Theoretical background

Abstract

Today’s world is increasingly characterized by services. This trend is particularly strong in the most advanced economies which are dominated by services generating often more than 70% of their gross domestic product (GDP). In the U.S., e.g., employment in the manufacturing sector has declined over the past 60 years while the services sector grew by 1.9% annually. This trend is unlikely to change as the underlying drivers of service growth are unlikely to change: growing outsourcing activities, gain of production efficiencies, and global competition. But even globally, countries like China and India focus on services development in order to transform into modern service economies. On a firm level, this shift towards services becomes manifested in a transformation of firm orientation from purely producing output such as goods to dealing with services. As such, traditional manufacturing firms such as IBM or GE understood that offering high value services will help them grow their business. Today, they generate 50% respectively 70% of their revenues with services.