Chapter – 1 Role of Service in an Economy

Chapter – 1

Role of Service in an Economy

1

Service Management (5e)

Operations, Strategy, Information Technology

By

Fitzsimmons and Fitzsimmons

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Learning Objectives Describe the central role of services in an economy. Discuss the evolution of an economy from an agrarian

society to a service society. Describe the features of preindustrial, industrial, and

postindustrial societies. Describe the features of the new service economy

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Service Definitions Services are deeds, processes, and performances.

Valarie Zeithaml & Mary Jo Bitner

A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer.

James Fitzsimmons

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Definition of Service Firms

Service enterprises are organizations that facilitate the production and distribution of goods, support other firms in meeting their goals, and add value to our personal lives.

James Fitzsimmons

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Role of Services in an EconomyRole of Services in an Economy

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Percent Service Employment for Selected NationsPercent Service Employment for Selected Nations

Country 1980 1987 1993 2000 United States 67.1 71.0 74.3 74.2 Canada 67.2 70.8 74.8 74.1 Israel 63.3 66.0 68.0 73.9 Japan 54.5 58.8 59.9 72.7 France 56.9 63.6 66.4 70.8 Italy 48.7 57.7 60.2 62.8 Brazil 46.2 50.0 51.9 56.5 China 13.1 17.8 21.2 40.6

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Trends in U.S. Employment by Sector

0

10

20

30

40

50

60

70

80

90

Year

Pro

po

rtat

ion

of

tota

l em

plo

yem

ent

Service

Manufacturing

Agriculture

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Stages of Economic Development

Society Game

Pre- dominant activity

Use of human labor

Unit of social life

Standard of living measure Structure Technology

Pre- Industrial

Against Nature

Agriculture Mining

Raw muscle power

Extended household

Sub- sistence

Routine Traditional Authoritative

Simple hand tools

Industrial Against fabricated nature

Goods production

Machine tending

Individual Quantity of goods

Bureaucratic Hierarchical

Machines

Post- industrial

Among Persons

Services Artistic Creative Intellectual

Community Quality of life in terms of health, education, recreation

Inter- dependent Global

Information

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The New Experience Economy

Economy Agrarian Industrial Service Experience

Function Extract Make Deliver Stage

Nature Fungible Tangible Intangible Memorable

Attribute Natural Standardized Customized Personal

Method of supply

Stored in bulk

Inventoried Delivered on demand

Revealed over time

Seller

Trader

Manufacturer

Provider

Stager

Buyer

Market

User

Client

Guest

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The Four Realms of an Experience

Customer Participation

Passive Active

Environmental

Absorption Entertainment (Movie)

Education (Language)

Relationship Immersion Esthetic (Tourist)

Escapist (ScubaDiving)

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Experience Design PrinciplesTheme the Experience (Forum shops)Harmonize Impressions with Positive Cues

(O’Hare airport parking garage)Eliminate Negative Cues

(Cinemark talking trash containers)Mix in Memorabilia (Hard Rock T-shirts)Engage all Five Senses (Mist in Rainforest)

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Source of Service Sector GrowthInnovation

Push theory (e.g. Post-it)Pull theory (e.g. Cash Management)Services derived from products (Video Rental)Information driven servicesDifficulty of testing service prototypes

Social Trends Aging of the populationTwo-income familiesGrowth in number of single peopleHome as sanctuary