The service sector is the tertiary sector that comprises of production of services. These services are known as intangible goods including access, attention, discussion and experiences. The service sector has been increasing its important in the industrialised economy and the top most companies in the world now belong to the service sector. The service economies in developing countries are related to the hospitality, health, retail, human services, technology, education and financial services (Mohammadi et al. 2014). The servitisation of products is the main reason behind the growing importance in the service sector and individuals who are associated with the services sector provide services, not the products. Service sectors job related to the housekeeping, tax production, guided tours, teaching, nursing and psychotherapy. In sectoral composition, the service sector dominates the manufacturing sector in most of the national economies. The service sector is claiming the dominant position that has always been reserved for agriculture and manufacturing sector. The service sector accounts for an important portion of GDP in most of the low income economies. The recent growth in the service sector occurs due to the liberalisation of economy and service sector is growing in complexity and sophistication (Heizer 2016). In the service sector, increasing affluence of wealth in the industry is one such reason for service sector growth as the increase in demand of services has been observed. The people have more leisure time to spend and the services related to entertainment and tourism is observing growth. In addition, in developing countries, the people have greater life expectancy; therefore, there has been an increasing in services related to health care. In the market, there are many such products with greater complexity, the customers need indirectly supporting, like cars, computers and air-conditioning. Increasing complexity in life leads to increase in the use of different services like tax consultants, legal services and placement services (Jacobs and Chase 2013).
In service sector, the operation process mostly follows Service Development Cycle. In this cycle, the four major elements are development, analysis, design and full launch. In the developing stage, the services are related to the formulation of new services, idea generation, screening concept and concept development and testing (Krajewski et al. 2013). In the analysis stage, the business analysis should be done based on the project. Moreover, the design is needed with service design and testing. Process and system design, marketing programme, personnel training and test marketing are included in design. Lastly, the full scale launch of services is done. As stated by Slack (2015), operations management need changes according to gap in service quality as the business needs to understand the customer perception, service delivery, service standards. Operations management must focus on the intangible products and customization of specific needs of the customers. In recent time, the business must provide customization of specific services apart from the general standardise. The businesses must take into consider the customer contact as customers’ satisfaction with the services is very important now. Operations planning and process must go to improve the operational efficiency. In addition, the in expanding the service business, the business owners need to think about facilities that they provide.
Globalisation impacts on the operation strategies in both ways, negative and positive. Global factors in operation management are global sourcing, economies of scale, research and development and scanning and learning. Firstly, global sourcing in business can set a bigger skill base and businesses can access the skills that are not available in local areas. When a business uses the global sourcing, it could have risk to lose the data rather than domestic suppliers (Smith et al. 2014). In addition, economies of scale are the processes of making the business bigger through using the practical knowledge in globalisation. The management sub-divides the process that can increase the productivity of the business through employees. On the other side, according to Khanna (2015), business can expand over various management levels that can increase the complexity in communication among various departments. This communication issue can negatively impact on the organisation success. Operation management across the globe refers to dynamic that can affect the world economic and they can increase competitiveness through developing sales by expanding new market. Moreover, research and development can provide the advantage in business to offer the consumers something that they do not expect. After globalisation, the operation process of developing the products and services lead to high desires of the organisations to increase the sales through uniqueness. The cost of R&D within the organisation can be expensive and the organisation uses the employees of different regions to develop any services and products. In operation management, business venture can polycentric, geocentric or regiocentric approach to recruit new employees (Lewis 2013). Example of Coca-Cola can be taken in this regard, this multinational brand could sell only 11 bottles in the very first day and they increased the distribution around 44 countries. Today, Coca-Cola is having a network of 84,000 suppliers around the world for making the operation perfectly. Scanning and learning helps a business to look insight of the organisation in case any issue arises. Within the business, experience of others in similar situation can help the organisation to react. The business should not do the same mistake twice as repeating the same mistake may impact on profit of business.
Effective operation and efficient use of resources can drive the organisation towards global scenario, however, the operation strategy is related to the top=down perspective bottom-up perspective, market requirement perspective and operation resources perspective (Panayotou 2016). The global operation has some drawbacks as the management faces issue of language and customs, different laws and regulation. The economic downturn can impact on customer confidence on spending and multinational companies have been facing the issue of environmental and ethical challenges. In today’s organisations, they are facing immense pressure from competition and they are using Total Quality Management (TQM) to surmount challenges in future within a financial crisis. TQM provides clear and achievable objectives for the business organisations. Total quality management has the principles of participation of stakeholders, employee involvement and strives for continuous improvement. As suggested by McCombie and Thirlwall (2016), global inventory control and planning is necessary as it provides efficient operation and to minimise the risk.
