Factors Contributing to The Growth of Service Sector

SERVICE ECONOMY

Meaning of service economy:

The size of the service sector is increasing in virtually all countries around the world. In emerging economies, the service output is growing rapidly and often represents at least half of the GDP. Thus, Service economy is growing. As a national economy develops, the relative share of employment between agriculture, industry (including manufacturing and mining).The service economy in developing countries like India is mostly concentrated in  financial services, health, and  education.

FACTORS CONTRIBUTING TO THE GROWTH OF SERVICE SECTOR

1. GOVERNMENT POLICIES:

It is Govt. which makes mandatory for price levels, distribution strategies, defining procedure attributes.

Another important action taken by the Govt.‟s “Privatization” means the policy of transformcompanies.

The transformation of such operations like telecoms, airlines has led to restructuring cost cutting and more market focused.

PROS OF PRIVATIZATION:

a. Increase the efficiency

b. Increase in profits

New change will require services firm to change their marketing strategy, operational procedures, and HR policies.

2. SOCIAL CHANGES

Now a day there is a drastic change, two members are working, which requires to hire individuals to perform tasks that used to be performed by a house hold member.

E.g. Child care

Laundry

Food preparation

Combinations of changing life styles like

√Higher income

√Declining prices for many high technology products –made for people to by computers.

√Mobile phone etc.

Increased imaginations into countries –U.S, Canada and Australia.

3. BUSINESS TRENDS

Many professional associations have been forced by Govt. to remove long-standing bars on adv and promotional activities.

Franchising has become wider spread in many service industries.

Licensing of independent entrepreneurs to produce and sell a branded service according to tightly specified procedures.

4. ADVANCES IN IT:

Changes come from the integration of computers and tele-communication

More powerful software enables firm to create databases that combine information about customers with details of all their transaction, so that they can be used to predict new trends, segment the market, new marketing opportunities.

The creation of wireless networks and transfer of electronic equipments such as cell phones to lap tops and scanners, to allow sales and customer service personnel to keep in touch.

5. INTERNATIONALISATION AND GLOBALIZATION:

A strategy of international expansion may be driven by a sector for new markets or by the need to respond to existing customers who are traveling abroad in greater numbers.

When companies set up operations in other countries they often prefer to deal with just a few international suppliers rather than numerous local firms.

The net effect is to increase competition and to encourage the transfer of innovation in both products and processes from country to country.