LECTURE - 1

INTRODUCTION AND IMPERATIVES OF

SERVICES
Learning objectives

1. To introduce the meaning and importance of services

2. To appreciate the role of service and service transformation

happening in nation’s economy

1.1 Introduction

Services play a vital role in our day to day life as well as in the economy of any
nation. The services can be seen between business to business service and business
to customer service. The services can be provided by government sector or private
sector or NGOs.

Services take place when customer direct some actions to service provider to get
some intangible benefits may or may not assisted with some goods. The output can
be in the form of action done on customer like surgery or on customer’s
possessions like repair of customer’s car.

1.1.1 Definition and Perspectives of Services

Service sector include all economic activities whose output is not a physical
product or Construction and is generally consumed at the time it is produced, and
facilitates in the forms of convenience, comfort, timeliness or health that are
essentially intangible concerns of its customer - (Quinn, Baruch and Paquette,
1987).
A service is an activity or series of activities of more or less intangible nature that
normally, but not necessarily, take place in interactions between customer and
service employees and/or physical resources or goods and/or systems of the service
provider, which are provided as solutions to customer problems. - (Gronroos,
1990)

Services are deeds, processes, and performances. - (Zeithaml and Bitner, 1996)

A service is a time-perishable, intangible experience performed for a customer

acting in the role of co-producer. - (Fitzsimmons, 2006)

 Any act or performance that one party can offer to another that is essentially
intangible and does not result in ownership of anything. Its production may
or may not be tied to physical product. – (Kotler, 2003)

 Services are economic activities that produce time, place, form or

psychological utilities. – (Haksever et al., 2003)

 A crèche service facility takes care of baby and saves parents Time

 Buying grocery or household items in one convenient Place that is

supermarket or big malls

 A database service provider providing information in a Form to

insurance manager for easy usage

 Going for a movie or theater for Psychological refreshment

1.1.2 What is Service?

Service is a process or a set of activities in which a customer interacts with service
provider to produce intangible experiences as an outcome. Service can be
provided as a combination of tangible good and intangible experience.

Customer’s inputs and mostly physical presence are important to initiate the
service. In some self-services, customer acts as co-producer of service.

The simultaneous activities, customer request and service delivery, leads to the
perishable characteristic of services. A service process is shown in Figure 1.1.

Service provider can be

• Employee – Waiter in
the restaurant
• Physical Resource
• Physical good

FIGURE 1.1: SERVICE PROCESS

Forms of Services

Services that deploy resources in order to deliver some form of service,

which are given below.
 Business to consumer (Financial services, retail)
 Business-to-business (Consultants, communications)
 Internal services (Personnel, IT)
 Public services (Education, health services)
 Not-for-profit services (Charities, faith organizations)

1.1.3 Imperatives of Services

We start our daily routine which is driven by various services provided by

different service providers like Newspapers, grocery items, home delivery of
household items. The introduction of new services has made human life easy
and comfortable that now a person can focus on his/her core job. For example
Child care services and ready to eat meals services have driven females
(specially in India) to join workforce without any worries of home and kids.

The need & dependency on services can be highly seen by the companies who
are not categorized as service sector like manufacturing. The following points
provide us some service imperatives.

 The need of service can be realized in our daily personal requirements as can
be seen in Figure 1.2.

 Manufacturing companies are evolving their products, which are to be

accompanied by services as shown in Figure 1.3.
 Growing attention by the service provider on service quality and customer
satisfaction.

 Service sectors have been marking real impact on nation’s economy.

 Need for cost effective and convenient services available anytime and from
anywhere.
 Direct contact of customer: Feedback to innovate and improve.
 Women are increasingly joining the workforce results in rising two-income
families hence there is more dependency on services like Care taker at home,
baby-sitting jobs, dry-cleaning and laundry services.
 More industrialization and increasing penetration of companies in cross
border markets result in new and variety of services like advertising,
logistics, event management and placement services.
 Competition between companies has been moved from mere technology and
process based to the service based competition.
FIGURE 1.2: DAY-TO-DAY SERVICE REQUIREMENTS OF
HUMAN
 FIGURE 1.3: SERVICES REQUIRED BY MANUFACTURING
SECTOR

The different levels of service perspectives can be seen in Figure 1.4

Individual perspective
Quality of life

Organizational perspective
Routine machine tending jobs,
Shift to white-collar
occupation

Nation’s perspective
Nation’s security
Providing utilities

FIGURE 1.4: DIFFERENT LEVELS OF SERVICE PERSPECTIVES

The service sector of any developed or developing nation has evolved from Pre-
industrial era through Industrial era to Post-industrial era as shown in Figure 1.5.
 • Pre Industrial
• Struggle for survival where muscle determined survival and
power
• Activities: Agriculture, mining and fishing
• Life governed and conditioned by the elements of nature

• Industrial
• Standard of living was determined by quantity of goods
• Activities: Mass production of goods in factories under
hierarchical and bureaucratically organization structure bound by
strict rules and regulations

• Post Industrial
• Services predominantly determined the quality of life with
Information as key resource
• Service activities: Healthcare, Education and recreation service
sectors
• Main aim is to support industrial phase and encourage labor
saving initiatives

FIGURE 1.5: EVOLUTION OF SERVICES

1.1.4 Service Sector in Indian Economy

 Service sector contributes to Indian Economy by having 57.2 % share in

gross domestic product (GDP) in 2009-2010 as shown in Figure 1.6.

 The year on year growth rate of service sector is 10 %

 The service sector has been contributing to about 34% of total employment

 The Indian IT services industry is expected to reach US$ 100 billion in

revenues in 2012, with exports contributing to about US$ 69 billion (Source:
http://indiabudget.nic.in/es2010-11/echap-10.pdf accessed on 29 June 2012)

Services “Tertiary Sector” in Indian GDP

 Service industries have assumed the mantle of economic leadership and it

supports manufacturing and agriculture sector.

% Share of various sectors in total

GDP (2009-2010)

14.40%

Services
Industrial
28.40% 57.20%
Agricultural
FIGURE 1.6: SERVICE SECTOR CONTRIBUTION IN INDIAN ECONOMY

(Source: Economic Survey 2010, pp. 4–5)

1.1.5 Various Sectors Constitute Service Industry

Service sectors of Indian economy are classified as following

 Trade
 Hotels and Restaurants
 Railways
 Other Transport & Storage
 Communication (Post, Telecom)
 Banking
 Insurance
 IT
 IT enabled services (ITeS)
 Real Estate
 Business Services
 Public Administration; Defense
 Personal Services
 Community Services
 Other Services

The service sectors of Indian economy that have grown faster than the economy
are as follows:
 Information Technology (the most leading service sectors in Indian
economy), IT-enabled services (ITeS), Telecommunications, Financial
Services, Community Services, Hotels and Restaurants.
 Increasing income levels have resulted in higher spending by middle
class on value added services like communications, entertainment,
hospitality and healthcare, which has led Indian Service sector to high
levels of sustained growth.
(Source:http://www.ibef.org/industry/services.aspx)