The Service Industry and Economic Growth - Coursework Example

The service industry and economic growth Name: ID No: Unit code: Unit name: Assignment: Due date: In the traditional economy, the service industry was not regarded as important aspect as other sectors of the economy such as manufacturing industry. However, the new economy has been affected by the rapidly improving technology amongst other factors such as the booming of the service economy and the satisfaction of the product market which have led to the revolution of the service industry (McManus 2009, pp. 18). In the modern economy, services contribute immensely to economic growth and thus organizations need to improve the quality of their service rendering. The service sector comprises industries such as health, finance, law, insurance, tourism, education, information communication technology, among others. I would like to describe what various authors and economists identify as the need for organizations to develop their service rendering and how organizations develop services to attract new and existing customers to buy their services. I would also like to select two organizations and describe how they build their service offerings. Finally, I would like to compare and contrast the approaches of the two organizations in service building. There is a need for organizations to develop their service offerings because efficient service delivery is a sound marketing strategy because it improves the customers’ self-assurance and also enables the organization to gain a competitive edge over its rivals. If an organization develops its service delivery, it will attract new customers thus resulting to higher profit margins. The customers also stand to benefit. Apart from the satisfaction derived from the quality service, customers are also cushioned against high prices because of the large customer base (Rayport et al 2005, pp. 80). According to Kaiser, there is a need for organizations to develop services offerings because it will create a job market for the unemployed. When organizations develop their services offering, new job opportunities will arise due to different reasons. The first reason is because new quality services attract new customers. This facilitates organizational growth which in return spurs the demand for more workers because the number of customers has increased. Secondly, when new services are introduced, new workers with the relevant skills are required to provide the services. This creates employment opportunities for people with those required skills. In the modern business environment, the services sector employs more people than the manufacturing and construction industries in most developed countries such as the United States, United Kingdom, Germany, Russia, Australia and even China. Thirdly, when financial institutions (which are a part of the services industry) develop and improve their services offering, this directly increases investments in the economy. With new investments come new organizations and new employment opportunities. According to Kaiser, if organizations develop their services offering, they will have the capacity to employ more people and this will also result to improving the standards of living of the people and also improve the economy of the country (Kaiser 2002, pp 58). According to Tarcher & Russell, if organizations develop their service offerings, they are able to reduce some of their operational costs and high overhead costs. The increased use of technology in organizations leads to reduction of costs. Automation in particular has enabled most companies save on the high labor and production costs that are associated with a full labor and manual system. Automation also helps in smooth and fast business transactions (Tarcher & Russell 2006, pp. 254). Organizations use different ways and means to design and build services to attract new and also existing customers to buy their services. In the competitive business and corporate world, the quality of service that an organization is offering determines whether customers will be loyal to the company or depart. Quality service also attracts new customers to an organization. According to Daigneau, for many organizations, the process of service design and building is characterized by the identification of fundamental issues such as what the customer experience should be like, what the workers experience should be like, how the company is to remain loyal to its brand and how the business is to stay relevant to its existing customers and also attract new customers. For many organizations, service design is all about deciding what will be rendered, when it will be rendered and how fast it will respond to the customers’ needs. In order to keep the already existing clients and also attract new ones, businesses carry out continual service improvement. When this is done, organizations come up with new and innovative services with the view to reduce costs in order to keep existing clients intact and attract new clients. In addition to costs reduction, the organization aims to improve the clients’ experience, for example in the banking industry, banks come up with faster and better quality banking systems and this ensures customers do not get attracted to other banks. In the communication industry which is also another example of a service industry, international companies such as Vodafone came up with innovative money transfer services which have ensured that they do not lose their customers to competition. Service design is not a short term project, but is rather based on ongoing research that is carried out by the respective organizations (Daigneau 2011, pp.301). Different organizations are using different approaches in service building. Abbey bank for example, uses customer led innovation. In this type of approach, the organization possesses the ability to work with client needs and client experiences in the service building process. This type of approach is characterized by the intense focus on the needs of clients. In order to be able to focus on consumer needs, Abbey bank maintains a strong communication link with its customers. When the bank gains the knowledge of the customers’ needs, it is able to come up with services that address those needs and experiences. Abbey carries out a market research which involves identification of what clients need, how they need it and then the organization meets these needs. A significant part of this is the expectation of client needs and being ahead of competition. Abbey was aware of the high misinterpretation of financial requirements of clients amongst banks and was committed to provide simpler and more satisfying solutions. To do this, the bank sets up regular high quality meetings with some small groups of its clients and deliberate in honest, open negotiations about the financial services sector and the desired improvements that the clients comprehensively want to see. In particular, the bank likes to know how it can bring about these services that the customer wants. This customer led approach that Abbey uses prioritizes user needs and emerging client issues rather than focusing on profits. Since adopting the use of the customer led approach, Abbey removed much of its banking barriers and positioned itself fully within the valid issues of its clients. This approach often leads to satisfied clients who, in turn develop loyalty to the bank since their issues are addressed (Howells & Bain 2007, pp 198). Other financial institutions may choose to use other approaches. Barclays bank widely applies technology driven innovation. In this approach, technology is widely applied to meet clients’ needs. In the past several years, Barclays bank has been gradually improving its plans to become a successful global bank with a strategic improvement in the use of internet banking and widely applying emerging other technologies to derive customer satisfaction and increasing sales volume. The bank has optimized decision making using the latest technology. Barclays bank on one of the first banks in Europe to develop Automated Teller Machines. These machines revolutionized the financial services industry. The bank was also one of the pioneers of credit cards with its successful brand of Barclaycard. The bank has also introduced other banking technologies such as internet banking and electronic banking. The use of technology also enables clients to derive satisfaction through fast and none tiresome ways like queuing in banking halls. This way, customers’ can be loyal to the bank because technology helps them solve their problems (Ackrill & Leslie 2008, pp.402). In conclusion, I would like to compare and contrast both customer led innovation and technology led innovation in the financial services sector. Both approaches address customer requirements effectively and the client derives satisfaction from this. Also, both of these approaches help in marketing of the banks services thus attracting new customers to the respective banks. The quality of service is also ensured in both cases since technology brings about better and faster services while customer led innovations bring about customer friendly services. On the other hand, the two approaches are different in that the customer satisfaction is the main focus in the customer led innovation approach while the use of technology is the main focus in technology led innovations approach. Finally, the other main difference in the two approaches is that in customer led innovation, communication with the clients is a continuous process with regular meetings between the bank and client. This is not the case in technology led innovation. References McManus, J 2009, The service economy. Management Services. Vol. 53, issue. 2, pp.16-20. Rayport, J., Rayport, F. & Jaworski, J. 2005, Best Face Forward: Why Companies Must Improve Their Service Interfaces with Customers. Cambridge, MA: Harvard Business School Press, pp 77-83 Kaiser, U. 2002, Innovation Employment and Firm Performance in the German Service Sector: Physica-Verlag publishers, pp.56-60 Tarcher, S. & Russell, C.L 2006, Two Thousand and One Ways to Save Your Company by Reducing Costs: Atlantic Publishing Company: pp. 250-255 Daigneau, R. 2011, Service Design Patterns: Fundamental Design Solutions: Addison Wesley Publishers’ pp. 300-305 Howells P. & Bain K. 2007, Financial Times. Prentice Hall publishers, pp. 195-200 Ackrill, M. & Leslie H. 2008, Barclays: The Business of Banking. Cambridge University Press publishers’ pp. 400-405 Read More