LESSON 1
SERVICES IN TODAY’S SOCIETY
1.
2.
3.
4.
The service sector and utilities
Basic characteristics of the services
Types of services. Classification of service businesses
Distinctive features of utilities
1
Objectives
• Identify traits that all services have in common
• Describe the central role of services in an
economy
• Identify and differentiate the five stages of
economy activities
• Identify the sources of service sector growth
2
1. The service sector and utilities
• Fastest growing companies in the last years.
• Population sector that employs the most (GDP 65%)
• Definition:
– Macroeconomic
Primary (agriculture, mining, fishing, forestry)
Secondary (manufacturing and processing)
Tertiary (services)
– Microeconomic
Service: activity or series of activities of intangible nature
that normally, take place in interactions between
customer and service employees .
3
1. The service sector and utilities
Meanings of the term "service“
Service Industries: the final product is an intangible
asset and non permanent. (Entertainment
companies)
Products in the form of services: can be associated or
just working industrial services. (Consulting)
Occupations included in the scope of services: nonindustrial activities. (Repair, teaching, maintenance)
Service functions: outside the economic field. (NGOs)
4
1. The service sector and utilities
• Stages of economic development:
Stage 1
Agriculture, mining, fishing,
forestry
Stage 2
Manufacturing and processing
Stage 3
Restaurants, hotels, laundry,
maintenance, repair
Stage 4
Transportation, communications,
retailing, finance, governments
Stage 5
Health, education, research, arts,
recreation
Stage 6
Information Technology, Internet
5
1. The service sector and utilities
DISCUSS in groups of 4
Benefits of services nowadays?
6
1. The service sector and utilities
• Actually: DISCUSS
– More career opportunities for everyone
– Freedom to choose from a variety of jobs, tasks
and assignments
– More flexibility in how and where to work
– More control over your own time
– Increased opportunity to develop new skills
– Opportunity to present oneself as an independent
contractor or vendor with services to offer
7
1. The service sector and utilities
Riddle Model(1986): services functions in the economy
Primary sector
Service
Businesses
Consumers
Infrastructure
Services
Public
Administratio
n
Trade services
Personal
services
Secondary sector
(industrial)
8
1. The service sector and utilities
• The model shows the interaction between the
three sectors, but divided in 5 groups:
– Business Services: banks, consultancies
– Trade services: retailing, maintenance, repairs
– Infrastructure services: communications,
transportation
– Personal services: restaurants, hotels
– Public administration: education, health, security
• All theses activities go to the consumers
• So service activities are necessary nowadays to
ensure life quality.
9
2. Basic characteristics of the services
DISCUSS
Service
Industrial or physical
goods
10
2. Basic characteristics of the services
•
•
•
•
•
•
•
•
Service: DISCUSS
Labor intensive
Customer participation in the
service process
Cannot be stored
Cannot be transported
Intangibility
Simultaneity (created and
consume at the same time)
Localization: near the
customer
Cannot be patent
•
•
•
•
•
•
Industrial or physical goods
Capital intensive
Customer isolated from the
process
Can be stored
Can be transported
Tangibility
Not simultaneity
• Localization. near the
production factors
• Can be patent
11
2. Basic characteristics of the services
• Intangibility
– Services are ideas and concepts, goods are things.
So, service innovations are not patentable.
– Problems: when buying a good, customers are able
to see it, feel it and test its performance before
purchase it. However, with services, customers
must rely on the reputation of the service firm.
– In many service areas, the government has
intervened to guarantee acceptable service
performances.
12
2. Basic characteristics of the services
• Perishability
– A service cannot be stored. When it is not used, it is lost
forever. So, the full utilization of service capacity becomes a
management challenge, because customer demand exhibits
considerable variation.
– Solution: react to influence by:
• Smooth demand by: with discounts, marketing, price
incentives…
• Adjust service capacity by: using part-time help during
peak hours, scheduling work shifts to vary workforce
needs according to demand and increasing the customer
self-service content of the service.
13
2. Basic characteristics of the services
• Heterogeneity
– Services are difficult to standardized.
• Because the service system results in variation of service
from customer to customer. This creates the possibility of
a more satisfying human work experience.
• Difficult to control the service quality.
– Solution: how to manage service quality?
• Monitoring? Impossible
• Training
• Motivating
• Genuine concern for employee welfare
14
2. Basic characteristics of the services
• Simultaneity
– Services are created and consumed simultaneously
so, services cannot be stored and inventoried.
• Permanent contact with customers
• No distribution channels
• Customer is present while creating the service
– Solution: to consider the customer as another
productive factor.
15
3. Types of services. Classification
• Browning y Singelmann (1978)
– Extractive activities: primary sector
– Transformation industry: secondary sector
– Infrastructure services: transportation, communications, trade,
utilities.
– Manufacturing services: banking, finance, accounting, legal,
insurance, R&D design.
– Government services: health, education, judicial, military, security.
– Personal services: restaurants, hotels, hairdresser, domestic
service, entertainment.
16
3. Types of services. Classification
• Sabolo (1975)
– Tradable service:
•
•
•
•
•
•
Finance
Professional
Manufacturing
Transportation
Communications
Retailing, wholesaling
– Non tradable services:
• Government and Public administration
17
3. Types of services. Classification
• Other
– Functional classification
– CNAE classification
http://www.cnae.eu/
18
4. Distinctive features of service firms
• FOUNDATIONAL PREMISES OF SERVICEDOMINANT LOGIC
– Service is the fundamental basis of exchange
– Goods are distribution mechanisms for service
provision
– All economies are service economies
– The customer is always a co-creator of value
19
4. Distinctive features of service firms
•
The customer is the central point of all the decisions and action carried out
by a service firm.
Strategy
CLIENT
Methods
People
20
4. Distinctive features of service firms
Operations service management as an open system.
Consumer arrival
(input)
Service process
(consumer
participant)
Consumer
departures
(output)
EvaluationCriteria
Measurement
Control
Service operations
managers:
Consumer demand
Perceived needs and
location
Production and marketing
function
Service personnel
Empowerment,
training,
attitudes.
Define standard
Communicate by
advertising
Service package
Supporting facility
Facilitating goods
Information
Explicit and implicit services
Basis of selection
21
4. Distinctive features of service firms
The role of the service operations manager includes
the functions of both production and marketing in an
open system with the customer as a participant.
For services, the process is the product. The presence
of the customer is what characterized the open system
and makes him/her the co-producer.
Customers impressions of service quality are based on
the total service experience.
22
REFERENCES
• Service management, Operations, Strategy,
Information Technology. James Fitzsimmons
and Mona Fitzsimmons. Seventh edition,
McGrawHill international edition. Chapters 1
and 2.
23