As shown in Figure 1.1 , services are central to the economic activity in any society. Infrastructure services, such as transportation and communications, are the essential links among all sectors of the economy, including the final consumer. In a complex economy, both infrastructure and distribution services function as intermediaries and as the channel of distribution to the final consumer. Infrastructure services are a prerequisite for an economy to become industrialized; therefore, no advanced society can be without these services. In an industrialized economy, specialized firms can supply business services to manufacturing firms more cheaply and efficiently than manufacturing firms can supply these
services for themselves. Thus, more and more often we find advertising, consulting, and other business services being provided for the manufacturing sector by service firms. Except for basic subsistence living, where individual households are self-sufficient, service activities are absolutely necessary for the economy to function and to enhance the quality of life. Consider, for example, the importance of a banking industry to transferfunds and a transportation industry to move food products to areas that cannot producethem. Moreover, a wide variety of personal services, such as restaurants, lodging, cleaning, and child care, have been created to move former household functions into the economy.
Government services play a critical role in providing a stable environment for investment and economic growth. Services such as public education, health care, wellmaintained roads, safe drinking water, clean air, and public safety are necessary for any nation’s economy to survive and people to prosper. Increasingly, the profitability of manufacturers depends on exploiting value-added services. For example, automobile manufacturers have discovered that financing and/or leasing automobiles can achieve significant profits. Otis Elevator long ago found that revenues from after-sales maintenance contracts far exceed the profits from elevator equipment sales. As personal computers become a commodity product with very low margins, firms turn to network and communication services to improve profits.
Thus, it is imperative to recognize that services are not peripheral activities but rather integral parts of society. They are central to a functioning and healthy economy and lie at the heart of that economy. Finally, the service sector not only facilitates but also makespossible the goods-producing activities of the manufacturing sectors. Services are the crucial force for today’s change toward a global economy.
Government services play a critical role in providing a stable environment for investment and economic growth. Services such as public education, health care, wellmaintained roads, safe drinking water, clean air, and public safety are necessary for any nation’s economy to survive and people to prosper. Increasingly, the profitability of manufacturers depends on exploiting value-added services. For example, automobile manufacturers have discovered that financing and/or leasing automobiles can achieve significant profits. Otis Elevator long ago found that revenues from after-sales maintenance contracts far exceed the profits from elevator equipment sales. As personal computers become a commodity product with very low margins, firms turn to network and communication services to improve profits.
Thus, it is imperative to recognize that services are not peripheral activities but rather integral parts of society. They are central to a functioning and healthy economy and lie at the heart of that economy. Finally, the service sector not only facilitates but also makespossible the goods-producing activities of the manufacturing sectors. Services are the crucial force for today’s change toward a global economy.
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