Product Based Vs Service Based Industry – Which one is Best?

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Written by BusinessAlligators Support

Support Staff at BusinessAlligators is a team of business experts led by Shilpi Singh Trusted by over 100K readers worldwide.

January 16, 2017

The most arduous choices are to the questions that tend to bring life-changing decisions, for a fresher it is choosing just the right firm to work for either as a job or as an entrepreneur. No one will ever bear the brunt of your failure, so making the right choice plays a pivotal role in garnering the relevant experience in one’s desired field.

To make the right decision and to know the difference between the two kinds of firms, you should have clearance about the concept of both, Product based firms and Service based firms. What kind of work they do, what these firms look in a candidate while hiring them, what is the job security, what is the market scope and how profit margin will vary at both the places?

Firstly, what is a “Product” and what is a “Service” in your views?

Let’s understand this difference by using an example. Apple Inc is a product company which produces various products like iPhone, iPad, MacBook etc. They manufacture the product and keep it in stock, prior to client’s requirement. At the same time, there’s a company named iCracked which is a service firm. It repairs apple products on client’s requirement. So, Apple Inc is a product firm while iCracked is a service firm. Some more examples of service firms are TCS, Habib saloon, tailoring, etc. and some examples of product firms are Google, Motorola, Dell, tinytoons, John Miller, Madame etc.

Hope the very basic difference between the two is crystal clear. Here in this article, you will get to know the difference between the two kinds of firms depending upon the various facets such as prototype phase, requirement of land, Fun expects, Investment, Global Economic growth, Job Security, Work Pressure, Hiring Candidates and Business flow.

Difference at Prototype Level

This is the phase when Founder and Co- Founder of the company works and presents their business idea in the form of the small business model.

Whenever we think about starting a product firm, there is huge land required, basic machinery along with the person who knows to operate that machinery, to produce our product. Product firms need to invest in buying machinery and large land in this phase. They required large space to keep those machines. So, that’s the reason, product firms can’t be started from a small room. There’s an exception here, Product based software firm can be started from a small room since software firms just require laptops as a machine.

If we start a service firm, then from this phase onwards, we require a sales person. It should be the person with good communication skills and ability to convince the clients. If co-founder possesses these skills, hiring a sales person isn’t requires at this level. Service firms don’t require any machine except basic machines like laptop etc. That’s the reason they can grow from a small room as well.

Difference in Investment Required

Due to the requirement of machines and manpower, investment is usually high in product firms from the prototype phase onwards. That’s the reason, they require a large amount of funding from investors.

Service firms can be started from a comparatively much smaller amount than product firms. If they get less funding from investors, then it does not have the severe effect on service firms.

Related- Technical Startup Vs Non-Technical Startup

Economic Growth of Both Sectors

service vs product based industry difference economic growth

If we analyse the data of past few decades, there has been a shift from manufacturing to service economy. The manufacturing economy has been steadily fallen in the past decade while at the same time; there has been a constant rise in the service economy graph.

According to the World Bank’s graph of Service economy and Manufacturing economy, we can see from 1996 to 2014, there is a constant downfall in the growth percent in the manufacturing economy while there is a constant increase in the growth percent in the service economy.

Business Flow

Product firms create their products or application in advance. First, the stock of the product is made or application is created, then it is presented in the market.

Service firms work only on client requirement. Firstly, the client asks for a particular service from them, and then the service firms work on it.

Hiring Candidates

Product firms usually hire candidates with good domain knowledge of the technology. It rarely matters whether they are having good communication and sales skill or not. For product firms, employees grooming i.e. they should be well dressed, presentable and well mannered, is not necessary.

In Service firms, Candidates with average technical knowledge can easily get hired, if they are having good communication skills and good marketing skills. To get a job in a service firm, a candidate should be well dressed, presentable and well mannered. It’s necessary for a service firm to hire well-groomed candidates, as they have to deal with the clients.

Job Security and Work Pressure

After having the survey of people who have worked in service firms as well as in Product firms, Business alligators concluded that:

In Product Firms, people feel less work pressure and there is more job security in these firms. Management doesn’t fire people easily. Employees in a product firm don’t switch job easily but part time jobs are rarely available in product firms.

In Service Firms, People usually feel pressurise due to deadline associated with the project or service. Management also pressurises the workers regarding deadlines. If someone works at a snail’s speed, then he/she will get fired by the management. Even, some service firms fire the employees if the “On Bench” period exceeds particular months. That’s the reason that job security is less in service firms but Part-time jobs are easily available in service firms.

Fun at workplace

After reading so many differentiating points, you must be curious to know, whether you can have fun at your workplace if you join any of these firms? Butterflies might be flying in your stomach to know, what these firms do for their employees and it differs in the two firms? Here you go to get your answer,

In product firms, Office parties are rarely once a month or in two months. Employees have been given various perks and benefits but when it comes to fun, product companies doesn’t have much.

Service firms usually organise office parties around 2-3 a month for their employees. Along with the perks and benefits they give, they also organise trips for their employees.

I hope this article gives you the answer of all questions that have been popping in your mind regarding the service and product firms. For any query regarding same, you can ask for it in the comment section.

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1 Comment

  1. vaishali

    Awesome article


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