MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY BI VU THANH XUAN IDENTIFYING DIMENSIONS OF BIDV’S TRADE FINANCE SERVICES QUALITY IN HOCHIMINH CITY AREA MASTER THESIS Ho Chi M[.]
Trang 1MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY
Trang 2MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY
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BI VU THANH XUAN
IDENTIFYING DIMENSIONS OF BIDV’S TRADE FINANCE SERVICES QUALITY
IN HOCHIMINH CITY AREA
MAJOR: BANKING AND FINANCE
MAJOR CODE: 60.31.12
MASTER THESIS INSTRUCTOR: DR TRUONG QUANG THONG
Ho Chi Minh City, 2011
Trang 3My special gratitude is extended to all instructors and staff at Postgraduate Faculty, University of Economics Ho Chi Minh City (UEH) for their support and the valuable knowledge during my study in UEH
I also wish to thank to my colleagues in BIDV’s branches, who help me during the collection of data My thanks would also extend to the respondents, without them, my thesis could not have been done
Specially, my thanks go to Ms Vu Thi Bich Ngoc for their valuable and enthusiastic support for this research study as well as for their comments of English from early draft of my thesis
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Abstract
Maximizing customer satisfaction through service quality has been described as the ultimate weapon This study applied the SERVQUAL model of Parasuraman (1988) to test the dimensions to have relationship to BIDV’s trade finance service quality in Ho Chi Minh City area A study of 150 respondents from branches was conducted Multiple linear regression technique was used to test the hypotheses and research model The chosen model is modified from SERVQUAL model According to the results, empathy, responsibility, assurance, reliability were confirmed to have positive impact on service quality Some independent variables such as tangibility, price, portfolio have no enough evidence to conclude
to have relationship to service quality
Recommendations for related regression results are suggested to improve trade finance services quality and therefore BIDV can serve customers better
Keywords: Customer satisfaction, Service quality, trade finance, SERVQUAL
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CONTENTS
Acknowledgement i
Abstract ii
Contents iii
List of tables vi
List of Figures and Charts vii
Chapter I: INTRODUCTION TO THE STUDY 1
1.1 Rationale of the study 1
1.2 Problem statement 1
1.3 Research objectives 2
1.4 Scope 2
1.5 Research methods 2
1.6 Structure of the study 3
Chapter II: RELATED LITERATURE REVIEW 4
2.1 Understand service quality 4
2.1.1 Definition of service quality 4
2.1.2 The role of banking service quality 4
2.1.2.1 A significant source of competitive advantage and customer retention 4
2.1.2.2 Increase Bank brand 5
2.1.2.3 Profitability 5
2.2 Empirical evidence 6
2.2.1 Models 6
2.2.2 Summary and comparative evaluation of service quality models 13
Trang 62.2.3 Applications models in some countries 15
Chapter III: OVERVIEW TRADE FINANCE SERVICES IN VIETNAM 18
3.1 Trade finance in Vietnam 18
3.1.1 Exports 18
3.1.1.1 Some highlights in 2010 18
3.1.1.2 First haft of 2011 19
3.1.2 Imports 20
3.1.2.1 Some highlights in 2010 20
3.1.2.2 In the first half of 2011 21
3.1.3 Vietnam trade balance 22
3.2 Trade finance services in BIDV 23
Chapter IV: DATA ANALYSIS AND FINDINGS 28
4.1 Methodology 28
4.1.1 Data collection 28
4.1.2 Sample size 28
4.1.3 Questionnaire design 28
4.1.4 Variables 29
4.1.5 Measurement and scales 30
4.1.6 Tests Used for Data Analysis 30
4.2 Data analysis 30
4.2.1 Preliminary results 30
4.2.2 Hypotheses development 32
4.2.3 Regression results - test and analyze 32
4.2.3.1 Basic regression model 32
4.2.3.2 Optimal regression model 34
Trang 74.3 Findings 40
Chapter V: CONCLUSION AND RECOMMENDATIONS 41
5.1 Conclusions 41
5.2 Implications and recommendations 41
5.3 Assessment 42
5.3.1 Strength 42
5.3.2 Limitations 43
References 44
Appendix 48
Appendix I Database 49
Appendix II Questionnaire 55
Appendix III General statistic index 59
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List of Tables
Table 2.1: Definition of service quality 4
Table 2.2: Impact of quality improvement 6
Table 2.3 Comparative evaluation of service quality models .13
Table 2.4 Comparing service quality dimensions with past research (by rank) 17
Table 3.1: Top 10 import products in Vietnam in 1st haft 2011 22
Table 4.1: General information of customers 30
Table 4.2: Gap score for seven dimensions 31
Table 4.3: Compare service quality dimensions with Parasuraman’s research (by rank) 40 Table 5.1 The hypotheses testing results 41
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List of Figures and Charts
Figure 2.1 Service quality model 8
Figure 2.2 Gap analysis model 10
