Approaches to the classification of services

The concept of “service” includes a complex of diverse types of human economic activity, causing the existence of various options for classifications of services.

International practice identifies the following 12 service sectors, which in turn include 155 subsectors:

commercial services; postal and communication services; construction works and structures; trade services; education services; environmental protection services; financial intermediation services; health and social services; tourism-related services; services for the organization of recreation, cultural and sports events; transport services; other, not included services.

In the system of national accounts, services are divided into consumer (tourism, hotel services), social (education, medicine), production (engineering, consulting, financial and credit services), distribution (trade, transport, freight).

The WTO focuses on the relationship between the producer and consumer of services, distinguishing four types of transactions in international trade in services.

From the territory of one country to the territory of another country (cross-border supply of services). For example, sending information data to another country via telecommunications networks. Consumption of a service in the territory of another country (consumption abroad) implies the need to move the buyer (consumer) of the service to another country in order to receive (consume) services there, for example, when a tourist goes to another country for recreation. Delivery through a commercial presence in the territory of another country (commercial presence) means the need to move factors of production to another country to provide services in the territory of this country. This means that a foreign service producer must invest in the country’s economy, create a legal entity there in order to provide services. We are talking, for example, about the creation or participation in the creation of banks, financial or insurance companies in the territory of another country. Delivery through the temporary presence of natural persons in the territory of another country means that an individual moves to another country for the purpose of providing services on its territory. An example is the services provided by a lawyer or consultant.

In the conditions of a high degree of saturation of the world market with goods and toughening of competition in it, services provided to the business sector, for example, engineering, consulting, franchising, etc., are of great importance.

Let’s briefly describe some of the above services.

Engineering is an engineering and consulting service for the creation of enterprises and facilities.

The totality of engineering services can be divided into two groups: firstly, services related to the preparation of the production process and, secondly, services to ensure the normal course of the production process and sales of products. The first group includes pre-design services (mineral exploration, market research, etc.), project (drawing up a master plan, estimating the cost of the project, etc.) and post-project services (supervision and inspection of the implementation of work, training of personnel, etc.). The second group includes services for the management and organization of the production process, inspection and testing of equipment, operation of the facility, etc.

Engineering services are provided by special engineering consulting firms, as well as industrial or construction companies. The largest number of engineering firms is located in Germany, where mainly small and medium-sized structures with less than 20 employees operate. The leading place among the exporters of engineering and construction services in terms of the volume of orders received is maintained by American and Japanese contracting companies. The third place is held by France.

Consulting is the process of providing the client with the special knowledge, skills and experience necessary for the implementation of professional activities.

Consulting services can be considered from the point of view of the subject of consulting and classified depending on the sections of management: general management, financial management, etc. Based on the method of consulting, for example, expert and training consulting are distinguished.

The services of consultants are intended for use by the management of companies, i.e. decision-makers and related to the activities of the organization as a whole. By involving a consultant, the client expects to receive assistance from him in the development or reorganization of the business, expert opinions on some decisions or situations, and finally, just to learn or adopt certain professional skills from him. In other words, consultants are invited to remove uncertainty that arises at different stages of the process of preparing, making and implementing responsible decisions.

The development of the global management consulting industry will be illustrated by the following examples. Global revenue from management consulting services is growing steadily, from $25.3 billion. in 1991 to 98 billion dollars. Among the world’s largest firms in terms of revenue from services in the field of management consulting in 1999 can be called IBM global services ($ 9762 million), Cap Gemini-Ernst & Young ($ 8200 million). The global average level of hourly professional remuneration rates for management consultants has remained virtually unchanged for 30 years between $100 and $150 per annum.

Franchising is a system for transferring or selling technology and trademark licenses. This type of service is characterized by the fact that the franchisor transfers not only exclusive rights based on the license agreement to engage in entrepreneurial activities, but also covers assistance in training, marketing, management in exchange for financial compensation from the franchisee. Franchising as a business assumes that, on the one hand, there is a company known in the market and having a high image, and on the other hand, a citizen, a small entrepreneur, a small firm. Both parties are bound by a franchise agreement.

International tourism provides a variety of tourism services designed to  meet a wide range (e.g., cultural, spiritual) of people’s needs.

Tourism can be classified according to various characteristics:

purpose: route-educational, sports and recreational, resort, amateur, festival, hunting, shop tourism, religious, etc .; form of participation: individual, group, family; geography: intercontinental, international, regional, seasonal – active tourist season, off-season, off-season.