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Management Report

Management reports, briefs issued by Samsung Economic Research Institute

Process Innovation for Improved Service Competitiveness

Process Innovation for Improved Service Competitiveness


Sept. 4, 2006

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Korea's service industry is becoming increasingly vital, accounting for about a half of its GDP. It hires more than 60% of total workforce, a sign of growing economic maturity. In the more mature economies of the US, UK, Japan and Germany, the service industry's share is over 70% of GDP.

Some manufacturing companies take advantage of the power of service to improve their competitiveness. Giant manufacturing companies like aerospace technology firm Honeywell, power and automation technology group ABB, medical equipment manufacturer Siemens, and jet engine manufacturer General Electric (GE) have all created new business opportunities by strengthening their after-sales service.

However, Korean companies in general, have inadequate idea on the need for providing better service to their clients. To assess their level of competitiveness in services, Samsung Economic Research Institute surveyed 757 subscribers to our website www.seri.org, hoping to see how Korean chief executive officers regard this matter. The result showed that 98% of respondents affirmed the critical importance of service as a factor determining a company's competitiveness. But 56% of respondents also said their companies' service competitiveness was no better than that of competitors. When asked why they hesitate strengthening their service competitiveness, 33% replied that they lacked information on how to improve their service, even though they recognized its need. Thus many Korean companies appeared unable to improve service competitiveness because they had no idea how to improve it.

Because service production and service consumption go together, Korean companies must make more efforts to innovate service process in order to strengthen their competitiveness in the service area. This report focuses on how they can achieve this goal by way of process innovation.

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