UNIT ONE

Introduction to Services – Importance, role in economy service sector – growth; Nature of

services - The Nature and Classification of Services. The Future of Services., E commerce
and public sector developments- Manufacturing Continuum, Service classification , Service
Package, distinctive characteristics , open-systems view; Service Strategy, Strategic service
vision, competitive environment,

Role of Service Sectors in the Growth of Indian Economy

Contribution of Service Sector in Indian Economy The importance of services sector in India
has been increasing continuously decade after decade. With the continuous enlargement of
services sector, both in relations of volume and diversity, the status of services sector is
increasing at a high speed.

1. Growth in GDP:The contribution of total services sector in India’s GDP, which is

organised by trade, hotels, transport, storage and communications, banking, insurance, real
estate, community and personal services increased from 42.48 per cent in 2007 and then
finally to 48.93 per cent in 2017.

2. Services Sector Generate Employment:The significant of services sector can also be

realised from its support towards generation of employment in India. Even though the
primary sector (mainly agriculture) is the leading employer followed by the services sector,
the share of services sector is increasing over the years and this way of the primary sector has
been decreasing.

3. Contribution in Services Trade:The services sector is also contributing an important role in

raising the volume of exports in India. Thus country is moving towards a services-led export
growing in the recent years.

4. Contribution towards Human Development:Services sector plays significant contribution

towards human development in our country. Therefore, services sector has been rendering
certain valuable services, for example educational facilities,health services, IT and IT enabled
services (ITes), skill development, tourism, sports, and cultural services etc. which are mostly
responsible for human empowerment and expansion of quality of life of the people.

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5. Services Sector Growth and FDI Inflows:Modest progress of services sector has made
sufficient scope for the smooth inflow of FDI into the country. FDI also plays a significant
role in the dynamic growth of the services sector. On the optimistic side, at global level,
medium term prospects for services are normally better than those manufacturing sector with
global investment in the services sector anticipated to grow relatively faster.

6. Contribution towards Development ofCommunication and Infrastructure:Services sector

has also been contributing a significant role in developing,escalating and management of
infrastructure with a special highlighting on development of transportation and
communication services. In India the significant development of infrastructural facilities is
quite high.

7. Contribution towards Development of IT and ITeS:The services sector has also play a
significant role in the continuous growth of its IT and IT enabled services (ITeS) sector and
thus helping the economy of the country to achieve higher growth both in terms of GDP
share, employment, exports etc. which has put India on the universal map.The IT and ITeS
sector of the India has developed an image of a young and has earned a brand identity in this
sector.

8. Contribution towards Development of Social Services: Services sector is also playing a

significant role in the development and growth of some social services like sports, cultural
services etc. Sports encourage physical fitness and develop human personality which also
played an essential role in national identity, community bonding and international bonding.
To meet the objective of protective and encouraging all forms of art and culture, a variety of
activities are being undertaken by the Government of India.

Government Initiatives and Achievement in Service Sector

The Government of India identifies the significance of promoting growth in services sectors
and provides numerous incentives in wide variety of sectors such as health care,
tourism,education, engineering, communications, transportation, information technology,
banking, finance and management. Prime Minister Narendra Modi has specified that India's
main concern will be to work towards Trade Facilitation Agreement (TFA) for services,
which is expected to help in the smooth movement of professionals.

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The Government of India has approved a few initiatives in the recent past years. Some of
these are as given below:  Under the Mid-Term Appraisal of Foreign Trade Policy (2015-
20), the Government of India increased incentives providing under Services Exports from
India Scheme (SEIS) by two per cent.  Central Government is working to eliminate many
trade barriers to services and tabled a draft legal text on Trade Facilitation in Services to the
World Trade Organisation (WTO) in 2017.

Five Main Advantages of the Service Sector

1. No Inventory: In the service sector, there is no need to built-up a reserve of inventory
that needs to be stored in a warehouse. Because the product that you are selling is your
skills and expertise wherein you’ll only need to have the necessary equipment required
to perform the required services, no warehouse full of inventory needed.
2. Easy to start up: In comparison to other business industries, starting a business in the
service sector is relatively easy. Because business in the service sector requires little
more than a license, phone, and a person with the required skills and expertise to get up
and going. This not only makes it quite easier but also very affordable to get started.
3. Flexible hours: Working in the service sector provides flexibility in the working hours,
which in turn allows you to get an opportunity to further increase your skill and
education and to accomplish other important tasks at times you might not otherwise be
able to.
4. Greater adaptability to changes: The service sector companies are able to adapt to the
changes in customer needs much easily and quickly in comparison to product-based
companies.
5. Provides job even during economic crisis: During an economic dip, when people are
cutting down their expenditure and are only paying for basic necessities, the service
sector helps to keep the job and bring in the revenue as service sector experts are always
in demand.
Significance of the Service Sector
1.  Gross Value Added (GVA) at current prices for the services sector is estimated at 96.54
lakh crore INR in 2020-21 and accounts for 53.89% of total India’s GVA of 179.15 lakh
crore Indian rupees. Thus, holds the highest share in the country’s Net National
Product.
2. Promotes industrialization: The service sector provides various facilities such as
transportation, banking, electricity, repair, or communication in support of the distribution

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of the manufactured goods which directly affects the development of an industry in a
country. For example-transport systems helps to carry laborer, raw material and finished
goods to their destination, communication networks are required to make a market for the
product and for the industries to prosper, we require banking and electricity. Moreover, the
feedback from the marketplace, fast delivery as well as the ability to customize products are
all dependent on the service industry.
3. According to World Bank data in the year 2017, India has become the 6th largest
economy with a GDP of 2.59 trillion USD, demoting France to the 7th position, allowing
for the growth of the service sector in the country.
4. Growth of Agriculture: By providing network facilities, service sectors help in the
development of agricultural products such as helping in the transport of raw material and
finished goods from one place to another.
5. Increase in the productivity of the goods: The service sector helps in providing
appropriate technical knowledge/education to the workers as well as provide them with
proper medical facilities. Moreover, the service sector also facilitates an organized network
of communication and transport systems which helps in increasing mobility and
information among the workers. This results in an increase in the productivity
6. Provides Good Quality Life: By providing better services in the field of education and
health, banking and insurance as well as communication and transportation, the service
sector has helped in increasing the quality of life in the country and thus helping in raising
the country’s human development index (HDI),
7. Growth of Market: This sector provides various services catering to the needs of both
primary and secondary sectors and thus helps in providing a market for the finished goods
as well as raw materials or semi-finished goods for both i.e. agriculture and industries.
8. Increase in international trade: India’s trade in services recorded substantial growth as
the country became globally competitive in ICT services which increased exports manyfold
and led to an increase in India’s trade surplus. Service exports have contributed to the
inclusive economic processes by increasing the amount of well-paid jobs and by
reallocating labor to a high-productivity sector.
9. Removes regional disparities: The service sector has made it possible to connect every
small town and village through a well-organized system of communication and transport.
Moreover, the expansion of education, medical as well as banking services in various
backward areas of the country has helped in removing the regional imbalances and
disparities throughout the nation.

