01 economy
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Role of Services in an EconomyRole of Services in an Economy
Learning ObjectivesLearning Objectives
Describe the central role of services in an Describe the central role of services in an economy.economy.
Discuss the evolution of an economy from Discuss the evolution of an economy from an agrarian society to a service society.an agrarian society to a service society.
Describe the features of preindustrial, Describe the features of preindustrial, industrial, and postindustrial societies.industrial, and postindustrial societies.
Describe the features of the new service Describe the features of the new service economyeconomy
Service DefinitionsService Definitions
Services are deeds, processes, and performances.Services are deeds, processes, and performances.Valarie Zeithaml & Mary Jo BitnerValarie Zeithaml & Mary Jo Bitner
A service is a time-perishable, intangible A service is a time-perishable, intangible experience performed for a customer acting in experience performed for a customer acting in the role of a co-producer.the role of a co-producer.
James Fitzsimmons James Fitzsimmons
Definition of Service FirmsDefinition of Service Firms
Service enterprises are organizations that Service enterprises are organizations that facilitate the production and distribution of facilitate the production and distribution of goods, support other firms in meeting their goods, support other firms in meeting their goals, and goals, and add valueadd value to our personal lives. to our personal lives.
James James FitzsimmonsFitzsimmons
Role of Services in an EconomyRole of Services in an Economy
Percent Service Employment for Selected NationsPercent Service Employment for Selected Nations
Country 1980 1987 1993Country 1980 1987 1993 20002000United States 67.1 71.0 74.3United States 67.1 71.0 74.3 74.274.2
Canada Canada 67.2 70.8 74.8 67.2 70.8 74.8 74.174.1
Israel 63.3 66.0 68.0Israel 63.3 66.0 68.0 73.9 73.9
Japan 54.5 58.8 59.9Japan 54.5 58.8 59.9 72.7 72.7
France 56.9 63.6 66.4France 56.9 63.6 66.4 70.870.8
Italy 48.7 57.7 60.2Italy 48.7 57.7 60.2 62.8 62.8
BrazilBrazil 46.2 46.2 50.0 50.0 51.9 51.9 56.5 56.5
ChinaChina 13.1 17.8 21.2 13.1 17.8 21.2 40.6 40.6
Trends in U.S. Employment by SectorTrends in U.S. Employment by Sector
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Year
Pro
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Service
Manufacturing
Agriculture
Stages of Economic DevelopmentStages of Economic Development
Pre- Use of StandardPre- Use of Standard dominant human Unit of of living dominant human Unit of of living Society Game activity labor social life measure Structure TechnologySociety Game activity labor social life measure Structure Technology
Pre- Against Agriculture Raw Extended Sub- Routine Simple handPre- Against Agriculture Raw Extended Sub- Routine Simple hand Industrial Nature Mining muscle household sistence Traditional toolsIndustrial Nature Mining muscle household sistence Traditional tools power Authoritative power Authoritative
Industrial Against Goods Machine Individual Quantity Bureaucratic Machines Industrial Against Goods Machine Individual Quantity Bureaucratic Machines fabricated production tending of goods Hierarchical fabricated production tending of goods Hierarchical naturenature Post- Among Services Artistic Community Quality of Inter- InformationPost- Among Services Artistic Community Quality of Inter- Information industrial Persons Creative life in terms dependentindustrial Persons Creative life in terms dependent Intellectual of health, GlobalIntellectual of health, Global education,education, recreation recreation
The New Experience EconomyThe New Experience Economy
Economy Agrarian Industrial Service Experience
Function Extract Make Deliver Stage
Nature Fungible Tangible Intangible Memorable
Attribute Natural Standardized Customized Personal
Method of supply
Stored in bulk
Inventoried Delivered on demand
Revealed over time
Seller
Trader
Manufacturer
Provider
Stager
Buyer
Market
User
Client
Guest
The Four Realms of an ExperienceThe Four Realms of an Experience
Customer Participation
Passive Active
Environmental
Absorption Entertainment (Movie)
Education (Language)
Relationship Immersion Esthetic (Tourist)
Escapist (ScubaDiving)
Experience Design PrinciplesExperience Design Principles
Theme the Experience (Forum shops)Theme the Experience (Forum shops) Harmonize Impressions with Positive CuesHarmonize Impressions with Positive Cues
(O’Hare airport parking garage)(O’Hare airport parking garage) Eliminate Negative CuesEliminate Negative Cues
(Cinemark talking trash containers)(Cinemark talking trash containers) Mix in Memorabilia (Hard Rock T-shirts)Mix in Memorabilia (Hard Rock T-shirts) Engage all Five Senses (Mist in Rainforest)Engage all Five Senses (Mist in Rainforest)
Source of Service Sector GrowthSource of Service Sector Growth
InnovationInnovationPush theory (e.g. Post-it)Push theory (e.g. Post-it)Pull theory (e.g. Cash Management)Pull theory (e.g. Cash Management)Services derived from products (Video Rental)Services derived from products (Video Rental)Information driven servicesInformation driven servicesDifficulty of testing service prototypesDifficulty of testing service prototypes
Social TrendsSocial Trends Aging of the populationAging of the populationTwo-income familiesTwo-income familiesGrowth in number of single peopleGrowth in number of single peopleHome as sanctuaryHome as sanctuary
Discussion TopicsDiscussion Topics
Illustrate how the type of work he or she Illustrate how the type of work he or she does influences a person’s lifestyle. For does influences a person’s lifestyle. For example, contrast a farmer, a factory example, contrast a farmer, a factory worker, and a school teacher.worker, and a school teacher.
Is it possible for an economy to be based Is it possible for an economy to be based entirely on services?entirely on services?
What is the value of self-service in an What is the value of self-service in an economy?economy?
Interactive Class ExerciseInteractive Class Exercise
The class breaks into small groups. Each The class breaks into small groups. Each group identifies service firms that should be group identifies service firms that should be listed in the top listed in the top Fortune 100Fortune 100 and places and places them in rank order of estimated annual them in rank order of estimated annual revenue.revenue.
www.fortune.com/lists/F500/index.htmlwww.fortune.com/lists/F500/index.html