Function of management is equally important for all types of institutions including business firms as well as non-business organizations. and manufacturing companies as well as service providers.
Management of all these organization entails carrying out basic management activities like planning, organizing, motivating and control. All need to carry out business functions such as purchasing, marketing, operating, HRM and finance. The basic concepts and principle of management applicable to all these organization remain same. However depending on the the nature of activities of each organization the relative emphasis placed on different functions and concepts of management may be different. Accordingly, there are some differences in management of manufacturing and service organizations also.
Manufacturing companies are primarily concerned with manufacturing and selling tangible goods like, say, automobiles, toothbrushes and sugar. We call such tangible goods products. In contrast, service organization generate and provide non-tangible goods such as haircuts, transportation and advice. we call such intangible goods services.
There are many difference in the nature of products and services, and because of that the way these are produced, marketed and supplied to the customer. Discussion of all these differences, and how these affect all the activities of product manufacturing and service providing organizations, will become too large to be covered on this forum. However the main differences is that unlike products, services are consumed as these are produced. This has several implications. First, services cannot be manufactured and kept in stock to be sold and consumed later. Second, it is not possible to inspect quality of service before it is consumed. Third, the variation in quality of services produced is generally high and unpredictable in advance for several reasons. Finally, the customer receiving the service is exposed to the people producing the service as well as the facilities and process used for the same. As a result, the people, physical environment where service is provided, and the process of providing service also becomes part of the service received and experienced by the customers.
Biggest implication of these differences is that for service organization the role of employees in producing and marketing services is much more than in manufacturing organization. In manufacturing organization it is primarily the marketing personnel that come in contact with the customers, but in service organizations the service providers also play important marketing role. Also the employees need to be well trained and well behaved as mistakes committed by them cannot be rectified before the service is delivered to customers. Further employees form an important component in total assessment of quality of service by customers.
For all these reasons management of people takes up very important dimension in service organization. One important concept in this respect, used primarily in service organizations is that of internal marketing and interactive marketing. Internal marketing refers to the need to motivate employees of a firm to become more customer oriented, and interactive marketing refers to the need for improving interaction between employees providing the service and the customer to supplement the company's external marketing efforts. Another important concept specifically applicable to services is that of service gap model.