Credit services quality of vietnam joint stock commercial bank for industry and trade vietinbank

LIST OF FIGURES 2.2 Model Technical and Functional Quality Model 25 2.3 ModelQualityService-Based Distance GAP model 26 2.4 Model ofCausalRelationshipsBetweenPerceived 2.6 Model Customer

CREDIT SERVICES QUALITY OF VIETNAM JOINT STOCK COMMERCIAL

BANK FOR INDUSTRY AND TRADE - VIETINBANK

_

A DISSERTATION Presented to the Faculty of the Graduate School Southern Luzon State University, Lucban, Quezon, Philippines

in Collaboration with Thai Nguyen University, Socialist Republic of Vietnam

APPROVAL SHEET

The Dissertation of

DONG TRUNG CHINH

entitled

CREDIT SERVICES QUALITY OF VIETNAM JOINT STOCK COMMERCIAL

BANK FOR INDUSTRY AND TRADE - VIETINBANK

Submitted in Partial Fulfilment of the Requirements for the Degree

DOCTOR OF BUSINESS ADMINISTRATION

A program offered by Southern Luzon State University,

Republic of the Philippines in collaboration with

Thai Nguyen University, Socialist Republic of Vietnam

has been approved by Oral Examination Committee

MELCHOR MELO O PLACINO, PhD EDWIN P BERNAL, DBA

WALBERTO A MACARAAN, EdD ALICE T VALERIO, PhD

CECILIA N GASCON, PhD

Chairman

CONRADO L ABRAHAM, PhD APOLONIA A ESPINOSA, PhD

Accepted in Partial Fulfilment of the Requirements for the Degree

Doctor of Business Administration

_ WALBERTO A MACARAAN, EdD

Date Vice President for Academic Affairs

CERTIFICATE OF ORIGINALITY

ACKNOWLEDGMENT

I would like to express my heartfelt gratitude to leaders of Thai Nguyen University in VietNam and Southern Luzon State University in the Philippines who created best conditions for me to complete the course generally and fulfill the thesis particularly

My gratitude goes towards Professors who directly gave me useful and memorable lectures and guides in DBA namely Dr Cecilia N Gascon, Dr.Walberto A Macaraan, Dr Milo O Placino, and Dr Alice T Valerio They provided me a rich and fertile environment to study and explore new ideas They made my DBA life ever fluid, and, in the course of it all, a warm and inviting place to work

My special thanks to Dr.Conrdo L Abraham who provided me valuable guides to complete the dissertation

I would also like to thank: Associate Professor, Dr Do Anh Tai, Dr Pham Hong Manh who helped me during this research, read the manuscript and provided me with constructive comments

I extend especial thanks to the board of Rectors of Hanoi University of Industry for permitting me to pursue the doctoral course and create favorable conditions for me to accomplish this doctoral degree

I would not have completed this road if not for my parents, my wife, my children, and all of my dear friends who instilled within me a love fr creative pursuits, science and language, all of which finds a place in this the dissertation

Dong TrungChinh

TABLE OF CONTENTS

PAGE

TITLE PAGE ……… i

APPROVAL SHEET ……… ii

CERTIFICATE OF ORIGINALITY ……… iii

ACKNOWLEDGEMENT ……… iv

DEDICATION ……… v

TABLE OF CONTENTS ……… vi

LIST OF TABLES ……… viii

LIST OF FIGURES ……… x

LIST OF APPENDICES ……… xii

ABSTRACT ……… xiii

CHAPTER I INTRODUCTION ……… 1

Background of the Study ……… 2

Statement of the Problem ……… 3

Objectives of the Study ……… 4

Scope and Delimitation ……… 5

Significance of the Study ……… 6

Definition of Terms ……… 7

II REVIEW OF LITERATURE ……… 9

Conceptual Framework ……….… 32

III METHODOLOGY ……… 36

Locale of the Study ……… 36

Research Design ……… 37

Data Gathering Procedure ……… 38

Population, Sample and Sampling Technique … ……… 39

Research Instrument ……… 40

Statistical Treatment ……… …….…… 41

IV RESULTS AND DISCUSSIONS ……… 45

V SUMMARY OF FINDINGS, CONCLUSIONS AND

RECOMMENDATIONS

Summaryof Findings ……… 76

Conclusions ……… 79

Recommendations ……… 80

REFERENCES ……… ……… 85

APPENDICES ……… 91

CURRICULUM VITAE ……… 114

LIST OF TABLES

3.1 Distribution of the Sample in the Study Area 36

4.1 ClassificationBorrowing Subjectsby Type of Enterprises

4.3 Status of Repayment fortheCreditLoans 52

4.4 The EaseofApproaching BusinessCredit

TABLE PAGE

4.17 StatisticalAverageComposition"Empathy" 68 4.18 StatisticalAverageComposition"Response" 69 4.19 Statisticalaveragecomponent "Assurance” 70 4.20 StatisticsoftheAverage"Profile" 71

