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depending on the amount of tangible and non-tangible elements, we can distinguish the
following combinations:
The supply of service implies an intermediate consumption of tangible origin or
the use of tangible components;
The intangible activity has a tangible outcome that is easy to multiply;
For the information-service, the consumer contributes as supplier of data in the creation,
use and control of information. This relationship with the user that is directly involved in
its creation is a prerequisite of the existence of the service.
Consumers involvement - servuction
Consumers opinion is taken into consideration - cooperation -> A. Toffler prosumer
3. HETEROGENEITY
As a consequence of the fact that consumers differ from one production cycle
to another, the quality of services supplied will also be different. This is why
services are considered to be heterogeneous and difficult to standardize.
Each production process will generate different outputs. Consequently, the
possibility to obtain brand services is more the effect of producers reputation
than a result of tangible components that are easy to standardize.
The need to reduce consumers uncertainty and to obtain a constant level of
quality forced producers to identify ways of standardizing services output by
attempting
to
standardize
the
inputs
through
technical
norms
(telecommunications services, construction services), procedures (accounting
services), standards (communication services, tourism services), similar
education, training of the labor force.
4. PERISHABILITY
As a direct consequence of the intangibility of services and of the fact that
their existence is dependent upon their consumption, services cannot be
stored. The production factors do not produce value unless they are
consumed (ex: in the absence of students a course cannot take place the
information still exists, but it is not delivered).
IMPOSSIBILITY OF APPROPRIATION
The impossibility appropriation is not a characteristic per se, but a
consequence of the characteristics mentioned. Because of the intangibility
and perishability of services, we cannot speak about ownership of services
(consumers do not have possession). The transfer of rights refers to either
intangible assets (in which case we are confronted with intellectual property
rights) or to intangible artifacts (in which case full ownership is possible).
The characteristics of services have an impact on their economic properties.
Miles used the term peculiarities to differentiate those specific properties.
The table includes properties which could be attributed to different types of
services and that are common to most services.
Serviceproduct
Immaterial/intangible
Information-intensive
Non-storable
Great diversity
Custom-made
Valuation = labor inputs
Non-rival
Product quality dependant on consumer
quality
Processes and products difficult to separate
Intellectual property difficult to protect;
easy to replicate
Reputation is crucial
Service
productio
n
o
o
o
o
o
o
o
o
o
Service
markets
Service
consumpti
on
Footloose
Craft-like production
Labor intensive
On demand production
Limited scale economies
Material intermediate inputs either very
high or very low
Bundled with other production
Apparent weak incentives to change
Interaction
with
the
consumer
heterogeneity
Services have use-value, but not exchangevalue
User-producer
integration
making
production, transaction and consumption
indistinguishable
Distribution in closed networks
Un-transportable
Appropriation difficult
Perishable
Duplication
easy:
marginal
cost
of
production negligible;
No usual market price
Price as direct compensation of labor inputs
Public and professional regulation
Trust in user-producer relations
Consumed while produced
Consumed where produced
Consumer specific utility
Satisfying psychological needs
Producer integrated
TAXONOMY OF SERVICES
The heterogeneous nature of the service sector means that, in order to trace
through and analyze changes within the sector, it is necessary to
disaggregate it in some way. As Miles argued: the service sector is not
one sector at all; it is comprised of extremely heterogeneous activities, which
play very diverse roles in overall economic performance.
Understanding the service sector is, in large part, a problem of gaining a
better conceptual and empirical understanding of this complexity and its
implications.
However, devising a useful classification system for a sector encompassing
such a diverse range of activities presents a number of challenges.
Traditional approach
The traditional classification is industry based.
Personal
services
Domestic services
1. Hotels, bars,
Hotels and lodging places
restaurants
Repair services
2. Recreation,
Laundry and dry cleaning
amusement, cultural
Barber and beauty shops
services
Entertainment and recreational 3. Domestic services
services
4. Miscellaneous
Miscellaneous personal services personal services
D. Other
7. Financial services
A. All insurance and insurance-related services
B. Banking and other financial services
C. Other
8. Health related and social services
(other than those listed under 1.A.h-j.)
A. Hospital services
B. Other human health services
C. Social services
D. Other
9. Tourism and travel related services
A. Hotels and restaurants
B. Travel agencies and tour operators services
C. Tourist guides services
D. Other
10. Recreational, cultural and sporting services
(other than audiovisual services)
A. Entertainment services (including theatre, live bands and
circus services)
B. News agency services
C. Libraries, archives, museums and other cultural services
D. Sporting and other recreational services
E. Other
11. Transport services
A. Maritime transport services
B. Internal waterways transport
C. Air transport services
D. Space transport
E. Rail transport services
F. Road transport services
G. Pipeline transport
H. Services auxiliary to all modes of transport
I. Other transport services
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1986, 1990, 1992). Concrete policy issues (Quinn and Doorley 1988) arising
from this may be summarized as follows:
i) macroeconomic and tax policies focused on improved capital formation
rates, lower cost of capital, and lengthened investment time horizons,
ii) increased and better-targeted national investments in both hard and soft
infrastructures supporting services,
iii) restructured regulatory practices to improve the efficiency and
innovativeness of the services sector,
iv) a focus on employment and human resources development policies more
appropriate to the mobility and intellectual skills required for a servicesdominated society,
v) stronger recognition and exploitation of services-manufacturing interface
potentials in international trade measurements and in trade negotiations.
