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Procedia Economics and Finance 27 (2015) 479 – 483

22nd International Economic Conference – IECS 2015 “Economic Prospects in the Context of
Growing Global and Regional Interdependencies”, IECS 2015

Development Strategy for Service Companies

Albina Volkovaa,*
a
Saint-Petersburg State Economics University, Sadovaya str., 21, Saint-Petersburg, 191023, Russia

Abstract

The services sector is the largest sector of the world economy, and it is growing actively and rapidly. Even in the
production sector, a substantial part of work has more to do with services than with production as such. Every year,
the variety of services and ways of providing them to consumers is increasing. (Pashigoreva, 2012).
The services sector is one of the main branches of social production, designed to be responsive to the needs and
demands of the population. Modern operating conditions of the services sector are marked with a significant level of
volatility, which means that the pace of market changes is significantly ahead of the rate at which the subjects of the
services sector can provide a response to the changes that have taken place.
It is essential for every organization to analyze the environment in which it has to operate, in order to be able to identify the
favorable prospects and opportunities at hand and avoid any unwanted effects of negative external factors influencing the situation.
Based on this analysis, the optimal strategy for the organization is selected. This is equally true for both the sphere of production
and the services sector.
This work is dedicated to studying development strategies for services sector companies.
©
© 2015 The Authors.
2015 The Authors.Published
PublishedbybyElsevier
ElsevierB.V.
B.V.This is an open access article under the CC BY-NC-ND license
Peer-review under responsibility of Faculty of Economic Sciences, "Lucian Blaga" University of Sibiu".
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of Faculty of Economic Sciences, “Lucian Blaga” University of Sibiu”
Keywords: strategy, the services sector, development management, management, public services

1. Services Sector Businesses – an Outline

The services sector nowadays is a fast-growing sector in the global economy. No social activity, regardless of the
level of detailization and generalization, can be conceived as existing and developing without the phenomenon of
services. The said phenomenon is unusual in that it possesses an array of unusual properties – thus, the outer shell of

* Corresponding author.
E-mail address: albvolkova@yandex.ru (A. Volkova)

2212-5671 © 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of Faculty of Economic Sciences, “Lucian Blaga” University of Sibiu”
doi:10.1016/S2212-5671(15)01024-2
480 Albina Volkova / Procedia Economics and Finance 27 (2015) 479 – 483

a service may be material in a way, but its essence will always remain immaterial, and therefore it is never completely
comprehensible. Human activity is almost constantly accompanied by services.
The notion of a service has a large number of interpretations. F. Kotler believes that a service is to be understood
as "any activity or benefits that one party can transfer to another one".
Features of services are related to the four objectives of company management in the sector under discussion,
namely, quality management, ensuring high performance, internal marketing and developing differentiated supply.
In essence, several distinctive features of services, among them the diversity, intangibility, multifactoriality, and
systematicity of services emerging in a market economy, determine the need to control the development of services
on the consumer market. The emergence of needs on the market and the growth in demand types of services set in
motion the productive forces of most varied nature (Pashigoreva, 2012).
The term "services sector" has long been used worldwide in both theoretical and practical economics. It is now
quite familiar and frequently used due to many reasons:
Firstly, it is due to the fact that virtually every industry, in one way or another, produces services but at the same
time, not every industry produces tangible goods (for instance, tourism, banks, transportation, education, etc.);
therefore, the production of services is a phenomenon more common than the production of material goods.
Secondly, it can be stated that in some cases, the production, sale and consumption of services can be performed
without the use of material goods (for example, in education or the provision of legal services). Conversely, the
production, sale, and often consumption of material goods (not things) can hardly be implemented nowadays if services
are not involved. Moreover, the process of the sale of tangible goods, in itself, means providing the customer with a
whole set of services on the part of the seller.
Thirdly, people's demand for many sorts of services (also when catering for their own needs) results in the
production of a large number of goods which are basically unnecessary, and the manufacture of which represents,
under the present-day conditions, entire strategically important industries that form parts of the national economy and
even the global economic complex.
Service companies are economically independent units of output in the service sector, which produce and distribute
one or more services (Burmenko, 2008).
The specifics of the service sector (as well as of a particular services industry) determines task priorities and the
specifics of service organizations management. In turn, those define specific approaches to strategy development in
service providing companies.