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 Some Contribution of Service Sector in Indian Economy
The service sector is the largest recipient of FDI in India with an inflow of 83.14 billion
USD between April 2000 and June 2020. Some of the services in the umbrella of the
service sector are listed below:

1. Research and Development services: In the Global Innovation Index of 2020, India
ranks 48 among the top 50 countries. This sector presents a significant opportunity for
multinational corporations across the world due to the highly-trained Indian manpower
available at competitive costs and intellectual capital available in the Indian market. For
that reason, in recent years, several MNCs have shifted or are shifting their research and
development part to India. It helps those MNCs to either develop new innovative products
to serve the local market or help the parent company to deliver products faster to the world
markets. India’s expenditure in R&D is targeted to be about 2% of the country’s total GDP
by the year 2022.
2. Telecom services: According to FY20 by TRAI, India has an average wireless data
usage of about 11 GB per month per subscriber which is expected to reach 18 GB by 2024.
Thus, making India one of the biggest consumers of data worldwide.
3. IT Enabled Services (ITES): Owing to the socio-economic conditions of India and
rapidly changing business, as well as the proliferation of the internet, the Indian ITES
industry is now day by day increasing its area and has become a tough competitor for the
world market. India’s success in software and IT-enabled serviced exports has made it a
major exporter of services with a share in world service exports rising from 0.6% to 3.3%
from the year 1990 to 2013.
4. Tourism services: Due to historical heritage, variety in ecology, terrains, the rich
culture, and places of natural beauty spread across the country, the Indian tourism and
hospitality industry has emerged as one of the important services sectors in India. Thus,
Tourism is a significant source of foreign exchange for our country. During 2019, the total
contribution of travel & tourism to GDP was 6.8% of the total economy, and in the
financial year 2020, the tourism sector in India accounted for 8 percent of the total
employment in the country. It is expected that about 53 million jobs will be created in the
Indian market by 2029. 

CONCEPT AND NATURE OF SERVICE

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Service – Concept of Services
Services are the major component and somehow influenced by the service motives of any
business. The service are much needful to develop and make safeguards of customers
interest. Moreover, services are complementary and decisional part of marketing.

According to Philip Kotler:

“A service is any activity or benefit that are being an offer to another that is essentially
intangible and does not result in the ownership of anything.”

The characteristics of services are briefly stated here:

(i) It is a core area or an activity or a task of business,

(ii) It is a major component and denotes a parallel size of business,

(iii) Services may be collateral activity and have a supplementary service to support the core
area of business,

(iv) A service is an act or performance offered by one party to another,

(v) It is an ideology or concept or an approach based on customers’ orientation,

(vi) A service is an economic activity that creates values and provides benefits for customers,

(vii) The service process may be tied to a physical product and the performance is transitory,

(viii) Services are based on the concepts of rational behaviour and the norms of ethical
values,

(ix) Services may be treated as the philosophical part in the form of art and a systematical
part in the form of ‘science’,

(x) It is prominent task to serve at the input as well as output stages in any value creation
process,

(xi) It serves as dynamic platform to accommodate professional attitudes,

(xii) It is provided by a person who processes a particular skills, quality, competencies and
learning aspects,
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(xiii) Services having the continuous process within their performance,

(xiv) Services may be characterised as intangibleness, inseparability perishability,

heterogeneity in nature and does not normally result in ownership of any resource,

(xv) Service are based on different environmental factors.

Service – 6 Distinctive Characteristics
Service, marketing academics and practitioners argued that services required special
treatment as a result of their distinctive characteristic; intangibility, inseparability,
heterogeneity and perishability. These characteristics were outlined during the “crawling out”
stage.
Characteristic # 1. Intangibility:
Services cannot generally be seen, tasted, felt, smelt, heard before being bought. The
potential customer’s is unable to perceive the service before the service delivery. Service is
totally intangible and cannot be seen what is done.
Intangibility presents problems in the sense that the customer may experience difficulty in
knowing and understanding what is on offer before and even after in receipt of the service.
The challenge for a service provider is to make the service tangible which implies resort to
make some form of measurement and to provide-tangible evidence, e.g., computerised
representation of hairstyle or a university prospectus.
Service cannot be inventoried and therefore fluctuations in demand are often difficult to
manage, e.g., resort owners have same number of rooms to sell year around but demand
varies during peak and non- peak seasons. Services cannot be easily patented and new service
concepts can therefore be easily copied by customers, Services cannot be readily displayed or
easily communicated to customers, so quality may be difficult for consumers to assess.
Decisions about what to include in advertising and other promotional campaigns are
challenging as is pricing. The actual cost is difficult to be determined and so price quality
relationship is complex. Levitt has suggested that there are no so such things as service
industries, only industries where the service components are relatively greater than those in
other industries.
Similarly, Shostack has argued that there are few industries or activities that are purely goods
based or a purely service based, and presents a continuum from tangible dominant goods to
intangible dominant services. Kotler identifies four distinct categories of offerings, ranging

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from purely tangible goods, to tangible goods with accompanying services, to a major service
with some accompanying goods, to pure services.
Characteristic # 2. Inseparability:
There is marked difference between physical goods and services in terms of the sequence of
production and consumption.
Sequence of Production and Consumption:
a. Physical Goods

b. Services

c. Production

d. Sale

e. Storage

f. Produced and consumed at the same time

g. Sale

h. Consumption

Goods are first produced stored finally sold and consumed, whereas services are first sold
then produced and consumed simultaneously. For various services at production site
customers presence is must, e.g., counselling, rail travel, hotels, etc. Some services are
produced and delivered in the absence of customers, e.g., carpet cleaning, plumbing, etc.
Whatever be the nature and extent of contact the potential for inseparability of production and
consumption remains.
The involvement of customers in production and delivery of services implies service provider
must take care in what is being produced and delivered. Proper selection and training of
customer contact personnel are necessary to ensure the delivery of quality of services.
Production and consumption are said to be separable, but for a service production and
consumption are said to be inseparable where both must meet at a time and place which is
mutually convenient in order that the producer can directly pass on service benefits, e.g., the
service of the ATM machine can be realised if producer and consumer interact.

