Services Services A service firm is defined

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Services Services A service firm is defined Powered By Docstoc

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.

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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.

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Fiji Economy

   The Fiji. economy consists of
    sectors producing goods and
   The goods-producing sector consists
    of manufacturing, construction, and
    extractive industries such as
    agriculture, mining, forestry, and

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Different types of services

   business services such as
    consulting, banking and financial
    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.

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Need of services

   Services are not peripheral
    activities, but are an integral part of
   Except for basic subsistence living,
    services are an absolute necessity
    for a functional economy and
    enhancement of the quality of life.

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Industrial vs. Services Society

   Industrial society defines the
    standard of living by the quantity of
    A service society sees the standard
    of living through quality of life as
    measured by health, education, and

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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

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   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.

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Services Sector Revolution
   The fact is that the service sector
    has replaced the goods-producing
    sector as the economy's dominant
    This shift in the economic locus has
    variously been called the service
    sector revolution, the postindustrial
    revolution, the information age, and
    the technotronic age.

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    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.

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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.

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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.

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Services Attributes

   Although services can have tangible
    (high goods content) and
    intangible (low goods content)
    services are generally regarded
    as intangible, that is, you can't
    see, feel, or test a service's
    performance before purchasing it.

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Problem with Intangibility
   Since services are intangible, it
    makes sense that they can't be
   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?

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Problem with Intangibility

   the difficulty in measuring output.
   Service output tends to be variable
    and nonstandard, making quality
    control and productivity
    measurement a problem.

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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.

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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.

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Labor intensity

   Labor intensity is another
    characteristic of services.
    In fact, labor is usually the most
    important determinant of service
    organization effectiveness

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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.

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   Site selection for services is usually
    dictated by the location of
   Preferably, services will utilize
    decentralized facilities within close
    proximity to customers.

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   Equipment-based services
    People-based services.

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Equipment-based services
   automatic services such vending
    machines and automated car
   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.

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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

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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.

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   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

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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
   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-

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Low interaction/customization

   Service firms with low
    interaction/customization utilize
    standard operating procedures and
    pay less attention to physical

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High interaction/customization

   Strive to maintain quality, react to
    customer intervention and gain
    employee loyalty.

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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

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Service Process Matrix
                   Degree of Interaction and Customization

                              Low                           High
                   Service Factory               Service Shop
                   •Airlines                     •Hospitals
                   •Trucking                     •Auto Repair

Degree             •Hotels                       •Other Repair Services

of Labor           Mass Service                  Professional Service
                   •Retailing                    •Doctors

                   •Wholesaling                  •Lawyers

            High   •Schools                      •Accountants

                        Aspects of
                   •Retail                       •Architects
                   Commercial Banking

                      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.

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Professional services

   Firms that have a high degree of
    labor intensity and a high degree of

           MGT605 :Services in the Economy   43
Mass services

   Service firms with a high degree of
    labor intensity but a low degree of

           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

           MGT605 :Services in the Economy   46

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