Information technologies applied in services change the structure of domestic
and global competition in both goods and services industries (Quinn, 1992).
The manufacturing and service sector are interdependent, with the share of
services in manufacturing growing.
Through the impact of new generic technologies in services,
* new economies of scale appear, leading to larger institutions, often with a
decentralized structure,
* new economies of scope, created by new technologies, have often
unintended and beneficial second order effects,
* increased complexity can often be handled more efficiently with new
technologies.
New economic paradigm
The service society
Economic growth over the last decades has therefore been strongly affected
by development of service sectors. This has opened up for characterizing
contemporary society as a service society, or to emphasize the role of
information and knowledge, as an information society. The use of such
terminology has connotations to a service or information revolution; a new
industrial revolution, marking the watershed between the industrial society
that emerged over the last 150 years, and the new service society.
Therefore, we will end this section by asking if the label service society is
appropriate as a characterization of ongoing structural change. To do that, we
will start with the concept of an industrial society as a benchmark.
When the manufacturing industries matured during the nineteenth century,
through the complementary processes of market growth, technical change
and organizational development, the industrialization lead to an overall
productivity and income growth, dominated by these industries. They were
the economies productivity leaders and they also had a strong influence on
productivity in other sectors, primarily in the second large sector, agriculture.
As the manufacturing industries grew in size, they increasingly affected and
shaped the society in which they were embedded. The development of new
organizational forms and formalized relations between workers and capitalists
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and managers affected the social roles of the different classes, the growth of
the industries ensured a rapid diffusion of these roles in industrialized areas.
As the nineteenth century drew to a close, quite a few countries had emerged
as industrial societies, several others followed quickly after. Even though
manufacturing industries never attained a share of employment compared to
the one of agriculture previously, and the share ascribed to service sectors
todays, the social development in this period is so intimately linked to these
industries that the epithet industrial society is pertinent.
The modern period of studies of the emerging economy started in the
mid-1960s. In The New Industrial State (Galbraith 1967), Galbraith described
what he regarded as the main structural reorganization of economic
production in the new era. He saw a new industrial organization emerging,
replacing the capital-based and owner-managed industrial organization that
was completed in the first post-war period. What John Galbraith saw as the
fundamental new feature of industrial production and value creation was the
emergence of a new governance structure in large scale industries, viz., a
knowledge-intensive management structure with a different set of interests
than the previous owner-manager. Combined with increased abundance of
capital, and hence a weakened power base for it in initiating and organizing
commercial activity, this paved the way for the technostructure as the critical
factor that would shape progressive industries.
Thus Galbraith clearly saw the vital role that knowledge and expertise would
play in organizing future economic activity, but he chose to interpret it as a
reorganization of manufacturing industries, with large scale, technologyintensive industries as vanguards of the new industrial restructuring. But
what he did not take into account was that the underlying processes he used
as a basis for his predicaments about manufacturing industries, also opened
up for a restructuring of vital services and the relation between these service
functions and manufacturing activities. Hence we will regard John Galbraith
primarily as a beaming culmination of previous analytical approaches to
structural change in capitalist economies, rather than as an approach that
establishes a genuinely new mind-set. This is not to deny, however, that
Galbraiths analysis definitely points forward and renews old approaches, but
his manufacturing bias lets him by-pass at least one of the characteristic
dimensions of the restructuring of economic systems during the last decades.
Almost simultaneously with the publication of Galbraiths book, Victor Fuchs
published the first modern approach to the emergence of the service
economy (Fuchs 1968). In contrast to Galbraith, Fuchs took as a starting
point that the characterizing feature of the development of the capitalist
system in the modern era is the emergence of a complex of services. The
analysis was substantiated by considerable use of statistical data to identify
characteristics and drivers of change processes. Fuchs followed the lead of
Colin Clark (Clark 1957); tertiarisation is the next stage of economic
development in industrialized countries. Fuchs hypothesized and elaborated
explanations of structural change in modern economies and the concomitant
employment growth in services.
The overall service content of the economy grows, with a shift towards
higher skilled white collar employment in most industries, away from low- or
un-skilled blue collar employment. This is accompanied by an increase in
flexible, service-like production methods in several manufacturing industries,
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13
=>
Lean production
Buyer-driven chain
14
15
To
Networks of large and small firms based increasingly on computer networks
and close cooperation in technology, quality control, training, investment
planning and production planning. Downstream services become the main
source of competitive advantage and value-added in production.
Commercial subcontracting involves the manufacture of a finished product
by a subcontractor to the principals specifications. The subcontractor plays
no part in marketing the product, which is generally sold under the principals
brand name and through its distribution channels. The principal firm, in this
case, may either be a producer firm or a retailing or wholesaling firm, whose
sole business is distribution.
Industrial subcontracting involves the carrying out of specialized functions
which the principal chooses not to perform himself, but for which the
subcontractor has special skills and equipment (specialty subcontracting) or
the extension of production capacities (complementary subcontracting).
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