reasons for gowth in service sector

8/22/2019 Reasons for Gowth in Service Sector

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Reasons for growth in service sector:

Introduction:

In recent times the service sector is increasing at a very fast pace. After the liberalization in the

year 1991, the contribution of service sector is continuously increasing in the growth of our

economy. However, agriculture is still dominating the Indian economy. The services sector now

accounts for over 70% of total employment

The reasons for growth of the service sector can be broadly categorized into two :

1) Growtih in intermediate demands from firms

2) Growth in final demand from customers.

Intermediate demand from Firms:

Manufacturing firms realized the importance of staffing function when good services provided

by human resources of organisation boosted the sale of those products. Manufacturing firms

started bundling with a number of service functions such as selling, marketing research

advertising, labor welfare, HRD etc. With the growth of competition and pace of change in

consumer exposure and expectations forced organisation to look for specialized services.

Final demand from customers

There is a growth in direct demand from customers for a variety of services. People spend more

and more on services. The demand of health services, beauty, entertainment, travel services

and the like registered a significant growth in recent years

Service sector are growing not only in volume but also in sophistication and complexity. The

growth of service industry is the result of combination of several reasons, they are,

Affluence: - The increase in per capita income from Rupees 238.8 in 1950 to Rupees

11,934.5 in 1998 is an indicator of he increase in general affluence has given rise to

service like pest-control, personal security, interior designer, etc.

Leisure time: - People do get some time to travel and holiday and therefore there is a

need for travel agencies, resorts, hotels, and entertainment. There are others who

would like to utilize this time to improve their career prospects and therefore there is a

need for adult education/distance learning/part time courses.


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Life expectancy: - The health programmed have significantly contributed to an

increase in life expectancy given rise to services like old age homes, nursing homes,

health care, etc.

Changing role of women: - Traditionally the Indian woman was confined to

household activities. But with the changing time there has been a change in the

traditional way of thinking in the society. Women are now allowed to work. They are

employed in defense services, police services, postal services, software services, health

services, hospital services, entertainment industries, Business Process Outsourcing and

so on.

The percentage of working women has been growing rapidly. The changing role of

women has created a market for a number of product and services. Earning women

prefer to hire services in order to minimize the innumerable roles that they are required

to perform. The demand by woman is forcing service organisations to be more

innovative in their approach. As more and more women have started working, the need

for day care for children has increased, and so is the care with packed food and home

delivery.

Cultural Changes: Change is the underlying philosophy of culture place of change in

Indian culture is not uniform. However, during the last century the factors of change are

prominent. The emergence of the nuclear family system in place of the traditional joint

family system creates a demand for a host of services like education, health care,

entertainment, telecommunication, transport, tourism and so on. There has been a

marked change in the thought Processes relating to investment, leisure time perception

and so on which has created a huge demand for services.

Development of Markets: During the last few decades the wholesaler and the retailer

population has grown in the country. Urban India has become a cluster of wholesaling

and retailing business. In the Semi urban areas, retailing has spread to the nooks and

corners of the streets and in the rural areas retail business is significantly present. A new

breed of organisations, offering marketing services has come up. The government also

offers marketing services to the small-scale agricultural farmers, artisans and other

traditional business sectors such as promotion of regulated markets, export promotion

councils, development boards etc.

Market orientation: The changing competitive situation and demand supply positions

has forced the manufacturing organisation to shift their philosophy from production


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orientation to market orientation. Market is a service function that has been added in the

organisation. The pressures in the market has further forced the manufacturing

organisations to have marketing research, accounting, auditing, financial management,

human resource management and marketing research divisions all of which are

services functions.

Economic liberalization: The economic liberalization of the 1991 has brought many

changes in the Indian scenario. With the Disinvestment and the Privatization policies the

state owned monopolies in many service areas came to an end Multinationals were

permitted to enter the Indian market. Liberal lending policies and lower interest rates

motivated many people to become self-employed. Different sectors like Banking,

Insurance, Power projects, Telecommunication, Hospitality sector, Health Services,

Entertainment, Air transport, and Courier services witnessed intense competition, due to

the entry of multinationals. The flow of time-tested service technology from various parts

of the world changed the attitude of the Indian consumer towards sources..

Rampant migration: One of the important reasons for the growth of services in India is

the rampant migration of rural to semi-urban and urban areas. Migration to urban areas

for the want of jobs and livelihood has resulted in the expansion of cities and townships

due to which businesses like real estates, rentals, transportation and infrastructure

services are rapidly expanding.

Export potential: India is considered to be a Potential source for services. There are a

number of services that India offers to various parts of the world like banking, insurance,

transportation co data services, accounting services, construction labour, designing,

entertainment, education, health services, software services and tourism. Tourism and

software services are among the major foreign exchange earners of the country and that

the growth rate is also very high as compared to the other sectors.

