Role of Services in an Economy

Welcome to
Service Management
Professor James Fitzsimmons
University of Texas at Austin
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
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
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
Role of Services in an Economy
Percent 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
Trends in U.S. Employment by Sector

90
Proportation of total employement

80
70

60
50
40
30

20
10
0
50

70

90

10

30

50

70

90
18

18

18

19

19

19

19

19
Service
Year Manufacturing
Agriculture
Stages of Economic Development

Pre- Use of Standard

dominant human Unit of of living
Society Game activity labor social life measure Structure Technology

Pre- Against Agriculture Raw Extended Sub- Routine Simple hand

Industrial Nature Mining muscle household sistence Traditional tools
power Authoritative

Industrial Against Goods Machine Individual Quantity Bureaucratic Machines

fabricated production tending of goods Hierarchical
nature

Post- Among Services Artistic Community Quality of Inter- Information

industrial Persons Creative life in terms dependent
Intellectual of health, Global
education,
recreation
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 Stored in Inventoried Delivered Revealed
supply bulk on demand over time

Seller Trader Manufacturer Provider Stager

Buyer Market User Client Guest

 The Four Realms of an Experience

Customer Participation

Passive Active

Absorption Entertainment Education

Environmental (Movie) (Language)
Relationship Immersion Esthetic Escapist
(Tourist) (ScubaDiving)
Experience Design Principles

 Theme 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)
Source of Service Sector Growth

 Innovation
Push theory (e.g. Post-it)
Pull theory (e.g. Cash Management)
Services derived from products (Video Rental)
Information driven services
Difficulty of testing service prototypes
 Social Trends
Aging of the population
Two-income families
Growth in number of single people
Home as sanctuary
Discussion Topics

 Illustrate how the type of work he or she

does influences a person’s lifestyle. For
example, contrast a farmer, a factory
worker, and a school teacher.
 Is it possible for an economy to be based
entirely on services?
 What is the value of self-service in an
economy?
Interactive Class Exercise

 The class breaks into small groups. Each

group identifies service firms that should be
listed in the top Fortune 100 and places
them in rank order of estimated annual
revenue.

www.fortune.com/lists/F500/index.html