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Inseparability has number of marketing implications for services. First, goods are generally
first produced then offered for sale and finally sold and consumed, inseparability causes this
process to be modified for services. Services are sold first then produced and consumed while
the method of goods produced is to a large extent of little importance to the consumer,
production process are critical to the enjoyment of services.
All service encounters have similarities. The “service encounter”, the provision and
consumption of a service, is central to service experience and an understanding of service
encounters involves an appreciation of a complex set of behaviours on the part of all involved
in them.
a. Waiting time – time spent in queues or in-process delays;
b. Personal interaction – between participants, service provider, customers and others present;
c. Expectations and perceptions – of service adequacy and quality.
Characteristic # 3. Variability:
An unavoidable consequence of simultaneous production and consumption is variability in
performance of a service. The quality of a service may vary depending upon who provides it
as well when and how it is provided, e.g., an airline company provides on time services to
and fro, whereas some other airline provides though regular service but not on time. Within a
service provider one employee may be courteous and helpful others might be inefficient as
well as rude.
Reducing variability involves determining the causes. It may be due to unsuitable personality
traits in an employee which is difficult to determine at the selection stage. There may be good
sound reasons for variations in performance, e.g., it could be due to poor training and
supervision, lack of communication and performance and also lack of general support.
For services variability impacts upon customers in terms not just of outcomes but also of
process of production. At the production stage variability pose a much greater threat for
services as customers are usually involved in the production process at the same time as they
consume it so becomes difficult for the service provider to maintain consistency of quality.
Pre-delivery inspection is not possible for the service providers as services are produced in
the presence of the customer without the possibility of intervening quality control. The
variability of service output can pose problems for brand building in services compared to
tangible goods for the latter it is usually relatively easy to incorporate monitoring and a
quality control procedures into production processes in order to ensure that a brand stands for
a consistency of output. It’s often difficult to obtain standardisation of output in services.
Characteristic # 4. Perishability:

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Services cannot be stormed for later sale or use, e.g., hotel rooms not occupied, airline seats
not purchased and college places not filled cannot be reclaimed since services are
performances, they cannot be stored. If demand exceeds supply it cannot be met as things
cannot be taken out from warehouse. Even if capacity exceeds demands the revenue value of
the service is lost.
Fluctuations of demand being one of the characteristics of service organisation pose a great
problem when these fluctuations are unpredictable, e.g., increase in the number of patients in
any hospital due to a sudden calamity, the hospital beds being the same. So, there should
always be strategies to provide a match between demand and supply. Services unlike goods
cannot be stored. A producer of cars which is unable to sell all its output in the current period
can carry forward stocks to sell it in the subsequent years.
The only significant costs are storage; financing and possibility of loss through obsolesce. In
contrast the producer of a service who cannot sell its output cannot move it to the subsequent
years other than incurring loss. An airline which offers regular flights at 9.00 p.m. from Delhi
to Mumbai has to fly even its few seats are empty. The service offer disappears and spare
cannot be stored to meet increased demands.
This characteristics of the perish ability results in greater attention to be paid in the
management of demand by evening out peaks and trough and scheduling service production
to follow this pattern as far as possible. Pricing and promotion are two of the tools usually
adopted to tackle this situation.
This characteristic emphasises that service encounters involves individuals – service
providers and consumers. Moreover, service encounters take place again and again, at
different times. As a consequence, there are likely to be variations in service provision, by
virtue of the participants, the time of the encounter or the circumstances.
Characteristic # 5. Heterogeneity:
To handle a service sector even though standard sectors may be used, e.g., to book in the cab
service, to quote for insurance in one’s life, etc., each unit may differ from each other unit.
Franchise operations ensure to bring a standardisation but ultimately it is difficult to ensure
the same level of output in terms of quality. From customers viewpoint also it is difficult to
judge quality without using it.
Capacity levels should be available on cope which surge in demand before service levels
falls. Equal attention has to be given in times of low levels of usage to manage the spare
service, e.g., different programmes can be adopted to compensate for uneven demand like
theatre halls can go for weekend specials, films festivals, dentist – family discounts, etc.

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This characteristic emphasises that service encounters involve individuals – service providers
and consumers. Moreover, service encounters take place again and again, at different times.
As a consequence, there are likely to be variations in service provision, by virtue of the
participants, the time of the encounter or the circumstances.
Heterogeneity clearly has wide-ranging implications for the operational side of service
provision:
i. Service Personnel – Service delivery and customer satisfaction are highly dependent upon
the activities and actions of those members of staff in the “front-line”, who actually perform,
and are seen to perform, services. Service personnel must therefore be competent to perform
services. They must be made aware of service standards and be able, or enabled, to achieve
those standards.
ii. Service Standards – Must be established and made clear, to assist quality control and more
effective management of service encounters, in particular evenness and equity of service
delivery.
Characteristic # 6. Lack of Ownership:
Lack of ownership is the basic difference between a service industry and a product industry
as a customer gets an access for a service after paying for it but not owns it, e.g., hotel rooms,
hospitals beds, etc. So, service industry should put a stress on easier payment terms in order
to facilitate better growth of service sector. Ownership relates to the notion that the
consumers of services do not own them overall, but only have temporary access to them.
Service – Classification of Services
There are numerous varieties of services. The numerous varieties of services can be classified
into certain categories or types on the basis of certain criteria.

Classification of services into certain categories or types serves certain purposes.

The purposes of classification of services into various categories are:

1. The classification helps to understand the nature of different services.

2. The classification is helpful to understand the attributes of a service product.

3. The classification is helpful to understand the relationship between service organisations

and their customers.

4. The classification is helpful to understand the nature of a service demand.

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5. The classification is helpful in solving issues connected with planning and designing of
services.

The criteria used for the classification of services and the various classifications of
services are:
1. Classification Based on the Ultimate Users of Services:
On the basis of the ultimate users of services, services can be classified into two categories.

They are:
(a) Services to final consumers – Services to final consumers are services which are provided
to ultimate consumers. Examples of such services are recreation and entertainment services,
tourism, hair-dressing and other personal care services, etc.

(b) Services to business firms – Services to business firms refer to services rendered by a
service organisation to business firms. Examples of these services are advertising, marketing
research, maintenance and repairs, installation of plants and equipments, computer
programming, consultancy, legal, accountancy, etc.

2. Classification Based on the Degree of Intangibility of Services:

On the basis of the degree of intangibility, services can be classified into two broad
categories.

They are:
(a) Low intangible content services or highly tangible services – Low intangibility content
services are those services which have low intangibility content or which have high
tangibility content. Examples of these services are fast food services, vending machines, etc.

(b) High intangibility content services or highly intangible services – High intangibility
content services refer to services which have high intangibility content or which are highly
intangible. Examples of these services are consultancy services, legal services, baby-sitting,
etc.

3. Classification Based on Service Options:

On the basis of service options, services can be classified into two categories.

They are:

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(a) Primarily people-based services – Primarily people-based services refer to services which
are primarily people-based or labour intensive. Examples of these services are restaurant,
insurance, medical services, etc.

(b) Primarily equipment – based services – Primarily equipment – based services refer to
services which are primarily equipment – based and which involve low contact with people.
Examples of these services are vending machines, automatic teller machine services in banks,
cinema, etc.

