Service Industry: Overview
A Service is a general term that describes work that supports a business but does not produce a tangible commodity. A type of economic activity that is intangible, is not stored and does not result in ownership. A service is consumed at the point of sale. Services are one of the two key components of economics, the other being goods. Examples of services include the transfer of goods, such as the postal service delivering mail, and the use of expertise or experience, such as a person visiting a doctor. The service sector produces “intangible” goods, some well known – government, health, education and some quite new- modern communications, information, and business services.
Every economy consists of three sectors. They are primary sector (extraction such as mining, agriculture and fishing), secondary sector (manufacturing) and the tertiary sector (service sector). Economies tend to follow a developmental progression that takes them from a heavy reliance on primary, toward the development of manufacturing and finally toward a more service based structure. Historically, manufacturing tended to be more open to international trade and competition than services. As a result, there has been a tendency for the first economies to industrialize to come under competitive attack by those seeking to industrialize later. The resultant shrinkage of manufacturing in the leading economies might explain their growing reliance on the service sector. However, currently and prospectively, with dramatic cost reduction and speed and reliability improvements in the transportation of people and the communication of information, the service sector is one of the most intensive international competition.
Service sector is the lifeline for the social economic growth of a country. It is today the largest and fastest growing sector globally contributing more to the global output and employing more people than any other sector. For most countries around the world, services are the largest part of their economy. The real reason for the growth of the service sector is due to the increase in urbanization, privatization and more demand for intermediate and final consumer services. Availability of quality services is vital for the well being of the economy. In advanced economies the growth in the primary and secondary sectors are directly dependent on the growth of services like banking, insurance, trade, commerce, entertainment, social and personal, etc. The U.S. and other developed economies are now dominated by the services sector, accounting for more than two-thirds of their Gross Domestic Product (GDP).
A growing economy changes the proportions and interrelations among its basic sectors— agriculture, industry, and services and between other sectors—rural and urban, public and private, domestic- and export-oriented. One way to look at the structure of an economy is to compare the shares of its three main sectors—agriculture, industry, and services—in the country‘s total output and employment. Initially, agriculture is a developing economy‘s most important sector. But as income per capita rises, agriculture loses its primacy, giving way first to a rise in the industrial sector, then to a rise in the service sector. These two consecutive shifts are called industrialization and post industrialization. All growing economies are likely to go through these stages, which can be explained by structural changes in consumer demand and in the relative labor productivity of the three main economic sectors.
The various sectors that combine together to constitute service industry are:
- Travel & Tourism
- HR Consultancy
- Public Relations
- Office Administration
- Education & Research
- Banking & Insurance
- Real Estate
For complete list of sectors, click here.
Manufacturing Industries engaged in the production of goods (finished products) that have value in the marketplace. These industries are further classified into two as Process Industries (Flow production or continuous process production industries) and Discrete Manufacturing Industries.
Service Industries include those industries that do not produce goods, but provide certain services. The peculiarity of these industries is that often the consumption of the service takes place while it is in the generation. Typically, this sector includes hospitality, advertising, banking, insurance, consultancy, logistics, etc.