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
67.1
67.2
63.3
54.5
56.9
48.7
46.2
13.1

1987

1993

2000

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

Proportation of total employement

90
80
70
60
50
40
30
20
10
0
Service
Year

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

Economy

Agrarian

Industrial

Service

Experience

Function

Extract

Make

Deliver

Stage

Nature

Fungible

Tangible

Intangible

Memorable

Attribute

Natural

Standardized Customized Personal

Method of
supply

Stored in
bulk

Inventoried

Seller

Trader

Manufacturer Provider

Stager

Buyer

Market

User

Guest

Delivered
on demand

Client

Revealed
over time

The Four Realms of an Experience

Customer Participation
Passive

Active

Absorption Entertainment Education

(Movie)
(Language)
Environmental
Relationship

Immersion Esthetic
(Tourist)

Escapist
(ScubaDiving)

Experience Design Principles

Theme the Experience (Forum shops)
Harmonize Impressions with Positive Cues
(OHare 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 persons 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