Services: Performance of the Future

Services have outperformed the economic leverage of manufacturing. The growth not only changes the structure and composition of economic activities in both the United States and the world but also leads to a more integrated future. Both legislators and negotiators must pay more attention to the service components of international exchanges if they are to achieve long-term change.

Worldwide, services contributed more than 60 percent of total value added in most major economies in 2017. China and India were the exceptions. For world trade, the value of services exports grew 5.1 percent per year between 2006 and 2016 with a rising tendency. 

U.S. services now account for over two-thirds of GDP. The U.S. companies achieved more than $2.2 trillion in recorded international services sales In trade, services deliver a large surplus. Four out of five new private-sector jobs in the U.S. are created by services. In 2015, the Peterson Institute estimated that the elimination of global barriers to trade in services would increase the U.S. service exports by $300 billion and create 3 million jobs when fully implemented.

There is more to services than meets the eye. Services come in different categories and at different, often opaque international levels. Examples are varied performances in fields such as telecommunications, financial services, computer services, retail distribution, environmental services, education and express delivery.

Manufacturing strength increasingly comes from strong and tailor-made services which enable manufacturing to be more effective and competitive. Current cars are service driven and updated with sophisticated navigation systems. TVs have to connect to streams in order to be smart. iPhone sales rely on Apple’s support services, including troubleshooting and retailing. Even a traditional aerospace exporter like Boeing uses cloud services to manage inventory, optimize maintenance, and minimize the costs of system malfunctions.

Service performance at high has typically been greatly underestimated due to insufficient measurement insight. For example, if a person travels abroad for medical tourism, such value generating activity is hardly recorded. A local session of advice with a financial expert may create high value. However, poor valuation and insufficient recordation lead to only little understanding of current account impact.

Services and manufacturing are not at opposite ends of a scale. Rather, services strengthen the performance of manufacturing and are enhanced by the application of technology. Through its investment in the services sector, China has greatly improved the capabilities of its logistics, transport and infrastructure conditions. China can now demonstrably use its newly generated logistics expertise to outperform its competitors. For example, due to its service investments, the transport time of persons and goods via the new Hong Kong-Zhuhai-Macao Bridge has diminished from 4 hours to 30 minutes since the end of 2018. What a time wharp, yielding clear insights into shifting capabilities. Many will be the companies and countries which sign up to exchange raw materials for infrastructure. 

The integration between services and manufacturing will relegate entire supply chain conditions, which have been laboriously created, to a mere blur. Today, most apparel manufacturers own retail stores. Many store brands like Target build up their own manufacturing, controls, and retail distribution. Apple manufactures its own chips, fingerprint sensors, and other custom components. Concurrently, its retail stores flourish and allow it to control its direct distribution and sale to customers.

Services growth promotes new types of manufacturing. Printing technology gives new meaning to scale economies. Services, combined with flexibility and adjustment bring opportunity and vitality to the global economy. In terms of innovation and employment, strong services are no less important for a country than a strong manufacturing sector. U.S. legislators and negotiators must place growing emphasis on services and their links, both direct and indirect, with manufacturing. A more integrated economy will provide all with a significant payoff.

Professor Czinkota (czinkotm@georgetown.edu) teaches international marketing and trade at Georgetown University and the University of Kent in Canterbury. His latest book is ‘In Search for the Soul of International Business’ 2019, Businessexpertpress.com

iPhone vs. rule of law

In this video, Professor Czinkota stresses that young generations become increasingly inward-oriented in terms of education, career path, and, more importantly, the attitude towards the rule of law. He then calls public attention to the impacts these changes may have on individuals, corporation, and countries in an international marketing context. In particular, where the young generations will lead us to.

Good Souls Bring Curative Marketing

A good soul promotes quality of humility, empathy, and reflections for human developments at a time when society often perceives business as soulless. Today, concern over the lack of soul in business life creates a fine layer of transparent filigree which negatively shadows and biases public impressions. Eventual fossilization may turn out to be very costly since it influences society’s willingness to allocate, spend, play, and nudge.

People and society generally seek pursuits which advance wealth and good feelings. But nowadays, wealth seems to have won out. Concurrently, technology and artificial intelligence may contribute to further alienate business from the soul. The environment appears to weaken the overall qualities of a soul. Two fatal crashes involving Boeing 737 Max 8 planes have faltered public confidence in the aviation giant. Volkswagen’s teutonic attraction to honesty was deflected by its cheating on the emissions of diesel engines. Church child abuse scandal reveals a faith’s failure to govern human behavior. All these cases may lead to a separation of business and society, where business becomes a mere supply chain member without influence or respect.