4. Classification Based on Specialisation:

On the basis of the expertise, skill and specialisation of the service providers, services can be
classified into two categories.

They are:
(a) Professional services – Professional services refer to services rendered by skilled
specialised professionals to business firms and ultimate consumers. Legal services, medical
services, consultancy services, accountancy and auditing services, etc. are examples of
professional services.

(b) Non-professional services – Non-professional services refer to services provided by non-

professional persons. Baby-sitting, domestic help, etc. are examples of non-professional
services.

5. Classification Based on Profit-Orientation:

On the basis of profit-orientation (i.e., profit motive), services can be classified into two
categories.

They are:
(a) Profit-Oriented Services – Profit-oriented services refer to services rendered primarily
with profit motive. In other words, they are commercial services designed for profit.
Examples of profit-oriented services are banking service, insurance service, hotel, restaurant
and catering services, tour operation, airline service, etc.

(b) Non-profit-oriented services – Non-profit-oriented services refer to services rendered

without any profit-orientation or profit motive. Examples of such services are educational
services by Government, hospital services by Government, services of cultural organisations,

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services of welfare organisations, services of religious institutions, services of research
foundations, etc.

6. Classification on the Basis of the Fact whether they are Primarily Directed at Public
at Large or Primarily Directed at Individuals:
On the basis of the fact, whether the services are primarily directed at public at large or
primarily directed at individuals, services can be classified into two categories.

They are:
(a) Public services – Public services refer to services which are primarily directed at (i.e.,
provided to) public at large. Examples of public services are public utility services, transport
services, insurance services, municipal services, etc.

(b) Private services – Private services refer to services which are primarily directed at
individuals. In other words, they are services designed for and used by consumers as
individuals. Examples of private services are personal care services, medical advice, etc.

7. Classification on the Basis of the Extent of Contact between the Service Provider and
the Consumer:
On the basis of the extent of contact between the service provider and the consumer, services
can be classified into two categories.

They are:
(a) High contact services – High contact services refer to services in which the consumers or
users have to spend more time with service providers to acquire or utilise the services.
Examples of high contact services are medical services, personal care services, etc.

(b) Low contact services – Low contact services refer to services in which the consumers or
users have to spend less time with the service providers to acquire or use the services.
Examples of low contact services are internet services, hospitability, theatre performance, etc.

8. Classification on the Basis of Number of Delivery Outlets:

On the basis of the number of delivery outlets, services can be classified into two categories.

They are:

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(a) Single or specific outlet services – Single or specific, outlet services refer to services
which are provided to customers through a single outlet. In this case, the convenience of
receiving the service is less. Examples of these services are theatre services, museum
services, etc.

(b) Multiple outlet services – Multiple outlet services refer to services which are provided to
consumers through many outlets. In this case, the convenience of receiving the services is
more. Examples of these services are fast food service, bus service, etc.

9. Classification of Services as External and Internal:

Services can also be classified as:
(a) External services – External services refer to services provided by a service organisation
to external or outside agencies. Examples of these services are installation services,
distribution services, etc.

(b) Internal Services – Internal services refer to services provided by the service provider
within the organisation. Examples of these services are internal transport, office cleaning, etc.

10. Classification on the Basis of the Presence of Customers and Employees:

On the basis of the presence of customers and employees, services can be classified into three
categories.

They are:
(a) Self-services – Self-services refer to services in which there will be the presence of only
the customers. Examples of self-services are self-service restaurants, ATM banking service,
etc.

(b) Inter-personal services – Inter-personal services refer to services in which there will be
the presence of both customers and employees. Examples of these services are education,
hotel services, entertainment services, etc.

(c) Remote Services – Remote services refer to services in which there will be the presence of
only employees. Examples of such services are insurance services, etc.

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Service – Nature and Role of Service Marketing
Nature of Service Marketing:
It evolves from its multidisciplinary coverage of activities.

It includes:
1. It is a dynamic process.

2. It is customer oriented.

3. It is creative.

4. It is intangible.

5. Transfer of ownership is not possible.

6. It is heterogeneous.

7. It has zero shelf life.

8. Services are production is inseparable.

9. It is perishable.

10. It is a social process.

11. It is an economic function.

12. It involves customer participation.

Role of Service Marketing:

The role of service marketing is as follows:
1. Reduced operating expenses.

2. Competitive differentiation.

3. Enhanced quality.

4. Enhanced efficiency.

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5. Enhanced responsiveness.

6. Enhanced market Share.

7. Enhanced customer loyalty.

8. Enhanced Competition.

9. Manufacturing Support.

10. Makes Economic Sense.

The Future of Service

The customer service landscape is rapidly evolving with technology disruptors, societal
changes, and demographic trends requiring service leaders to contemplate what the Future of
Service looks like.

Demands on all aspects of service continue to grow, be it omnichannel service, in field, in

person, and/or via contact centers. Reducing costs, growing revenue, improving customer
experience, and cultivating talent remain top of mind for executives. However, the strategic
importance of service as a critical asset to differentiate firms from their competitors continues
to be a major priority.

The mission of customer service continues to evolve beyond issue resolution. As the driver of
a company's main relationship touchpoints with customers, the service organization shapes
experiences, drives choices, and reinforces perceptions and beliefs. In doing so, customer
service functions transform from being cost centers to being customer retention and profit
centers.

Deloitte’s view of the Future of Service is based on our work with hundreds of global service
organizations, thought leaders, and technology-enabling alliances. We believe a series of
disruptive forces are likely to profoundly change the way service is delivered in the future,
and we think about them in five major themes.

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DISTRIBUTED COMPLEXITY

Service segmentation will continue to proliferate

It’s not just what is simple vs. complex, but also high-value vs. low value, high-risk vs. low
risk, and emotionally involved vs. automatic

How complexity is defined and handled will be a critical strategic element

 

PERSONALIZED AND PROACTIVE

Customers will mandate that service is tailored to their own uniqueness

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Employees will demand they can do their job faster with a more personal touch

Customers will want to be provided with insights via data analytics that they otherwise would
not know

Successful customer experience execution will require a coordinated effort between field
service, sales, marketing, and other functions
 

INTEGRATED ECOSYSTEMS

Ecosystems will need to be connected and integrated to be person to person, tech to tech, etc.

How service is delivered is likely to change due to the gig economy, outsourcing, and
partnerships

Cloud will continue to be a major force in how things are connected and scaled
 

WORKFORCE REDEFINED

New skills like a hospitality mindset and tech fluency will be required, impacting screening,
training, and internal mobility 

New tools like intelligent knowledge management and sentiment analysis will change how
service professionals do their jobs
 

AI OMNIPRESENCE

AI will become a core business requirement

Various levels of maturity (RPA, Cognitive, ML) will need to be considered to satisfy
business and customer needs

What is ecommerce?
Electronic Commerce or ecommerce, also known as the Internet Commerce, is
the process of selling and purchasing goods or services using an electronic
medium via the internet. It let’s selling and buying goods and services from
around the globe using the internet. Ecommerce has today evolved in such a way
that finding any product or service using the internet is the easiest possible task.
Irrespective of the device used, and a good internet connection, you are now able

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to purchase goods and services from any online retailers. Similarly, selling
online through ecommerce websites or stores has also become seamless with
technology such as ecommerce building platforms.

