role of services in economy society
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Services Operations Management - Role of Services in Economy SocietyTRANSCRIPT
Session 1:Role of Service in an Economy & Society
Session 1:Session 1:Role of Service in an Role of Service in an Economy & SocietyEconomy & Society
Economic Structure & Development of Service Economy
Underdeveloped economy
Developed economy
What is a Service?
The global trade framework does not provide clear definitions on what is a “good” or a “service”
Limited help: “When you can drop it on your foot, it is not a service! “ (The Economist)
Service Definitions• A service:
– is an activity or series of activities
– more or less intangible nature, and
– Mostly takes place in interaction between customer and service employee (but not necessarily)
– With/without physical resources/ goods/ systems of the service provider,
– With an aim to provide solutions to customer problems.
• Services can be defined as economic activities thatproduce time, place, form or psychological utilities. They are intangible acts deeds or performances
Characteristics of Goods & ServicesGOODS
• Tangible product• Consistent product definition• Production usually separate
from consumption• Can be inventoried• Low customer interaction• Can be resold• Quality measurement possible• Goods are transportable• Site of facility important for
cost
SERVICES• Intangible in nature• Inconsistent product definition• Produced & consumed at same
time• Cannot be inventoried• High customer interaction• Reselling is unusual• Quality difficult to measure• Provider/customer, not
product is transportable• Site of facility important for
customer contact.
Definition of Service Firms
Service enterprises are organizations that:
• facilitate the production & distribution of goods,
• support other firms in meeting their goals, and
• add value to our personal lives.
James Fitzsimmons
Categories of Service Mix
PurePureServiceService
TangibleTangibleGoodGoodWith With
servicesservices
MajorMajorServiceService
WithWithGoodsGoods
HybridHybridPurePure
TangibleTangibleGoodGood
0 25 50 75 100255075100
AutomobileComputerInstalled Carpeting
Fast-food & Restaurant MealAuto Repair
Hospital CareAdvertising Agency
Investment ManagementConsulting Service
Counseling
Percent of Product that is a Good Percent of Product that is a Service
Proportion of Goods and Services in Purchase Bundle
Role of Services in an Economy
Impact of Service Sector on Economy(Emphasis on Indian Economy)
-- Health of the country (GDP): Health of the country (GDP): GDP is the market value of all the final goods and services produced within the country in a given period of time.
-- EmploymentEmployment-- Manufacturing sectorManufacturing sector-- International TradeInternational Trade
The contribution of the services sector to the Indian economy has
been manifold: a 56.3% share (excluding construction) in GDP,
growing by 9.4% (CAGR), contributing to about 25% of total
employment, accounting for a high share in FDI inflows and over one-
third of total exports, and recording very fast (27.4 per cent) export
growth through the first half of 2010-11.
National Accounts Statistics (India) Classification
Classification of the services sector:Classification of the services sector:
trade, hotels, and restaurants;
transport, storage, and communication;
financing, insurance, real estate, and business
services; and
Community, social, and personal services.
Service Sector Impact on Service Sector Impact on
GDPGDP
Among the top 12 countries with highest overall GDP in 2010,
India ranks 8 and 11 in overall GDP and services GDP
respectively.
While countries like the UK, USA, and France have the highest
share of services in GDP at above 78%, India’s share of 57% is
much above that of China at 41.8%.
Size of Specific Services in India (% of GDP)
Service Sector Impact on Service Sector Impact on
EmploymentEmployment
Contribution of Services to Employment
Employment % in Developed (non-Asian) Countries(as per 2002)
Country Share in Employment (%)Agriculture Industry Service
UK 1 25 74USA 2 24 74
France 3 25 72Japan 5 31 64
Germany 3 33 64Italy 5 32 63
Australia 5 21 74
–90% of All Jobs by 2020 is expected from the service sector
Contribution of Services to Employment
Employment Share in Asian Countries (2002)
Share (%)
Country In GDP In EmploymentChina 34 31
Indonesia 38 39Thailand 48 33
Philippines 53 47Malaysia 54 50
Rep. of Korea 55 62Pakistan 54 34
India 51 22
Service Sector Contribution to Service Sector Contribution to
ManufacturingManufacturing
• Input to the manufacturing Sector• The contribution of services to growth of
manufacturing output went up considerably, from about 1% (1980) to about 25% (in 1990’s).
Reasons for demand of services as intermediate input:- Splintering- Globalization
Contribution of Services to Manufacturing
Sustainability Issue of Service sector growth?
Recent decline in manufacturing and corresponding shift to services is unsupportable in the long run as services depend critically on manufacturing for their demand ??????????
Service Sector Impact on Service Sector Impact on
International TradeInternational Trade
Contribution of Services to International Trade
Country Share of service exportUnited States 28.4U.K 32.4Australia 22.4Japan 13.9China 9.6 (it is net importer of services)India 30.9WORLD 18.6
Share of Service Export Over Total Export (World Bank (2005))
• India's total merchandize export in world – 31st rank
• India’s service export – 20th rank
Dynamism of India’s Services Sector
World Bank, 2004
• CAGR of the Indian economy from 5.7% (1990s) to 8.6% during the period 2004-05 to 2009-10 was to a large measure due to the acceleration of CAGR in the services sector from 7.5% (1990s) to 10.3% in 2004-05 to 2009-10.
• The services sector growth was significantly faster than the 6.6 per cent for the combined agriculture and industry sectors annual output growth during the same period. In 2009-10, services growth was 10.1 per cent
Openness has been associated withhigher growth World Bank, 2004
Determinants of growth in service sector
Income elasticity of demand
Scope of work
Technological development related to industrial
development
Participation of women in workforce
Urbanization
Regulatory Policies
External demand
Increase in life expectancy
Innovation
How Can Services Boom (IT-ITES) Lead To Sustainable Growth?