Strategic drivers focus primarily on acquiring and securing the company`s competitive advantage. For the company to gain a sustainable competitive advantage, its resources must be valuable, scarce, difficult to emulate, and organized. Servitization may not be the only ultimate guarantee for the company to achieve this. However, it proves to be valuable because it is not provided by many suppliers and facilitates the use of the product by the customer. It is also rare and difficult to imitate because few companies are able to provide services to the customer because the manufacturer has a better knowledge and experience of how the product works. In addition, services are less visible and require more work, making them harder to imitate. Finally, commercialization lowers prices and forces companies to constantly innovate. However, adding services to the product increases its value to the client, making it more valuable and personalized, as service delivery can be more individualized by meeting the needs of ad hoc clients. The financial driver is reflected in improved profit margins and stable profits associated with servitization. In the increasing price competition between product offerings, companies can use the services to compensate for the loss of revenue. GE`s transportation division experienced a 60% decline in the number of locomotives sold between 1999 and 2002, but this was not catastrophic, as service revenues tripled from $500 million in 1996 to $1.5 billion in 2002. [4] According to a report by AMR Research (1999), companies generate more than 45% of gross profits from after-sales services, even though they account for only 24% of sales. It also shows that in 2001, GM made more profit with $9 billion in aftermarket revenue than $150 billion in revenue from car sales.
[5] The old dichotomy between product and service has been replaced by a service-product (economic) continuum [1]. Many products become services. The service economy can refer to one or both recent economic developments: The service sector, also known as the tertiary sector, is the third stage of the three-sector economy. Instead of product production, this sector produces maintenance and repair services, training or consulting. Examples of jobs in the service sector include housekeeping, visiting, nursing and teaching. In contrast, people employed in industry or manufacturing produce tangible goods such as cars, clothing or equipment. According to the CIA World Factbook, in 2018, the following countries are the most important in terms of services or tertiary production: Full cost accounting and most accounting reforms and monetary reform measures are generally considered impossible without a good model of the service economy. The export potential of many of these products is already well known, for example in tourism, financial services and transport, but new opportunities are emerging in other sectors such as healthcare. For example, “Service industry”. Merriam-Webster.com Dictionary, Merriam-Webster, www.merriam-webster.com/dictionary/service%20industry.
Retrieved 14 January 2022. It is often applied to paints, tires and other products that become toxic waste if not disposed of properly. It is best known as container deposit charged for a returnable bottle. You pay a fee to buy the bottle, separate from the fee to buy what it contains. When the bottle is returned, the costs are refunded and the supplier must return the bottle for reuse or recycling. If not, you`ve paid the fee, and it can likely pay for landfill or garbage control measures that dispose of diapers or a broken bottle. Since the same fee can be charged to anyone who finds and returns the bottle, it is common for people to collect and return it to earn a small income. This is quite common, for example, among homeless people in American cities. Legal requirements vary: the bottle itself may be considered the property of the purchaser of the contents, or the purchaser may be required to return the bottle to a depot so that it can be recycled or reused.
Among the countries that attach great importance to the services sector, the United States, the United Kingdom, Australia and China are among the favorites. In the United States, the Institute for Supply Management (ISM) compiles a monthly index that shows the general state of business activity in the service sector. This index is considered a measure of the overall economic health of the country, as about two-thirds of U.S. economic activity takes place in the service sector. Those who advocate it deal with the final stages of the product life cycle and the overall result of the entire production process. It is considered a prerequisite for a strict interpretation of the service economy of relations (fictitious, national, legal) and “commodity” relations. Responsible management or withdrawal of a product are words for a specific requirement or action when the waste management service is included in the distribution chain of an industrial product and paid for at the time of purchase. This means that you pay for safe and proper disposal when you pay for the product, and rely on those who sold it to you to get rid of it. For example, IBM treats its business as a service company.
Although it still makes computers, it considers physical goods to be a small part of the “business solutions” industry. They found that the price elasticity of demand for “enterprise solutions” is much lower than that of hardware. There has been a corresponding shift towards a subscription pricing model. Instead of receiving a one-time payment for a manufactured device, many manufacturers now receive a steady stream of revenue for ongoing contracts. Since the 1950s, the world economy has undergone structural changes. For this change, the American economist Victor R. Fuchs called it the “service economy” in 1968. He believes that the United States has taken the initiative to enter the service economy and society in Western countries. The statement heralded the arrival of a service economy that began in the United States on a global scale.
With the rapid development of information technology, the service industry has also shown new development trends. [1] Services account for more than 50% of GDP in low-income countries, and as their economies develop, the importance of services in the economy continues to grow. [2] The services economy is also key to growth, accounting for 47% of economic growth in sub-Saharan Africa during the period 2000-2005 (industry contributed 37% and agriculture 16% over the same period). [2] This means that recent economic growth in Africa depends as much on services as on natural resources or textiles, although many of these countries benefit from trade preferences for primary and secondary products.