Importance of Service Sector: In

Relation to India
 Snapshot of Indian Service Sector
• India stands out from other emerging economies because its growth has been led by the service
because its growth has been led by the service sector.

•  The Sector constitutes a large part of the Indian economy both in terms of employment potential and
its contribution to national income.

• The services sector accounts for 53.89% of total India's GVA of 179.15 lakh crore Indian rupees. With
GVA of Rs. 46.44 lakh crore, the Industry sector contributes 25.92%. While Agriculture and allied sector
share 20.19%.

•   India’s services sector GVA increased at a CAGR of 11.43% to Rs. 101.47 trillion (US$ 1,439.48 billion) in
FY20, from Rs. 68.81 trillion (US$ 1,005.30 billion) in FY16. Between FY16 and FY20, financial, real estate
and professional services augmented at a CAGR of 11.68% (in Rs. terms), while trade, hotels, transport,
communication and services related to broadcasting rose at a CAGR of 10.98% (in Rs. terms).

•  The sector covers a wide range of activities. The sector covers a wide range of activities like retail,
banks, hotels, real estate, education, health, social work, computer services, recreation, media,
communications, electricity, gas and water supply.
Why is Service Sector Growing in India?
• Both demand and supply factors have led to this growth.
• On the demand side, the high growth of services output
was mostly attributed to factors such as increasing input
usage of services by other sectors, mainly manufacturing
sector (i.e. higher domestic demand); higher foreign
demand due to trade liberalization; and high income
elasticity for services.
• On the supply side, the increased trade in services
following trade liberalization policies and other reforms
in the 1990s induced this growth.
Why is Service Sector Growing in India?

• Economic affluence.
• Cultural changes.
• IT sector’s growth.
• Economic liberalization.
• Changing role of women.
 Service Sector Contribution to the Indian
Economy
• The service sector contributes the most to the Indian
GDP (around 53.8% in 2005).
• The service sector contributed only 15% to the India’s
GDP in 1950. The contribution increased from
43.695% in 1990-91 to around 51.16% in 1998-99.
• The contribution of service sector has increased
rapidly as information and communication technology
enabled services (ITES) from India won the confidence
of many global corporations, wanting to lower their
operational costs through process outsourcing.
 Service Sector Contribution to the Indian
Economy
• India has a large pool of highly-skilled and educated workers
available at relatively lower cost.
• So, high quality services from India continue to win market
share across the globe from companies wanting to outsource
their non-core business processes.
• There is a growing demand for business solutions, financial
services and high-tech knowledge processes delivered
remotely from South Asian countries for which relevant
expertise are often in short supply in western nations.
• According to McKinsey & Co. (a consulting firm), 11% of
service jobs around the world could be carried out remotely.
 What is Transforming the Service Sector?
• Service markets are shaped by government policies, social changes, business
trends, advances in information technology, and internationalization.
• These forces, collectively, shape the demand, supply, competitive landscape,
and even customer’s styles of decision making.
• Example: Internet is transferring power from supplier to customers,
especially in consumer markets.
• Example: Deregulation and advances in technology have broken the rigid
structure of the financial service industry.
• Example: Travelers can easily research alternatives and make their own
bookings.
• Example: Electronic distribution is changing relationships and roles among
suppliers, intermediaries, and customers as traditional channel members are
replaced by innovative newcomers such as makemytrip.com.
 What is Transforming the Service Sector?

Government Policies
• Changes in regulations.
• Privatization.
• New rules to protect customers, employees,
and the environment.
• New agreements on trade in services.
 Trade in services are the international code of
conduct that provides the rules for promoting
international trade in services.
 What is Transforming the Service Sector?

Social Changes
• Rising consumer expectations.
• More affluence.
• More people short on time.
• Increased desire for buying experience vs. things.
• Rising consumer ownership of computers, mobiles,
and high-tech equipments.
• Easier access to more information.
• Growing but aging population.
 What is Transforming the Service Sector?

Business Trends
• Push to increase shareholder value.
• Emphasis on productivity and cost savings.
• Manufacturers add value through service and sell
service.
• More strategic alliance s and outsourcing.
• Focus on quality and customer satisfaction
• Growth of franchising.
• Marketing emphasis by nonprofits.
 What is Transforming the Service Sector?

Advances in Information Technology

• Growth of internet.
• Greater bandwidth.
• Compact mobile equipment.
• Wireless networking.
• Faster, more powerful software.
• Digitization of text, graphics, audio, and video.
 What is Transforming the Service Sector?

Globalization
• More companies operating on transnational
basis.
• Increased international travel.
• International mergers and alliances.
• “Offshoring” of customer service.
• Foreign competitors invade domestic markets.
Govt. policies, Social Changes, Business Trends, Advances in IT, Globalization

New markets and product categories create increased demand for

services in many existing markets more intensive competition

Innovation in service products and delivery systems, stimulated by

application of new and improved technologies

Customers have more choices and exercise more power

Success hinges on (1) Understanding customers and competitors,

(2) Viable business model, (3) Creation of value for both customers
and the firm
 Role of Competitors in Shaping the Service
Industry
• From one industry to another, competition is stimulating innovation,
especially through application of new and improved technologies.
• Competition occurs not only among the firms within the same
industry, but also among firms from other industries that can offer
customers new solutions to their needs through alternative
approaches.
 Example: Person-to-person communication. Voice telephone has long
competed with first-class letter mail, then internet-based email emerged to
compete with first-class letter mail, then internet based email emerged to
compete with both voice telephone and letter mail, and more recently, text
messaging (WhatsApp, Messenger) has emerged to compete with all of
them.
 In the past few years, you’ve been able to watch how the internet and
mobile telephony have evolved, adding new service and features.
 Role of Competitors in Shaping the Service
Industry
• Customers needs and behavior are evolving, in response to changing demographics
and lifestyles.
• So, managers of service organization need to focus more sharply on marketing
strategy if they hope to meet-or even anticipate- these needs with services that
customers see as offering value.
• Customers are vital source of ideas, not only for new products but also for
improvements to the existing ones. E.g.: Hotels improve their services after feedback.
• So, marketers should work with experts in R&D, and with operations and HR
managers. Then, they will be able to create new services feature that customers will
value.
• Research into customer needs and priorities can provide vital insights into what
specific features to emphasize and how much they might be worth to customers.
• E.g., The courtyard by Marriot boasts that its hotels were “designed by business
travelers for business travelers,” with rooms containing all the services and amenities
they require to be comfortable and productive.