Service industry and Its Importance in Economic Growth - Essay Example

Service industry and its importance in economic growth Name: ID no. Unit code: Lecturer name: Assignment: Date of submission: Currently the world is experiencing a high rate of globalization. As a result, the rate of competition has increased as the companies are able to open more than one branch in different parts of the world. Multinationals have therefore, taken this opportunity to diversify their production as a way of evading any risks and uncertainties that result from producing a single product. Diversification has been increased by efficient flow of information, opening up of countries’ boundaries and liberalization of the global markets. This has had an impact on the level of competition as local companies face intense competition from well established multinational companies that are able to produce goods at a low cost due to their high investment in technology. As a way of increasing their revenues and spreading their risks manufacturing companies are turning to service offerings as a way of spreading risks and improving customer relations and loyalty towards the products (Nissan, Galindo, & Mendez, 2011). According to Davis (2004), many manufacturing production are mainly broadening their produce offering with different package as a way of reducing the level of competition. Competition from low-cost countries is decreasing the margins for traditional product sales as a result of commoditization, and the increasing rate of demand. This aspect has forced organization to extend their businesses with new offering of services. The manufacturing industries are in a better position to make use of any existing possibilities of increased service content, as a result of their well installed and established base that has a long life cycle and insight product knowledge. This move has improved the companies’ competitive ability in the market thereby enabling the company to position itself in an already saturated market (Ronald, & Huang, 2012, p. 51). Initially, manufacturing industries were only concentrating on production leaving other sectors to offer other services such as transportation. Some were even renting machinery from service providers as a way of removing liability of maintaining machines such as transportation trucks. Much of the profit margin was lost in between the release of the products and the market. Service offerings are therefore a way of closing this gap in order for the industry to reap all the benefits accrued from the products. This implies that manufacturing industries are mainly moving towards “sevitization of business” (Vandermerwe and Rada, 1988, p. 314) i.e. organizations are not only developing their product offerings but they are going ahead to develop new service offerings making the product not the centre of value proposition. In an example, companies that were initially selling warehouse trucks is turning to rental agreements and using the new revenue models to maintain, finance and insure the trucks. It’s crucial to know that with service perspective, client is regarded as an actor who has a long term benefits to the organizations’ existence (Riedl, 2010, p. 746). Many of the manufacturing industries are venturing into service offerings as a way of improving their own processes. Manufacturing industries procedures need to be updated frequently in order to be up-to –date. In an example, the services that the organizations are turning to include internet and communication technologies e.g. cell phone use. These new approaches are being used to keep a close communication with the customers concerning the products and services being offered. In addition these technologies are also used at the centres of innovating services (Drejer, 2004, p. 560). Service design encompasses different approaches in order to ensure that all issues that are of great importance are taken care of. This is to prevent any loopholes that may lead to losses by the organizations. Recognizing how design new services give the company a competitive advantage in the market. Before coming up with the design, it is important for the designer to have detailed information concerning the predicted design. It is important to know how the design will work in improving the company sales and how to sustain and protect the design from the competitors. It is important to note that the distinctive features of services is that they are not tangible, cannot be stored, are not separable from consumption, their quality cannot be measures and cannot be owned. These features make services very complex to handle making them to require high skills to draft (Moritz, 2011, p. 31). There exist different service designs. These include design of features i.e. product, service or space, design of client experience, design of processes and difference systems and designing strategies, philosophy, policies and even ideology (Moritz, 2011, p. 33). In coming up with these designs, organizations undertake different stages. First stage is marketing sensing. Market sensing entails thorough scrutiny of the client, the set up base and the whole organization. This helps in identifying any challenge that might hinder