competing in Service economy

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COMPETING IN A SERVICE ECONOMY

BYMAIWADA ZUBAIRU, MSC, MBF, FIMC

[email protected] 08033116655

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DELIVERABLES� Concept of Service� Service Economy: An Overview� The Concept of Competition� Competing in Service Economy: What

Companies should do� Competing in Service Economy: The role

of Government.� Concluding Remarks

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Concept of Service

Services are a diverse group of economic activities that include high technology, knowledge-intensive sub-sectors, as well as labour-intensive, lows kill areas. In many aspects, service sectors exhibit marked differences from manufacturing – although these distinctions may be blurring.

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Concept of Service…

� Services are not directly associated with the manufacture of goods, mining or agriculture.

� They typically involve the provision of human value added in the form of labour, advice, managerial skill, entertainment, training, intermediation and the like.

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� Services cannot be inventoried and must be consumed at the point of production. Examples -trips to the doctor, enjoying a meal at a restaurant, flying from Lagos to Paris, or attending a concert.

� This is in marked contrast with manufactured products, whose tangible character allows them to be stored, distributed widely and consumed without direct interaction with the entity that produced the good.

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� Technological advances are, however, narrowing the differences between services and other economic activities

� Information and communication technology (ICT) now enables people to participate in a growing number of service-related activities in real, or deferred, time, without having to be physically present

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� Software is developed and boxed like any other manufactured product, and is considered, for all intents and purposes, a good – albeit with a high service-related content.

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Service Economy: An Overview

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Service Economy..

� When we think of services we may not appreciate the breadth of economic activity that they encompass:

� the engineer’s network design, � the barber’s haircut,� the doctor’s diagnosis,

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� the waitress’s service,� the architect’s building plans,� the carpenter’s craftsmanship� the consultant’s business strategy.

The contribution to the world economy of these and many other services is large and

growing .

Service Economy..

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Service Economy..

� Services are essential for the efficient operation of an economy, facilitating commercial transactions and enabling the production and delivery of goods and other services .

� Services are a crucial component of innovation and production in a host of manufacturing industries and agriculture.

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How Services Help An Economy

� They can build infrastructure,� hone competitiveness,� ignite technological development,

increase productivity� and expand trade capacity.

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How Services…

� A country with an open, dynamic and efficient service sector enjoys a competitive advantage in the production of both goods and services.

� As a critical component of the economy, it is therefore essential that government leaders focus on the service sector when devising plans to foster innovation, promote economic growth and create jobs .

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How Services…

� In developed countries, the service sector employs far more people and creates many more new jobs than the manufacturing sector.

� Research has shown that economies with more efficient service sectors enjoy higher productivity and growth . (Catherine Mann, The U.S. Current Account, New Economy Services, and Implications for

Productivity, p. 2. )

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The Concept of Competition

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The Concept of Competition….� Merriam-Webster defines competition in

business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms."

� it may stimulate innovation,� encourage efficiency,� or drive down prices,

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The Concept of Competition….

� Competition causes commercial firms to develop new products, services, and technologies.

� Competition gives consumers greater selection and better products. The greater selection typically causes lower prices for the products compared to what the price would be if there was no competition (monopoly) or little competition (oligopoly).

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Levels of competition

� Brand competition where products/services which perform the same function compete against each other. For example, Internet Service Providers. Sometimes two companies are rivals and one adds new products/service to their line so that each company distributes the same thing and they compete.

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Levels of competition..

� Substitute or indirect competition, where products/services which are close substitutes for one another compete. 0803 and 0805

� The broadest form of competition is typically called budget competition. Included in this category is anything on which the consumermight want to spend their available money

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� Internal competition. This is competition within companies. deliberately creating areas of overlap between divisions of the company so that each division would be competing with the other divisions.

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� Competition between individual employees. An example of this is a contest between sales representatives. The sales representative with the highest sales (or the best improvement in sales) over a period of time would gain benefits from the employer.

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Competition between Countries� Competition between countries is quite subtle to

detect, but is quite evident in the World economy. Countries compete to provide the best business environment for multinational corporations Such competition is evident by the policies undertaken by these countries to educate the future workforce. For example, East Asian economies like Singapore, Japan and South Korea tend to emphasize education by allocating a large portion of the budget to this sector.

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Competing in Service Economy: What Companies should do

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The most visible differences between the corporation of the future and its presents day counterpart will not be the products they make nor the equipment they use, but who will be working, why they will be working, and what work will mean to them.- Robert Haas, CEO of Levi Strauss and Company

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The best companies know, without a doubt, where the real productivity comes from. It comes from challenged, empowered, excited, rewarded teams of people. It comes from engaging every single mind in the organization, making everyone part of the action, and allowing everyone to have a voice in the success of the enterprise.- Jack Welch, Chairman and CEO of General Electric

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Build Customer Loyalty

� Be Reliable: Reliability arises from consistent follow-through and execution. Standardize service and product quality.

