Business services are a broad category of activities that support the business world and have nothing to do with the creation of tangible products. They include a broad range of activities such as information technology, human resources, marketing and consulting. In most cases, these are provided to other businesses rather than consumers. Many of the same strategic management techniques that apply to product businesses are also applicable to business service firms, but some additional tools and frameworks must be employed.
While the underlying business model is the same, it is easier to define a business in terms of its physical product than a business that provides an intangible service. This is why it takes so long for some companies to transition from a product-oriented company to a service-oriented company.
In a service-oriented business, there is no physical product, and the pricing system can be difficult to understand. Most service businesses are based on a “service charge” that is based on value, not on the cost of providing the service. This is in contrast to a product-oriented business, which generally tries to achieve market-based pricing for its products.
The nature of service businesses makes them more susceptible to operational issues than other types of firms. For example, if an employee at a service firm does not explain the purpose of an operational process clearly to a customer, that can have an adverse effect on both the customer and other employees in the same department. Similarly, if a fast-food restaurant customer dithers at the counter while waiting for his order, it can slow down service for everyone else in line.
Because of these unique challenges, it is important for top managers to be aware of the special needs of their service-oriented businesses. These managers can then take advantage of the best practices and techniques that have proven effective in achieving success in these firms, both when creating new services and upgrading existing ones. Examples of service-related initiatives include a human resources shared services approach that reduces costs and improves performance by consolidating functions such as payroll processing, benefits administration and employee onboarding. Another common strategy is financial shared services, which combines finance departments and reduces the cost and time to implement changes to accounting processes. Other examples are a service to help foreign companies to find and work with contractors in the United States and a service that helps organizations manage their supply chain operations. These initiatives are a great way to improve the efficiency of service-oriented businesses. This will make them more competitive and profitable. This will provide a boost to the economy and increase employment opportunities. The European Union has taken a number of steps to encourage the growth of these firms, including the development of a High Level Group on Business Services (web archive)EN*** and the passage of internal market legislation and policies. These efforts aim to remove barriers that inhibit business services’ competitiveness in the EU. This will lead to a more integrated industrial policy and stimulate global economic growth.