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