Business services are a category of goods and services that assist businesses, despite not delivering a tangible product. They include information technology, shipping and procurement among others. These are specialized services and are usually offered by companies in their own countries.
The Business Services Industry is a major contributor to global GDP, with over 11% of EU gross domestic product being made up by this sector. The service economy is a key driver of economic growth and contributes to high levels of employment and productivity in many European countries.
Unlike goods, which can be stored for future use, services must be delivered when demanded. It also requires customer involvement, which makes them less efficient than physical goods.
While some products develop a brand name identification, such as Bic, Coke, and Xerox, very few services do. For this reason, it is important for service businesses to build a reputation that will serve as a barrier to entry.
Cost Reduction and Improved Service
Business services are typically produced by a single company and delivered from one location. The advantage of having a single company producing a service is that it can often benefit from economies of scale, which help to reduce costs. However, the disadvantage is that service production cannot be decentralized to the local level as it can with goods, so multiple locations can be a major obstacle to entry.
The shared services sector is a subsector of the business services industry that encompasses a number of functions such as finance, marketing and IT. By sharing these functions with other companies, it can save time and money while also enabling better management of performance.
While business services are a relatively new industry, they have been growing at a fast rate over the past few years. They are increasingly seen as important to the success of manufacturing and other service sectors. This is largely because they provide value added services that add to the overall value of the finished product. These services also help to streamline processes, which in turn helps to increase the efficiency of the entire production process.