Business services are a recognised subset of economic services. Like economic services, they are both consumer and provider. Businesses are often concerned with building service systems that enable them to deliver a range of products and services to their customers. However, they differ significantly from traditional economic services in several ways. This article explores the key aspects of business services.
Intangible activities
Intangible activities in business services are items that cannot be directly measured, such as brand name recognition and patents. These types of assets can be extremely valuable to a business. The Coca-Cola Company, for example, has intangible assets in the form of its brand name, which has an incalculable value and is a significant contributor to its earnings. The healthcare industry is another industry with a high proportion of intangible assets. These assets can include research and development and highly-valuable employees.
Cost
During this time of global recession, cost cutting is becoming more of a strategic imperative for many organisations. Cost cutting is not just about reducing direct costs – indirect spending is also a growing contributor to organisations’ costs. With the right indirect procurement strategy, organisations can cut down on business services costs while maintaining quality.
Profitability
A business’ profitability is its ability to generate more revenue than it costs to operate. Its revenues come from sales to consumers, while its expenses come from paying employees and producing products and services. These expenses can be broken down into two categories: direct and indirect. Direct costs are what the company pays for its employees, while indirect costs are the costs that aren’t directly involved in the production process.
Location
Business services are often highly concentrated within cities, reflecting urban hierarchies. This study uses Eurostat Urban Audit data for 51 cities across Europe to examine the role of market factors in determining the location of business services. Findings reveal that location-related determinants play a prominent role. These factors include business demand, accessibility, institutional frameworks, and urban agglomeration. However, supply factors also play an important role.
Regulation
Regulatory institutions in Europe have an impact on the competitiveness of business services. They regulate the quality, variety and prices of business services and may also constrain new entry into the sector. The extent to which these regulations restrict entry is important in determining how effective they are.
Offshoring
Offshoring business services has a growing significance for the global economy. With the tradability of services increasing, FDI flows in this sector have shifted from traditional manufacturing to service-based industries. While India and Ireland have traditionally been the preferred destination for business services, the Central and Eastern European region is becoming increasingly popular. This article examines the conceptual issues related to offshoring and outsourcing and provides a theoretical framework for understanding specific patterns of FDI in this sector in CEE.