Business and Services

In today’s parlance of Business and Growth, another terminology which assumes special significance is Services.

The economic czars would confirm in no uncertain words that ‘high growth’ can surely be maintained with a potential or robust market. But there is no debate that neither the industry nor the manufacture alone can really help sustain the growth rate. The services sector has made the largest contribution to keep the growth graph maintain a northbound movement.

Having said so, it is also important to draw attention to the debate and cross arguments put forward by academicians and experts that – whether such growth can be maintained for long. Experience has shown that it soon faces its limit and it is more vulnerable to periodic fluctuations.

But the service sector has its own merits. One can say absurd but it is true that the economy of a country can grow around 5 to 6 percent even if the two vital fronts manufacturing and industry sectors have not grown beyond 5 percent or even less.

In many developing countries, the structural changes that have taken place in a decade time has raised the share of the service sector to about 60 percent.

A Differentiator:

Services as a sector are also a differentiator that enhances performance and ensures better loyalty from the customers – that is the market in the sense of a bigger canvas. But a plethora of factors also often make Services a hotbed of wrangling marked with credit taking and blame giving syndrome.

In the raw business sense, warranty is a good yardstick of services. With consumables and even a host of IT products, the scenario in services changed radically when the large companies themselves showed greater penetration in the services. The shrinking budgets of the customers in various countries and other market dynamics forced customers to prolong the life of their equipment. This eventually meant increased opportunities for service providers.

In Indian context itself, the share of services sector went up from 55 percent in 2001 to around 62 in 2006-07. That could happen because the services sector as a whole grew at a faster pace than manufacture or industry. Surveys have revealed that in , income from services sector raised much due to several factors.

The income from trade, hotel and restaurants increased by a whopping 50 percent and that from transport, storage and communication increased by an unbelievable 95 percent.

 
A Close Look:

The composition of services sector being what it is, not many of it supply directly to the industrial sector or even manufacture sector for that matter. Studies have shown that trade, hotels and restaurants in share around 25 percent of all services wherein the trade alone has the lion’s share of the cake. Financing, insurance and real estate have a share of 23 percent and the community and personal services will also share around 25 percent. Transport, storage and communications will walk away with about 17-18 percent share.

From debating point of view, trade essentially means retail trade run by approximately 30 lakh workers. Notably, in and also in developing countries most of the work force in trade or retail essentially is composed of self-employed people transacting essential goods particularly agricultural goods.

Trade/Services vis-à-vis Manufacture sector:

The volume of the trade transactions in manufactured products has a rather small share in their total sale. Their services are surely necessary for circulation of manufactured goods from the production unit to the consumers via middlemen or small time retailers. Hence, it is found that the respective growth figures of manufacturing sector and the trade show a very thin interdependence.

Therefore, it will not be surprising to find that in a fiscal when the trade shows a growth of over 9 percent, the manufacturing sector could still be limping with a meager 2 to 3 percent growth.

Take a few instances of service sectors. These would include chiefly IT, then Aviation under transport and communications sub-head, Hotel – linked to tourism sector and unorganized service sector besides the BPO culture making waves across the globe.

 Unorganized Transport:

In and a few Asian countries, unorganized transport sector employs a huge army of population and it is believed also gives them so called catch word: “gainful employment”. In , an estimated 65 lakh people are in unorganized transport services – spread across urban and rural areas. There are an overwhelming number of people employed in the form of pulling rickshaws, bullock carts, and boats.

There’s an abundant growth of unorganized sector also in communications with the unprecedented development and technological uplift seen in mobile tele-communications. Even small time kiosk owners have started dealing with SIM cards and making their share of the profit.

In another context, it is also found that small distance passengers have a larger share in transport sector though it is difficult to calculate exact mix of goods and passenger transport.  The use of transport system for traveling by unorganized sector is quite minimal and therefore, a larger share of growth in the transport segment does not depend upon the trend in manufacturing.

Demon of Customers’ Expectation:

When it comes to IT products and other consumables like television sets to washing machines, market findings reveal that service expectations in the minds of the customers is like a demon. But it is essentially created by the market itself. Many a places, dealers and retail players complain that most often customers make a beeline demanding a replacement after the expiry date to products with warranty.

On their part, the dealers find it very difficult to ignore the customers because of highly competitive market.

Other problems with services:

The companies have on one hand set up service centers to deal with market demand but seldom they are well equipped to cater to the problems of the customers. Dealers complain that the transit issue is one of the chief maladies afflicting the services of products for various consumables. The service centers set up by large companies often insist on transportation demanding that the defective piece should be brought to large centers like state capitals or so. This demands lot of time taking and the customers ultimately lose faith in the dealers.

IT Services and Warranty: