Do service organizations add value to society Well according

Do service organizations add value to society? Well, according to the MA Dept of Revenue, over 85% of the persons who filed MA Income Taxes, their primary (largest) source of income came from a service organization. Massachusetts would be in deep trouble financially if there were only a few service organization were paying wages in this state.

Do you think the US economy needs service organizations?

Solution

The importance of the service organisations in the US economy can be measured by the fact that in the latest list of Fortune 500 companies, there are more number of service organisations than number of manufacturers and product-based organisations in comparison to the fortune 500 lists of past decades. Today, no company can boast of being just a product-based organisation. Service has become an inseparable component of the product offering. As mentioned in the case, according to the Massachusetts Department of Revenue, over 85% of the people who filed MA income taxes had their primary income source coming from a service organisation. This shows the huge employment opportunities that the service organisations have to offer in the economy.

With constant technological advancements and the increasing need of producing a steady stream of revenue from ongoing contracts instead of having a single payment coming from a sold manufactured product, more and more companies are adapting to the idea of transforming their age-old traditional manufacturing business to a product-service system. The businesses are now shifting to a subscription pricing model from the existing lump-sum one-time payment systems. Talking about the servitisation of products, service industries such as hospitality, retail, banking, health, information technology, education, etc. focus on service aspect of the business more than the product aspect. These industries are mass employment providers and heavily invest in their human capital. Service organisations make use of the skillset, knowledge, experience and talent of their human resources to produce valuable outcomes for their customers. Whereas, manufacturing organisations are accused of exploiting depleting natural resources by using them as raw materials and in return, adversely affects the environment and adding to the prevailing environmental issues such as pollution and global warming.

There is no denying that the relative importance of service is increasing in the product offering of many organisations. Take the example of IBM that treats its business as a service business instead of a manufacturing business. Inspite of being in the business of manufacturing of computers, the management of IBM over a period of time has realised that as a service organisation they can offer business solutions to their clients where the price elasticity of demand is much lower. In such cases, physical goods become a negligibly small part of the overall business solution component. Thus, because of all the benefits and contributions that the service organisations make to a economy, the US economy very much need them for its future growth prospects and advancements.