Business services are activities that benefit businesses but do not involve supplying physical products. These include consulting, cleaning, hospitality, transportation and travel. In many countries, the service sector accounts for the largest part of GDP.
These services may be used by businesses to help them meet their strategic goals or simply to increase productivity. They may also be used to save money or access expertise that the business does not have in house. For example, a company might hire an outside firm to manage its IT infrastructure or a catering service for industry events. Other examples of business services would be a security company that provides alarm monitoring or a law firm that provides legal advice.
A large portion of business services are provided as a service to consumers rather than businesses. This is commonly referred to as the consumer economy. Some of the most well-known examples are airlines and hotels that offer a premium “business class” option on their flights or hotels that cater to the needs of corporate travelers. This approach to providing services is often seen in other consumer industries as well, such as IT, software, entertainment and education.
Unlike physical goods, services do not have a tangible form and thus cannot be stored. They can be provided only when they are requested and must be delivered immediately. This characteristic explains why business services are sometimes referred to as a “service economy.”
Business-to-business (B2B) and business-to-consumer (B2C) business services are both subsets of the service sector. In a business-to-business context, these services are sold between companies instead of being consumed by individuals. For example, a company might purchase a professional cleaning service for its office or a catering service to hold an industry conference. A company might even contract with a construction firm to renovate its building.
Another significant difference between business services and physical goods is that the customers themselves can have an impact on the quality of the service. For example, an architect’s client’s input on a new facility design will affect the effectiveness of the final product. Likewise, a customer who dithers at a fast-food counter might make the wait time longer for everyone behind him.
A key challenge of a service business is designing its offerings to meet the needs and desires of desirable customers. This requires a shift in thinking from one that focuses on the features and benefits of a particular product to one that focuses on creating valuable experiences for customers. This requires a different kind of management than a product business and can often be more difficult to achieve. However, successful service businesses are often recognized for the value they bring to their customers and the competitive advantage they create for their employers. In addition, they are often valued for the role they play in the’servitisation’ of the European economy. These services are being increasingly combined with other types of economic activities to create new value propositions. This is driving significant changes in the way that firms compete with each other for business services.