GlobalEDGE: Business Services

Business services

In the traditional three-sector economic theory, business services are considered tertiary, which means they complement or add value to primary and secondary industries that produce tangible products. Examples of business services are consulting, training, and logistics. These activities help a company in production, safety, cost, and convenience. Companies can also outsource these services to reduce the risk of losing control over their processes and to focus on other areas of their business.

Service businesses face unique challenges that are not found in product businesses. Unlike physical goods, which can be stored for future consumption, services must be provided immediately to satisfy customer demand. Moreover, service quality is difficult to measure. A good example is a fast-food restaurant, where a customer who dithers at the counter can make the service experience less efficient for everyone else in line.

Most service businesses must work to ameliorate both productivity and quality of service. They also have to invest in people and equipment. To achieve competitive advantage, they need to provide quality service at a lower cost than their competitors. In order to do so, they need to develop and implement effective management strategies. These include recruiting and training people with appropriate skills, managing the service supply chain, measuring service quality, developing innovative services, and establishing a culture of continuous improvement.

The success or failure of a service business comes down to whether it gets four things right. Based on an approach developed as a core teaching module at Harvard Business School, the four critical elements of service design are: Sense and Respond, Create and Deliver, Capture and Retain, and Manage and Innovate. A business that does not get all of these right runs the risk of putting its customers, employees, and suppliers at a disadvantage.

There are three types of business services: business-to-business (B2B), business-to-consumer (B2C), and social. For globalEDGE’s purposes, all the help that a business needs with its money or assets is filed under Financial Services, while all the other miscellaneous help it might need falls under the Business Services category.

In the United States, professional and business services accounts for more than 11% of total GDP. It is the largest sector in the economy, encompassing everything from computer support and information technology services to advertising and marketing and from law firms and human resource management to facility management. Despite its importance, the sector faces several challenges. These challenges are primarily the result of legal and regulatory barriers that need to be removed to improve competitiveness. The European Union’s internal market legislation and policies are working to do just that. This is a particularly important initiative given the increased importance of services in the European economy.