Fundamentals of Services

L EC T UR ER , P HD. LU I ZA S OU CA
E MA I L: LUI ZA . SOUCA @ ECON .U BBCLUJ. RO
S MLUIZA @YAHOO.COM
ROOM: 3 1 1
Course overview:
Duration: October 2017 January 2018
Final grade:
7 points written exam
1 point default
6 points questions (20 multiple choice questions, 4 open questions)
3 points project for the seminar
Up to 2 bonus points for interventions and written assignments during the course.
All the points summed up contribute to the final grade.
Lecture overview
The role of services in the economy
The nature of services
The relationship between the service industry and the manufacturing industry
The role of services in the economy
In the economy of well-developed countries:
Based on their contribution to the global GDP, the output is divided between
Services (63%), Industry ( manufacturing and mining 31%) and Agriculture (6%)
In well-developed countries, Services account for more than 70% of the GDP, while Manufacturing
for less than 20%.

Services play the main role in the economy

The relationship between the manufacturing and the service industry is dynamic
Outsourcing: companies focus on core competencies, while service related
functions get sourced to specialized firms
The role of the internet: communication and electronic commerce
The nature of services
Factors which impact the development of the service based economy
Government policies
Social changes
Business trends
Advances in computer technology
Globalization

The results:
New markets and product categories create increased demand for services in many existing
markets, making them more competition intensive.
Innovation in service products and delivery systems is stimulated by application of new and
improved technologies
The nature of services
The success of the service based economy hinges on

1. Understanding customers and competitors

2. Viable business models
3. Creation of value for both customers and the company
4. Increased focus on service marketing and management
The nature of services
Traditional definition of services:

Economic activities not directly associated with the manufacture of goods, mining
and agriculture

Human activities which add value through labor, advice, skills, entertainment,
training, intermediation, experience and other similar activities.
The nature of services
Services involve a form of rental through which customers can obtain benefits: their
desired experiences and solutions.
Labor, skills and expertise rentals people are hired to perform work that customers either
cannot or choose not to do themselves. (e.g. car repairs, medical check-ups, management
consulting, etc.)

Rented goods services allow customers to obtain the exclusive temporary right to use a
physical object that they prefer not to own (e.g. boats, fancy dress costumes, construction
and excavation equipment, etc.)
Defined space and facility rentals customers obtain the use of a certain portion of a larger
facility, such as a building, vehicle, or area, which they share with other customers. (e.g. a
seat in a plane, a suite in an office building, a storage container in a warehouse, etc.)
The nature of services
Access to shared facilities customers rent the right to share the use of facilities, which may
be a combination of indoors and outdoors (e.g. theme parks, golf clubs, toll roads, etc.)
Access and use of networks and systems customers rent the right to participate in a
specified network, which are under a variety of terms for access and use, depending on
customer needs (e.g. telecommunications, utilities and banking, social online networks and
games, etc.)
The nature of services
The services characteristics: Perishability
Lack of ownership transfer (total/partial)
Dont have an expiration date.
Intangibility
Underlines the perishability of resources
Lack of material, or physical used to create them (e.g. time)
characteristics
Heterogeneity
Difficult to compare/ imagine
Co-created from the interaction
Inseparability between service provider and customer
Cannot be inventoried, must be Hard to standardize
consumed at the point of production
The nature of services
The role of technology
ICT (information and communication technology) enables people to participate in a growing
number of service related activities in real, or deferred time, without having to be physically
present

Allows companies to produce a single product, which is not mass-produced, but which is capable
of being mass-consumed, either on a standardized or a customized basis. (e.g. online dictionary)

Affects the relationship between providers and consumers, in ways traditionally thought
impossible (e.g. health and mental care apps)

Decreases the heterogeneity of services, which can lead to standardized quality

The relationship between the service
industry and the manufacturing industry
Services are a major driving force for economic growth
E.g. without the need for transportation, there is no need for trucks, buses, ships and airplanes

There is an interplay between manufacturing and service activities

E.g. software development pushes for the development of more powerful computers and vice versa.
Yet, computers and software are completely dependent on each other (neither has commercial value
without the other)

Services are increasingly embodied in manufactured products:

E.g. the final value of the product increases because of the innovative effort and expertise of the design,
technical assistance and other intangible aspects.

Manufactured goods can now provide a competitive advantage to service providers:

E.g. switch your mobile communication provider, get a phone free