LIST OF FIGURES

2.2 Model Technical and Functional Quality Model 25 2.3 ModelQualityService-Based Distance (GAP model) 26 2.4 Model ofCausalRelationshipsBetweenPerceived

2.6 Model Customer Satisfaction Index of the United States 29

2.7 The Research Model with Hypotheses Based on Five

Dimensions by Parasuraman et al (1988) 34

4.2 Age GroupofCustomerinTransactionsinVietinBank 46 4.3 Educational AttainmentoftheCustomerTransactionVietinBank

47 4.4 The Position of the Customer in the Transaction with

4.5 Types of Business Enterprises Transacting inVietinBank 48 4.6 CharacteristicsofCustomerTransactionsatVietinBank 49 4.7 The SizeofBorrow CapitalEnterprise Customersin

ABSTRACT

Title of Research : CREDIT SERVICES QUALITY OF VIETNAM

JOINT STOCK COMMERCIAL BANK INDUSTRY AND TRADE – VIETINBANK

Researcher : DONG TRUNG CHINH (ERICH)

Degree Conferred : DOCTOR OF BUSINESS ADMINISTRATION

Name and Address

of Institution

: Southern Luzon State University Lucban, Quezon, Philippines and Thai Nguyen University, Socialist Republic of Vietnam

Adviser : Dr Conrado L Abraham

Year Written : 2013

Industrial and Commercial Bank of Vietnam (VietinBank) is one of the largest commercial banks in Vietnam with a long history of development However the explosion of commercial banks is still a major challenges in improving the quality of service credit

This study used a model of service quality by Parasuraman et al (1985; 1988) as applied to the credit quality services at VietinBank - Red River Delta Region Statistical analysis tools such as reliability analysis, factor analysis to explore, regression analysis and ANOVA analysis of the 368 customers surveyed are in the business of trading in the local VietinBank of the Red River Delta area

Results reveal thatthe majority ofcustomersaretransactions withVietinBankcorporate customers, who have much timetransactions withthisbank.Most ofthebusinessestradingatVietinBankare

privateenterprisesandnon-statebusiness corporations.State-owned enterprises(the state capital) accounts for onlya small fraction

Second,creditloansare mostlyunder5billion These loans aremainlycomplementary for businessesin thecapitalandprocurement of machinery andequipmentforproduction and businessactivitiesoftheenterprise

In addition,enterprisesalsousethese loansforother purposes, such asin the construction of buildings.However,forthe purpose ofthisloanis negligible

Third,the

accessibilitythecreditofVietinBankstillshowcertaindifficultiesfortheenterprisescustomer ThedifficultyinVietinBankloansis that borrowingconditionshavesecured assetsforthe mortgage

Fourth,the natureofservice qualityoftenchangevery rapidlyover timedue

to theincreasingdemandsofcustomers and thedifferencebetweenthebanks Therefore,the use ofmodelsofservicequalityof Parasuramanet al(1988) show significant differencebetween the studiesinVietnamand the world The study revealsthat, in addition to 5componentsofservicequalityParasuramanet al(1988),thequality of servicesinVietinBank-Red River Deltaregionalso hasa"creditprofile" component

1

Chapter I INTRODUCTION

Thecommercial bankshave increasinglydemonstratedtheirimportant rolein the economyofeach country, in whichVietnamis notan exception In the earlier times, Vietnam's economyhas beenrapidly integratedwiththe world economy, which createdmany opportunitiesbutalsomanychallenges toevery field

Credit activityisone of themainfunctionsofthecommercial banks, and thisactivity createsthe largestsource ofincomeforbanksinVietnam Theprosperityofthecommercial bankswill depend onthe quality of services, especiallycredit services Putin the context ofthe increasingly fiercecompetitiontoday, improvingcredit qualityto satisfyincreasinglyhigherdemandsfrom customersare becomingmajor concernsofthecommercial bankstoday

The emergenceofthejoint-stock commercialbanks, innovationandstrongadvanceofthebig state-ownedbankshas broughtbetterqualityservices,

helpingbusinessesandindividual’sconditionalselectionbankingtransactionsand access tobanking servicesmoreeasily This makescompetitionbetween banksalreadyfierceand now,fiercer

With thefierce competitiontaking place,improving the quality ofservicesismatter of survivalforthe competitiveness oftheBank

