Business services refer to the non-financial services that a company provides to other businesses. They include advertising, marketing, consulting, logistics (including travel and facilities services), waste handling, staffing, shipping, administration, and security.
The business services industry is a relatively large and diverse industry that provides companies with many benefits. This industry is especially important for larger organizations that need to provide their employees with convenience, safety and cost-effective services.
Unlike product-oriented businesses, which sell physical or concrete products to customers for an agreed price, service businesses are not concerned with delivering tangible goods to customers; they are concerned with providing intangible and specialized services that are essential to the success of their businesses. A service-oriented business must develop a reputation for the quality and scope of the services that it offers.
This reputation must be built up over time by the development of an innovative and unique set of offerings. It must also be built up by the management of the employees and managers in the company.
There are several barriers to entry in the business services industry. Among these are:
Service differentiation. In product-oriented businesses, the product is developed and marketed to differentiate it from other products–Bic, Coke, Xerox, for example–so that a customer can be sure to get the right product for the money. For services, the more complex the service is, the more difficult it may be to develop a product differentiation.
The importance of service differentiation is even greater in service-oriented businesses because the value of the service is often a function of the way the service is interpreted and used by customers. This means that the operational process in a service company must be carefully designed to accommodate the varying needs of different kinds of customers and, if the operation is not well-designed, the cost and quality of service can be significantly affected by a variety of factors outside the direct control of the business itself.
A service-oriented company must be careful to design its service process in such a way that it takes advantage of economies of scale that a product-oriented business can develop over time. This is a critical consideration for all new service-oriented companies, but it is particularly important for the first generation of such companies.
Another barrier to entry is the need to build a reputation for quality and customer satisfaction. This can take the form of an upscale or exclusive service that is only available to a select group of customers.
Other barriers to entry in the service business include the need to develop economies of scale and the need for multiple locations, which can be difficult or expensive to establish. This is particularly the case for service-oriented companies whose services are abstract and complex, as in the case of professional and management consulting firms.
Despite the challenges involved in managing a service-oriented business, they offer a great deal of potential for growth and development. In fact, business services are a growing sector of the economy and the job opportunities in this industry are expected to increase throughout the years ahead.