Reasons for the growth in Services Sector

Reasons for the growth in Services Sector

The reasons for the growth in service sector can be broadly categorized into
two. They are:

 Growth in intermediate demand from firms

 Growth in final demand from customers

Growth in intermediate demand from firms

Manufacturing firms started bundling with a number of service functions

such as selling, marketing, research, advertising, labour welfare, HRD,
financial advisers, strategic advisers, etc. with the growth of competition and
the pace of change in consumer exposure and expectations forced
organizations to look for specialized services.
Companies started unbundling the organizations and taking the services
from outside, where highly professional and specialized services are
available at a relatively low price. As a result, a number of service
organizations have come up in the world. The wave of specialist services
during the last three decades changed management philosophies and
encouraged them to outsource many services. Hence, the demand for special
services has gone up.

Growth in final demand from customers

There is growth in direct demand from customers for a variety of services.

People spend more and more on services. The demand for health services,
travel, entertainment, sports and the like registered a significant growth in
recent years.

Increase in affluence

A majority of the population in developed economies and significant groups

in developing economies are becoming more affluent year by year. The 250
million strong middle income households of India with their desire of variety
of products and services attract many multinational companies to the
country. The demand for personal services, travel, tourism, entertainment,
clubs and the like greatly depend upon the affluence of the society.

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 Reasons for the growth in Services Sector

Affluence reduces the scope of self- service and creates the opportunities for
many service people and organizations.

More Leisure time

The tendency of the people through out the world is to gain more leisure
time so as to attend to their personal and family activities. People are
spending time on education, training, skill development for themselves as
well as for children, touring, entertainment, personal care and so on.

Working woman

The percentage of women in employment is increasing each year in many

economies. They no longer can be viewed merely as housewives and inferior
to men. They have proved beyond doubt that they are equal to and, in some
areas, more competent and suitable than men. As they belong to a double
income group, they have more money affluence to spend on services. As a
result, the demand for crèches, baby sitting, household domestic help, health
services, fitness services, special education services and so on has gone up.

Growth in population of DINKS

DINKS is the acronym for double income group with no kids. It is not that
the couple cannot have children due to physical problems. The couple do not
try to have children, may be because both are busy with their respective
careers. DINKS spend liberally on services. DINKS spend liberally on
services.

Greater life expectancy

Economic prosperity and increasing standard of living of the people have

resulted in grater life expectancy. As a result, there is significant growth in
the population of senior citizens. There would be greater demand for nursing
homes and health care services with the increasing population of the elderly.

Greater complexity of products

The rapid pace of change in technology offers more and more new products
to the society. People now have a very large spectrum of needs compared to
the earlier generations and are using a number of complex products in day-to
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 Reasons for the growth in Services Sector

day life. They need specialists for maintenance of products such as

computers, automobiles, televisions and kitchen appliances. Therefore, the
demand for such services is growing day by day.

Greater complexity in life

In today’s society people are required to play a number of roles. There is a

demand for such services which can reduce or share their burden. As such,
there is an increased demand for income tax consultants, counseling,
employment services, labour supply services, baby care centres and so on.

Greater concern for resources scarcity and ecology

In recent years, many economies are concerned about environment and

ecological balance. A large number of public organizations are being
promoted by governments of various countries to protect the environment
from pollution and other hazards and to maintain the ecology through
conservation of forests, protection of animals, birds, insects and other
important species.

Increasing number of new products

Consumers have been exposed to a wide variety of choice in recent years.

The life of products and services is shrinking owing to the rapid introduction
of new or improved products. Consumers, being very busy, are unable to
understand a product completely, before taking a purchase decision relating
to the product or service. As such, consultancy services are enjoying
increased demand.

The Young

The younger generation tends to use more and more services than the older
generation, who depend on themselves for a number of activities. The
younger generation would be able to cope up with the pace of change only
through consumption of a number of services.

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