Services
A service firm is defined as one that
derives more than 50 percent of its
sales from providing services
MGT605 :Services in the Economy 1
A service package
A service package is a bundle of
explicit and implicit benefits
performed with a supporting facility
and using facilitated goods.
When you eat at a fast food
restaurant (supporting facility), you
may purchase a hamburger
(facilitating good) that someone
else cooked for you (service).
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Service Concept
The service concept is the perception and
expectations of the service itself in the
minds of the customers, employers,
shareholders, and lenders.
The service system is the equipment,
layout, and procedures used to provide
the service and maintain quality and
delivery standards.
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Service revolution
The service revolution relates to the
shift in the economy to a service
economy and the proliferation of
service automation.
MGT605 :Services in the Economy 4
Define Services Operation
A service operation is an open
transformation process of
converting inputs (consumers) to
desired outputs (satisfied
consumers) through the appropriate
application of resources (family,
material, labor, information, and
the consumer as well).
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Services Operation
Services are economic activities that:
• produce time,
• place,
• form, or
• psychological utility
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Services Operation
A meal in a fast food restaurant
saves time.
A meal with a date in an elegant
restaurant with superior service
provides a psychological boost.
MGT605 :Services in the Economy 7
Fiji Economy
The Fiji. economy consists of
sectors producing goods and
services.
The goods-producing sector consists
of manufacturing, construction, and
extractive industries such as
agriculture, mining, forestry, and
fishing.
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Different types of services
business services such as
consulting, banking and financial
services;
trade services such as retailing,
maintenance and repair;
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Different types of services
social/personal services such as
restaurants and healthcare;
public services such as government
and education; and
infrastructure services such as
transportation and communication.
MGT605 :Services in the Economy 10
Need of services
Services are not peripheral
activities, but are an integral part of
society.
Except for basic subsistence living,
services are an absolute necessity
for a functional economy and
enhancement of the quality of life.
MGT605 :Services in the Economy 11
Industrial vs. Services Society
Industrial society defines the
standard of living by the quantity of
goods,
A service society sees the standard
of living through quality of life as
measured by health, education, and
recreation.
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Industrial vs. Services Society
In addition, infrastructure services
(communication and transportation)
are seen as essential links between
sectors of the economy.
These infrastructure services are
prerequisites for the
industrialization of an economy, so
no advanced society can be without
them.
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History
Countries with successful manufacturing
histories are the ones that now have the
ability to create service jobs.
There is a ripple effect from
manufacturing to the creation of services,
along with a continual stream of newly
invented services for sale.
Also, services can now be bought in
greater quantities than in the past.
MGT605 :Services in the Economy 14
Services Sector Revolution
The fact is that the service sector
has replaced the goods-producing
sector as the economy's dominant
force.
This shift in the economic locus has
variously been called the service
sector revolution, the postindustrial
revolution, the information age, and
the technotronic age.
MGT605 :Services in the Economy 15
CHARACTERISTICS OF SERVICES
Services are generally performed
with an open-systems perspective,
that is, the system is not closed or
isolated from the consumer as it is
in manufacturing.
MGT605 :Services in the Economy 16
Customer contact
The consumer is said to be within
the service's "factory."
There is a high degree of customer
contact throughout the service
process, with the customer
frequently participating in the
process itself.
MGT605 :Services in the Economy 17
Customer participation
Customer participation within the
process means that there is
simultaneous production and
consumption; thus,
the service cannot be stored for
later use, possibly as a buffer to
absorb fluctuations in demand.
MGT605 :Services in the Economy 18
Services Attributes
Although services can have tangible
(high goods content) and
intangible (low goods content)
attributes,
services are generally regarded
as intangible, that is, you can't
see, feel, or test a service's
performance before purchasing it.
MGT605 :Services in the Economy 19
Problem with Intangibility
Since services are intangible, it
makes sense that they can't be
patented.
The intangibility of services
sometimes makes it difficult for the
service firm to identify their
product. Is the product at a
restaurant the food itself, the
service, or the atmosphere?
MGT605 :Services in the Economy 20
Problem with Intangibility
the difficulty in measuring output.
Service output tends to be variable
and nonstandard, making quality
control and productivity
measurement a problem.
MGT605 :Services in the Economy 21
Time perishable
Services are time perishable.
An empty seat on an airline means
that that seat on that flight will
never be available again.
The same holds true for an empty
hotel room. The empty room will
never again be available on that
particular night.
MGT605 :Services in the Economy 22
Time perishable
The usefulness of service capacity is
time-dependent—another reason
that services cannot be inventoried
and held for a later date.
