Course Weightage

Internal Assessment

OLT 1

10 %

OLT 2

10%

Group Project

Mid Term

10%

Total

50%

Final Exam

50%

Grand Total

100%

20 %

The Emerging Service

Environment

Some examples of Service

Industries

Service classified according to

major 11 categories

Services are extremely heterogeneous

and varied. GATS identifies 155 activities
as services in 11 major categories :
Business services
Communication
Construction and Engineering
Distribution
Education

Environment
Finance
Health
Tourism
Recreation
Transport

Services definition

Something that can be bought and

sold but that cannot be dropped on
your foot.

Short and snappy but not too helpful.

Working definition of
Service

Services are activities or benefits that

one party can offer another that are
essentially intangible and do not
result in the ownership of anything

Classification of Service
organizations by ownership and
Business Objectives
Government

Government

Non

For profit
government

Government

Non -

Non profit
profit

Govt. non profit

Non govt.- non

Four Broad Categories of

Services

Based on differences in nature of service act

(tangible/intangible) and who or what is
direct recipient of service
(people/possessions), there are four
categories of services:
People processing
Possession processing
Mental stimulus processing
Information processing

Four Categories of Services

Employing Different Underlying Processes
What is the
Nature of the
Service Act?
TANGIBLE
ACTS

INTANGIBLE
ACTS

Who or What is the Direct Recipient of the Service?

DIRECTED AT PEOPLE

DIRECTED AT POSSESSIONS

People Processing

Possession Processing

e.g., airlines, hospitals,

haircutting, restaurants hotels,
fitness centers

e.g., freight, repair,

cleaning, landscaping,
retailing, recycling

Mental Stimulus
Processing
e.g., broadcasting, consulting,
education, psychotherapy

Information Processing
(directed at intangible assets)

e.g., accounting, banking,

insurance, legal, research

Steps in transforming an industrial

society into a post - industrial society
1.

2.

Expansion of services such as transportation

and public utilities is needed for the
development of industry and distribution of
goods.
Mass consumption of goods and population
growth require an expansion of wholesale and
retail services, as well as services such as
finance, real estate and insurance.

3. As personal incomes rise, the %age of money

devoted to food declines. Increments in income
are first spent for durable consumer goods such
as housing, automobiles and appliances.
Further increases in income are spent on services
such as education, health care, vacations, travel,
restaurants, sports and entertainment.
This tendency leads to the growth of the personal
services sector.

General reasons for growth in

services across the world

Increase in efficiency of agriculture and

manufacturing that releases labour to services

The flow of workers from agriculture and other

extraction to manufacturing and then to services.

The application of comparative advantage in

international trade.

A rise in per capita income.

An increase in urbanization

Deregulation

Demographic shifts

An increase in international trade

Joint symbiotic growth of services and manufacturing

Why has the

Service Industry
grown in India?

Reasons for growth

Affluence : The huge per capita increase in income: from1950 to the present
day is an indicator of increase in general affluence levels. Indias per capita
income rose by 37.6 per cent to Rs 88,533 in the last four years to
2014-15( Pest control, personal security, interior design).
Leisure time : People have some spare time for travel and holidaying. Hence
travel agencies, resorts, hotels, entertainment.
Others would like to use this time to enhance their career prospects. Hence
education, distance learning, part time courses.

Life expectancy : Health programmes have contributed

significantly to increase in life expectancy, hence old age
homes, nursing homes, health care, insurance etc.

Working Wives: Increase in numbers of working

women has triggered an increase in day care facilities
for children, packed food and home delivery.

Product Complexity : Growth of a large number of

products that can only be serviced by specialized
persons eg washing machines, water purifiers, home
computers etc. needing after - sales service,
maintenance etc.

Lifes complexity : As daily routines get

busier, individuals find it difficult to manage
things on their own. Hence tax consultants,
legal advisors, insurance consultants,
property advisors etc.

Resource scarcity and ecology :With depleting

natural resources , need for conservation
increases. Hence pollution control agencies,
car pools, water management etc.

New products . IT has given rise to PCOs,

pager service providers, web shoppe etc.

The contribution of the Services Sector in the

Indian GDP has also increased very rapidly as
many foreign consumers have shown interest in
the country's service exports.

This is due to the fact that India has a large pool

of highly skilled, low cost, and educated workers
in the country. This has made sure that the
services that are available in the country are of
the best quality.

Foreign companies seeing this have

outsourced their work to India specially in
the area of business services which includes
business process outsourcing and
information technology services.

This has given a major boost to the Services

Sector in India, which in its turn has made
the sector contribute more to the India GDP.

The Changing Indian Customer

Things are changing. Although

attitudes remain complex, they have
shifted substantially toward
consumerism, particularly over the
past decade. The countrys recent
economic performance is a factor, of
course

The populations demographic profile

also plays a role: Indians constitute a
fifth of the worlds citizens below age
20. So a youthful, exuberant
generation, weaned on success, is
joining the ranks of Indian consumers.