Figure 2.3 Attribute service quality model 12
Figure 2.4 Model of service quality, customer value and customer satisfaction 13
Figure 2.5 Model of service quality in internet banking 14
Chart 3 1: Major Export product of Vietnam in 2010 21
Chart 3.2 Top ten main exports of Vietnam in first quarter 2011 22
Chart 3.3: Vietnam import year 2010 23
Chart 3.4: Exports, imports and trade balance of Vietnam 25
From Jun 2010 to March 2011 Chart 3.5: Comparison export and import turnover of BIDV with some banks 29
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CHAPTER I: INTRODUCTION TO THE STUDY
1.1 Rationale of the study:
In a more globalized and integrated economy with increasing deregulation, competition in the banking industry has become significantly fiercer Banking industry in Vietnam has also grown rapidly especially in the growth of foreign banks This makes customers have many choices and compare the service quality among banks that they perceive Satisfying customers is one of the main objectives of every business Businesses recognize that keeping current customers is more profitable than having to win new ones to replace those lost Therefore, customer satisfaction and service quality are compelling to the attention of all banking institutions Service quality is the core problem for banks to differentiate, retain customers, make revenues and expand market share
Besides, since Vietnam joints in WTO, bilateral agreements, multilateral conventions, trade barriers have been loosen This encourages the international trade to grow rapidly Vietnamese businesses have opportunities to trade with foreign partners is very high Therefore, banks in Vietnam has focused their interest in trade finance services
to serve better the demand of customers This is the potential field business that banks should continue to explore
Among many kinds of banking services, trade finance services bring a large source of fees for banks It is better when Vietnamese banks wants to increase the fees from services and decrease the fees and commissions from credit This is completely suitable to international trends Beside, developing trade finance services also increase the Vietnamese banks position in international market
However, customers perception of service quality is a complex process Therefore, multiple dimensions of service quality have been suggested It is agreement that there is
no standard model to adapt to banking service quality measurement in a specific country Because of the role of service quality and optimism of trade finance development, this research aims to identify dimensions of BIDV’s trade finance services quality in Ho Chi Minh City area
1.2 Problem statement:
Service quality is an elusive concept It attracted the interest of academics and practitioners as well Service quality is a dynamic, multidimensional concept For instance, ‘… quality is what the customer says it is’ (Webster & Hung 1994) or ‘… a measure of how well the service level delivered matches the customer’s expectations’ (Lewis and Booms, 1983) Thereafter, some researchers suggest that service quality
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stems from a comparison of customers’ performance perceptions with expectations (Parasuraman, 1988) or from perceptions of performance only (Cronin & Taylor 1992)
In today’s competitive banking environment, delivering services with high quality
to customers is a must for success and survival With the significant findings in the financial service industry, it is important to understand how BIDV’s trade finance service quality is perceived by customers, and what are the elements considered to make sense to them Therefore, the thesis try to identify the dimensions that affect to BIDV’s trade finance services quality in Ho Chi Minh City area
1.3 Research objectives:
Objectives are understood to express the purpose of the research in measurable terms It defines standards of what the research should accomplish The research applied the SERVQUAL model proposed by Parasuraman (1988) and tests the model in a specific service (trade finance) at the branches of a specific bank (BIDV)
The objectives of the study are as follows:
To examine how the customers perceive the BIDV’s trade finance service quality
To determine the elements that influence to the BIDV’s trade finance service quality
To contribute to the suitable recommendation for management implications
To serve these tasks, three research questions need to be answered:
Does there exist the gaps in customers’ expectation and perception?
What are the dimensions that correlate to the BIDV’s trade finance service quality?
What are the main factors that have a high correlative relationship to the BIDV’s trade finance service quality?
