Grommit can answer for himself, but since I have this on half-avoid :-))), I'll give my take.
Service companies are "bad", because:
a. they are dependent on human capital. If the best people leave, company crumbles. In reality, this may not be a big issue, since mass exodus is infrequent, but its ghost is there.
b. presumably it is easier to compete in services than in widgets. This also may be a fallacy, but presumably entering service area requires less capital and so is more open, fewer entry barriers.
c. services are less differentiable than widgets. I don't care if CPA A or CPA B does my taxes. This may be a fallacy too - see example above, won't you prefer the CPA you know?
d. there are fewer benefits of growth. A large widget maker saves on the economies of scale, can muscle suppliers and distributors. A large service organization competes with itself (think realtors) and does not necessarily gain any benefit (CPA Old Friend Bob vs. HR Block CPA Who Cares).
e. it's easier for investor to learn the quality of widget than the quality of service.
f. they manufacture something ephemeral instead of something physical - and some people have problem accepting this as a product.
Most of the above are fallacies, but they have also some grain of truth.
Jurgis |