2 Banksdomakea differenceinservice, highusability; the banks willhavestrongcompetitiveadvantages

Background of the Study

VietinBankisa bank that conducts one of themostlarge scaleoperationsinVietnam, with awide branchnetwork, and havingmet the demandsfor investmentonalleconomic sectors VietinBankcreditisthe bank’s mainsource ofincome, which has createdalarge volume ofassetforthe bank The total revenue, interestincomeandother expensesdirectly relatedtocredit operations, represents65% -75% of the profit of VetinBank However,the service qualityofbankcreditstillhavemany limitations, such as:the proceduresare stillfrillsloan, andtheloan conditionsstillneedthe collateral, among others.Allof these problemsareobstaclesforcustomersin approaching servicesatthe bankcredit Ifthese problemswere noresolved,soonthere will bepotential risksforVietinBankin raisingthe competitivenessofthe economyas well asenhance the reputationofVietinBankonthe domestic and international market

Over the years, thegeneralquality of serviceincommercialbankshave beenstudied by many authorsin the world ofresearch, such as: studiesofGuoet al(2008) formeasuringservice qualityinthebankingmarketshareinChina,the studyofAldlaigan&Buttle(2002) formeasuringthe quality ofbanking services, andresearchofSureshchandaret al(2002) on the relationshipbetweenservice qualityandcustomerssatisfaction Most of theresearch onquality of serviceis basedonthe theoretical foundationfor the qualityofserviceof Parasuramanet al(1985, 1988), the scale of which was developedinhisstudies

PhamHongManh,HaThiThieuDao(2010) on access tocredit servicesusedthe theoryTDPto assessthe accessibilityofcreditservices forfishermen

Considering these matters,the leadershipofVietinBankhasmany solutions, such as: raisingcharter capitalandimprovetechnology, diversification

of productsandimprovement ofthe quality of serviceinstages, includingcredit servicesto improve thequalityofbankingservicesforfastmarket share Apparently, evaluationof creditqualityservicetomore responsivecustomersatisfactionisaregular operationofVietinBanktoknow thequalityoftheirservicecreditwherethere

aregapswhatwiththecustomer'sexpectationsforimprovedmeasures

Stemmingfromthe above problems,the researcher became motivatedtochoosethe research topic onthe credit qualityservicesofVietNamjoint-stock commercialbank for industryandtrade, the case ofVietinBank

Statement of the Problem

4 The dissertation objectives will concentrate on the following research questions:

1 What is the demographic profile of the respondents?

2 What is the composition of the quality of service of VietinBank?

Objectives of the Study

The studygenerally determined the levelofcustomersatisfactionwiththe service qualityofVietinBank-Red River Deltaregion-Vietnam to proposesolutionsto improve the qualityofservicecreditVietinBank This dissertation specifically aims to:

1 Determine the demographic profile of the respondents as to:

5 h) Accessibility of Service

2 Identify thecomponents of qualityservicecreditof VietinBank;

3 Build scale components of service quality credit for VietinBank;

thataffectthecustomersatisfactionaboutthe credit qualityofVietinBank; and

servicecomposition, demographiccharacteristicstothe satisfactionof thecustomer's creditqualityVietinBank

Scope and Delimitation

In the completion ofthe thesis, the author usedthe modelcomponentsof ParasuramanQualityofServicesto assessclientsatisfactionwiththe servicesof VietinBankcredit Although there have beenmanyeffortsinthe implementation process, thedissertationmaintainedcertain limits:

First,the process of collectingdocuments anddatainvestigationon theuseofcreditservicesfromthe customersof VietinBankisdifficult Therefore, thesamplesizeissmallcompared tothe totalnumber of customerswho are using the servicesofVietinBankinthe Red River Deltaregiondue to the limitationof timeandfinancial resources

Second,stratified samplingmethodforthelocalstudy areacannotrepresent manydifferentcustomers, that is why it was not employed as a sampling technique

6

Third,withalargecredit institutionasVietinBankmanydifferent services, such asloans, receivingdeposits, ATM, cash, a recentstudystoppedjustinfinancial servicesresearchofthebank

Fourth, to analyze the quality service composition of the bank, the theory of service qualitytaken fromParasuraman’s SERVQUAL model was adjusted for the characteristics of VietinBank in the region Red River Delta, Vietnam

The data was collectedfromJuly 2012 to April 2013

Significance of the Study

This study will be primarily beneficial to the customers and administrators of VietinBank, as well as other banks in the country

