First Research US Industry Profile

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Business Services Sector
SIC Codes: 73
NAICS Codes: 56
Last Quarterly Update: 7/11/2022
Companies in the sector provide support services to businesses, such as office administration, hiring and placing of personnel, security services, travel arrangement, cleaning, and waste disposal. Major companies include ADP, Allegis Group, ManpowerGroup, and Waste Management (all based in the US), along with Adecco (Switzerland), Randstad (the Netherlands), and TUI Group (Germany).
Europe and North America are the primary markets for business services. Worldwide demand in the sector is driven by technology, digitalization, and new communication technologies and infrastructure. As a result, startups have emerged across the world, with business solutions that are innovative, flexible, and sustainable, according to Statista. While large companies may operate globally or within a specific region, many business services firms serve smaller geographic areas near their headquarters.
The US business services sector consists of about 420,000 establishments (single-location companies and units of multi-location companies) with combined annual sales of about $950 billion.
Competitive Landscape
Providers of business support services may face competition from customers or potential customers, as these services in many cases can be undertaken in-house. Most segments of the industry feature low barriers to entry, as little capital investment is required to start businesses such as landscaping, pest control, or staffing firms. The low barrier can result in intense competition among small companies, which not only compete with each other, but also with much larger, established companies with more resources.
Large companies are better-positioned to win national accounts. Small companies can compete effectively by offering highly specialized services or focusing on a single geographic region or local market; they typically also have less overhead, which allows them to charge less. The US business services sector is fragmented: the 50 largest firms account for about 30% of sector revenue. In most areas, no single company has a dominant share of the market.
For many business services, newer technologies have also increased competition, forcing traditional providers to adapt to survive. For example, in recent years online services such as LinkedIn (career-related social networking) and Indeed (online job postings) have transformed the personnel staffing industry, while companies such as Airbnb (alternative lodging) and Google Flight (price comparison and booking) have upended the travel arrangement industry. In order to compete with these types of industry disruptors, established companies may need to upgrade their own technologies and provide superior customer service.
Competitive Advantages:
Multi-Channel Marketing -- To stand out in a crowded market, smaller companies may benefit from effectively using low-cost marketing techniques such as social media sites, recommendation sites, and neighborhood newsletters or message boards. Other options include internet search ads and ads in local or regional business journals.
New Technologies -- Companies that can adopt new tools, or adapt to technological changes, have the upper hand. For example, voice over internet protocol (VoIP) has lowered the cost of long distance phone calls, enabling telephone call centers, collection agencies, and business service centers to use workers in remote locations and reduce costs.
Superior Customer Service -- Customer retention is important for providers of pest control, janitorial services, and landscaping because of intense competition. The travel industry also faces high expectations from customers, who are more likely to stop doing business with a service due to poor customer service relative to other industries, according to a recent industry survey.
Industry Specialization -- Smaller companies can compete with larger ones that have more resources by offering highly specialized services. A company can develop expertise in a particular area, such as a travel agency that offers custom African safaris or a staffing service that caters to IT professionals, to target a specific type of customer and provide a higher-value service.
Products, Operations & Technology
Major services provided co-employment staffing services (about 40% of US sector revenue) and temporary staffing services (about 40%). Other revenue sources ... plus:
Sales & Marketing
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Finance & Regulation
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Regional & International Issues
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Human Resources
Also includes the following chapters:
Quarterly Industry Update
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Industry Indicators
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Business Challenges
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Trends and Opportunities
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Call Preparation Questions
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Financial Information
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Industry Forecast
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Industry Websites
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Glossary of Acronyms

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