Main findings in a Harvard Business

Review Research Paper quoting Gallup
Survey

Indians are getting more materialistic.

Indians are often stereotyped as deeply

spiritual people who reject materialistic
values. Our research suggests that this
stereotype no longer reflects reality. For
instance, almost half of Indias urban
population had adopted a work hard and
get rich ethos by 1996; another 9% had
done so by 2006.

Consumerism is becoming a way of life in

India.

An analysis of Indians savings goals

underscores the increase in materialism.
Although long-term plans remain a high
priority, lifes pleasures in the here and now
have gained importance over the past
decade.

Indians desire to set money aside for

electronics and durables has grown so
dramatically that it has nearly caught up with
their desire to save for their childrens
education. Travel and entertainment have
also gained ground.

This trend does not apply only to the young

it holds true for people aged 15 to 55. And it is
not merely a large-city phenomenon; people
in smaller towns have these values as well.

Among durable goods, high-tech luxury items

are increasingly in demand. The number of
Indians who own or use mobile phones, for
example, has grown 1,600%not surprising in
a country that is adding more than 3 million
subscribers a month.

The number of people who own or use

computers or laptops is up 100%. Ownership
of music systems and televisions is also on
the rise.

Foreign is out; Indian is

paramount.

Indians long believed in the

overwhelming supremacy of all things
foreign. Antiquated products and
technologies, well past their sell by
date in more developed nations, were
once lapped up by Indian consumers.
Now, though, with Indians succeeding
on the global economic stage, Made
in India is no longer an apology.

While Indians confidence in foreign

companies has remained essentially
static, their faith in domestic companies
has grown. In 1996, only 34% of those
surveyed expressed confidence in Indian
companies; in 2006, 56% did. Indians
realize that not all foreign goods are
perfectly suited to their tastes and needs.
They have become discerning consumers
who want products that are made in India
and for Indians.

A look at the most respected brands in India

is significant. Of the top 20 named in a
survey, eight are Indian, including names
like Tata, Godrej, and Bajaj. Only five of the
top 20 are new foreign brands.

These have succeeded because they have

customized technology to meet Indian
needs. Hutch, Nokia, and Samsung have
done this particularly well. Nokia modified
one of its mobile phones by adding a built-in
flashlight that truck drivers, for instance,
find useful on poorly lit highways.
Indianizing also has to do with keeping
prices at levels that are manageable for the
average Indian consumer.

Seven of the top brands came from wellestablished MNCs that were either
thoroughly indigenized or involved in a
joint venture that gives them the
advantages of both worlds
customization of products for India with
levels of quality and technology
associated with international companies.
Names such as Philips and Hero Honda,
Maruti Suzuki fall into this group.

A more comprehensive
definition of Services

All economic activities whose output is

not a physical product or construction, is
generally consumed at the time it is
produced, and provides added value in
forms( such as convenience, amusement,
timeliness, comfort or health) that are
essentially intangible concerns of its first
purchaser.

What are Services ?

In simple terms Services are :

deeds, processes and performances.
Thus IBM offers repairs and maintenance
services for its equipment, consulting
services for IT and e- commerce
applications, training services, web design
and hosting and other services.

These services may include :

A final , tangible report
A website
Instructional material for training

But they largely involve :

Problem analysis activities

Meetings with the client
Follow- up calls
Reporting
In short -deeds, processes and
performances.

Core offerings of:

Hospitals,
Hotels
Bank
Utilities
comprise deeds and actions
performed for customers

Tangibility Spectrum

The broad definition of services

implies that intangibility is a key
determinant of whether an offering is
a service. Although this is true very
few products are purely intangible or
tangible.

Tangibility Spectrum
Salt

T
P

Tangibility Spectrum

Contribution of Service
Industries to Indias GDP,
2011-12
The Services Sector contributes the most to the
Indian GDP. The Service Sector in India has the
biggest share in the country's GDP at 59%.
Other sectors :
Agriculture
Industry
Service Sector

(14%)
(27%)
(59%)

The contribution of the Services Sector in India

GDP has increased a lot in the last few years.

The Services Sector contributed only 15% to

the Indian GDP in 1950. Further the Indian
Services Sector's share in the country's GDP
has increased from 44% in 1990- 1991 to 51%
in 2005 and around 55% in 2006-2007. 59% in
2011-12

Thus the Services Sector in India accounts for

nearly 60 % of the country's GDP.