What is the Importance of Ecommerce?

In the continuously emerging of technologies, ecommerce has become a vital part
of all types of businesses. The increase in the popularity of ecommerce, there is
a decrease in the inflation caused on the products and services with perks such as
cost savings, kickass competitions, and changes in the pricing behaviour of the
sellers. At the same time, the online buyers of a now know the convenience of
purchasing online. If you are still sceptical about opting for an ecommerce, here
are a few compelling reasons that will surely drive you to create one soon:

Ecommerce helps you keep a check on costs

When you sell online, it is not necessary to showcase only those products that
are stored in a physical place. Many online sellers showcase their entire
inventory using the ecommerce. By doing so, you can save on the rental for the
storage space, the electricity and all the charges involved to manage the products
in a physical medium. Also, even if you wish to provide a physical space, you
don’t need to make one that includes all the products you sell. Either way, you
are saving your money with ecommerce.

It helps your expand your brand

Ecommerce helps you take your brick and mortar store online in a creative, more
attractive, and easier way. When you offer quality products round the clock
along with a dedicated customer support team, social media interactions,
knowledge-base, blogs, etc, you are creating a strong online presence for your
brand. And by creating a strong online presence, gone would be the days when
you had to worry about business expansion, change of locations, product
expansion, and brand recognition. All these can be done from a single screen
right from the comfort of your house using the internet and ecommerce.

Wide Range of Products

In the areas where there is a lack of availability for all kinds of products or
services, there will be a need for comprehensive services. They would face a
scarcity of products or services with limited access to the normal. This is when
ecommerce plays an important role. The traditional brick and mortar stores
usually fail to satisfy customers due to limited access to varieties of products.
You have been into the market at least once where you had to visit more than one
shops to get what you desire. It is near to impossible for retailers to provide all
the variations in the products and that’s when ecommerce helps by expanding the
product variations breaking the boundaries of the traditional brick and mortar
store. With ecommerce, people can now purchase any product by visiting n
number of websites in a few minutes and they can choose their required colour,
size, pattern, and so on by filtering their searches. With ecommerce, you can now
shop online for anything within 15 minutes or even lesser.

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Attract newer customers
Online sellers have wider visibility to a large set of an audience from around the
globe. While a brick and mortar store can only be seen by a passerby or the
localities’, an ecommerce store can be viewed, browsed, and accessed by people
from anywhere on earth, provided they have access to the internet. If your
ecommerce website or store is well-optimized, you will be easily visible by
online shoppers through browsers such as Google and Bing. The better the
optimization of your store, the higher are the chances of attracting newer
customers to your business. Just as word of mouth works for the brick and mortar
stores, social sharing works for ecommerce stores. By social sharing, customers
can share their experience with your services using the internet. Moreover, they
can share the link to your products based on their contentment with your
services. Other online sellers can easily know which product is been loved by
many and where to find it; credits to ecommerce.

Lower business risks

As said earlier, starting an online ecommerce store or website will cost you much
lower than that of a brick and mortar store. You need not worry about the
overhead charges that might incur while selling online which is otherwise an
uninvited guest for brick and mortars. This will help you sell your products at a
competitive price, increased profits, and lower business risks.

Convenient selling option

An online ecommerce store is available to customers and shoppers throughout
the day for 365 days, irrespective of their schedules. It is known without saying
that people are now convenience-driven and no one has got time to shop from a
physical or a brick and mortar shop. Instead, people are now browsing for online
shopping options to get products and services delivered at their footsteps without
needing for them to step outside their houses. Especially during the corona wave,
people are willingly or unwillingly locked down in their houses to stay safe and
this is the time when the number of online shoppers has significantly raised.

Transparency in business
With the increase in the number of frauds in online shopping, customers now
look for trustworthy online retailers on which they can invest their money. For
building such trustworthiness, your business should be transparent in all possible
ways. When your business methods are transparent with your customers, they can
easily know and believe in the authenticity of your brand, products, and services.
When it comes to ecommerce transparency, you are responsible for accounting to
the mode of receiving payments, the source of income, expenditure, and transfer
of amount. Ecommerce businesses mostly use digital paying methods such as
credit cards, debit cards, net banking, and so on. The online transactions are
facilitated by payment gateways and therefore are under the Governments
supervision. Any fraudulent act can and must be questioned by the buyer or the
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concerned officials. Ecommerce is hence important for your business to create a
transparent business system.

Better marketing opportunities

An ecommerce site is the best marketing tool any online seller can get. It helps
in creating an authentic online presence for all other marketing options. With the
increased use of the internet, there are many marketing tools available online
such as Search Engine Optimization or SEO, email marketing, social media
marketing, Pay Per Click or PPC ads, and Search Engine Marketing or SEM. For
instance, if you have invested your time in working for quality SEO
optimization, you can be assured that your ecommerce store will appear in the
top lists of Google’s Search Engine Results Page (SERP). The social media
platforms will help you get social reviews and feedbacks of your customers’
experiences. Moreover, it can help you keep your customers engaged and interact
with them easily.

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Public Sectors in India: Role, Growth and Problems

The idea that economic development should be promoted by the State actually managing

industrial concerns did not take root in India before 1947, even though the concept of

planning was very much discussed by Congress Governments in the Indian provinces as far

back as 1931. However, in the post independence period, the expansion of public sector was

undertaken as an integral part of the Industrial Policy 1956.

Central Public Sector Undertakings:

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There were 236 Central public sector undertakings excluding banks in 1996-97. The growth

of investment in Central public sector undertakings has also increased. Since 1951, the

number of industrial and commercial undertakings of the Central Government has increased

from 5 units in 1950-51 to 236 units in 1996-97 and the Capital investment has increased

from Rs. 29 crores to Rs. 2020.2 billion in 1996-97.

State Governments Public Enterprises:

As on March 31, 1986, there were 636 State level Public Enterprises (SLPEs) functioning in

24 states. The investment in SLPEs as on March 31, 1986, was of the order of Rs. 10,000

crores as against. Rs. 2,860 crores, as on Mach 31, 1977.

While inclusive of State Electricity Boards and State Road Transport Corporations total

investment stood at Rs. 25,000 crores in 1986, as against Rs. 9,576 crore in 1977. The

average rate of growth of investment in State level enterprises during 1977-86 period was of

the order of 20 percent per annum.

