Business services are activities that benefit companies without supplying physical products. These services help with marketing, production, safety, cost and convenience.
Definition: Service businesses are a type of business that produces or sells a service to earn profits. They are different from product-oriented companies in that they do not develop a brand name and tend to create a reputation for the type and quality of their services.
Barriers to Entry:
The main barrier to entry in most product-oriented companies is a market for the product that can differentiate them from other firms in their sector. This is especially true for more abstract and complex services that do not have a built-in brand name identification.
In contrast, many service-oriented businesses do not have this advantage and must be developed in a way that will establish their reputation as the quality standard for their sector. For example, in car rental services, the company must decide where to put their vehicles so that they can provide a consistent service at each location and maximize profitability.
Moreover, the nature of these businesses also makes them difficult to manage and operate. The most common management challenges that service businesses face are managing the work of multiple employees. In addition, service businesses are often unable to develop economies of scale and must focus on smaller local markets for their products. As a result, they may be more susceptible to market disruptions and to unforeseen changes in business conditions.