First,servicesaredifficult to measure, identify theelementsofaqualitycharacterizedby customerserviceevaluation, especiallycredit servicesis essential Understanding theexpectations andperceptionsofcustomers towardsbankshelpmanagersbetter understand, more sympathetic, more enthusiasmforservingcustomers

Second,the level ofqualityofservicecreditprovidedby the Bankanditsdegree of influencetothe satisfactionofbankcustomershave the opportunity tohelplookat themselvesfrom the perspective ofthe customer.From there, through the result of this study, they may makepoliciesappropriateto their operations so astoimprovetheir service quality, and eventually to betterserve the customers

7

For banks, the results of the measurement the satisfaction level of the customers in this studymay be used to easily building strategies, action plans towards achieving the target customer satisfaction level and customer loyalty, thereby retaining customers and increase profits

For bank staff, the identification of the elements of a quality customer service, especially on the credit services are essential in better understanding, beingmore sympathetic, and being more enthusiasticin serving his subjects

This dissertation is likewise done in the hope of contributing to the system part of the rationale for assessing service quality satisfaction measurement of credit quality and in particular quality banking services in general

In addition, the study results can be the basis for other units of the system VietinBankin similar services such as telephone service, transportation service passenger, courier services

Definition of Terms

The following terms are defined conceptually and operationally:

Assurance.The knowledge and courtesy of employees and their ability to

convey trust and confidence

Empathy.The provision of caring, individualized attention to customers

Quality service Quality service is what customers perceive through feel the

perception or customer related to their individual demand

Service Service is any act or benefit one party can offer to another party that

is basically very and the owner does not bring any

Tangibles.The appearance of physical facilities, equipment personnel and

communication materials

9

Chapter II REVIEW OF LITERATURE

This chapter presents the theoretical foundations of this study Thecontentincludes: Services andcharacteristicsofservicesandservice quality, service qualityofbankcredit, customersatisfactionandthe relationship betweenservicequalitycustomersatisfactions In addition,an overview oftheresearchmodelrepresentingthequality of the service; the components ofservice qualityare also presented

Finally, theproposedtopicmodelintothestudy ofthequality of servicecreditforcustomersatisfactionisalsopresented inthechaptercontent

Service

The concept of service: According to modern marketing research

Kotler and Armstrong (2004) service definition as follows: "Service is any act

or benefit one party can offer to another party that is basically very and the owner does not bring any” Services have four (4) properties below:

Invisibility (intangibility): a pure service cannot be evaluated using any

public body senses before it is purchased Therefore, to reduce uncertainty, people will search for evidence of the quality of service from their audience exposure, equipment that they see

The inseparable (inseparability): specific services are produced and

consumed simultaneously at the same time If someone is hired, the service provider side will be part of the service, whether the service provider is the real person or machine Because customers will also be present at the

10 services offered to the interaction between the service provider and the customer is a special feature of services marketing

Calculate or change (variability): characteristics reflected in the quality

of service depend on the service provider, time, location and the way services are provided

The fragile (perishability):other services to the common goods in that it

cannot be stored In other words, services are more sensitive to common goods before the change and the diversity of needs When demand changes, the service company always looking to match supply and demand together, such as the travel companies always hire car to serve tourists in the peak season

In addition to the above properties, the service can be described with the following attributes:

- Lack of transport properties can be: services must be consumed in place of "production" services

- Lack of uniformity: almost impossible to provide services with the same quality finish

- Need more manpower: services typically include significant human activity, rather than the process of being set up correctly Therefore, human resource management is very important Human factor is often

a key factor to the success in the service sector

- Fluctuations needs: it is difficult to predict demand Demand can vary

by season, time of day, the business cycle

- No refund if customers are not satisfied, they can return the money, but services cannot be refunded

theperceptionorcustomerrelated totheir individualdemand.

According toParasuraman, ZeithamlandBerry(1985), the quality of

bycustomersasavalue-creatingservicesworthyoftheirprevious expectations According toParasuraman(1988), expectationsofservice qualityisthe desire ofthe customer, which means they feelproviderstoperformwillnotperform therequestedservice

Otherqualitygoodsaretangibleandcan be measuredbyobjective criteriasuch asfunctionality,features, anddurability However,service qualityisintangible Therefore, the documentdefinedservice qualitybased on: subjective,attitude, andability to identify Zeithaml(1987) explains: "Quality of service isthecustomer'sevaluationoftheultraVietnamandthegreatgeneralofan entity Itisa form ofbehaviorandconsequencesfroma comparisonbetween whatis expectedandawareness ofwhatwereceive "

ButLewisandBoomssaid:"Serviceisameasure ofthe level of servicegiventocustomerswithadequatecustomerexpectationsofto where

