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Managing the Services Industries


Each and every industry whether it is service or manufacturing industry operates its business in an environment which comprises of different issues or factors such as the physical environment, tradition and socialization, technology, politics, economics, and social factors. Each type factors have significant impact on almost every aspect of the industries such as production, pricing, marketing, customers satisfaction, and promotion etc.

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Economics Issues

Economic issues that affect the service industries are economic growth, electricity and fuel price, price of everyday products, inflation and interest rate and the level of unemployment rate in the country the organization is running its business.

“During higher inflation, interest rate and increasing price of day to day products consumers have little amount of their disposable income in hand and they perceive a product as expensive. They feel themselves unable to afford different products. Thus different external economics factors influence the consumer satisfaction and behabiour” (Mincey, 23 June 2008).

Weaker economic condition indicates an economy with lower per capita income where people cannot afford expensive services though they are quality services. When a service organization intends to provide service in such a country they have to focus on the cost minimization and maintaining quality and running the operations more effectively and efficiently. Higher inflation make the service providers charge customers increased price.

So, the firms have to try to reduce cost through efficient operation. Higher interest rate increases the cost of capital (White, 1996). In this case, if a service organization makes a loan to finance its working capital or operation related activities, it has to pay higher interest rate which will make its operations expensive. Consequently, the organization will lose profit.

During lower unemployment the service provider has to pay higher wages to the employees which will make the operation expensive. So, the organization has to charge higher price or it will make less profit. Different economic conditions have different effects on the society. During weak economic condition participation in the social works, charitable works and donations in different organization reduced (Scott, 14 April 2004). And low- income people can not afford expensive but quality services. So the firms try to offer different price reduction packages.

Technology Issues

Technological advancement or change has a significant impact on the operations of the service organization (Wicks, 2002). In a service organization technology affects different factors like cost, quality, convenience and safety of services provided and efficiency and effectiveness of the service organizations. Technology helps the companies reduce labour cost and use the materials and machineries more efficiently. Now a day, in any service organization only one employee can serve more customers than it could be done previously by several employees.

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With the help of computer aided system companies can forecast their product or service demand. Some companies practices Just In Time (JIT) process, which require no inventory, with the help of modern technologies. So, cost of inventory or warehousing reduces significantly. With the help of different latest technologies organizations can fetch information about their competitors’ strategy, market demand, changing customer choice, existing competition and arrange teleconference with the suppliers and distributors which saves time and cost.

The emergence of the internet facilitated the operations of almost all areas of the organization. Now people can visit different organization’s own websites and get access to vast information about numerous products or services which allow them to place an purchase order online after evaluating a lot of alternatives. It reduces customer handling cost. It also increases customer satisfaction as they can make order for a service or product without going to the firm physically which would consume more time.

Technologies have reduced the cost of production in many ways. Now, thousands of businesses are run based from own home or a very small office space. Technology helps the companies to reduce their rental cost for office space (Norton, 2001. pp.11-19). With the help of computer aided system design their product and service and maintain their employee scheduling. Computer can manage maintenance invoice, billing and other activities. This reduce cost of providing service or manufacture a product at a reduced cost and ensure quality and on time delivery. As a result customer satisfaction and profit increases. With the help of different software management can take proper decisions also.

So, technology is helping the organization make more profit and developing by running the business efficiently and producing quality products. But, now people are devoting more time to works and becoming more workaholic, Besides due to increasing use of technologies more people are becoming unemployed.

Political Issues

Different political issues are very much associated with the operation of most of the industries. The political factors that may affect the industries includes different government regulations, the relationship with the government, political stability and other political influences on the operation of the industries (Griffin, and Ebert, 2003, p.78).

Government imposes different types of rules and regulations regarding fair trade and competition, environmental and product safety, packaging, labeling ,fair advertising , pricing strategies, customer interests. To protect the consumers and the society from unrestricted and unfair trade government imposes such type of rules. Sometimes government imposes import duties on the imported goods to protect the local firms (Principle of marketing, Philip Kotler, 11th edition, page 85-87). Importation of machinery and tools required to provide services may become higher which increases the service cost.

The government of a country determines the extents of activities or operations of the organization. Sometimes the government imposes rules against doing business abroad. So, the service and manufacturing firms get fewer chance for merger and acquisition. Due to political influence some internal problems regarding recruitment and promotion may occur. Politically influential may be placed to an important position for which he is nor competent.

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Because of political influence some people may get early promotion or tend to dominate over other employees of the organization. Such type of situations often result in dispute, conflict, frustration among the employees which ultimately lead to lower productivity, absenteeism, higher turn over and production of poor quality product and services (Ghebregiorgis, and Karsten, 2006). Consequently, the firms may lose customers (Sibly, 1992).

Political unrest has influential impact on the business operations (Joynal, 2008). Due to the political unrest such as strike, procession, and lock out normal operation or working hour is hampered. As a result, service organizations lose their profit. Sometimes such type of destructive activities causes damage to the assets of the organization. And the organization invests again in acquiring the fixed assets which raises the cost of the organization (Ben-Porath, 1980). Sometimes the trade unions and other organizations led by the employees are exploited by the political parties to satisfy different interests. Workers may be agitated and involve themselves in destructive activities which impede the smooth operation of the firms which ultimately hampers both the workers and the organization.

