In pure service businesses any transfer of a physical or concrete product is incidental to the service—for example, the written report of a management consultant.
Top managers should ask themselves six questions about strategic management.
The questions are fairly common, but the answers for service businesses are often unique.
- Do we fully understand the specific type of service business we are in?
- How can we defend our business from competitors?
- How can we obtain more cost-efficient operations?
- What is the rationale for our pricing strategy?
- What process are we using to develop and test new services?
- What acquisitions, if any, would make sense for our company?
Here are some strategies a company can use for growth and other aspects:
Describing Services
In product-oriented businesses, the physical reality of the product provides a simple but powerful base on which to build a business description.
For example, it may be difficult to describe management consulting as a business to someone who has never experienced a consulting relationship.
Building Barriers
In product-oriented companies, capital is the most commonly used barrier to entry of competition.
Location decisions are often very important and multiple locations can serve as a barrier to entry.
One example is the car rental business, where a large number of airport locations are very important.
Economies of Scale
Managers of service businesses should not conclude that they have no opportunities for scale economies and the resulting capital barriers to entry.
With the probable exception of advertising clout, the economies of scale that may provide a barrier to entry exist primarily in equipment-based, and not in people-based, service businesses.
Cutting Costs
Substitution of capital for labor is the classic method of obtaining operating leverage in both products- and service-oriented businesses.
Capital is used to purchase machinery which can produce a product or service at a faster rate with more consistent quality.
Many service businesses have followed this path of development.
Twenty years ago, virtually all car washes used unskilled labor; today, most are automated.
To know more about these strategies and some more, you can read this article: https://hbr.org/1978/07/strategy-is-different-in-service-businesses
And if you have doubts or questions related to your business’s growth strategies, you can send in your questions for our expert entrepreneurs through this link: https://sncoglobal.com/#q&a