the process of coming up with an efficient design. Second stage is the developmental stage. This involves designing the service and implementing the plan that was drafted after market sensing. This stage ensures that the following stages that involve delivering the services and selling the services are successful. After designing the product it is important to prepare for the launch in order to force the service in the market (Johne and Storey, 1998, p. 250). There are different designs that different organizations undertake. One of the designs is participatory design. This entails allowing the client to participate in designing process. This gives the client an opportunity to comment on any issue that he/she might require to be incorporated in the design. Second design is interaction design. This mainly examines the role of behaviours in physical and virtual spaces. This is mainly used in cases of software applications and website. Clients interact through an interface. Interaction design therefore involves designing a system that can be easily understood by the clients and fulfils all their expectations (Moritz, 2011, p. 33). Third design is psychology design. Given that services mainly interacts with various design discipline, psychology design plays a crucial role in helping one to gain in depth understanding of the underlying drivers and demand of the new services (Moritz, 2011, p. 33). One of the companies that have been working hard to draft a service design is Telstra Company. The company is designing its services through participatory design. This involves involving customers in their design. The company is aiming at provision of innovative telecommunication services. It is also designing its services in order to provide services of solutions to small and medium enterprises which are among their target customers (Telstra, 2011, p. vii). The company is using strategy design. This is through specifying on how to perform different operations in the company. This has been achieved through a close relationship with the target market. In addition the company has improved its marketing design through supporting its own advertising strategies. This is aimed at reducing the cost that the company was incurring by giving contracts to outside firms that were being involved in advertising on behalf of the company (Telstra, 2011). On the other hand, National Australia Bank is another organization that is developing its service design. The organization is using strategy design which is aimed at improving customer relations an aspect that increases customer relations towards the services offered. In addition the company has been agitating for teamwork in the organization as a way of ensuring that services delivered to the customers are of high quality and meet all the customer’s requirements (National Australia Bank, 2012). Second, the bank is trying to streamline its operation trough drafting new policies. This is aimed at improving efficiency and filling all loopholes that previously existed in the organization. This will see an improvement in service delivery an aspect that will differentiate the services with those of the competitors such as ANZ bank and Common Wealth Bank of Australia (National Australia Bank, 2012). As the case with Telstra Company, the national Australia Bank has turned its attention on interaction design. This has been through setting aside some money that is meant for corporate social responsibility. This design is aimed at creating a positive image concerning the company an aspect that will increase customer loyalty towards the products (National Australia Bank, 2012). In designing new services, both companies were faced with a challenge of recruiting new qualified and experienced service designer. This is because there are many designers in the market who are not qualified and if the company makes a mistake of employing such designer, it may give way to losses. References Davies, Andrew 2004, "Moving base into high-value integrated solutions: a value stream approach," Industrial and Corporate Change, 13 (5), 727-56. Drejer, Ina 2004, "Identifying innovation in surveys of services: a Schumpeterian perspective," Research Policy, 33 (3), 551-62. Moritz, S. 2011. Service Design. Retrieved from http://stefan moritz.com/welcome/Service_Design_files/Practical%20Access%20to%20Service%20Design.pdf National Australia Bank. 2012. National Australia Bank. Retrieved from http://www.nab.com.au/wps/wcm/connect/a3c5cf804b2fab798d2d9db77c837afe/Half-year-results-2012.pdf?MOD=AJPERES&CACHEID=a3c5cf804b2fab798d2d9db77c837afe Nissan, E, Galindo, M., & Mendez, T. 2011. The future of services in a globalized economy. The Service Industries Journal, 31(1), 59-78. Riedl, A. 2010. Location factors of FDI and the growing services economy. Economics of Transition, 18(4), 742-761 Ronald, T., & Huang, M. 2012. Optimizing Service Productivity. Journal of marketing, 76, 47-66. Telstra. 2011. Annual report 2011. Retrieved from http://www.telstra.com.au/abouttelstra/download/document/tls796-annual-report-2011.pdf Vandermerwe, Sandra and Juan Rada 1988, "Servitization of Business: Adding Value by Adding Services," European Management Journal, 6 (4), 314. Read More