Post on 03-Jun-2018
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Chapter 1 LearningObjectives Describe the central role of services in
an economy.
Discuss the evolution of an economy
from an agrarian society to a servicesociety.
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, andperformances.
Valarie Zeithaml & Mary Jo
Bitner
A service is a time-perishable,
intangible experience performed for acustomer acting in the role of a co-producer.
James
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Definition of Service Firms
Service enterprises are organizationsthat facilitate the production anddistribution of goods, support other
firms in meeting their goals, and addvalueto our personal lives.
James
Fitzsimmons
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Role of Services in anEconomy
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Percent Service Employment for SelectedNations
Country 1980 1987 1993 2000United 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 72.7France 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
Pro
portationoftotalemployement
Year
Service
Manufacturing
Agriculture
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Stages of Economic Development
Pre- Use of Standard
dominant human Unit of of living
Society Game activity labor social life measure StructureTechnology
Pre-
Industrial
Industrial
Post-
Industrial
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Stages of Economic Development
Pre- Use of Standarddominant human Unit of of living
Society Game activity labor social life measure StructureTechnology
Pre- Against Agriculture Raw Extended Sub- Routine Simple hand
Industrial Nature Mining muscle household sistence Traditional toolspower 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
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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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Source of Service SectorGrowth Innovation
Push theory (e.g. Post-it) Product looking for a problem
Pull theory (e.g. Cash Management) Need drives innovation
Services derived from products (Video Rental)Information driven servicesDifficulty of testing service prototypes
Social TrendsAging of the population
Two-income familiesGrowth in number of single peopleHome as sanctuary
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Data Envelopment Analysis(DEA) Method for evaluating efficiency of
similar venues/products
Incorporates inputs and outputs not
just one dimensional Uses LINEAR PROGRAMMING (LP)
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Sample LP: Product MixProblem How much beer and ale to produce from
three scarce resources: 480 pounds of corn 160 ounces of hops
1190 pounds of malt
A barrel of ale consumes 5 pounds of corn,4 ounces of hops, 35 pounds of malt
A barrel of beer consumes 15 pounds ofcorn, 4 ounces of hops and 20 pounds ofmalt
Profits are $13 per barrel of ale, $23 forbeer
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Key terms of LP
Variables
Parameters
Objective function
Constraints
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DEA summary of terms
Define variables E_k = efficiency of unit k
u_j= coefficient for output j (relative decrease in efficiencyper unit reduction of output value)
v_i = coefficient for input i (relative increase in efficiency
per unit decrease of input value) O_jk = observed ouput j units generated by service unit k
during one time period
I_ik = no. units input used by service unit k during oneperiod
Note: k=1..K = service unit counter
j=1..M = output counter
i=1..N = input counter
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DEA Objective andconstraints
Niv
Mju
KkIvIvIv
OuOuOu
ts
IvIvIvOuOuOuE
i
j
NkNkk
MkMkk
NeNee
MeMeee
,...,2,1,0
,...,2,1,0
,...,1,1...
...
..
...
...max
2211
2211
2211
2211
KkIvIvIvOuOuOu
ts
IvIvIv
NkNkkMkMkk
NeNee
,...,1,0).. .(.. .
..
1.. .
22112211
2211
Evaluating unit eTrick = Rescaling to get linear equations