment of truth; it is this interaction that will shape to a great extent the customer's perception of the service received. In this environment, service managers must consider the characteristics of participants in the encounter and factors that inﬂuence their interactions. Managing expectations and service quality are key tasks in the service encounter. This necessitates special attention to training and issues of power, control and respect.