ARTICLE | Strategy
Strategy is Different in Service Businesses
JULY 1978 | Author Dan R. E. Thomas
Many managers of service businesses are aware that the strategic management (by which I mean the total process of selecting and implementing a corporate strategy) of service businesses is different from that of manufacturing businesses. This article discusses how pure service businesses are different from product-oriented businesses and why they require different strategic thinking. A pure service business is one in which the service is the primary entity that is sold.
Top managers should ask themselves six questions about strategic management. The questions are fairly common, but the answers for service businesses are often unique. Each question will be raised here and discussed in depth later.
1. Do we fully understand the specific type of service business we are in? Although service-oriented businesses are different from product-oriented businesses, the nature of the difference depends a great deal on the specific type of service business. I will present a classification scheme to help distinguish between service businesses along some important strategic dimensions.
2. How can we defend our business from competitors? Every business must consider how it can build and protect a strong competitive position. To do this, the economics of the business must be carefully analyzed. Service businesses often require different competitive strategies from those of product-oriented companies. If an enduring institution is to be created, some attention must be given to the management of economies of scale, proprietary technology, and reputation of the company.
article website: https://hbr.org/1978/07/strategy-is-different-in-service-businesses
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