Transcript SEVICES: GOING GLOBAL?

Lecturer: Dr. Truong Thi
Kim Chuyen
CONTENT
I. Defining and the theorizing services
II. National and global stimuli to the growth of
services
III. Service outsourcing: benefits and drawbacks
for all?
IV. Limits to service export growth in the semiperiphery and periphery
V. Geography of services
VI. Variety in the internationalization of services
Group members
 Thái Thụy Tường Vy
 Đỗ Bảo Khánh
 Phạm Bình Dương
 Đoàn Anh Việt
 Nguyễn Thị Anh Thư
11.1/ Defining and the theorizing
services
I. Defining and the theorizing services
Following Fisher – Clark thesis, services have been
defined:

Comprising what remains after agriculture, mining and manufacturing
are excluded. (1st defined way)

Production and consumption of intangible inputs and outputs. (2nd
defined way)
st
1
defined way
Differences between manufacturing and
services play important implications
 For LDCs and the DCs
 For measuring and studying services
Services are categorized into 7 major components

Finance, insurance and real estate

Business services

Transportation and communications

Wholesale and retail trade

Entertainment, hotels and motels

Public services at all government levels

Non-profit services
2nd defined way
• The distinction between tangible manufactured goods and
intangible services is not clear cut
• Many manufactured products have come to be offered not in
their own right to consumers, but in terms of their wider
service attributes. This has occurred in 2 ways
−
The manufactured products can be offered along with closely aligned
service products in a single package
−
Instead of buying a manufactured product in a single one-time purchase,
a consumer can buy the service which the manufactured product provides
as part of a continuing process involving long-term customer contact
through service delivery
Service encapsulation
11.2/ National and global stimuli
to the growth of services
II. National and global stimuli to the
growth of services
 Rising per capita incomes
 Growing demand for healthcare and educational services
 Increasingly complex division of labor
 Growing size and role of the public sector
 Increasing international trade in services
 Rapid growth in outsourcing service functions
11.3/ SERVICE OUTSOURCING:
BENEFITS AND DRAWBACKS FOR
ALL?
 Deciphering outsourcing terminology
Outsourcing/offshoring
Where
Domestically
Outsourcing
√
How
Abroad
Affiliated company
( Internal )
√
Unaffiliated company
( External )
√
Offshoring
√
√
Captive
outsourcing
√
√
Offshore
outsourcing
√
√
√
 Outsourcing can be done domestically or abroad, involves work done
externally
 Offshoring is always done abroad, the work can be done either
internally
 External outsourcing – where the work is done by unaffiliated
companies ( including independent foreign subcontractors, as in
offshore outsourcings )
 Internai outsourcing – where the work is done by affiliated companies
as in captive outsourcing
 While the outsourcing of services is still at a relatively early age, it is
seen as representing the leading edge of changes in global production
 UNCTAD : Reflect a shift to a new internal division of labour in the
production of services
 OECD : The total number of jobs could be affected by international and
domestic outsourcing
 Service and manufacturing activities, important differences are
expected to fuel an acceleration in service outsourcing
 First, There is significant room for growth
 Second, The rate of increase in the amount of services that has become
tradable
 Third, Manufacturing companies have primarily carried out the
outsourcing of goods production
 Fourth, Skill levels are typically higher
 Fifth, Services may be more mobile than outsourced manufacturing
activities
 The benefits of service outsourcing for LDCs include the criterion of
higher skill jobs involving better pay, training and transferable skills
and associated infrastructure investment that can contribute to further
local job growth
 The drawback for some LDCs include the possible relocation of
outsourced service activities to other more competitive LDC locations
unless worker skills and local infrastructure are continuously upgraded
11.4/ LIMITS TO SERVICE
EXPORT GROWTH IN THE
SEMI-PERIPHERY AND
PERIPHERY
Semi-periphery and periphery
 The semi-periphery countries are the industrializing,
mostly capitalist countries which are positioned between
the periphery and core countries
 The periphery countries (sometimes referred to as just
the periphery) are those that are less developed than the
semi-periphery and core countries.
TECHNOLOGY AND
INFRASTRUCTURE
EDUCATION AND TRAINING
GOVRNMENT REGULATIONS
AND POLICIES
CORPORATE STRATEGIES
TECHNOLOGY AND
INFRASTRUCTURE
TECHNOLOGICAL LIMITATIONS:
USE BY COMPUTER
DIGITAL FORM
MADE TO
OUTSORCING
TECHNOLOGICAL LIMITATIONS:
 Ex: Africa has less than 1 internet host per 1000
inhabitants
LIMITED INFRASTRUCTURE:
TELECOMMUNICATIONS
RELIABLE POWER SOURCES
FINANCIAL SERVICES
DISTRIBUTION LOGISTIC
LIMITED INFRASTRUCTURE:
EX: LDCs cannot link into telecommunications network in
submarine cables
=> They are limited in their ability to develop competitive
base for services exports
EDUCATION AND TRAINING
Lack of education and training is a limiting
factor in knowledge-intense services.
 Special skills are needed for more routine services:
Language
abilities
Customer
support
skills
Telesales
abilities
Dataentry
Processing
skills
LDCs may not be able to keep pace with the demand for
qualified workers, shortages of trained workers
=> Less attractive as an outsourcing destination
GOVERNMENT AND POLICIES
 Competitive regulatory environment is need to encourage
competition among service providers
 The regulatory and legal framework in some less
developed countries can place limits on the growth of
export services.
 => they need to be concern about poor data security and
intellectual property protection.
 WTO’s General Agreement on Trade in services (GATS)
covers all internationally traded services. However, it still
proceeds extremely slowly to help a greater competition
and non-discrimination.
CORPORATE STRATEGIES
Perception of risk
Limited
opportunity
in corporate
decision
Assessment of
the benefits of
outsourcing
Any assessment of the potential for service
outsourcing needs to include analysis of
corporate strategies and organizational
limitations
 Ex: some information that is to be processed can be
confidental. However,this can increase transation cost and
limit desirability of outsourcing.
The royal Bank of Scotland in UK are right when
deciding not to outsource certain financial service abroad
while LDCs is limited in decision of outsourcing.
11.5/ GEOGRAPHY OF SERVICES
1.
2.
3.
4.
5.
PATTERNS AND TRAJECTORIES
INTERNATIONAL TRADE IN SERVICES
TRANSNATIONAL INVESTMENT PATTERNS
EXPORT PROCESSING ZONES (EPZS)
AGGLOMERATION AND NEW BUSINESS SERVICE
CONCENTRATIONS
PATTERNS AND TRAJECTORIES
 2006: milestone for service
 Low employment in services  ?
 Economy
Informal
Formal
2006: milestone for service
(not include informal economy)
1996
2004
2005 2006
World
35.5
38.9
39.5
40
Developed Economies and European Union
66.4
71.6
72.4
72.7
Central and Eastern Europe (non-EU) and CIS
45.8
49.5
49.8
50.3
East Asea
20.7
24.5
25.1
25.8
South East Asia and the Pacific
32.7
34.6
34.6
35.2
South Asia
25.3
28.2
28.9
29.5
Latin America and the Caribbean
56.5
60.6
61.1
61.4
Middle East and North Africa
48.6
47.6
47
47.4
Sub-Saharan Africa
22.9
26.2
27.9
28.2
Changing employment in services as a percentage of total employment
Source: ILO (2007:12, table 5)
Employment rate in service
 Low employment rate in services  LDC
Percentage
of Workers
in
the
Service
Sector
Source:
U.S. Bureau
of
Labor
Statistics
(2008)
The connection between two
kinds of economy
 Informal economy: informal sector, informal
employment, LDC
 employment without labour or social protection—
both inside and outside informal enterprises,
including both self-employment in small unregistered
enterprises and wage employment in unprotected jobs.
(D E S A W o r k i n g P a p e r N o . 4 6)
 Formal economy: formal sector, formal employment,
DC
 Informal sector  resource for the formal sector.
 Reason: informal sector provides a huge range of cheap
services for employees in the formal sector  reduce
the living cost of them  reduce the wages  reduce
the goods price  good for formal economy
International trade in services
EURO
ASIA
NORTH AMERICA
SOUTH AND CENTRAL AMERICA
AFRICA
MIDDLE EAST
COMMONWEATH OF INDEPENDENT
STATES
EXPORTS
IMPORTS
2005
TRANSNATIONAL INVESTMENT
PATTERNS.
 FDI
Services
2/3 world FDI stock
The largest
•
•
•
•
Physical presence requirement of delivering of non-tradable services
Home market success  build and strengthen strategies.
Relaxing regulation of service industries & foreign service
Information & communication technologies  low cost location
worldwide.
EXPORT PROCESSING ZONES (EPZS)
 LCDs use subsidies and EPZs  attract investment.
 Subsidies: variety of service industries.
 EPZs: manufacturing (traditional), export-oriented
services
Table 1. Regional distribution of EPZs targeting services, 2004
No. of countries with EPZs for services
World
91
Asia and the Pacific
26
Latin America and the Caribbean
26
Africa
20
Central and Eastern Europe
13
European Union and other developed
countries
6
Source: ILO, www.ilo.org/epz.
 Most EPZs for service industries are located in the
LDCs.
 The kinds of these EPZs have growth rapidly:
commercial services, simple data entry, call centres,
medical diagnoses, architectural, business,
engineering and financial services.
Modern communication technologies
 EPZs
Reliable power supplies
Highly skilled work-force.
AGGLOMERATION AND NEW BUSINESS
CONCENTRATIONS
Standardized
Easily
transmitted
Tacit
Not
standardizes
Kinds of
knowledge
Actor-network theory
 High value-added services + skilled labor + tacit
information = world’s global cities.
 Low value-added services + standardized
knownledge = world’s low wage.
11.6/ Variety in the
Internationalization of