Organizationally, there are four types of public sector enterprises:

(1) Departmentally Managed;

(2) Managed by independent boards;

(3) Run as public corporations; and

(4) Organised as Companies. The company form of organisation is the most common.

Role of Public Sector in India:

After the attainment of independence and the advent of Planning, there has been a

progressive expansion in the scope of the Public Sector. The passage of Industrial Policy

Resolution of 1956 and the adoption of the Socialist Pattern of Society as our national goal,

further led to deliberate enlargement of the role of public sector.

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To understand the role of the Public Sector, we must have an idea about its size in the context

of the Indian economy. For a comprehensive view of the entire Public Sector, we should

cover besides autonomous corporations, the departmental enterprises.

While doing so, not only the enterprises owned and run by the Central Government be

covered but the enterprises run by the State Governments and local bodies should also be

included.

Secondly, it would not be appropriate to use any single measure to estimate the size of the

public sector; rather it would be desirable to use quite a few indicators, e.g., employment,

investment, value of output, national income generated, savings, capital formation and capital

stock.

Share in National Income:

An important contribution to the National Income is Public Sector. During the period 1960 to

1999, the public sector has doubled its share in the national income in real terms and account

for 25 percent of the total income of the economy. This is, undoubtedly, a significant change

in the structure of economy in terms of the increased importance of the public sector in

domestic activity.

Share in Capital Formation:

Another most important contribution of public sector in India has been in respect of capital

formation. Investment in the private sector producing goods for rich people mainly should be

evaluated lower than similar type of investment in the public sector which is engaged in the

provision of essential infrastructural services to the economy as a whole. This is true even

though the commercial profitability of the private sector is being rated high.

The above table shows the investment in this sector is that after having reached the peak

during the third plan, the share of public sector, in total investment in each of the plans has

however, been on the decline.

Growth of Ancillary Industries:

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Public Sector enterprises are helping the growth of ancillary industrious in numerous ways.

These are as follows:

(1) They take responsibility for providing managerial and technical guidance on production

process and equipment selection etc.

(2) Public Sector enterprises give long-term contracts to small ancillary industries.

(3) Public enterprises guide for sources of financing and procedure for obtaining them.

(4) Public enterprises have made efforts to purchase items from ancillary units.

Problems in Public Sector:

Even though the public sector is going in a correct path, some problems and short comings

are there. The main short comings are as follows:

(1) Heavy losses.

(2) Influence of political factors.

(3) Work delays.

(4) Over-capitalisation.

(5) Pricing policy.

(6) Use of Manpower Resources.

(7) Control over employees.

(8) Inefficient Management.

(9) Higher capital intensity leading to lower-employment generation.

(10) Capacity utilisation.

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Suggestions to Improve the Performance of Public Sector Enterprises (PSEs):

(i) Controlling the cost at every level of public sector enterprises.

(ii) Increase the production,

(iii) Reforms in capital base.

(iv) Increase the standard of public sector enterprises to manage the competition from both

domestic and foreign competitors.

(v) Identifying redundant manpower and dealing with it through means a retraining,

redeployment and encouraging self-employment etc.

Service package
The service package is defined as a bundle of goods and services
A service package is a bundle of explicit and implicit benefits performed with a supporting
facility and using facilitated goods. When you eat at a fast food restaurant (supporting
facility), you may purchase a hamburger (facilitating good) that someone else cooked for you
(service).

Service managers have difficulty describing their product. This problem is partly a result  of
the intangible nature of services, but it is the presence of the customer in the process that
creates a concern for the total service experience. Consider the following examples. For a sit-
down restaurant, atmosphere is just as important as the meal because many diners regard the
occasion as a way to get together with friends. A customer’s opinion of a bank can be formed
quickly on the basis of a teller’s cheerfulness or the length of the waiting line. The service
package is defined as a bundle of goods and services with information that is provided in
some environment. This bundle consists of five features as shown in Figure 2.1 in the shape
of an onion with the service experience at the core.

1. .Supporting facility. The physical resources that must be in place before a service can
be offered. Examples are a golf course, a ski lift, a hospital, and an airplane.
2. Facilitating goods. The material purchased or consumed by the buyer, or the items
provided by the customer. Examples are golf clubs, skis, food items, replacement auto
parts, legal documents, and medical supplies.
3. Information. Data that is available from the customer or provider to enable efficient
and customized service. Examples include electronic patient medical records, airline
Web site showing seats available on a flight, customer preferences from prior visits,
GPS location of customer to dispatch a taxi, and Google map link on a hotel Web site.

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 4.  Explicit services. The benefits that are readily observable by the senses and that
consist of the essential or intrinsic features of the service. Examples are the absence
ofpain after a tooth is repaired, a smooth-running automobile after a tuneup, and the
response time of a fire department.
5.  Implicit services. Psychological benefits that the customer may sense only vaguely,
or the extrinsic features of the service. Examples are the status of a degree from an
Ivy League school, the privacy of a loan office, and worry-free auto repair

All of these features are experienced by the customer and form the basis of his or her
perception of the service. It is important that the service manager offer a total experience for
the customer that is consistent with the desired service package. Take, for example, a budget
hotel. The supporting facility is a concrete-block building with austere furnishings.
Facilitating goods are reduced to the minimum of soap, towels, and tissue paper. Information
on room availability is used to book a reservation. The explicit service is a comfortable bed in
a clean room, and implicit services might include a friendly desk clerk and the security of a
well-lighted parking area. Deviations from this service package, such as adding bellhops,
would destroy the bargain image.
For example, a cleaning company might sell a basic service package that includes a weekly
cleaning for a month. This cleaning would include vacuuming, mopping, dusting, dishes,
laundry, and cleaning the bathroom. This is a service package because it is a collection of
individual services the cleaning company offers. The managerial challenge of offering service
packages is keeping track of which clients have purchased which purchases.
For example, Client A might have purchased the basic cleaning service from the cleaning
company, while Client B might have purchased the basic cleaning service with an additional
de-clutter service. It is the job of the management to keep track of which clients have
purchased which services and then to convey this information to the company's workers.
Management also has to make sure when scheduling workers, it includes the time necessary
to complete the purchased services. Depending on the service package and what other
services are ordered, the time needed to complete the job would be different.

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Service strategy

The marketing strategy of service industry focuses on delivering experiences processes and

other intangible is to the customers and not physical goods like product industry. It also
involves a focus on all functions equally.

Role of the functions of a company like selling, marketing, operations, human resources, and
other functions must work efficiently and together in order to create an excellent
service strategy. A service strategy is more customer-centric and is centered on the usage of
customers and their relationships.

Many of the service sectors such as hospitality healthcare transportation our offerings of
themselves and also the primary revenue-generating activities of the respective companies.
Service industries categorized into another category which is called customer service which
includes providing technical support for the product of the company to the customers and
assisting the customer with any technicalities required.