The services sector contributed US$

783 billion to the 2014-15 GDP (at
constant prices) growing at CAGR of
9 per cent, faster than the overall
GDP CAGR of 6.2 per cent in the past
four years. - See more at:
http://www.ibef.org/industry/services.
aspx#sthash.X4KtetJQ.dpuf

Service sector break up (59%)

of Total GDP
Community,
social and personal services

14%

Finance, Insurance, real estate 17%

and business services
Trade, hotels, transport
and communication

28%

Some other countries ( CIA

World Fact Book 2010 )

Country

1. US
2. France
3.Netherlands
4.UK
5.Japan
6.Germany
7.India
8.China

Services as
Percentage of GDP
77
72
75
75
76
70
61(Construction included)
43

Service Industries
Service industries and companies
Those industries and companies within
the service sector whose core product
is a service.( ITC Welcome Group of
Hotels (Boarding and Lodging), Jet
Airways( Transport), Birla Sun
Life( Insurance and Financial Services).

Services as products

Intangible product offerings that customers

value and pay for in the market place.

eg HP and IBM offering IT consulting services to

the marketplace in competition with companies
like Accenture which offer traditional pure
services. Department stores like Macys which
sell services such as gift wrapping and shipping
and pet stores selling pet grooming and training
services.

Customer service

A support service to the companys

core products. Not to be confused
with after sales service.

Derived service
This abstract concept states that the value
derived from physical goods is really the service
provided by the good, not the good itself.

Eg a pharmaceutical company provides medical

services, a razor provides barbering services, a
computer provides data manipulation services.

Advantage of this concept is that it we think

functionally of the service and hence we define
it more broadly.

Fedex

Whilst at Yale, Fred Smith produced a paper

on logistics that identified the need for a
rapid delivery service to supply spare parts.
He explained that advances in the use of
computers would lead to a system that
could replace physical inventories as fast as
the computer moves data.

He was awarded a C for the paper

On his return from military service,

he decided that a 'hub and spoke'
system, where all the parcels for
delivery would be sorted in a central
location in America, should be tried
to get overnight delivery anywhere in
the United States.

Was this an act of faith?

No.

Good judgment always needs to be backed up

with data. He commissioned a couple of
independent research studies that confirmed
that there was a business need for overnight
delivery. As a result, Federal Express was born
in 1973.

Today, the expression "FedEx" has become

everyday talk for overnight delivery
whatever carrier is used. The FedEx
satellite tracking system identifies where
every package is in the system and 55
million electronic entries are made every
day.

Fedex which delivers 5 million packages

every night is achieving a 99.82% success
in delivery on time

Management Philosophy

The most impressive part of FedEx is not its

advanced technology or its incredible service quality.

The management philosophy is a magnificent

example of how to run a company. Fred Smith
formed the following view while serving as a marine
in Vietnam:

'Take care of your People. They in turn will deliver

the impeccable Service demanded by our customers
who will reward us with the Profitability necessary to
secure our future.'

This has become the watchword of the company

The magic formula

PEOPLE,SERVICE,PROFITS
Compare with Marriot :
Take care of your employees, and
they will take care of their
guests.

The Essence of all successful service

industries

People

Service

Profits

Twist it, turn it, disguise it, add to it if you

like, give it new avatars, but you keep
coming back to it, and you certainly cant
subtract from it.

Striking a balance

Keeping these three elements in

balance is the hardest part. In order
to align the staff to this philosophy,
FedEx has a clear goal to have
people who are committed,
motivated and well trained.

Learning Points

Put your people first if you want them to

realize your vision

Recognize behaviour that you want others

to copy

Use your best people to train managers

Don't accept less than 100%

Measure everything that you want to

improve

Key Tools Employed

Reviews

Staff Recruitment

Training

Performance Surveys

Fair Treatment

Reward and Recognition

Communication

Management Development

Quality

In the American Management Association's

publication 'Blueprints for Service Quality',
Fred Smith is quoted as saying "The way I see
it, leadership does not begin with power, but
rather with a compelling vision or goal of
excellence.
One becomes a leader when he or she is able
to communicate that vision in such a way that
others feel empowered to achieve success."

The nine leadership

dimensions
Charismatic Leadership

Consideration for Individuals

Intellectual Stimulation

Courage

Dependability

Flexibility

Integrity

Judgment

Respect for Others

Service Standard

Fedex has a 100% service standard that

says:

"We are committed to delivering each

shipment entrusted to us on schedule
100% of the time. Equally important, we
will maintain 100% accuracy of all
information pertaining to each item we
carry. Our objective is to have a 100%
satisfied customer at the end of each
transaction.'

Reward and recognition

The pay for performance of salaried staff is
based upon measures relating to the
company's key philosophy.

People - measuring the leadership index and the

safety performance

Service - results of the company's 'Service

Quality Indicator.

Profit - pre-tax margin.

The foundations of success

A Vision

A Belief

Backed by data

A Philosophy ( PSP or something similar)

Meticulous Planning

Systems for actualizing the PSP philosophy

Measurement

Ability to reassess, search for new opportunities and

regroup

Competing strategically
through service

Exemplary out of the box service

Innovative, cutting edge services

Value added , Revenue Producing

Services

A service Culture that differentiates

( An employer of choice)