12 Creating aquality servicethat isexpectedto meetcustomeraconsistent manner

"This commentclearlydemonstratesthat thequality of servicerelated tocustomerexpectationsandtheir perceptionsofthe service

Inthe banking sector, qualityofcredit servicesis the ability tosatisfythecredit servicesforthe expectations ofborrowers, In other words, it is the gap betweentheexpectationsof borrowerswiththeir feelings abouttheresults theyget aftertransactionsloans Bank

As tothe characteristics ofservice quality,Kotler(2004) offered the following basiccharacteristics of service quality:

First,Outstanding:Forcustomers,qualityserviceis a servicethat demonstratesitssuperiorityoverother products Theadvantagesof thismakeVietnamservice qualitybecomea competitive advantageoftheserviceproviderandthis dependslargely onthe perceptionoftheservicereceived This relationshiphasa great significancein evaluating thequality of servicefromthe client sideinmarketingactivitiesandresearchofcustomersatisfaction

Second, Specificityof the product:Quality of serviceisthe sum ofthe

coreandtheessencecrystallized increatingproducts and servicesof theparticular characteristicsof products and services Thesehigh qualityproductswillcontainmore"dominant characteristic" of tangibleand intangible assetsthat customerscanfeelandchoice However,in

determinethedominantcharacteristicabsoluteaccuracyand completeness

Third,supply: Quality of serviceassociatedwiththe service deliveryprocesstocustomers,theinternalfactorsofthe serviceproviders, such as

13 service deployment, servicestyleandservice providerswill decidegoodqualityor badservice Therefore, toimproveservice quality, serviceprovidersmust firstimproveintrinsic factorto formlong-termstrengthsofthemselves

inserviceactivitiesprovidedto customers

Fourth, thesatisfying: Services designed tomeet the demandsofcustomers.Therefore, thequality of servicenecessary tomeetcustomer needsandrequirementsofcustomerstakingas a basistoimproveservice quality.Ifcustomersfeel thatthe servicedoes not meettheir needs, they will not be satisfiedwiththe quality ofservice theyreceiveorotherwisevaluableserviceto customers This is reallyimportant becauseprovidersare nowgeared towardscustomer needsandtry to meetthose requirementsin an optimal waypossible.This featureis drivenbyexternal impactmore

Fifth, the create value:Quality of serviceassociated

Businessescreatecustomervalueandthe objectthatreceivesthevalue So, considerthequality of serviceormore specifically,thevaluebroughtto customersdepends onthe customer'sevaluation, not businesses Customers typicallyreceivetheseservicesbringvalueandcompare themwithwhatthey expecttoreceive Therefore,thevalue creationisthe basic featureandis the foundationforthe constructionanddevelopment ofqualitybusinessservices

Measuringthe quality of services

Qualityofservicecreditisthe ability to meetthe servicecreditforthe expectations ofborrowers, in other words, it is the gap

14 betweentheexpectationsof borrowerswithfeelingsthemabouttheresults theyget afterdealingwithbankloans.

Unliketangible productscan touch, smell, seeortasteand canbe evaluatedquite easilyby consumers, products and servicesarethereforeinvisibletoassess the quality ofservicesis difficultmuch Parasuraman&theauthors havestudiedthe flow channelsofqualityandserviceformany

researchersisfairlycomprehensive(Svensson2002) Accordingly, theSERVQUALscaleincludes05componentsand22variableswasobservedmainlyin themarketingtoolto evaluatethe servicequality of service Parsuraman& et

al (1994) scalecontinuoustestingand reviewingdifferent theoriesandthattheSERVQUALscalewasreliableandvalid This scalecan be appliedindifferentenvironmentsandservicesvary fromdifferent contextssuch asmarkets, types of services etc

In thebankingsector, many researchershave appliedthe SERVQUALscalein measuringthe quality of servicessuch as: LotfollahR.BishuNajjarandRam(2006), UgurYavas(2007).Thesestudiesfocus

on the calibration of quality components based onvariablessuggestedbyParasuraman

15 The tangible elements deal with the availability of physical facilities, equipment and personnel Reliability is the ability of the service provider to perform a service dependably and accurately Responsiveness is concerned with the willingness of service provider to assist customers and deliver prompt services Assurance means that customers can put their trust in service provider employees and Empathy is individualized care and attention that customer receives from service deliver (Parasuraman et al 1988) The SERVQUAL questionnaire covers these five service quality dimensions using two portions One portion is comprised of expectations of customer and other

is based on received service quality perception Each portion has 22 items

The use of SERVQUAL instrument has already been validated in assessing service quality of repair and maintenance service providing firm, long-distance telephone corporation, telecommunication, credit card company, information system, libraries, insurance, restaurant, health care and retail chains (Parasuramanet al 1988; Van der Wal et al 2002; Kilbourne et

al 2004; Lee and Ulgado 1997; Mels et al 1997; Parasuraman et al 1985; Jiang et al 2000; Cook and Thompson 2001)