This means that services cannot be
transferred or resold but must be
sold directly to the customer.
It also means that services cannot
be mass produced.
MGT605 :Services in the Economy 23
Labor intensity
Labor intensity is another
characteristic of services.
In fact, labor is usually the most
important determinant of service
organization effectiveness
MGT605 :Services in the Economy 24
Barriers to entry
Services can also have very weak
barriers to entry.
Though not true for all services,
many require little in the way of
capital investment, proprietary
technology, or multiple locations.
MGT605 :Services in the Economy 25
Location
Site selection for services is usually
dictated by the location of
consumers.
Preferably, services will utilize
decentralized facilities within close
proximity to customers.
MGT605 :Services in the Economy 26
CLASSIFYING SERVICE FIRMS
Equipment-based services
People-based services.
MGT605 :Services in the Economy 27
Equipment-based services
automatic services such vending
machines and automated car
washes;
services monitored by unskilled
labor, such as dry cleaning and
movie theaters; and
services operated by skilled labor,
such as excavating, airlines, and
computer services.
MGT605 :Services in the Economy 28
People-based services
utilizing unskilled labor, such as
lawn care, security guards,
janitorial service; those utilizing
skilled labor, such as appliance
repair, plumbing, catering, electrical
work, and auto body repair;
and professional services such as
law, medicine, accounting, and
consulting.
MGT605 :Services in the Economy 29
Wheelwright and Hayes's product-
process matrix
This framework groups firms based
on their position on the:
1. product life cycle
2. product structure and their stage
within the process life cycle and
3. process structure, yielding the
classifications of project, job shop,
batch, repetitive-assembly, and
continuous-flow manufacturing.
MGT605 :Services in the Economy 30
Projects
Projects include professional
services in which the process is
characterized by a number of
interrelated, well-defined activities,
accomplished in a sequence.
Doctors, lawyers, and architects
typically manage a number of
projects.
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Job shops
Job shops and batches define
services that are tailored to the
customers' specifications.
Repetitive assembly has a line flow,
as do services that can be
standardized and divided into
routine tasks such as university
registration, license renewal, and
military medical examinations
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High-contact services
High-contact services must have
their operations near the customer
and must be able to interact well
with the public, since quality is
often subjective (in the eye of the
beholder).
Output is variable, so wages have
to be time-based.
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Low-contact services
Low-contact services can place their
operations near their suppliers, labor, or
transportation, since the customer is not
in the environment.
The workforce is required to have only
technical skills, as work would be
performed on a customer surrogate
. This also allows wages to be output-
based.
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Low interaction/customization
Service firms with low
interaction/customization utilize
standard operating procedures and
pay less attention to physical
surroundings.
MGT605 :Services in the Economy 35
High interaction/customization
Strive to maintain quality, react to
customer intervention and gain
employee loyalty.
MGT605 :Services in the Economy 36
Low labor-intensive firms
. Low labor-intensive firms
concentrate on capital decisions,
technological advances, maintaining
a high utilization rate, and
scheduling service delivery.
MGT605 :Services in the Economy 37
Highly labor-intensive
Highly labor-intensive services
emphasize workload scheduling,
managing growth, hiring, training,
and employee welfare
MGT605 :Services in the Economy 38
Service Process Matrix.
Horizontal dimension
Vertical dimension
MGT605 :Services in the Economy 39
Service Process Matrix
Degree of Interaction and Customization
Low High
Service Factory Service Shop
•Airlines •Hospitals
Low
•Trucking •Auto Repair
Degree •Hotels •Other Repair Services
of Labor Mass Service Professional Service
Intensity
•Retailing •Doctors
•Wholesaling •Lawyers
High •Schools •Accountants
Aspects of
•Retail •Architects
Commercial Banking
7
MGT605 :Services in the Economy 40
Horizontal dimension
The horizontal dimension is the
degree of labor intensity, which is
defined as the ratio of labor cost to
capital cost
MGT605 :Services in the Economy 41
Vertical dimension
The vertical dimension of the matrix
measures the degree of customer
interaction and customization.
MGT605 :Services in the Economy 42
Professional services
Firms that have a high degree of
labor intensity and a high degree of
interaction/customization
MGT605 :Services in the Economy 43
Mass services
Service firms with a high degree of
labor intensity but a low degree of
interaction/customization
MGT605 :Services in the Economy 44
Service shop,
Low labor intensity and a high
degree of interaction/customization
MGT605 :Services in the Economy 45
Service factory.
Firms with both low labor intensity
and a low degree of
interaction/customization
MGT605 :Services in the Economy 46