1.4 Scope:
Because the limitation of time and budget, survey is done in BIDV’s branches in
Ho Chi Minh City area for corporate customers
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In the second phase, a quantitative approach was used Data were collected by interviewing bank’s customers The purpose of this phase was to answer three research questions
Multiple Linear Regression analysis was employed to test the research model and hypotheses Chapter IV will discuss the methodology for this study in more detail In this chapter, the author used data analysis tools to implement the research such as: descriptive statistics, multiple regression models with Eviews 7 for Windows
1.6 Structure of the study:
The structure of the study consists five chapters:
Chapter 1: Introduction
This chapter presents the rationale of the study, as well as, research problems, research objectives, research methodology and scope
Chapter 2: Literature Review
This chapter summarizes the related literature review and presents the fundamental ideas
on finding out the model that can be applied in this thesis
Chapter 3: Overview on trade finance in Vietnam
Some highlights in Vietnam export – import recently express that trade finance service is the potential field for BIDV to focus more This chapter also provides trade finance operation in BIDV with its strengths and weaknesses as well as the opportunities and threats
Chapter 4: Data analysis and findings
This is the main chapter of this study with the clear regression results This chapter aims to answer three research questions as above mention
Chapter 5: Conclusions, Recommendations
Chapter 5 presents main conclusions and recommendations based on the results of the previous chapters Besides, it gives the limitations of this study
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CHAPTER II: RELATED LITERATURE REVIEW
This chapter searches and reviews the relevant theories in the literature The aim of this review is to understand the conceptual service quality and to seek a research model of service quality that can be applied in the Vietnamese banks in general and in BIDV in particular to answer the research questions
2.1 Understand service quality
2.1.1 Definition of service quality
There are many opinions of quality It is a wide and difficult category Depending
on different positions, different opinions may be raised
Many researchers define service quality as follows:
Service quality: as the difference between customers’
expectations for service performance prior to the service
encounter and their perception of the service received
Asubonteng (1996)
Service quality: as the comparison that customers make
between the quality of the service that they want to
receive and what they actually get
Gefan (2002)
Service quality: as the difference between customer’s
expectations of services provider’s performance and their
evaluation of the services they receives
Parasuraman (1985, 1988)
Table 2.1: Definition of service quality (cited in Parmita Saha, Yanni Zhao, 2005, p.15)
In general, service quality is defined as how well the service meets or exceeds the customers’ expectations on a consistent basis However, the difficulty is that service quality, unlike product quality It is more abstract and elusive, because of unique features
to services: intangibility, inseparability, heterogeneity and perish ability Therefore, service quality is difficult to measure
2.1.2 The role of banking service quality
2.1.2.1 A significant source of competitive advantage and customer retention
The banking industry is highly competitive Banks not only compete among each other, but also with non-banks and other financial institutions Most of products that banks provide are nearly similar Therefore, they can only distinguish themselves based
on price (charges and interest rate) and quality - the important factor that customers can perceived When customers satisfy with the bank service quality, they stay to long term transaction with a bank They become loyal and use more and more services.So, service
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quality is considered as an essential determinant that allows one organization to differentiate from the others It helps an organization to gain sustainable competitive advantage
Cronin and Taylor (1994) also found that service quality has a significant effect on repurchase intention Moreover, many studies proved that the costs of acquiring new customers to replace those who have been lost are high Rust and Zahorik declared that the cost of attracting new customers may be five times of keeping existing customers (Cited in Mostafa Ghazizadeh, Ali Soleimani Besheli, Vajiheh Talebi, 2010, Assessing of bank Customers retention and loyalty, p.275)
