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ROLE AND NATURE OF SERVICES
BBB 3273 | Service Operation Management
Lecturer: Babita Gupta
[email protected]
Ext:8404
Chapter 1
Role of Services in an Economy
& The Nature of Services
McGraw-Hill/Irwin
Service Management: Operations, Strategy, and
Information Technology, 6e
Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.
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BBB 3273| SERVICE OPERATION MANAGEMENT
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 coproducer.
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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STAGES OF ECONOMIC ACTIVITY
Primary
Extractive
Agriculture, mining, fishing, forestry
Secondar
y
Goods – processing
Manufacturing, processing
Tertiary
Domestic – service
Restaurant & hotels, barber & beauty
shop, laundry & dry cleaning,
maintenance & repair
Quaternar
y
Trade & commerce
service
Transportation, retailing,
communication, finance & insurance,
real estate
Quaternar
y
Refining and
extending human
capacities
Health care, education, research,
recreation, arts
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Role of Services in an Economy
FINANCIAL
SERVICES
· Financing
· Leasing
· Insurance
MANUFACTURING
Services inside company:
· Finance
· Accounting
· Legal
· R&D and design
BUSINESS
SERVICES
· Consulting
· Auditing
· Advertising
· Waste disposal
INFRASTRUCTURE SERVICE
· Communications
· Transportation
· Utilities
· Banking
DISTRIBUTION
SERVICES
· Wholesaling
· Retailing
· Repairing
PERSONAL
SERVICES
· Healthcare
· Restaurants
· Hotels
CONSUMER
(Self-service)
GOVERNMENT SERVICES
· Military
· Education
· Judicial
· Police and fire protection
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Stages of Economic Development
Society
Game
Predominant
Activity
Use of
Human
Labor
PreAgainst Agriculture
Industrial Nature
Mining
Standard
Unit of
of Living
Social Life Measure Structure
Raw
Extended
muscle
household
power
SubRoutine
Simple hand
sistence Traditional
tools
Authoritative
Industrial Against
Goods
Machine
fabricated production tending
nature
Individual
Postindustrial
Community Quality of
life in terms
health,
education,
recreation
Among Services
Persons
Artistic
Creative
Intellectual
Technology
Quantity
of goods
Bureaucratic Machines
Hierarchical
Interdependent
Information
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Stages of Economic Development
• Service economy has moved from transactional nature to
experience-based relationship (refer next slide)
• In experience base we have
– Customer services
– Business services
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Economic Evolution
Consumer becomes the co-producer and input to the service process
Engaging with consumer in a personal
& memorable way
Economy
Agrarian
Industrial
Service
Experience
Economic
Offering
Food
Packaged
goods
Commodity
service
Consumer
services
Business
services
Function
Extract
Make
Deliver
Stage
Co-create
Nature
Fungible
Tangible
Intangible
Memorable
Effectual
Attribute
Natural
Standardized Customized
Personal
Growth
Method of
Supply
Stored in
bulk
Inventoried
Delivered
on
demand
Revealed
over
time
Sustained
over
time
Seller
Trader
Producer
Provider
Stager
Collaborato
r
Buyer
Market
Customer
Client
Guest
Collaborato
r
Expectation
Quantity
Features ALL RIGHTSBenefits
RESERVED
Sensations
Capability
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Distinctive Characteristics of Services
• Simultaneity: buying and selling happens at one go
• Perishability: time-perishable (will die off) capacity
• Intangibility: depends on the reputation of the firm and
advertising
• Heterogeneity: more than one element has to be present
• Customer Participation in the Service Process: customer
plays an active part in the process
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The Service Package
• Supporting Facility: The physical resources that must be
in place before a service can be sold. Examples are golf
course, ski lift, hospital, airplane.
• Facilitating Goods: The material consumed by the buyer
or items provided by the consumer. Examples are food
items, legal documents, golf clubs, medical history.
• Information: Operations data or information that is
provided by the customer to enable efficient and
customized service. Examples are patient medical
records, seats available on a flight, customer
preferences, location of customer to dispatch a taxi.
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The Service Package (cont.)
• Explicit Services: Benefits readily observable by the senses.
The essential or intrinsic features. Examples are quality of
meal, attitude of the waiter, on-time departure.
• Implicit Services: Psychological benefits or extrinsic
features which the consumer may sense only vaguely.
Examples are privacy of loan office, security of a well
lighted parking lot.
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Service Package: Banking
• Supporting Facility
Building, machine and people
• Facilitating Goods
money, transaction, security, documents
• Information
about the customers, where the transactions done
• Explicit Services
immediate attention given, on-time transaction
• Implicit Services
quality, privacy (experienced by consumers)
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Challenges For Service Managers
SERVICE FACTORY
SERVICE SHOP
Airlines
Trucking
Hotels
Resorts and recreation
Hospitals
Auto repair
Other repair services
Capital decision
Technological changes
Managing demand
Scheduling service delivery
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Challenges For Service Managers
SERVICE SHOP
Hospitals
Auto repair
Other repair services
PROFESSIONAL SERVICE
Doctors
Lawyers
Accountants
Architects
Fighting cost increase
Maintain quality
Reacting to consumer
Managing advancement of people
Managing flat hierarchy with loose employe
employee relationships
Gaining employee loyalty
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Challenges For Service Managers
MASS SERVICE
Retailing
Wholesaling
Schools
Retail banking
PROFESSIONAL
SERVICE
Doctors
Lawyers
Accountants
Architects
Hiring
Training
Employee welfare
Scheduling workforce
Start-up of new units
Managing growth
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Challenges For Service Managers
SERVICE SHOP
Hospitals
Auto repair
Other repair services
MASS SERVICE
Retailing
Wholesaling
Schools
Retail banking
Marketing
Making service ‘warm’
Attention to physical surrounding
Managing rigid hierarchy with the
need for
standard operating procedure
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Services can be classified base on various strategic
insights, such as
• Nature of the service act (tangible action and intangible
action)
• Relationship with customers and the nature of delivery
• Degree of customization and the judgment involved in
meeting customer needs
• Extent of demand fluctuation and demand capacity
• Nature of service delivery and service availability
(refer to the text book – page 26 - 29
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Source of Service Sector Growth
• Information Technology (e.g. Internet)
• Innovation
• Changing Demographics
Aging of the population
Two-income families
Growth in number of single people
Home as sanctuary
End of Lecture
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End of Lecture
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