ABSTRACTService firms face different obstacles than merchandise firms when expanding overseas. This paper examines the challenges and responses of service firms that have expanded internationally. The findings indicate that the most cited problem is that of host government restrictions, closely followed by marketing related problems and cultural differences. The responses of international service firms ranged from increasing control to using external resources to solve problems. It is important that service managers be sensitized to these problems and examine history of strategies used by others to overcome them.