Physical environment

Physical environment has direct impact on the organization and employee performance, productivity, efficiency and customer satisfaction etc. It is the surrounding environment in which the organization operates its operations. It focuses on lighting, ventilation, decoration or arrangement of equipments and furniture, humidity, temperature and noise etc. Inappropriateness of the above mentioned factors may result in fatigue among the employees which reduce employee productivity and capacity and thus increases cost of production.

Inappropriate environment may sometimes cause accidents which causes damages to many employees. And accident will increase the cost of providing compensation. Organizational environment also includes presence of appropriate leadership, proper motivational factors and proper reward and punishment system etc.

In an organization absence of well defined role or responsibility, improper communication process, inappropriate leadership style, vague policy and rules, differences in cultures, ideology, values, experiences and education level of the employees may cause conflicts. Consequently, strikes, lockouts, agitation, obstruction, go slow, dispute, confrontation and absenteeism may cause. Such a situation may lose customers and loss may occur.

Due to lack of proper reward and punishment system, career development system, motivational factors employees will not be motivated and as a result Productivity and efficiency and quality of services will go down which may result in customer reduction. Presence of environmental block and different other conflicts employees may be frustrated which may cause apathy and withdrawal from the works. And such a situation cause reduction in the ability of the workers to provide less costly and quality services. Physical environment is also important is also important for increasing customer satisfaction (Martínez-Tur, Peiró, and Ramos, 2005).

In a service organization, if lighting, ventilation, arrangement of equipments and furniture are not lucrative customers will tend to take services from other firms. So, a untidy and unattractive environment may cause reduction in profit.

If the physical environment is so lucrative and safe the employees will feel good and safe and no accident will occur. If the employees are provided with sound salaries and other compensation packages they will be able to lead a decent life in the society, production will also be increased. So, both the firms and employees will be benefited and able to offer quality services to the society. And the customers will get a healthy environment of service.

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Social Issues

Each and every business operates its business in a society and is greatly affected by different social values, norms and belief. Every person belongs to a particular society and is subject to the rules specified by the society. He can not do anything whatever he wants. People have to show respect to the values of his society. So, every business considers the social issues and show respect to those to avoid any type of dispute and criticism. Different society belongs to different beliefs and values. And people of different society possess different taste and interest for clothing, food, music, traveling and arranging parties etc.

In a conservative Muslim society wherein people are not so interested in having alcoholic beverages, the business of a bar will not be profitable. In a society where people prefer to have their weekend lunch at a good restaurant and like to eat fast-food, the restaurant and fast food shop will be successful. So, the success of a service or manufacturing organization is greatly influenced by the characteristics and nature of society different.

People buy things not only to satisfy the material needs but to also meet their social needs such as status and prestige. For such type of people marketers develop new marketing strategies. They charges higher prices and limit the availability of the product in the market (Kim, Forsythe, Gu, and Moon, 2002).

So, the social factors like prestige and desire for exclusivity affect the price and profit of the industries.

Social issues that influences the industries also includes social class, educational level, lust for prestige and fame, age , gender, occupation, religion race, income, life style, holidays and festivities etc (Kotler, 2002). These factors affect the quality, price, production and marketing of the services and products.

Socialization and Tradition Issues

Tradition includes beliefs, thoughts and actions that have been practiced for a long period and inherited from one generation to other generation. Tradition represents a well-established set of values, customs and beliefs which are adhered by a group of people. Different nations and society belong to different traditions. Traditions are very sensitive and people shows adherence to their tradition. Different industries try to show their respect to the tradition of the country where they are operating their business. Industries develop different promotional campaign, pricing and marketing strategies on the basis of the local tradition to attract the people.

Socialization is a process by which one individual learns to behave in a way that is expected by others in the society. Through the process of socialization people learn to act in a socially accepted way. During socialization an individual understand and absorb the social beliefs, norms and values. In an organization, socialization is a process to embed one with the organizational climate, to make him understand the responsibility and to make him committed to the organization.

Socialization has a significant impact on the job satisfaction and employee performance. Socialization reduces the turnover and impact the new employees embedded into the organization. It helps the organization to retain the potential employees. Thus it reduces the cost of training and recruitment and interrupted production of services and product.

Socialization has also impact on innovation, commitment toward the organization. Different inputs on the socialization process such as job characteristics, role definition, organizational tactics, prior experience, and social involvement persuade the employees and generates different socialization outcome such as performance, satisfaction and commitment toward organization.

Socialization also plays an important role in developing customer satisfaction. If the employees are socialized, that is they are aware about the acceptable behaviour, they will be able to serve a customer in a decent way which is very essential for both manufacturing and service industries. On the contrary, if most of the people of a society are socialized and behave in a socially accepted way, the objective of the organization will be achieved very easily because this objective is dependent on the social factors of that particular society.

Socialized employees learn to understand each other and become dedicated to their organization. As a result a good working environment is created with less conflict, dispute and frustration. Socialization helps the employees to think themselves as a team with higher degree of trust.

Thus socialization helps the organization serves the society in a widely accepted manner and reduces the cost of operation.


In conclusion, we can say that different service issues associated with the industries have deep, continuing and crucial effects on the operation of the industries. Different industries have to investigate, analyze and understand these effects thoroughly due to utilize these effects in a profitable way. Industries have to be very careful about these effects and try to be adapted with the effects.


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