What Are Product Based Companies

by | Feb 26, 2021

In order for one to understand exactly what is meant by ‘Product Based companies’ and what these comprise of, it’s essential for us to take a look at its counterpart, “Service Based companies”, in order for us to distinguish between the two.

So what are they and why is it important to know the difference in the first place? If you’ve found yourself at the stage when it’s time to make a decision when choosing your career path or even what to study, it’s good to know the difference. Considering this valuable information may be the key in helping you narrow down your choices too now that you understand the difference.

Perhaps you’re simply looking to change careers and are interested in what else is out there? Let’s take a look at both types of company models and what they are, this could very well help you when choosing your (ideal) career path.

Product Based companies vs Service Based companies

The difference between the two is pretty simple, and the name of each is a helpful giveaway.

A Product Based company is one where the business makes a profit from selling an actual, tangible product to its customers, for example, laptops. A great example of a Product Based company would be HP or Google (just think of Google Drive, Google Maps, etc.).

On the other hand, a Service Based company is built on the premise of offering their customers an actual service. Oftentimes, they will utilise products within their business but they ultimately do the work (the service) for their clientele. Some examples of Service Based companies include Emirates Airlines or even your local hairdresser.

Key differences between Product Based and Service Based

It’s not only the core focus of each business that differs but many of the ways in which the different companies run in general too. Let’s explore a few examples…

Product Based companies will manufacture the product themselves which is aimed at the mass population, and then they create the demand for their product. Service Base companies react to this demand and thereafter tailor their service to their customer’s specific needs.

The actual product is what’s most important in Product Based companies and becomes the sole focus, whereas Service Based companies implore the rule that the customer/client is the focus…As the saying goes in the service industry…the customer is always right.

When looking at Product Based businesses, they normally have a large spread area for trading as their products are catered to suit a wide audience. Talking Service Based companies, this often involves physical contact/interaction which means they’re normally confined to a smaller area, i.e. a single town/city.

Sticking with the tech theme, let’s take a look at the popular gaming app Pokémon Go as an example. This game can be accessed anywhere in the world and is played and utilized by players literally worldwide. Uber on the other hand is a prime example of a service-based business and although available in many countries, you have to physically be there to make use of the service.

The actual product is what’s most important in Product Based companies and becomes the sole focus, whereas Service Based companies implore the rule that the customer/client is the focus

Career Path

Consider this one, Product Based companies normally choose to hire only a select amount of candidates for the given job role within a company. However, Service Based companies choose to mass recruit because their skill requirements for a job application aren’t as specified.

It’s also believed that job security is usually higher in Product Based companies which can be an added bonus. Oftentimes, the service-based industry relies heavily on deadlines or ensuring targets are met which can lead to huge amounts of stress, burnouts or job insecurity, including financial.

The last few decades have for sure seen the shift towards Service Based companies over that of Product Based companies/big manufacturing enterprises.

It’s important to remember though that each type of company faces its own sorts of challenges, and both industries have their own pros and cons, it all also depends on the actual company you find yourself working for.

The last few decades have for sure seen the shift towards Service Based companies over that of Product Based companies/big manufacturing enterprises.

One just needs to look at recent 2021 statistics for the UK to find such evidence. Once a large manufacturing-heavy country, 80% of the country’s economic growth is thanks to the Service Based industry and in fact, from July to September 2020 – just before pre-Covid lockdown restrictions – 82% of employment lay in Service Based businesses.

But for many, the extra security and generally more employee-friendly work environments make Product Based companies seem on a whole, a more attractive proposition for many.

In your future career endeavours and pathways you find yourself exploring, do keep all of these in mind.

Want to know more? Checkout this Youtube clip…