Manufacturing operations of many multinational companies are taken place in low-cost countries that provide them extra benefits of cost reduction. Migrating costs to low-cost countries is now an imperative idea for many industrial firms as companies observe this as cost leadership strategy. In low-labour-cost countries, firms are able to make the products in low wages and companies make the products in Malaysia, China, Hungary, India and Mexico. The companies first identify the opportunities in the low labour cost countries, supply chain, distribution, materials cost and manufacturing of labour (Marglin 2014). Bain and Company did a survey to 140 manufacturing executives across the globe and 80% of them believed that moving to low labour cost countries can improve the profitability as the wages of the labour are low and companies can get the extra value-added services like Research and Development (Amin 2014). Low-cost country sourcing is a strategy of procurement through which companies source the materials from different countries with low labour cost and production cost that help the firms to curtail the expense of operations. This low-cost country sourcing falls under the category of procurement efforts named global sourcing strategy. In the manufacturing process of multinational companies, they want the materials and labours to be cheap to make the operation cost and production cost of the products to be low. In the low-cost country, materials of the production flow from low-cost country to high-cost country, whereas, the technologies of the production go high-cost country to low-cost country sourcing. As opined by Mangan and Lalwani (2016), the primary objective of using low labour cost countries is to obtain the efficiencies of sourcing through exploiting cost to the simultaneous sale and purchase to make a profit between geographies. For example, Nike, the famous shoes and apparel makers use the labours of Sialkot in Pakistan as the wages of the labours are low comparatively in any developed countries.
Apart from the cost pricing, low labour cost sourcing is used to improve the time-frame of manufacturing the products and manufacturing capacity can be increased in such locations. The human resources of these low labour cost countries are cheap and multinational companies provide training to the employees to make the quality goods that can provide improved customer services (Rodriguez et al. 2014). China is one such example in low labour cost countries and manufacturing operations in China for technological goods is lower than other places. In low-cost country sourcing, the companies get the advantage of logistics benefits as the cost of logistics is lower than developed countries. According to Lindberg et al. (2013), in most of the Asian countries, previous times, labours were associated to the agricultural works, due to the attraction of fixed wages, these labours shifted their works and they have come to be more productive in multinational companies. In the recent time, the low labour cost countries do not have the same condition as it was used to be, the labours have been demanding extra wages for increasing productivity and living cost (Coker 2014). The multinational companies are facing the pressure on profit margin as the labour cost is rising. However, the companies are searching the countries where the labour cost is cheaper and raw materials can be used easily.
The UK’s decision to leave the European Union can be marked as a significant event that can create the ripple effect on economy and operations management of firms. Operations management of an organisation have various aspects, Brexit can pose threat mainly supply chain and logistics operations. The shipping and logistics firms have been forced to deal with the disruption of the supply chain as the trade agreements and laws have not been implemented correctly to the EU based countries (Mijiyawa 2017). The flow of goods is hampered and the organisations are expecting a dramatic surge in manufacturing and retail organisations as they need new trade reality. In addition, logistics businesses in the global scenario will be hampered and XPO Logistics Inc observed the drop of share by 15% in recent time and 12% of the organisation’s total revenue is generated from the market of the UK. The supply chain process of retail industry will face the issue as the distribution channel must be restructured due to EU’s restrictions are in place (Adler-Nissan et al. 2017). The most critical condition is that the firms cannot do any changes right now as the planning of the new regulations is in the process and will take a few years to complete. In a survey conducted by The Guardian to logistics managers, 70% of the respondents believed that leaving of EU will impact on supply chain and logistics business. Additional concerns were shown in economic stability (71%), currency value (56%), trade deals (52%) and migrant workers reductions (17%). On the other side, Europa Worldwide Logistics Operator, Andrew Baxter opined that Brexit will be good for Britain and in long run; this may impact positively on operations process in the logistics and supply. The supply chain and logistics issue may impact on businesses like Information technology, insurance, finance, laws and sales (Pisani-Ferry et al. 2016).
After several months of the UK’s Brexit, the world got another quake when Donald Trump became the president of US. Trump has taken the agenda to slowly cut the US off from the global market (Jones 2014). Trade protectionism is a policy that can limit the unfair competition from foreign industry and it can be considered as politically defensive measure. Critiques think that isolationism is not good for the businesses to flourish as the stock market has started to perform worse. The business leaders and CEO of world famous organisations like Google, Netflix and Ford put a message on protectionism. Trump has a plan to cut the US into multilateral and bilateral trade policies. Many of the businesses in the US are trying to cut the taxes and spend more on roads and bridges. US President took the pledge to put the US first can bring the economic and political uncertainty. Therefore, the protectionism theory of Trump can increase the trade tariffs that can put supply chain on disaster. In operations management process, protectionism or isolationism throws a spanner in logistics and supply chain. In short-term, the economic realities and political uncertainties can pose damage to the business, however, the protectionism can allow the business to reap the rewards in long-term (Draper 2017). Protectionism or Brexit will allow the organisations to use more technologies and this can make the business more competitive.
Reference List
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