The applicability of SERVQUAL in the banking sector has revealed various results SERVQUAL application in Cyprus banking industry has identified three dimensions influencing the service quality i.e tangibles, reliability, and responsiveness-empathy Assurance has been eliminated due

to inadequate factor loadings (Arasli et al 2005) Use of SERVQUAL in Chinese banking sector have revealed six dimensions of service quality i.e tangibles, reliability, responsiveness, assurance, empathy 1 (understanding of needs) and empathy 2 (convenient operating hours) (Lam 2002) The quality

16

of the services that a bank provides is related to the satisfaction of customers and it is estimated by dissatisfying and satisfying the service provided by the bank over time The perceived service quality has positive effect on satisfaction of customers Previous studies have revealed that perceived service quality has positive effect on satisfaction of customer in four service sector i.e dry cleaning, fast food, pest control and banking (Cronin and Taylor 1992) Bei and Chiao 2006 also reported positive influence of perceived service quality on three service providers i.e petrol station, automobile repair and banking Significant correlations have been found between overall customer satisfaction and service quality dimensions (Aldaigam and Buttle 2002) The service quality in banking industry relates to assurance, empathy, responsiveness and reliability (Johnston 1995) Reliability and assurance has strong influence on banking sector service quality and customer satisfaction (Zhou 2004) Study carried out on USA, Netherland, Hong Kong, morocco and Australian banking sector reported direct impact of service quality on customer satisfaction (Brady et al 2005) Similar results have been reported in Greek banking industry (Arsali et al 2005)

Six dimension scales for evaluating service quality in banks have been developed by Bahia and Nantel (2000) from the original ten dimensions proposed by Parasuraman et al (1985) The six dimensions are reliability, tangibles, access, effectiveness and assurance, range of services and prices The application of SERVQAL in Islamic banking revealed six dimensions An extra dimension “compliance to the Islamic law” was added in SERVQAL five dimension scale (Othman and Owen 2001) A modified version of

17 SERVQUAL based on three dimensions i.e empathy, tangibles and human skill have been proposed by Jabnoun and Al-Tamimi (2003)

A study on Canadian banking system revealed six service qualities dimensions i.e reliability, tangibles, access, assurance, effectiveness, services portfolio The reliability of data falls in range of 0.78-0.96 The study involved 115 bank customers, 31 items and seven point likert scales was used in study (Bahia and Nantel 2000) Evaluation of service quality in Australian Banks yield four dimensions of service quality i.e communication, credibility, staff conduct and access to teller services The study was conducted on 791 customers of bank and overall data reliability was in the range of 0.80-0.88 17 items and five point likert scale was used (Avikaran 1994)

InGuo et al (2008) evaluated the qualityof retail bankingservicesin the United StatesandSouth Korea It involved 129 respondents Reliability was in range of 0.72-0.85 23 items and seven point likert scale was used in study Four dimensions of service quality were identified i.e trustworthiness, functionality, appearance and helpful employees Service quality of corporate banking in China was evaluated by Guo et al (2008) Two hundred fifty-nine (259) corporate customers were involved in study Reliability of data fell in range of 0.88-0.93 Twenty (20) items in seven-point likert scale was used in study The service quality dimensions identified were reliability, technology, communication, technical quality and human capital

The quality of the services that a bank provides is related to the satisfaction of customers and it is estimated by dissatisfying and satisfying the service provided by the bank over time The perceived service quality has

18 positive effect on satisfaction of customers Previous studies have revealed that perceived service quality has positive effect on satisfaction of customer in four service sector i.e dry cleaning, fast food, pest control and banking (Cronin and Taylor 1992) Bei and Chiao 2006 also reported positive influence of perceived service quality on three service providers i.e petrol station, automobile repair and banking Significant correlations have been found between overall customer satisfaction and service quality dimensions (Aldaigam and Buttle 2002) The service quality in banking industry relates to assurance, empathy, responsiveness and reliability (Johnston 1995) Reliability and assurance has strong influence on banking sector service quality and customer satisfaction (Zhou 2004) Study carried out on USA, Netherland, Hong Kong, morocco and Australian banking sector reported direct impact of service quality on customer satisfaction (Brady et al 2005)