2.1.2.2 Increase Bank brand.
One way for differentiation is through the development of brand Satisfied customers may create positive bank image by word of mouth promotion In Gronroos model (1984), the author pointed out the causality between the technical quality and image, also functional quality and image
2.1.2.3 Profitability
The relationship between service quality and profitability has attracted many researchers, managers According to Reichheld and Sasser (1990), profits increased between 25 to 125 percent when a company retained just 5 percent or more customers (Anthony Perrone and Antony Ward,1998, p.3)
Service quality actually affects on business profitability Some studies has been done to test this relationship The empirical study was in UK Newman and Cowling (1996) used SERVQUAL model and reported that profit increases substantial if service quality is improved It is estimated that an increase of 5 percent in customer retention is potentially worth £100 million per year
With respect to the quantitative benefits, a study was also conducted in 1988 of a particular US banks regarding the impact of service quality improvement on performance Before the quality had been improved, the bank had to pay for the cost of failures and corrections However, after the bank prevented errors and mistakes in serving customers or, in other words, improved its service quality, the cost of services systematically decreased while profit margins and earnings finally increased Accordingly, there was an increase in return on assets (ROA) from 1.05 per cent before improvement to 1.38 per cent after improvement and also a return on equity (ROE) from 16.10 per cent to 21.22 per cent respectively as shown in the following table (Harvey, 1996)
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Bank Performance Before Improvement After Improvement
Table 2.2: Impact of quality improvement
(Source: Harvey, T 1996, The Banking Revolution: Positioning Your Bank in the New
Financial Services Marketplace, Irwin Professional Publishing, USA, p 11 cited in
Chaisomphol Chaoprasert, 2002, p.83)
In the Taiwanese banking industry, Zeithaml (2000) also found evidence about the influence of service quality on profits and Heskett et al (1997) argued that a “direct and strong” relationship exists among service quality, customer satisfaction and profitability
2.2 Empirical evidence
2.2.1 Models
Because of the role of service quality and changes in the business environment, service quality actually becomes an interesting issue that takes attention to practitioners, researchers, managers There has been continued researches on the definition, models to measure the service quality During the period (1984 – 2003), nineteen conceptual service quality models were reported [Nitin Seth and S.G Deshmukh, Prem Vrat,2005, p.914] This paper attempts to review some selected models that can be applied in this practical thesis
Model no.1 Technical and functional quality model (Gronroos,1984)
Gronroos pioneered to propose and define the dimensions of service quality in global terms as comprising technical and functional parts According the author, three components of service quality are: technical quality, functional quality and image A service organization’s image functioned as a filter in the perception of service quality Finally, the model showed that service quality leads to customer satisfaction
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Figure 2.1 Service quality model
Technical quality is the quality of what consumers actually receive as a result of the interaction with the firms
Functional quality is as the manner in which the customer receives the service product (sometimes called the ‘process-related dimension’) (how customers get the technical outcome)
Image is very important to service business Image is an asset for any firm because image has an impact on customer perception of the communication and operations of the firm in many respects Image can be expected to build up mainly by technical and functional quality of service including the other factors (tradition, ideology, word of mouth, pricing and public relations)
Through the model, to manage perceived service quality, the firm has to match the expected service and perceived service to each other so that customers are satisfied
Model no.2: GAP model (Parasuraman, 1985)
Expected service Perceived service
quality
Perceived service
Image
Traditional marketing activities
(advertising, field selling, PR,
Pricing) and external influence
by traditions, ideology and word
of mouth
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Perceived service
Expected service Personal needs Past experience
Translation of perceptions into service quality specifications
External communications
to the consumer
Management perceptions
of the consumer expectations
Figure 2.2 Gap analysis model
Here, I’d like to focus on gap no.5 expected service – perceived service gap which is defined as a method of service quality measurement
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Originally, Parasuraman et al (1985) introduced ten dimensions of service quality including reliability, responsiveness, tangibility, assurance, communication, competence, credibility, courtesy and security, empathy Later (1988), these dimensions collapsed into five named: reliability, responsiveness, tangibility, assurance and empathy The model of Parasuraman was also called SERVQUAL
Parasuraman et al (1988) identified a number of potential applications for the SERVQUAL model, including:
It can be used on a regular basis to track customer perceptions of service quality
of a particular firm compared to its competitors
It provides the opportunity for a firm to assess its service quality performance on the basis of each dimension individually as well as the overall dimensions
It allows the firm to classify its customers into different segments based on their individual SERVQUAL scores
It allows multi-unit retail companies to assess the level of service quality offered
by individual stores and to group them into different sectors with different quality images
The SERVQUAL technique has attracted a lot of attention for its conceptualization of quality measurement However, it has also attracted criticism
One of those is that the instrument mainly focuses on the service delivery process Therefore, Bahia and Nantel developed a specific new scale for perceived service quality
in retail banking The bank service quality (BSQ) model is an extension of the original ten dimensions of the model of Parasuraman They added some items such as Courtesy and access and items representing the marketing mix of the 7Ps (Product/ service, Place, Process, Participants, Physical surroundings, Price and Promotion) (cited in H Emari, S Iranzadeh and S Bakhshayesh, 2011, p 58)
Ladhari (2008) summarised a list of theoretical and empirical criticisms of the model First, he argued that the use of gap scores is not the right method because of the lack of the support in literature to consumers evaluating service quality in terms of perception-minus-expectation He recommended that service quality is more precisely and correctly evaluated by measuring only perceptions of quality In addition, he pointed out that the previous research suggested using perception-only scores rather than gap scores for the overall assessment of service quality.( cited in Tameem Al Bassam, Sarmad Al Shawi 2009, p.7)
Model no.3: Attribute service quality model (Haywood-Farmer, 1988)