Page 19 - DMGT522_SERVICES MANAGEMENT

Services Management

Notes the service sector has kept employment up. Quinn and Gagnon identified substantial contributions
of the service sector to the economy in other respects as well:
1. People value services at least as highly as manufactured goods. Services are not something
one looks at after the good needs have been met.
2. The value added produced by service firms is very well comparable to, and even higher
than, the value added produced by manufacturers of goods.
3. The service sector is at least as capital intensive as the goods sector, and many service
industries have a high technology impact.
4. Service industries tend to be just as concentrated as manufacturing, and service firms tend
to be sufficiently big in scale to be important and sophisticated buyers.
5. Service industries develop productivity increases that are big enough to support continuing
real growth in per capita income.
6. The most traded services internationally are Tourism, Transportation, Financial services
(Banking and Insurance) educational training, and business services.

Note Services are economic activities offered by one party to another.
1.3.1 Reasons for Growth of Service Sector

The reasons for the growth of service sector can be broadly categorised into two. They are:
1. Growth in intermediate demand from firms.
2. Growth in final demand from customers.

Growth in Intermediate Demand from Firms

Manufacturing firms realised the importance of staff function when line mangers sub-optimal
performance in decision-making relating to operational activities as well as the growth of the
business. The manufacturing firms started bundling with number of service functions like selling,
marketing research advertising labour welfare, HRD, financial advisers, strategic advisers, etc.
with the growth of competition, the pace of change in consumer exposure and expectations
forced the organisations to look for specialised services. They started unbundling the
organisations and tasking the services from outside where highly professional and specialised
services are available at relatively low price. As a result large number of service organisations
has come up throughout the world.

Growth in Final Demand from Customers

There is growth in direct demand from customers from a variety of services. The changes in
society make the people to develop a different attitude toward life. The marginal utility from
goods diminishes, at least in a relative sense, and services grow in importance. People spend
more and more on services. The following are the reasons identified or the growth in demand
for services directly from customers:
1. Increase in affluence: Majority population in the developed economies and significant
groups in developing economies are becoming affluent year by year. The 250 million
strong middle income households of India attracting many multinational companies to
the country with their growing affluence to have a variety of products and services. The
demand for personal services, travel, tourism, entertainment, clubs and he like greatly

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