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
United States
Canada
Israel
Japan
France
Italy
Brazil
China
1980
1987
1993
2000
67.1
67.2
63.3
54.5
56.9
48.7
46.2
13.1
71.0
70.8
66.0
58.8
63.6
57.7
50.0
17.8
74.3
74.8
68.0
59.9
66.4
60.2
51.9
21.2
74.2
74.1
73.9
72.7
70.8
62.8
56.5
40.6
Trends in U.S. Employment by Sector
80
70
60
50
40
30
20
10
Year
19
90
19
70
19
50
19
30
19
10
18
90
18
70
0
18
50
Proportation of total employement
90
Service
Manufacturing
Agriculture
Stages of Economic Development
Society
Game
PreAgainst
Industrial Nature
Predominant
activity
Use of
human Unit of
labor
social life
Agriculture Raw
Extended
Mining
muscle household
power
Standard
of living
measure
Structure
Technology
Subsistence
Routine
Simple hand
Traditional tools
Authoritative
Quantity
of goods
Bureaucratic Machines
Hierarchical
Industrial Against Goods
fabricated production
nature
Machine Individual
tending
PostAmong
industrial Persons
Artistic Community Quality of InterInformation
Creative
life in terms dependent
Intellectual
of health, Global
education,
recreation
Services
The New Experience Economy
E co n o m y
A g ra ria n
In d u stria l
S erv ice
E x p erien ce
F u n ctio n
E x tract
M ak e
D eliv er
S tag e
N atu re
F u n g ib le
T an g ib le
In tan g ib le
M em o rab le
A ttrib u te
N atu ral
S tan d ard ized
C u sto m ized P erso n al
M eth o d o f
su p p ly
S to red in
b u lk
In v en to ried
D eliv ered
o n d em an d
S eller
T rad er
M an u factu rer P ro v id er
S tag er
B u y er
M ark et
U ser
G u est
C lien t
R ev ealed
o v er tim e
The Four Realms of an Experience
C u sto m er P a rticip a tio n
P a ssive
A ctive
A b so rp tio n E n tertain m en t E d u catio n
(M o v ie)
(L an g u ag e)
E n v iro n m en ta l
R ela tio n sh ip
Im m ersio n E sth etic
(T o u rist)
E scap ist
(S cu b aD iv in g )
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
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Role of Services in an Economy