In Vietnam, the study of Le VanHuy&PhamThiThanhThao(2008) inthefield ofBankofmodelvariables,Parasuraman’s scalewas also usedbut they alsoaddedsomescaleadjustmentssuch asscalesreputation, prestige bank, thebranchnetwork, product and servicequality

Thus,althoughthequalityofservicesvaries bysector and market,differentscales, the SERVQUALscaleisreliableandvalidintheoryand practice Inresearchqualitybanking services, thestudywasnot largeandnosignificant interestin the conceptofcustomersatisfaction

tousethepreviousresearchonactualstockCommercial BankforIndustry and TradeVietnamis seeking to achievetheresearch objectivesas outlined

Customer Satisfaction

19

Throughthe definition ofservicesandstudiesmeasuringthequality of servicesas describedabove, wemayremark thatservice qualityisthe causecustomer satisfactionor not Thereare many definitions ofcustomersatisfaction:

Oliver(1997) defines "Customer Satisfactionistheconsumerfeedback, thecomments onthecharacteristicsof the product, serviceor yourselfproducts andservices.Reflectionsthiswill showthedifferentlevels of satisfactionwhenthey consumeproductsand services"

Sprengand his colleagues(1996), on the other hand, stated that the

"customer satisfactionis theemotional statebacklogintheir mindafter usingthe product orservice”

According toZeithaml&Bitner(2003),"Satisfaction is the process ofreviewand evaluationof theclient'sproductor servicethat the productor servicehasmet theneeds andexpectationsofthemor not"

When it comes to theISO9000:2000standard, thebasisofcustomersatisfactionisthe customer'sperceptionofthelevel ofservice quality they receive That processis the set ofoperationsto determinethe valueofa quantity Thuscustomersatisfaction indexisthemeasureof"value" customersfeel theaboutthelevel of satisfaction oftheir demands

According toPhilipKotler&Armstrong(2004, p 351): "The satisfaction of customers onapurchasedepends ontheabilityof the productcompared towhatbuyersexpect Consumerscan take thedifferentlevelsof satisfaction Iftheproductisweaker thanexpected, customers will bedissatisfied Ifthe product'sperformancematchesexpectations, the customerwill be satisfied Iftheenergyis highthanexpected, customers will beextremelysatisfied

20 andhappy "Theexpectationhere istobringvalueto customersat the highest level-itisaboutthedifferencebetweentotalcustomer valueandtotalcustomercost Totalcustomer valueisthe totalvalueofproducts, services, personnelandimagethat customersreceive Totalcustomercostsarethe costsin terms of money, time, energy andspiritof thepeoplemust bebuying

Thus,the mostgeneraloverview, customersatisfaction indexisthemeasureofastateoffeelingderived fromthe comparison ofresultsobtainedfrom the productor servicewiththeexpectationthat.There areimportant implicationsofthis definition:

Quality of Service and Service Quality in Commercial Banks

Over the years, thegeneralquality of serviceandservice qualityincommercialbanksin particularhave beenstudied by many authorsin the worldresearch, such as: studiesofGuoet al(2008) formeasuringservice qualityinthebankingmarketshareinChina,the studyofAldlaigan&Buttle(2002) formeasuringthe quality ofbanking services, andresearchofSureshchandaret al(2002) on the relationshipbetweenservice qualityandcustomerssatisfaction Most of theresearch onquality of serviceis basedonthe theoretical foundationfor the qualityofserviceParasuramanet al(1985, 1988) proposes to developandscalemodelsinhisstudies

Manyempirical studieshave beenconducted todemonstratethe relationship betweenservice qualityandsatisfaction.Twoprominentresearch conducted byCronin&Taylor(1992) andOliver(1993) havetestedthisrelationshipandconcluded thatservice qualityleads tocustomersatisfaction Thestudyconcluded thatservice qualityis theantecedentofsatisfaction(Cronin &Taylor, 1992;Spreng&Mackoy, 1996) andisthe main factoraffectingsatisfaction(Ruyter, Bloemer, Peeters, 1997)

qualityisonedeterminantofsatisfaction(Parasuraman, 1985, 1988)

Qualityserviceandcustomersatisfactionisan important factorfor thesuccessof anyenterprise(Gronoos, 1990, Parasuramanetal, 1988)

22 AsValdani(2009) points out,businessesexistbecause there isa customerto serve The key toachievingsustainableadvantage liesin providinghigh-qualityserviceresultsinsatisfied customers(Shemwelletal, 1998) Qualityserviceandcustomersatisfactionisan important factorin the fightto obtaincompetitiveadvantageandkeep customers

