Business services are intangible activities that serve as the backbone of numerous industries. It includes activities like banking, IT, insurance and transportation.
There are various characteristics that define Business services. These include intangibility, inseparability and involvement of customers. Intangibility means that a service cannot be touched, but it is experienced through interactions and knowledge.
Inseparability is another characteristic of Business services as production and consumption take place simultaneously. This is unlike goods where production can be stored for future use. Customers also play a role in the delivery of business services, which is a significant difference from goods and products. This is because customers are likely to compare the quality of a service with its price, which can influence their satisfaction and loyalty.
The growth of this sector has been driven by new communication technologies and the growing importance of outsourcing. In recent years, many businesses have been moving their core functions to service providers from in-house departments. This has reduced their capital investments and improved their productivity. However, a number of challenges still exist for this industry such as legal barriers to cross-border trade, labor market rigidities and slow productivity growth.
Despite these challenges, the future looks bright for this sector. Increasingly, small businesses are entering the field with low barriers to entry and leveraging technology. This trend is expected to accelerate as companies continue to outsource their core functions to service providers. Furthermore, the coonavirus pandemic will accelerate the adoption of new service delivery models and the use of mobile applications for communication.