Customer services a segment of an organization which does not produce revenue but rather is
a form of a troubleshooting service which provides answers and solutions to the queries of
the customers. Services can also be considered as a value addition for the company.

In case of services, there is a requirement of 7 P’s of marketing instead of 4 Ps of marketing

which is product place price promotion people process and physical evidence since 4 P’s are
not enough to describe the intricacies of services marketing. Because unlike a product,
services are produced and consumed at the same time.

The company should also take care of their employees and personal appearance and all other
small factors which influence the perceptions of the customers towards the service. there
should also be an effective calculation of the service so as to be on par with the industry
standards. There is often a gap between the perception of the company and the expectations
of the customer.

The companies of an strive to device a service strategy in such a way that the gap is
minimum. The wider the gap more difficult it will be for the company to sustain in
the market. The strategies used by the organizations vary on the nature of the offering and the
business.

However, service strategy should be formed in such a way that it satisfies the customer
expectations or comes closest to it. the success of a company is measured in terms of the
service that they provide which is why it is crucial for organizations to not run the make
good products but also provide an excellent service.

Companies which are exclusive in service industries like hotel business or hospitality or
entertainment should constantly upgrade themselves and should modify their offerings in
order to meet the change in demand from the customers. However, there are companies

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which are both into the offerings of the product as with the service for example companies
like Dell and Apple.

Both of these companies provide products which are electronics and they also provide after
Sales service. In both of them, Apple stands out as the best because of efficient after sales
service.

Importance of service strategy

It is very important in a highly competitive business environment that there is a service

strategy present in order to address customer needs and wants. Following are a few of the
reasons which elaborate on the importance of service strategy:

1. The cost of getting a new customer is much more than entering the retention of the
existing customers. The customer strategy for service strategy should be in sync with
the marketing strategy of the company.
2. It is a well-known fact that to get a new customer the cost would be 5 to 10 times more
than that of the cost of retaining a current customer. More often than not customers are
lost because of poor services and bad treatment which gives them unsatisfactory. It is
also estimated that an unhappy customer will talk about his dissatisfaction to at least 8
to 16 other potential customers. Adding social media and that the satisfied customer’s
voice will reach 1600 more people which is why customer retention is of crucial
importance to the organization.
3. Looking on the other side of service strategy a customer who is satisfied or who is
loyal will cost not even a single penny but will add value to the business by being
word-of-mouth ambassador. This will save millions of bucks of the company since it is
free publicity from the customer to a potential customer. This is the reason why every
customer should be satisfied with the service strategy.
4. It is also stated that customer loyalty can have any impact on the business. Making the
customer is important creates all customers and those all customers will continue to do
business in spite of increasing competition. Higher customer loyalty translates into
higher customer retention and better competitive advantage.
5. Companies should ensure that the service strategy is in sync with
the vision and mission of the organization. They should complement the strategy of the
organization. Companies to take time in order to develop and implement an efficient
service strategy which will be responsible for the retention of the existing customers.

7 Steps to create an efficient service strategy

In most of the cases, the Service strategy depends on the nature of the business but here are
the following steps which can generally be used and implemented by most of the service
organizations.

1) Crafting a service vision

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The primary step is to communicate the vision of the service to the employees associated
with the business. The employees associated with the organization should understand and
comprehend the organizational goals and the vision of the organization and should be able to
write their responsibility to help the company achieve that vision.

2) Contemplating the customer needs

More often than not the companies fail and waste their valuable resources in creating services
of product that the company thought customers would want only to know that the offering
was not what the customers wanted at all.

The important part is to know what the customer needs and to put it in sync with the
organization’s vision and mission. Taking the feedback of customers is the first step in order
to know and determine what their expectations are so that the company can form a strategy
around the feedback obtained in order to deliver and meet the expectations of customers.

The market needs for customer needs can be assessed using a method such as satisfaction
surveys for focus groups and the customer feedback forms. Development of such feedback
forms and questionnaires is very important and should focus on the questions that need to be
answered by the customers.

It is also very important to keep in mind that the needs of customers keep on changing with
time and are like a moving target. Since it constantly keeps changing it is very important for
the companies to form a process which will continuously keep on updating them about the
changing needs of the customer so that the companies can prepare and modify themselves
and their offerings accordingly.

3) Right hiring

When it comes to facing the customers it is not the company who is going to face them rather
it is the employees who are going to face the customers. Employees are the face of the
organization and organization has to ensure that the face is represented correctly.

The employees should have the right skill set which meets the goals of the organization and
helps to form a strong network and backbone to provide service to the customers. Having a
right attitude and personality is something which companies cannot develop in the employees
which is why they should take care of these things with hearing.

Most of the things can be incepted and developed in the employees but most of the other
things have to be built in. Interacting with customers and providing services is an art more
than science and not everyone can achieve it.

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4) Goal setting for the service team

Wednesday identification of customer needs and the parameters for customer satisfaction is

done then the organizations have to create goals for the service team in order to achieve
customer satisfaction. These goals should be measurable and quantifiable so that the
organization can grow the employees as well as along with the growth of the business.

The employees should be able to understand the vision and mission and the target of the
organization so that they can align themselves to reach chief and exceed those objectives. An
example of customer satisfaction can be given as follows:

The service team of a refrigerator company provides after sales service. Once the customer
causes about the breakdown of the machine the time taken by the service team to reach the
place of the customer and correct the machine is measured.

The lesser the time to attend the customer breakdown calls the higher would be the customer
satisfaction. This can be a measurable parameter in order to appraise the employees.

5) Constant training and development

Once the hiring is done in a proper and correct way the employees will have some inborn
cause it is which the organization will be able to utilize them in order to serve the customers
correctly. The other part of having a good service team is providing them with constant
training in order to upgrade their technical skills.

The training should focus not only on technical skills but also on interacting with customers.
Right service strategy requires suitable training to the service team so that not only the
customer but also your organization benefit from it.

The employees need to know about the goals of the organization so that they can modify
themselves to fit accordingly. The need to be trained not only on the technical skills but also
on other soft skills like answering the customer phone calls and customer complaints and
providing services.

6) Accountability

Organizations should ensure that the employees have a suitable understanding of the
importance of good customer service and how their actions affect the
organization’s performance overall. The organizations should also ensure that the employees
are held accountable in order to achieve the service goals.

This also forms the part of the performance management system and should be embedded in
the culture of the company.

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For example, rewarding the employee with the highest customer satisfaction and working on
the employee with over customer satisfaction.

7) Awards and recognitions

Positive reinforcement always works in every organization which is why it is very important

to recognize the performing employees who are responsible for excellent customer service.
This will help the other employees to perform well and live up to the set goals or exceed
them.

This also reinforces the vision and mission of the organization and the service strategy which
is chalked out for everyone. A successful organization is categorized by strong customer
service.

