Service economy

It is considered a pre-requisite to a strict service economy interpretation of (fictional, national, legal) "commodity" and "product" relationships.

This is the financial reflection of the comprehensive outcome - noting the gains and losses to all parties involved, not just those investing or purchasing.

[2] This means that recent economic growth in Africa relies as much on services as on natural resources or textiles, despite many of those countries benefiting from trade preferences in primary and secondary goods.

As a result, employment is also adjusting to the changes and people are leaving the agricultural sector to find work in the service economy.

For example: The trend of servitization is very visible while looking at the growth of the service shares in the United States and European countries GDP than 20 years ago.

Baines, Lightfoot, & Kay (2006) name three main sets of factors that motivate companies to expand into services sectors: financial, strategic and marketing.

In the increasing price competition among product offering, companies can use services to recover the lost potential revenue.

GE's transportation division encountered a 60% drop in the number of locomotives sold between 1999 and 2002 but did not turn out disastrously because the revenue from services has tripled from $500M to $1.5B from 1996 to 2002.

[3] According to an AMR Research (1999) report, companies earn over 45% gross profits from the aftermarket services although they represent only 24% of revenues.

It is also rare and difficult to imitate as not too many companies have capabilities of providing service to the customer since the producer has better knowledge and experience in the product functioning.

As services are provided on a long-term basis rather than one-time sale they offer more time to build the relationship with the customers and allow supplier to create the brand.

This kind of work requires time and meetings of both sides during which trust and understanding are developed, which further leads to loyalty.

[6] Last but not least working closely with customer and having opinions from a different perspective provides the supplier with valuable insights about the industry enabling him to innovate with a more customer-centric approach.