Importance of Service industries in Economic growth
This paper analyzes how service industries are important in building economic growth. Moreover, it goes on to show how services industries help create a better global economy. Industries that rely purely on services other than goods or tangible objects are known as service industries.
Services industries range from wholesale and retail, banking and insurance, professional services such as medicine, computer and engineering, to consumer services and communication. Most service oriented industries are found in developed countries. For example, service industries form the largest category in the Australian and Canadian economy in regards to employment, and businesses. This is because they are open economies and have few regulatory barriers.
Different writers have identified the need for organizations to develop their services. Some have gone to the extent of mentioning quality as a crucial element in enhancing the service sector. According to Carman (2002), quality is seen as a way of meeting the exact customer needs.
Competition has gradually increased in the service sector for instance, financial service industry after globalization. Service quality is regarded as the key weapon to survival in the competitive world. Christian (2007) introduced the theory which indicated that, “employee attitudes directly impact the organization’s bottom line.
The employee-customer profit chain theory specifically addresses the chain reaction of employee behavior impacts on customer behavior, which then affects financial performance”. In addition, companies that provide better quality of life to their employees have benefited in offering quality services to clients.
Services according to Christian (2007), are key aspects in sustaining a customer. Any organization which wants to maintain a good reputation and image for its consumers therefore has to market and improve its services. However strategies to address unique characteristics of diverse cultures need to be applied when it comes to marketing and selling in a global environment. Service oriented industries are in a position of obtaining more human than natural capital (Jingwen 2008, p.6).
As a result, there has been a high demand for educated employees and more efforts for a given country to invest more in education. In addition, the need for organizations to develop their service offerings is due to the fact that making use of few natural resources exerts less pressure on the regional, global and local environment (Jingwen 2008, p.6).
Many organizations have embraced technology and automation to remain relevant and increase their productions while trimming down the labor used. This improves service provision (Rust & Huang 2012, p.6).
The service industries have increased the Gross National Product (GNP) proportion in terms of productivity. As the GNP rises, the income purchasing power also increases as more consumers are display the need to purchase products because of the after sales service they would receive (Moller 2008, p.21).
More companies such as computer development are searching for new talent therefore the proportion of employment also seems to increase as many people are employed on a daily basis to work in certain service industries. Compared to manufacturing organizations investments in the service sector has resulted to low costs of installation.
Government efforts to attract Foreign Direct Investment (FDI) have an immediate impact in the service sector in comparison to the Manufacturing (FDI) which happens to be at a much slower rate. Since services are intangible they are non-storable and non-tradable therefore they have to be produced where they are consumed unlike the manufacturing sector where prices have to be checked to compare unit labor costs in the international market (Schwepker 2003, p.17).
The service industry achieves sound and rapid development of a capital city’s economy for example, recreational services such as parks, museums all these enhances savings of resources and efficient utilization by citizens. A cultural and historical image is also maintained when an industry offers cultural services such as establishing a centre for cultural performances, animations and cultural exhibitions that relates to the history and background of a given country.
Moreover the automobile service industry which repairs and assembles engine parts of vehicles have become a necessity to most clients since these services are capable of sustaining vehicles for longer periods. In addition the level of technology has also made it possible for maintenance work to be carried out by skilled technicians. Nonetheless, the educational service sector offered by both private and public institutions provides educational training in foreign languages and computer technology (Holmlund 2008, p.44).
Services as opposed to commodities differ in terms of characteristics and it is due to these differences that determine how a service economy must be organized (McManus 2009, p16). For example, banking services have been undergoing turbulence in the market hence; regulatory barriers have been imposed to allow for institutional control but rather than improving the economies of scale, banking processes have been grounded (McManus 2009,p17).
According to (Nissan, Galindo and Mendez, 2011, p.59), “The New Economy Approach has been developed. This approach tries to analyze the relationship between countries through the globalization process and has changed the views of several economists about the behavior of economic activity. In this approach, services play a key role. “The MMR organizational group in the US department of commerce identifies industries sources of Gross National Product in measuring output.