2. Specific Features of Strategic Marketing in the Services Sector

Strategic marketing incorporates resource use methods that are aimed at achieving a certain goal. The strategy is
typically determined with regard to factors of both the internal and external environment, i.e. taking into account both
controllable and uncontrollable variables.
Strategic marketing constitutes a complex (an aggregate) of marketing measures aimed at sustainably promoting
specific goods and services onto the market, including identifying specific objectives, analyzing, monitoring, and
planning further actions.
Strategic marketing can be both intensive and passive. In other words, it is essential for every organization to
analyze the environment in which it has to operate, in order to be able to identify the favorable prospects and
opportunities at hand and avoid any unwanted effects of negative external factors influencing the situation. Based on
that analysis, the optimal strategy for the company can be selected.
The essence of strategic marketing lies in the following stages:
1. Tasks of the enterprise as a whole are defined;
2. Necessary business units are established;
3. Marketing goals are set;
4. A comprehensive analysis of conditions for each business unit is carried out;
5. A strategic marketing plan is developed;
6. The selected marketing tactics is implemented (Kelareva, 2006).
 Albina Volkova / Procedia Economics and Finance 27 (2015) 479 – 483 481

What is important, the model above is applicable for both large enterprises and small ones that either produce goods
or provide services. Despite the fact that the essence of strategic marketing becomes specific for different types of
businesses, a consistent strategic plan should always be used.
Strategic marketing in the services sector is gaining popularity because the services sector itself is growing and
expanding.
The specifics of marketing in the services sectors rests in the fact that in addition to the principal components of
marketing – product, place, price and promotion in this sphere the following factors are of paramount importance –
people, methods of offering services as well as financial resources. Most services are provided by people themselves
or with their direct participation. This means that company management needs to pay extra attention to its staff.
Traditional sources of competitive advantages are gradually receding into the past. Today, in a very "densely
populated" market that has become a hectic high-tech environment, it is hardly ever possible to gain a competitive
edge over economic rivals by delving into "classic" sources only, such as access to cheap resources, a favorable
geographic position, reducing production cost and others. When the "classic" sources of advantage are exhausted, the
only possible way to defeat the competition is to create and release onto the market a product that would have qualities
that its analogues have been unseen to possess.
Formation of a strategy for ensuring services competitiveness is a process that is falls into three main phases – the
preparation phase, the construction phase, and the strategy implementation phase (Selyaev, 2011).

3. Development Strategies for Services Sector Companies

The algorithms and stages in the development of strategies are determined individually for each company. In
general, the approaches to strategy development are the same for both the service sector and manufacturing companies.
However, in the case of service organizations we can talk about some specific approaches to strategic management
that would not be appropriate for production companies.
The services sector is geared to meeting a person's crucial needs. It has considerable social value and is
characterized by massive and widespread presence of its enterprises. As social welfare increases, a service becomes
the most attractive purchase a consumer can make.
Summarizing the views of different authors, five features of strategy development for service companies could be
identified (Fatkhutdinov, 2008):
1. In developing a strategy, one should focus additionally on analyzing "entry barriers" on the way into the industry.
Based on the ideas of M. Porter, these barriers can be described as:
the need for substantial initial investment when entering the industrial services market;
scale-related savings associated with a reduction in costs per customer as the volume of services provided increases;
differentiation of services, due to the fact that there are companies on the market that have created an attractive
image and a loyal customer base;
the advantage held by competitors, determined by their access to value chains and experience of operating on the
market, and so on.
2. Formulating a specific "strategic services concept". Haksever calls this the model of "strategic vision of a
service". In his opinion, the model must include "the four basic elements (the target market segment, the concept of
service, operational strategy and service delivery system) and the integrated elements (positioning, the value/cost ratio
and strategy/system integration) to link together all the basic elements".
3. It is important that the strategic efforts of a service company should focus on increasing the value of services
provided. The value of services is directly related to the level of customer satisfaction. Fig.1 shows the model of the
value of a service for the consumer, containing its various components (Fleischer, 2009).
482 Albina Volkova / Procedia Economics and Finance 27 (2015) 479 – 483