Strategic service vision

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 Strategic Service Vision

Service vision developed by James L. Heskett consists of following basic elements:

Lets analyse the strategic service vision of T.I.ME. -

Target market- students preparing for common entrance test( CAT) for entering good B
school. Apart from that T.I.M.E. also targets job seeking college students, GMAT, GRE, JEE
aspirants. Lately they also started play schools for children.

Service Concept- T.I.M.E. bets on its brand name for being No.1 in producing the maximum
successful B- school candidates. It has centres all across India with a centralized main office.
It runs all India test series for students to test their potential. It provides especially designed
printed modules for each topic separately for every subject. Faculty at T.I.M.E. are
experienced and are appointed after clearing the exam themselves.

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Operating Strategy- T.I.M.E. puts its maximum efforts on making the best utilization of
time both for students as well as faculty members. They excel at managing constrained
resources by maximizing parallel utilization. Several batches of students run simultaneously
round the day. Each faculty is rotated in such a way that every student irrespective of the
batch has a chance to interact with them and get their doubts cleared. T.I.M.E. mostly is a
franchise owned business. Due to its strong presence across India marketing costs are
generally less as compared to competitors.

Service Delivery System- T.I.M.E. differentiated itself from its competitors by providing all
facilities like library, computer centre, course material, online platform, classroom
interaction, revision sessions etc. all under one roof. They create an environment that student
learn better and faster. Pear learning component is also present in their activities. Students are
kept engaged with novels, online quizzes, pen paper tests, in class exercises etc. to stretch
their limits.

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Competitive environment

A competitive environment is a system where different businesses compete with each other
by using various marketing channels, promotional strategies, pricing methods, etc. This
system has regulations within it that companies should follow.

How does a competitive environment affect businesses?

Your competitors can directly affect your business and the decisions you make. Let's imagine
two online clothing stores that pose a threat to each other in terms of business
development and profit. One of them decides to conduct a flash sale before Christmas and
provide their customers with 40% off sitewide. The other store will also need to come up
with a great offer to attract leads and customers, raise sales, sell unpopular products and, as a
result, gain revenue.

Similarly, if one coffee company brings out a new product to the market, their competitor
will need to consider growth hacking. Thus, competition can be beneficial as it motivates
companies to get better and improve their products.

A competitive environment also has a positive effect on customers. Businesses often offer
high-quality goods at an affordable price to win the attention of consumers. Besides,
companies have to bring out their products through innovations. However, competition can
sometimes complicate the existence of a business. Let's take two companies within one
location, for example. If one of them sets low prices and discounts, it will be difficult for the
second company to compete.

Now that you know how a competitive environment influences your business and customers,
it's time to proceed to the types of competition that define the relations between and among
sellers and customers.

Types of Competitive Environment

It's essential to understand what types of competitive environments there are to assess the
economic environment in business. You should know how companies and markets function
so that you can analyze industry and market news, policy changes, and legislation in the
future. Let's distinguish the main types of competitive environments and review each of them
in detail.

 Pure competition. In a perfectly competitive environment, many small companies

produce similar products, and many consumers buy them. These manufacturers are
small, and thus they can't influence the price, defined by supply and product demand.

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 For example, when a farmer brings dairy products to the local market, this person
can't change the market price and agrees with the going one.

 Monopolistic competition. In this environment, many manufacturers produce

different products, although they might serve the same purpose. Customers can
distinguish the products because of the differences in quality, features, etc. Businesses
actively use advertising to promote their products and convince consumers that they
are not like other products and have better quality. Companies in monopolistic
competition are price makers, which means that they can influence the product price.
However, to justify the price increase of their products, they should offer something
exclusive to be unlike other businesses, for example, improve the quality of their
goods.

 Oligopoly. In this market model, there's a small number of businesses, usually two or
more. It's considered stable as companies don't compete but collude to obtain high
market returns. Firms set and keep prices high together or under the leadership of one
particular company. In an oligopoly, profit margins are higher than in a more
competitive environment. However, the main problem of this market structure is that
businesses often face a prisoner's dilemma, an incentive to cheat and act in their
interests at the expense of other companies.

 Monopoly. There's one company that produces a unique product. This manufacturer

doesn't face any competition, and the product doesn't have any substitutes. Also, a
monopolist decides on the product's price and sets barriers for new companies to enter
the market.

Perfect competition, monopolistic competition, oligopoly, and monopoly are the four main
market structures you should be aware of when entering the market. Now it's time to move to
the competitive environment analysis.

Competitive Environment Analysis

To develop a great marketing strategy, you need to understand your competitors and their
tactics. At this point, you need a competitive analysis framework to reach your business
opponents. Let's discuss several most popular frameworks.

 SWOT Analysis. You can assess the external and internal factors that influence your
company. This framework helps you identify competitive advantages, compare your
opponents' strong and weak sides on different marketing channels, and define your
further marketing steps.

 Strategic Group Analysis. This framework characterizes the strategies of all strong

competitors in various strategic dimensions. It allows you to identify your
competitors' positions in the competitive environment and the factors that bring your
business a profit. It also enables you to identify the key aspects of success and assess
your position among competitors.

 Porter's Five Forces. The basis of this framework lies in exploring the competitive
market forces in the industry and helping define the industry's strengths and

42
 weaknesses. It involves five elements: new entrants, buyers, suppliers, substitutes, and
competitive rivalry. These five influence the level of competition in your industry.

 Growth-Share Matrix. By using this framework, you can decide which products are
worth investing in according to their competitiveness and attractiveness within the
market. It's particularly useful for large companies since it helps them define their
product portfolios and decide which products are worth continuing to invest in and
which are no longer worth it.

 Perceptual Mapping. This framework allows you to see the position of your product
against the alternatives of your competitors. It enables you to understand how your
customers perceive your product compared to competitors' and whether your
positioning strategy matches your target audience. It can also help you find the gaps
you need to resolve.

To fully understand different market structures, let's walk you through some examples.

Examples of Competitive Environment

Every business plan of even a small firm contains a section about competitive environment
analysis. As you already know from the information above, it includes all the external factors
that influence your business and the product or service you offer.

Let's take electronics, for example. Samsung is a company founded in South Korea that
specializes in electronic and smart appliance technology. Their competitors include Apple,
Sony, Huawei, Intel, and many more, which is why Samsung's team tries to create a product
that is better than competitors' alternatives using innovations that can attract prospects.

Changes in technology or the way customers buy products can influence the types of
competitive environments. For example, Amazon changed products' distribution and
customer expectations. Introduced innovations influenced the number of consumer goods
companies and opened markets for small firms that previously had no opportunity to compete
with more prominent companies.

Your business can find itself in different types of competitive environments. That's why it's
critical to understand the difference between them and be ready to assess industry and market
news, policy changes, and legislation

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