The events are not just contemporaneous. More than a century ago, the Chinese Empress Dowager Tz’u-hsi, in order to renovate her summer palace, impounded government funds that had been designated for China’s shipping and its navy. Almost totally isolated from world trade, China missed out on knowledge transfer, the inflow of goods, global innovation and the productivity growth that derive from international trade.

Passage of time may lead to the forgiveness of misdeeds but such mercy does not exempt one from recognizing their responsibility. Curative marketing may well be the upcoming direction to restore the good soul by raising wonderment about the triple helix linkage of business, faith, and society.

Business must look back and accept responsibility for past errors. A more emotionally appealing approach, for example, should have been taken by the Boeing company in recognition of its responsibilities. Merchants should be reliable, trustworthy, and bridge-building partners. For now, American firms, when compared to their global competitors, should strive for a transparent, humble, and discerning leadership.

Since the 1990s, governments again has begun to play a growing role in business. New global regulations and restrictions have emerged because markets don’t always succeed with constraints and self-regulation.

Today, the traditional role and effectiveness of the World Trade Organization are challenged. Multilateral agreements appear to be at a standstill or even in retrenchment. At the same time, the Trump administration’s deregulation brings confidence to the domestic economy. A 2018 survey by the National Association of Manufacturers showed that more than 92 percent of respondents suggested a positive outlook for their firms. Nearly a half-million new manufacturing jobs were created in the past two years.

The new and crucial joint responsibility of humanity, business, and faith can and should be used to humanize behavior, expectations and cultivation. Religious connectivity with commerce has had an important role for ages. There is, for example, the ejection of the money changers from the synagogue by Jesus and the creation of the honorable merchant, developed by the German Hanse Trading Group in the 13th century.

Curative marketing helps overcome past shortcomings and leads to a healthier economy. China, for example, tries to heal past wounds in areas such as food safety, environmental protection, and medical security.

In the preface of my book “In Search for the Soul of International Business”, Dr. Szabo, the Hungarian ambassador to the United States, states that “one of my goals is to strengthen business ties between Hungary and the United States. I would like to see businesses flourish that have multidimensional levels of depth and a natural concern for a good soul so that these connections can be meaningful, long-lasting, and honorable. ”

Good souls should not only point business to an exchange of human development for profit. Curative marketing should be the next step to help create an environment of global responsibility and growth.

Professor Czinkota (czinkotm@georgetown.edu) teaches international marketing and trade at Georgetown University and the University of Kent in Canterbury.

Engage in Global Business in Canterbury this Summer

Scholars typically spend their summers at interesting and learn-worthy organizations. For my summer this year such destination will be the University of Kent in Canterbury, UK. There I will participate in several events. I will be help coordinate a university-wide international business seminar: Global Business in a Dynamic Environment.

The Global Business in a Dynamic Environment course (details found here) provides a comprehensive and up-to-date overview of international business and the institutions involved in the process. Although there is an underlying universality to the basic principles of business administration, it is in the application of these principles that people in international business encounter unique problems. Theory will be emphasized for a normative understanding; practical aspects are designed to show the relation of theory to practice. We will teach each other and learn from each other by the use of analogies, parables, and examples – which will help us understand and remember, which, in an era of the British Exit from the European Union has taken on major significance.

I encourage interested students and scholars to attend those events. It will allow to make lasting connections with students from around the world, studying a range of subjects but sharing personal enthusiasm. Guided by leading professors from around the world such as a large team from the University of Kent, German, and the United States, Mark Casson England, Johannes Harl, Germany, Thomas Cooke, Michael Czinkota, Gary Knight and Charles Skuba of the United States, will enable participants to gain a deeper understanding of other cultures, develop new network, make lifelong friends from a wide variety of backgrounds and benefit from globally-renowned academic excellence. Stay tuned for more information!

The teaching team members are

Prof. Martin Meyer, Kent
Prof. Michael Czinkota , Kent and Georgetown
Prof.Gary Knight, Williamette
Prof. Zaheer Khan, Kent
Prof. Rudiger Kaufmann, Mannheim
Prof. Valbona Zeneli, Marshall Center
Mr. Adam Smith, Kent

The Course schedule

So that’s my summer. How about yours? If you want to join me and a group of distinguished colleagues please contact Floortje Hoette at f.hoette@kent.ac.uk to sign up for the course/seminar or request more detailed information about the summer events.

Global Interest Diverge

In this video Professor Czinkota speaks about the gradual divergence of global interests. No longer can one expect that a specific action always results in the same outcome in today’s International Business world. From creation to coordination,explains how people, firms and even countries should be grouped into four separate directions. Your comments are welcome. Let us grow together!