Services
The Internalization of
Services
Retailing
Tourism
Financial
Business
Internalization of Retailing
New Foreign Markets  Maintain
Sales & Profits
Limited Domestic Market Growth
Opportunities
5 Reasons
Globally appealing & innovative
Applying High-Tech to Foreign Mrk
High Risk  High Return
Large global retailers 
Internationalizing their Supply
Networks  Applying Buyerdriven commodity chain
What is Buyer- driven commodity chains ?
Labour- Intensive
Consumer goods industries
Profit
Buyer- driven model
Producer- driven
model
High- value Research &
Design
The scale & Volume
Sales & Marketing &
Finance
Technological
Advanced in producing
Keep low cost
Forcing Consolidation at all stages in LDCs
Positive Outcome of Buyer- driven model
1. Centralized Model
• A distribution center
• No Individual Stores
Reducing Administrative Cost
Increasing the efficiency of
network
3. Developing
Local
Specialized
wholesalers
Reducing the
Retailers’ cost
Highly Controlling
 Quality +
Delivery
2. Applying
modern
technologies 
the supply chain
Track Inventory +
Delivery
LCDs: Technologies
Transfer + Training
4. Using
short –
term
Contracts
5. Imposing
private
certification
+ standards
 supplier
net- work
The flexibility to
adjust supplier net
- work
Forcing LCD
suppliers to bid for
each new project.
Harmonizing
product
quality ( LCD
suppliers
Negative Outcome of Buyer- driven model
Power in hands of a few major
retailers.
Ex: Wal- Mart
Tighter Control over inputs and
standards
The World’s Largest retailer today
Wal-Mart Development in The US
How did Wal- Mart solve its difficulties in Germany?
Wal- Mart superimposes its own Culture to Germany
X
No
An Important Lesson
International Tourism
The requirements for rising International Tourism
Transportation service Hotels Service
Entertainment Service
Benefits
Promoting peace and stability in
LDCs
1
Rising Income + Consumption of Service
Tourism receipts (US$ million)
ex: In China
2. Providing jobs + Diversifying the economics.
Chart 1: Distribution of jobs in tourism industries, 2007 in the
US
3. Promoting cross- culture awareness.
Challenges
1
Producing jobs which are often seasonal.  not fixed
1
Pollution / environment degradation
3 Degrade traditional lifestyle + heritage
Internationalization of Finance
Internationalization
of Finance in LDCs
Transactional
Banks
Advances
Information
Modern
telecommunication
s
Offshore banking
center
Foreign exchange
transactions
FDI in financial
services
There has been a large increase in the presence of banks
from developed countries to LCDs countries
HSBC Viet Nam
Citibank Viet Nam
Banks from developed countries strongly develop in China, Korea,
Taiwan ( >= 50%)
Others : Argentina, Brazil, Colombia, & Venezuela ( higher increase)
United Nations Conference on Trade and
Development
One- third of the world’ s financial TNCs are from LDCs
 Its international standards: Low
 Less international active
 A physical presence in a few foreign banking markets
Ex: Banks ( from LDCs)
London: 1996- 2002 153- 122
New York: 118 - 90
The effects of the rapid spread of e- finance in recent year are
not limited to the DCs.
Online
banking( %
of bank
customers)
Online
brokerage ( %
of brokerage
transactions)
E-money (
no. of
merchant
terminals per
100,000 pp)
Business
environment
ranking,
2004-04
Core
8
27
427
8.2
Netherlands
15
40
1898
8.8
Norway
8
25
1059
8.0
Sweden
31
55
418
8.3
UK
6
26
3
8.8
The US
6
56
35
8.7
Semi-periphery
5
30
71
7.0
Czech Republic
1
90
Hong Kong
5
1
351
8.5
Mexico
3
41
2
6.8
Singapore
5
10
332
8.6
7.0
Offshore Banking Center
oLess regulated
oLow- or no tax settings for saving
oHavens for undeclared income + hot
money
The need
for
Secrecy
The desire
for shelter
from
Taxation +
Regulation
The
emergence of
offshore
banking
center
5 major specialized offshore banking
centers
•The Caribbean
•Europe
•The Middle East
•Southeast Asia
•The South Pacific
Internationalization of Business
Service
IBOS : in term of BPO to the LDCs in general and to India in
particular
Low- cost Indian Programmers
The necessary skills, speed, & attention
 The US outsources the conversion of custom- made software
programs ( 2/3 )
The large IT + BPO providers & intermediaries include
companies in:
The DCs : the US ( CSC, EDS, & IBM) .
The LDCs: India ( Infosys Technologies, Tata Consultancy
services and Wipro).
Service Activities
Call centers
Pros
Cons
A varied &
Flexible Process
Technology &
infrastructure
requirement
Computer network support
Legal services
Accounting & Procurement
Software development
More responsible
 entire project
Research & Development
Engineering services
Network
management
function
REFERENCES:
 www.g77.org
 www.worldbank.org/depweb/beyond/beyondco/beg_09.pdf
 www.deti.ie/trade/marketaccess/singlemarket/05serv277.pdf
 www.ilo.org
 http://www.worldcat.org/wcpa/servlet/org.oclc.lac.ui.DialABoo




kServlet?oclcnum=256533624
www.wto.org
UNCTAD
wikipedia.org/
The Geography of the World Economy
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