What Is The Difference Between Product And Service Based Company?

What Is The Difference Between Product & Service Based Company
Students Guide

What Is The Difference Between Product And Service Based Company?

In today’s dynamic business landscape, entrepreneurs and investors have a world of possibilities at their fingertips. They can choose to dive into the realm of product-based companies, where they can bring innovative and game-changing ideas to life. 

Or, they can explore the exciting world of service-based companies, where they can offer specialised expertise and solutions to meet the ever-evolving needs of consumers. 

The choice is yours, and it all depends on your passion, skills, and goals. But wait, there is more! If you are looking to land a dream job in these top IT companies, look no further than the placement opportunities offered by the Bansal Group of Institutes

With their industry connections and expert guidance, you will be well-equipped to embark on an exciting career in the IT sector. Read on to learn about product based vs service based companies.

Table of Contents

  1. What Is A Product-Based Company?
  2. Advantages Of Product-Based Companies
  3. What Is A Service-Based Company?
  4. Advantages Of Service-Based Companies
  5. Core Characteristics of Product-Based VS Service Based Companies
  6. Challenges Faced By Product-Based VS Service Based Companies
  7. Understanding Product Based Vs Service Based Companies
  8. The Final Say
  9. FAQs

What Is A Product-Based Company?

A product-based company revolves around creating, manufacturing, and distributing tangible goods. These enterprises design and produce physical items that are sold to consumers. Product-based companies include manufacturers of

  • Smartphones
  • Automobiles
  • Clothing

The success of such companies often hinges on product quality, branding, and customer demand.

Top Product Based Companies In India

The top product-based companies in India are:

1. Google

2. Microsoft


4. Facebook

5. Hewlett-Packard

6. Amazon

7. Flipkart

Advantages Of Product-Based Companies

Some major advantages of product based companies are:

1. Scalability

Product-based companies can often scale operations and reach a broader market by mass-produced goods.

2. Diversification

They have the flexibility to introduce new product lines and diversify their offerings.

3. Market Presence

Successful products can establish a strong market presence and generate brand loyalty.

4. Economies of Scale

As production volumes increase, product-based companies may achieve cost efficiencies.

What Is A Service-Based Company?

A service-based company primarily offers intangible services to its clients. These businesses provide expertise, skills, or assistance to fulfil specific needs. Examples of service-based companies include

  • Consulting firms
  • Digital marketing agencies
  • Healthcare providers

The success of these companies is typically tied to the quality of services, customer satisfaction, and the expert’s reputation.

Top Service Based Companies In India

  1. Accenture
  2. Tata Consultancy Services (TCS)
  3. IBM
  4. Infosys
  5. Wipro
  6. HCL

Advantages Of Service-Based Companies

Some advantages of service based companies are:

1. Low Initial Investment

Service-based companies typically require lower initial investments compared to manufacturing setups.

2. Flexibility

These businesses can quickly adapt to changing market demands and offer customised solutions.

3. Human-Centric Value

Services are built on human expertise, leading to strong client relationships and repeat business.

4. Higher Profit Margins

Service-based companies often enjoy higher profit margins due to lower production costs.

Core Characteristics Of Product-Based VS Service Based Companies

The core characteristics of product-based vs Service Based companies are:

1. Characteristics Of Product-Based Companies

The core characteristics of product-based companies are:

1. Physical Products

Product-based companies produce and sell tangible goods that customers can touch, see, and use.

2. Manufacturing And Inventory

These companies invest in manufacturing facilities and maintain inventories to store their products.

3. Supply Chain Management

Managing the supply chain is crucial for product-based companies to ensure efficient production and distribution.

4. Branding And Marketing

Building a strong brand presence and effective marketing is vital to attract and retain customers.

2. Characteristics Of Service-Based Companies

The core characteristics of service-based companies are:

1. Intangible Offerings

Service-based companies offer clients expertise, advice, or support which cannot be physically held or possessed.

2. Human Resources

Skilled professionals are the most valuable assets for service-based companies, and their expertise drives the business.

3. Customisation And Personalization

Services are often tailored to meet clients’ needs and preferences.

4. Relationship-Centric Approach

Building strong client relationships is paramount for the success of service-based businesses.

Challenges Faced By Product-Based VS Service Based Companies

The challenges faced by Product-Based VS Service Based companies are:

1. Challenges Faced By Product-Based Companies

The major challenges faced by product-based companies are:

1. Inventory Management

Overstocking or understocking products can lead to significant financial losses.

2. Product Obsolescence

Rapid technological advancements may render products obsolete, necessitating continuous innovation.

3. Competition And Differentiation

Product-based companies face intense competition and must differentiate their offerings to stand out.

4. Logistics And Distribution

Ensuring efficient distribution and reaching remote markets can be challenging.

2. Challenges Faced By Service-Based Companies

Challenges faced by service based companies are:

1. Service Quality

Maintaining consistently high-quality services is vital to retain clients and build a reputation.

2. Seasonal Demand

Some service industries experience fluctuations in demand, requiring resource management.

3. Scalability Of Expertise

Expanding services may require hiring additional experts or training existing staff.

4. Intangible Evaluation

Clients may find it challenging to assess the value of services before experiencing them.

Understanding Product Based Vs Service Based Companies

Product based or service based companies play a vital role in the growth and development of the business. It is essential to learn about the points that make them different. The table provides the key points on product vs service based companies.

AspectProduct-Based CompanyService-Based Company
Primary OfferingManufactures and sells physical products.Offers intangible services to customers.
Nature of WorkFocuses on production and distribution.Emphasises expertise and skill delivery.
Revenue GenerationIncome is generated from product sales.Revenue comes from fees for services rendered.
TangibilityProducts are tangible and can be stored.Services are intangible and consumed instantly.
Inventory ManagementMaintains a stock of physical products.No inventory management is required.
Customer InteractionLimited interaction after the sale.Ongoing customer engagement and support.
Research and Development (R&D)Invests in R&D for product innovation.May invest in R&D for service improvement.
ExamplesApple Inc. (electronics),Deloitte (consulting), Uber (transportation)
Supply ChainInvolves manufacturing and logistics.Focuses on service delivery and resources.
Pricing StrategyPricing of products depends on production costs and market demand.Pricing based on service complexity,

The Final Say

Finally, understanding the characteristics of product based companies vs service based companies is essential for entrepreneurs, investors, and individuals exploring career opportunities. Both product based company vs service based company offers unique advantages and faces specific challenges. 

Product-based companies focus on tangible goods, while service-based companies excel in providing intangible expertise and support. By recognising each model’s core characteristics, benefits, and challenges, stakeholders can make informed decisions that align with their goals and aspirations in the dynamic business world.


1. What are some examples of product based and service based companies?

Product-based companies include tech giants like Apple and Samsung and fashion retailers like Nike and Zara.

Service based companies include Accenture, Tata Consultancy Services (TCS), IBM, Infosys and Wipro.

2. What is service based and product based company?

A product-based company revolves around creating, manufacturing, and distributing tangible goods, while a service-based company primarily offers intangible services to its clients.

3. Can a company offer both product based or service based?

Many companies adopt a hybrid approach, offering products and services to cater to diverse customer needs.

4. What are the risks of investing in a product-based company?

Investing in a product-based company carries the risk of market changes, demand fluctuations, and technological obsolescence.

About BGI

The Bansal Group of Institutes offers a wide range of engineering, management, and nursing courses. It has the best and top-placement colleges in its various campuses across Bhopal, Indore, and Mandideep. With credible faculty and well-equipped laboratories, BGI ensures a top-notch learning experience. 

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