Chapter 6: SERVICE EXPORTS
Service industries span a wide variety of enterprises from hamburgers to
high technology. The service sector accounts for about 70 percent of the
U.S. GNP and 75 percent of employment. In 1988, the service sector also
accounted for slightly more than two-thirds of all self-employed
persons.
Internationally, a similar change has taken place. World trade in
services grew in the past decade at an average rate of 5 percent a year
to constitute approximately 20 percent of overall world trade today. In
some countries, the share is much higher. Spain reports a 39 percent
share; Austria, 36 percent. The leading exporter of services, the United
States, shows services accounting for 18 percent of all merchandise and
services trade and, unlike the situation with trade in goods, has had a
surplus in services trade for decades.
The income generated and the jobs created through the sale of services
abroad are just as important to the U.S. economy as income and jobs
resulting from the production and export of goods. In view of the shift
toward services both domestically and internationally and the
substantial competitive advantage of the United States in the services
field, those who have services to offer can become major participants in
world trade.
TYPICAL SERVICE EXPORTS
The service sector accounts for a great share of the U.S. economy,
although some services are not easily exported. It would be very
difficult to export most personal services, such as the service
performed by waiters in restaurants; but most business services can be
exported especially those highly innovative, specialized, or
technologically advanced services that are efficiently performed in the
United States. The following sectors have particularly high export
potential:
- Construction, design, and engineering. The vast experience and
technological leadership of the U.S. construction industry, as well
as special skills in operations, maintenance, and management,
frequently give U.S. firms a competitive edge in international
projects. Some U.S. firms with expertise in specialized fields,
such as electric power utilities, also export related construction,
design, and engineering services, such as power plant design
services.
- Banking and financial services. U.S. financial institutions are
very competitive internationally, particularly when offering
account management, credit card operations, collection management,
and other services they have pioneered.
- Insurance services. U.S. insurers offer valuable services ranging
from underwriting and risk evaluation to insurance operations and
management contracts in the international marketplace.
- Legal and accounting services. Firms in this field typically aid
other U.S. firms operating abroad through their international legal
and accounting activities. They also use their experience to serve
foreign firms in their business operations.
- Computer and data services. The U.S. computer services and data
industries lead the world in marketing new technologies and enjoy
a competitive advantage in computer operations, data manipulation,
and data transmission.
- Teaching services. The vast U.S. education sector offers
substantial new services for foreign purchasers, particularly in
areas such as management, motivation, and the teaching of
operational, managerial, and theoretical issues.
- Management consulting services. Organizations and business
enterprises all over the world look to the United States in the
field of management. U.S. management consulting firms as well as
other U.S. firms that are willing to sell their particular
management skills find great potential overseas for export of their
services.
EXPORT SERVICES VERSUS PRODUCTS
There are many obvious differences between services and products.
Consequently, important features differentiate exporting services from
exporting products:
- Services are less tangible than products, providing little in terms
of samples that can be seen by the potential foreign buyer.
Consequently, communicating a service offer is much more difficult
than communicating a product offer. For example, brochures or
catalogs explaining services often must show a proxy for the
service. A construction company, for instance, can show a picture
of a construction site, but a picture of the finished building
communicates the actual performance of the service more
effectively. Much more attention must be paid to translating the
intangibility of a service into a tangible and saleable offer.
- The intangibility of services also makes financing more difficult.
Frequently, even financial institutions with international
experience are less willing to provide financial support for
service exports than for product exports, because the value of
services is more difficult to monitor. Customer complaints and
difficulties in receiving payments can also appear more troublesome
to assess.
- Services are often more time dependent than products. Quite
frequently, a service can be offered only at a specific time, and
as time passes, the service perishes if it is not used. For
example, to offer data transmission through special telephone lines
may require providing an open telephone line. If this line is not
heavily used, the cost of maintaining it may not be covered.
- Selling services is also more personal than selling products,
because it quite often requires direct involvement with the
customer. This involvement demands greater cultural sensitivity
when services are being provided, since a buffer of indirect
communication and interaction does not exist.
- Services are much more difficult to standardize than products.
Service activities must frequently be tailored to the specific
needs of the buyer. This need for adaptation often necessitates the
service client's direct participation and cooperation in the
service delivery.
Demand for certain services can derive from product exports. Many of our
merchandise exports would not take place if they were not supported by
service activities such as banking, insurance, and transportation.
Services can be crucial in stimulating product export and are a critical
factor in maintaining such exports. However, in such cases, services
follow products rather than taking the lead over them.
MARKETING SERVICES ABROAD
Since service exports are often delivered in the support of product
exports, a sensible approach for some beginning exporters is to follow
the path of relevant product exports. For years, many large accounting
and banking firms have exported by following their major multinational
clients abroad and continuing to assist them in their international
activities. Smaller service exporters who cooperate closely with
manufacturing firms can also determine where these manufacturing firms
are operating internationally and aim to provide service support for
these manufacturers abroad.
For service providers whose activities are independent from products, a
different strategy is needed. These individuals and firms should search
for market situations abroad that are similar to the domestic market.
Many opportunities derive from understanding the process and stage of
development of relevant trade activities abroad. Just as U.S. society
has undergone change, foreign societies are subject to changing economic
trends. If, for example, new transportation services are opened up in a
country, an expert in the area of containerization may offer services to
improve the efficiency of the new system.
Leads for service activities can also be gathered by staying informed
about international projects sponsored by organizations such as the
World Bank, the Caribbean Development Bank, the Inter-American
Development Bank, the UN, and the World Health Organization. Very
frequently, such projects are in need of service support.
GOVERNMENT SUPPORT FOR SERVICE EXPORTS
In recognition of the increasing importance of service exports, the U.S.
Department of Commerce has made the Office of Service Industries
responsible for analyzing and promoting services trade. The Office of
Service Industries (telephone 202-482-3575) provides information on
opportunities and operations of services abroad. For information about
specific industry sectors, contact the following divisions: Information
Industries Division (202-482-4781); Transportation, Tourism, and
Marketing Division (202-482-4581); and Finance and Management Industries
Division (202-482-0339).
Through the Worldwide Services Program the Department of Commerce
provides the same overseas exposure in Commercial News USA magazine for
U.S. service firms as the New Product Information Service and
International Market Search do for manufacturers. A brief description of
the service with the firm's name and address is listed under the
appropriate category. Interested overseas parties are instructed to
contact listed firms directly. Application forms are available through
Department of Commerce district offices. A modest fee is charged for
this service, which distributes the listed information to almost 200,000
overseas agents, distributors, and government officials.
Both AID and TDP offer opportunities for U.S. service firms. For a more
complete description of their activities, see Making Contacts.
The Eximbank has introduced a new program to assist U.S. design,
engineering, and architectural firms with foreign contracts. For
information on this program, contact the Eximbank's Engineering Division
(202-566-8802).
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