� Be Credible Credibility is enhanced when you do exactly what you say you will do--every time. Avoid holding any hidden agenda.

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Customer Loyalty…

� Be Responsive: Share your customer's sense of urgency. Provide customers with easy access to information they may need.

� Show Empathy :Assess customer emotions and mirror them. If the customer seems anxious, reassure them.

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Customer Loyalty…

� Hire Good Employees: Select frontline employees based on emotional intelligence, not just skills.

� Train Employees Constantly Have an ongoing training process in place. This need not be formal classroom training but should be built around a set of skills critical to your company's success

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Customer Loyalty…

� Create a Sense of Employee Belonging : Invite them to participate in strategy development and quality improvement efforts.

� Make Things Easier for Customers : Look for things that give customers difficulty and solve them.

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Human Capital

� Skilled and creative employees are a fundamental factor in the innovation process and a major source of competitive advantage.

� Today, it is the ability to create and apply intellectual capital based on multidimensional expertise – increasingly in the area of services.

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Human Capital..

� Workforce skills must include both technology and strategic expertise.

� An understanding of technology – its current capabilities as well as its future potential – is now integral to business decision making.

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Research and Development

� There is an increasing need for multidisciplinary research into the role of services and how to improve them.

� Understanding the global market for services requires significant research in economics, econometric data, management science, political science, and other social sciences, coupled with a keen understanding of current technologies and likely future directions.

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Investment in ICT

� Information and communication technology is a major enabler of innovation and productivity growth in the service sector, since it is used to implement new or improved services, business models or processes.

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Investment in ICT

� For example, service sectors with high information technology penetration, such as communications, finance, and wholesale and retail trade, have experienced higher productivity growth

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Investment in ICT….

� Top-performing firms are found to implement effective ICT-supported business models to manage and deliver their services.

� But ICT alone does not make companies more innovative; process, management and organizational reforms must accompany it.

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Collaboration and Outside Sources of Knowledge

� Knowledge is vital to the success of services firms, and tapping into external information networks is essential, since much knowledge resides in a firm’s customers and suppliers.

� Input from customers may help a company develop a new service or improve an existing one, and research may help to improve connections between companies and their customers.

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Entrepreneurship and “Creative Destruction” :

� Entrepreneurship and the process of “creative destruction” play an important role in reallocating resources to more productive enterprises.

� New jobs are created and old jobs are destroyed.

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Competing in Service Economy: The role of Government

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Develop skilled human resources .

� Education must be transformed to prepare students to become innovators.

� An education system that focuses on acquiring discrete skills and memorizing information will not produce the leaders and innovators that the world needs.

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HR…

� Schools should provide Problem-Based Learning (PBL) that focuses on ill-structured problem solving.

� PBL can provide deeper meaning, applicability and relevancy to classroom materials and promote the development of crucial analytical skills that are required in the workplace.

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Open markets to trade and investment in services .

Countries can benefit by further opening their own markets to competition in services. Studies show that the benefits to the global economy from liberalizing services would greatly exceed the benefits from liberalizing agriculture and manufacturing

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Create innovation policies for the service economy

� Establishing R&D programs that address the needs of the service sector.

� Ensure that intellectual property policies strike a proper balance between incentives for innovation and the promotion of collaboration and diffusion of innovations throughout the economy

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Promote entrepreneurship, industry clusters and small and medium

businesses . � Facilitate the creation of new businesses.

� Support participation of small and medium businesses in these programs, since smaller companies are a major source of job creation.

� Create economic development programs to promote regional innovation “hot spots” and create more dynamic and innovative industry clusters.

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Adopt flexible labor laws.

Adopt flexible labor laws to facilitate adaptation and reallocation of human resources to more productive and innovative areas of the economy.

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Create a tax environment to support the service sector

Ensure that tax laws do not hinder the development of an efficient domestic service sector or discourage service exports.

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Enable competition in deployment of ICT infrastructure

Governments should promote competition in ICT infrastructure, network services value-added services and applications as a way to spur deployment, innovation and choice

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Create new metrics for the service sector .

New metrics for the service sector could provide greater insight into the contributions of services to the general economy. These metrics could help investors and policymakers make better decisions about this growing sector and enable them to track progress.

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Concluding Remarks

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Michael Porter www.knowledge.wharton.upenn.edu

Managers who think there is one best company and one best set of processes set themselves up for destructive competition. "The worst error is to compete with your competition on the same things,"

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THANK YOUTHANK YOU

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References

� IBM (2006), Services and Global Competitiveness

� www.eng.wikipedia.com� www.dummies.com

competing in Service economy

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