Customersatisfactionis the resultofthecustomer'sperceptionofperceived valueina transactionorrelationship, where valueis equivalent tothe qualityofservicesreceived, comparedwiththe expected valueinputs fromtransactionsorrelationshipswithcompetingvendors(Balanchard&Galloway, 1994;Heskettetal, 1990; Zeithamletal, 1990) To achievecustomersatisfactionandto meetthem, businessescan quicklyunderstandandmeetcustomerdemand, makegreater profitsthan those whodo notunderstand, and respond to them(Barsky&Nash, 2003)

Parasuraman et al., (1985) suggested that when perceived service quality is high, then it will lead to increase in customer satisfaction He supports the fact that service quality leads to customer satisfaction, which is in line with Saravana&Rao, (2007, p.436) and Lee et al., (2000, p.226) who acknowledge that customer satisfaction is based upon the level of service quality provided by the service provider

According to Sureshchandar et al., (2002, p 363), customer satisfaction should be seen as a multi dimensional construct just as service quality, meaning it can occur at multi levels in an organization and that it should be operationalized along the same factors on which service quality is operationalized

23 According to Negi, (2009, p.33), the idea of linking service quality and customer satisfaction has existed for a long time He carried out a study to investigate the relevance of customer-perceived service quality in determining customer overall satisfaction in the context of mobile services (telecommunication) and he found out that reliability and network quality (an additional factor) are the key factors in evaluating overall service quality but also highlighted that tangibles, empathy and assurance should not be neglected when evaluating perceived service quality and customer satisfaction The said study was based only on a specific service industry (mobile service) and it is believed that it is very important to identify and evaluate those factors which contribute significantly to the determination of customer-perceived service quality and overall satisfaction

Fen&Meillian, (2005, p.59-60) found that both service quality and customer satisfaction have a positive effect on customer’s re-patronage intentions showing that both service quality and customer satisfaction have crucial roles to play in the success and survival of any business in the competitive market Their study proved a close link between service quality and customer satisfaction

Sureshchanender et al (2002, p.372) conducted a study to find out the relationship between service quality and customer satisfaction From their research, they concluded that there exists a very large dependence between the two structures and an increase in one can lead to another increase In addition, they pointed out that service quality is more abstract than customer satisfaction because customer satisfaction reflects customers' feelings of many encounters and experiences with the company services while service

24 quality can be affected by perceptions of value (benefits related to cost) or by the experience of others which cannot be good

Modelstudiesalsohavemultiple authorsthat proposea model ofquality of servicecredit Teboul(1991) for one has developedmodelsforthe studyofcustomersatisfactionon thequality of servicecredit Quality of service, according to him,is perceivedbycustomers withthreedifferentlevels of satisfaction: (i) ifthe actual resultsworse thanexpected, the customer will not

be satisfied, (ii) ifthe actualfutureresultsexpectationvalue forthe customerwill

be satisfied, and(iii) ifthe actual resultsexceededexpectations, customers will enjoy

Figure 2.1 Model of Customer Satisfaction

(Source: J Teboul, Managing Quality Dynamics (Englewood Cliffs, NJ: Prentice Hall, 1991))

understandingofcustomersatisfactionin generalasconsumersofproducts and servicesin businesses The model does not show thefactors thataffectcustomersatisfactionandcause and effectrelationshipsbetween them

Research byGronroos(1984)affirms that in order to compete successfully, one must have an understanding of consumer perception of the

25 quality and the way service quality is influenced Managing perceived service quality means that the firm has to match the expected service and perceived service to each other so that consumer satisfaction is achieved The author identified three components of service quality, namely: technical quality; functional quality; and image (Figure 2.2):

Figure 2.2 Model Technical and Functional Quality Model

Source: (Gronroos, 1984)

Where:

(1) Technical quality is the quality of what the consumer actually receives as a result of his/her interaction with the service firm and is important

to him/her and to his/her evaluation of the quality of service

(2) Functional quality is how he/she gets the technical outcome This is important to him and to his/her views of service he/she has received

(3) Image is very important to service firms and this 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)

Parasuraman et al (1985) proposed that service quality is a function of the differences between expectation and performance along the quality

26 dimensions They developed a service quality model (Figure 2.3) based on gap analysis The various gaps visualized in the model are:

Gap 1: Difference between consumers’ expectation and management’s perceptions of those expectations, i.e - not knowing what consumers expect

Gap 2: Difference between management’s perceptions of consumer’s expectations and service quality specifications, i.e improper service-quality standards

Gap 3: Difference between service quality specifications and service actually delivered i.e the service performance gap

Gap 4: Difference between service delivery and the communications to consumers about service delivery

Figure 2.3 ModelQualityService-Based Distance (GAP model)

Source: (Parasuraman et al., 1985)