While economic services can be described as a subset of business activities, business services have a unique set of characteristics. Business organizations are concerned with building service systems and delivering value to their customers, acting both as service providers and consumers of these services. Let’s examine some of the characteristics of business services. Here are some examples. Let’s begin with the notion of service systems. How are business activities defined and categorized? The following section will introduce the key characteristics of business services and how they differ from traditional economic service production.
Service systems
Business services can be described as systems of exchanges and co-creation. In this sense, service systems are dynamically configured arrangements of resources that balance risk-taking and value co-creation. The service systems are largely human-based, as they involve people, who are ultimately the arbiters of value. In other words, people are both providers of and consumers of services. Because people are the end users of service systems, they also have rights and responsibilities.
Non-transferable
The nature of business services differs from products in that they are not transferable. Unlike products, these services cannot be sold or bought by anyone else. If you hire a beautician to do your makeup, you must pay the costs of the service and not the other way around. This is an important distinction, since not everyone has the means to hire a professional beautician. Similarly, a beauty salon is not a transferable asset.
Non-stacking
The most obvious example of non-stacking business services is insurance. Some states require drivers to carry uninsured motorist bodily injury coverage. This coverage gives drivers an added layer of protection in the event of a car accident. Uninsured motorist coverage is the only type of insurance that can be stacked. You must include it on each policy you purchase. You may be surprised to learn that some companies do not allow you to stack this type of coverage.
Lack of inhomogeneity
Although monetary policy may create some level of inhomogeneity in business services, this problem is not entirely inevitable. Studies have shown that in some countries, the level of inhomogeneity is higher than in others. For instance, the U.S., the world’s largest economy, has the highest level of inhomogeneity among developed countries. The United States is also a consumer nation, which encourages others to depend on its markets.
Fragmented industry
The industry is characterized by low entry barriers. Many small firms do not invest in specialized equipment or employees, and the business model is more focused on providing work for employees. Fragmented industries are often smaller than those of more established companies, and there is no single company that dominates the industry. This makes it more attractive for new entrants. Small businesses often focus on reducing costs by focusing on service rather than product.