Business services are activities that assist businesses but don’t produce a tangible commodity. They make up a large portion of the commercial economy and include a variety of areas that products cannot address, such as information technology, marketing, logistics and consulting.
Developing the right strategy to build a profitable service business can be challenging because it requires thinking differently from how product businesses do. Many of the core techniques that determine a company’s health in a product world can be used in service environments, but whole new areas of management remain open and require more work to understand. This article outlines a framework to help managers in these new areas build successful companies that create value for their customers.
While some modern business theorists see a spectrum with pure service at one end and pure commodity good at the other, most products fall somewhere in between these extremes. For example, a restaurant may provide a physical good (food), but also provides many services such as ambience and food preparation to enhance the customer experience. In addition, utilities such as water or electricity are often considered services despite the fact that they deliver a tangible product.
Companies that provide business services are a crucial part of the economy and offer jobs to millions of people. In terms of employment, they are responsible for about 11% of the total workforce in the United States. The largest sector of the business service industry is professional and technical services, which includes consultants, advertising agencies and law firms. The second largest category is transportation and warehousing, followed by manufacturing and administrative and support services.
The main function of business services is to provide value for a company’s employees, customers and other stakeholders by providing support functions that enable the business to perform its core activities. This can be done by offering advice, performing work as a consultant, or running the day-to-day operations of the firm such as billing and accounting. In some cases, business services may involve providing a physical good such as an office space, but most of the time, these types of companies are called service providers rather than manufacturers.
Another important aspect of business services is enabling companies to use the resources they have efficiently. For example, a construction company that offers business services can reduce the cost of a building project by bringing in a team with their own equipment and expertise rather than hiring a construction crew to rent or buy the necessary tools. This saves the company money and time while allowing them to use their employees for more productive tasks.
A company that provides business services may also have a special department that helps them with logistical problems such as supply chain management or shipping. This type of service can improve efficiency by streamlining the flow of goods from manufacturers to customers. This is accomplished by reducing paperwork, handling shipments and tracking inventory. Other types of business services include warehousing, packaging, light assembly and even marking prices.