Product complexity: - A large no. of products are now being purchased in households

which can be serviced only by specialized persons like water purifies, micro wave ovens,

home computers, etc. giving rise to the need for services like after sales service agents

for durables, maintenance service providers, etc.

Life complexity: - As the daily routine gets busier, individuals find it difficult to

manage things on their own. Their leads to an obvious need for tax consultants, legal

advisors, property advisers, etc.


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Resource scarcity and ecology: - As the natural resources are depleting and need

for conservation is increasing, we have seen the coming up of service providers like

pollution control agencies, car, pools, water management, etc.


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Demand Variation in service industry

The middle areas of the figure represent four basic scenarios that may result fromdifferent combinations of supply and demand:

Excess demand: Demand exceeds maximum capacity; some customersmay be turned away.

Demand exceeds optimum capacity: no one is turned away but servicequality may suffer.

Demand and supply balanced at an optimum level of capacity: staff and

facilities are utilized at the ideal level.Excess capacity: demand is below optimum capacity, and productive

resources are underutilized, resulting in low productivity.

(A) MANAGING CAPACITY

1) capacity level2) adjusting capacity to match demand

1. CAPACITY LEVEL

Some capacity is elastic in its ability to absorb extra demand. Here the actual levelof capacity remains unchanged, and more people are being served with the same

level of capacity.For example, the normal capacity for a subway car may offer 40 seats and allow

standing room for another 60 passengers with adequate handrail and floor space forall. Yet at rush hours perhaps up to 200 standees can be accommodated under

sardine like conditions.


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Another strategy for stretching capacity is to utilize the facilities for longer periods.

For example, some banks extend their opening hours during weekdays and evenopen on weekends.

2. ADJUSTING CAPACITY TO DEMAND PATTERNS

This set of options involves tailoring the overall level of capacity to match

variations in demand- a strategy that is also known as chasing demand. There areseveral actions that managers can take to adjust capacity as needed.

Schedule downtime during the periods of low demand. To ensure that 100percent capacity is available during peak periods, maintenance, repair and

renovations should be conducted when demand is expected to be low.

Cross-train employees. If employees can be cross-trained to perform avariety of tasks, they can be shifted to bottleneck points as needed, thereby

increasing total system capacity. In supermarkets, for instance, the manager may

call on the stockers to operate cash registers when lines become too long.Likewise, during the slow periods, the cashiers may be asked to help stock shelves.

Use part-time employees. Many organizations hire extra workers during

their busiest periods. For example, additional hotel employees during vacation

periods and for major conventions.

Invite customers to perform self-service. If the number of employees is

limited, capacity can be increased by involving customers in co-production of

certain tasks. One way to do this is by adding self-service technologies such aselectronic kiosks at the airport for airline ticketing and check-in or automated

check-out stations at supermarkets.

Ask customers to share. Capacity can be stretched by asking customersto share a unit of capacity normally dedicated to one individual. For instance, at

busy airports and train stations, where the supply of taxis is sometimes insufficientto meet demand, travelers going in the same direction may be given the option of

sharing a ride at a reduced rate.

Flexing capacity to match demand.


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Rent or share extra facilities and equipment. To limit investment in fixed

assets, a service business may be able to rent extra space or machines at peaktimes. Firms with complementary demand patterns may enter into formal sharing

agreements

(B) MANAGING DEMANDThe organization should determine the optimum level of demand for its given

capacity. Once this has been determined, it can vary its marketing mix elements of

product, price, place and promotion to change demand in line with the capacity.

a) Product: As a service provider you can alter the service offering to eventhe demand. The changes in service offering may be seasonal or based on days of

the week or time of the day depending on the nature of demand fluctuations. Ahotel for example may focus on weekend family entertainment and recreation

package to cope up with low demand from business executives during weekends.However, as marketers you must

ensure that by offering different types of services the image or positioning ofthe service firm is not diluted or confused.

b) Pricing: Many service marketers reduce price during the periods of low

demand to increase the demand. Airlines offer low fares during odd hours like latenight flights, movie theatres offer a lower price ticket for the morning show.

c) Place (Distribution): Many service firms modify their time and place of

delivery as a strategy to match demand and capacity. Bank may change its timingson specific days or during specific period, finance companies use mobile vans fordistribution and collection of forms.


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d) Promotion: You can also shift the demand by properly communicatingwith your customers. The customers should be made aware of the peak timings ofthe demand and also the benefits they can get in availing the service during non-

peak timings. They should also be properly informed about changes in product,

pricing and distribution. This can be done by putting signages at the service outlets(like banks) or advertising. Service firms can also use sales promotion to manage

demand. Many airlines offer free ticket for companion in the business class

reasons for gowth in service sector

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