Question

what is a service economy? what are the disadvatages and advantages?

Answer 1

Service economy is an economy where the Primary economic activity is the provision of services rather than production of Goods.The United States is the best example of Service economy as most of the growth of the U.S. economy is linked with services. The U.S. Census Bureau has broken down the service economy into 13 different sectors including Utilities, Transportation & Ware Housing , Information, Finance and Insurance, Real Estate and Rental & Leasing services etc. The services of Doctor, Salesman, Comedian, Waiter etc comes under Service economy. The focus is on the service rather than manufacturing. For Example, A Doctor doesn't create Medicine or Medical Devices but rather provides treatment and diagnosis of the disease. Similarly A Salesman job is to sell the products to the consumers, not to design or manufacture.

Advantages :

It provides great deal of opportunities for Free lancers and Entrepreneurs. For example it is a lot cheaper to start a lawn care business than to open up a factory to manufacture lawn mowers.

There is no need to buy and stock up Inventory. If you sell a service, there is no inventory. Instead of buying and selling products, you convince customers to take advantage of your ability to make their lives easier. So the cost of manufacturing, storing etc can be avoided.

It expertises the skills of the Individual as expertise in the respective field can increase the size and growth of the Business. This requires constant monitoring, evaluation and retraining of employees.

It enables local marketing as many Service Businesses are local.

It is flexible and adaptable to Changing Wants and Needs.

Disadvantages:

The valuation of Service business is difficult than a manufacturing or retail Company. Those businesses have inventory, equipment and Assets to have a value. You have to establish a track record of sales and some reliable sales projections to convince lenders of the value of the Company.

The demand is cutback in difficult times. Usually in difficult economic times, Consumers usually cut back on services. They focus on Products they need to survive and prosper and services are often taken as extras.

A service based Business is difficult to start and continue as You will be basically selling Yourself and not a Product and it is a big Challenge to build and provide a tangible experience of your services to a Customer.Everything from your skills, to your professional competance to Customer Service depends on how well you can package Yourself and Your services suit according to the needs of the Customers.

As every Business is subjected to Volatile Market Trends, various degrees of Customer satisfaction and expectations and the numerous laws of Marketing and Publicity etc. It is essential to adapt to the changing demand in type of services. You have to meet changing demands of the Customers or else Your Business is lost.