It entails that such products minimally contribute to the additional cost of service” (Boustead 2007, p.22). For example, an automobile service station should supply their customers with the latest oil filters. The profit making business form the first category of service provision and employment opportunities followed by the Government and the non-profit organizations. US society can entrust the government to provide such services that may not be self-policing for profit businesses.
Non-profit making firms offer services that improve society’s wellbeing for example recreational and educational programs for the youth. Financial sector such as insurance companies, banking institutions, security brokerages, offer financial advice and counseling to clients on financial practices that are well-suited for them.
The Japan representation company (JRC) is making efforts to enhance their service offerings. It is committed to helping organizations in achieving their business aims and objectives. The financial service industry such as foreign and domestic banks, stock exchanges, trust companies and funds, are making efforts to expand transactions of property rights and development of the capital market.
Japan is on the verge of improving its financing services by establishing a financial system that is multilayered with effective regulation, and rich functions (Silvetri 2007, p.33). The business service sector works to establish circulation and distribution models such as warehouses, chains, supermarkets, malls which would enhance development in suburbs, villages and towns. To transform tangible markets, a wholesale and retail market that already exists ought to be regulated.
Moreover, to create a system that serves business, commercial services such as appraisal, consulting is encouraged. Developing software services by further development of mobile communication, digitalization enhances the growth of e-business, online training and education (Silvestri 2007, p.59).
Upgrading of the mobile communications sector is a sure way of enhancing trade, distribution and marketing. Efforts are made by government to create a system that will offer preferences for educational and recreational programs on a compulsory basis.
Its main emphasis is on the rural settings because in these marginalized areas there are individuals who would love to benefit from education and recreational services. This sector is opting to encourage reforms in relation to the curriculum and ensure that the rights and interests of Japanese living abroad are safeguarded.
In both international organizations the fastest growing industries are the business and office service industries. This is a sector where youths are aiming for in search of employment opportunities. As a result of service industries, new trends keep on rising in the domestic and international market. In both economies the GNP continues to expand, industrial and consumption structures are upgraded continuously (Moller 2008, p.19).
Transformations of the economy in both rural and urban sectors have raised the living standards of people. Educational and recreational programs have been introduced to cater for the disadvantaged and the youths in the society. These service sectors ensure that individuals are encouraged to participate in building of the economy.
Nonetheless, as science and technology progresses, new innovations and inventions are made which determines the competitive edge of a given service. Christian (2007) argued that, consistent delivering of value added services to customers will lead to satisfied clients who will keep demanding and referring others to you.
According to (Nissan,Galindo & Mendez, 2011), one should “Implement a strategy for your business that fits in with your product or service to streamline your output and the flow of your business. Timely service, delivery and satisfaction with the end result will define the value the customer receives from your business. Satisfied customers will ultimately help your business grow and prosper.” Therefore both organizations are working hard towards upgrading and optimization of services.
Distribution services tend to be a major setback in both organizations with the wide range of regulations restricting the efficiency of the distribution system.
According to Carman (2002), “The operational application of the control law to the U.S. economy reveals and explains substantial lasting improvements in profitability, employment ratio, labor productivity and real labor compensation in the second normative scenario compared with the first normative scenario that are achieved together with extending proved non renewable reserves due to excess income levy.”
Restrictions and bans have limited the variety of choice services for consumers. In contrast to the MMR Group in the US, the economic growth of Japan is mainly investment driven therefore contribution from local consumption is minimal. Innovation competence and utilization of resource is inefficient and low (Carman 2002, p.15).
Unlike the US, Japan’s regional and urban development is uncoordinated with huge disparities in social public services and infrastructure. In addition, there is still a sluggish tendency in social and government reforms affecting the public sectors and enterprises.
In conclusion, enhancing the public service is a crucial part for improving the service industry and a guarantee for promoting a fast development of most fields of services, as well as creating a peaceful society and a transformed government body. Many service providers are under pressure to provide value-added services and therefore meet client’s requirement. Since customers insist on quality and consistency, most industries are looking forward to improve on their service to keep up with competitive market share.
References
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