Fig. 1. Service value model

Here introduce the paper, and put a nomenclature if necessary, in a box with the same font size as the rest of the
paper. The paragraphs continue from here and are only separated by headings, subheadings, images and formulae. The
section headings are arranged by numbers, bold and 10 pt. Here follows further instructions for authors.
In this model, the inherent features are the benefits that accrue to consumers from the services rendered to him.
Perceived quality characterizes the degree of customer satisfaction as well as how far the quality of the service
matches their expectations.
The external features are the psychological benefits the consumer gains, related to the characteristics of the
organization providing business services, in particular, its image and reputation.
Price expressed in value terms represents the consumer's expenditure associated with the provision of the service.
Non-monetary price means the consumer's expenditure not directly related to paying for the services provided (the
amount of time needed to access the service, any possible discomfort while the service is being provided and so on).
Service provision time characterizes the duration of the process of its provision and other benefits of temporal
nature gained by the consumer.
4. In M.Porter's line of thought, choosing a competitive strategy for a service company also has its own specifics.
5. For ensuring effective quality management, a service organizations' strategies may include target values based
on the concept of standard stages of turning service organizations into increasingly competitive business.
It is necessary to determine accurately whether the chosen strategy for achieving competitiveness corresponds to
the company's capabilities. If the company is able to provide in-demand services, it is necessary to proceed to the
production stage immediately. If at the moment there are no necessary conditions for executing the order at the disposal
of the organization, the entity should proceed to the stage of product development.
The most reliable strategies for ensuring competitiveness lean on uniqueness, leadership, quality and selective
specialization of services production (Pashigoreva, 2012).
A competitive strategy is defined as a set of rules and practices to be followed by a company, which aims to achieve
and maintain competitiveness in its industry. A company's competitive strategy is centred on securing the benefits that
can be achieved only if the company clearly understands its target audience. Guaranteeing the best sustainable financial
position for the company in the long-term perspective, as well as gaining a strong market position is possible if the
company is constantly adapting the range of services provided by means of organizational and technological
innovation, while the implementation strategies for ensuring competitiveness are based on technological and
organizational flexibility of a service company. (Melnikov, 2010)
The strategy of an organization is a generalized model of actions that need to be taken by company management if
the goals that have been set are to be achieved. The goals in this case are seen as the key outcomes sought by the
 Albina Volkova / Procedia Economics and Finance 27 (2015) 479 – 483 483

company. They play an important role in shaping benchmarks, and that is what the whole bulk of company activities
builds upon. The strategy of the organization always includes a variety of standard objectives - making a profit,
increasing business profitability, and so on. It all depends on the direction that the enterprise takes. (Vertakova,
Plotnikov, 2013)
The specifics of the service sector (as well as of a particular services industry) determines task priorities and the
specifics of service organizations management. In turn, those define specific approaches to strategy development in
service providing companies (Plotnikov,Volkova 2014).
The main drawback of the existing approaches to formulating development strategies for service companies lies
within attempting to put together a strategic plan while tapping into the operational practice of enterprises. The reason
for the error is the view that a company that is independent due to the currently existing property relations in the
country, is capable of acting virtually autonomously in the long run, whereas the objectives of an enterprise are formed
by a system of a higher order, i.e. by the national economy. Another major obstacle is the obsolescence of many
provisions that explain the implementing the process of social reproduction. There is a vicious circle - it is impossible
to determine the purpose of the enterprise without defining the objectives of the economic system as a whole, but the
process of functioning of the economy cannot be understood without defining the role of its subsystems, which are
separate business entities. This contradiction can be eliminated if the purpose of strategic planning is to create new
forms, which will be able to perform their functions more efficiently in the future. (Naumova, 2012)

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