Service quality and customer satisfaction in business to business the case of ready mix concrete industry vietnam

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Le Thi Binh Phuong SERVICE QUALITY AND CUSTOMER SATISFACTION IN BUSINESS-TO-BUSINESS: THE CASE OF READY-MIX CONCRETE INDUSTRY IN VIETNAM MASTER OF BUSINESS (Honours) SUPERVISOR: Dr Vo Thi Ngoc Thuy Ho Chi Minh City – Year 2014 Table of Contents ACKNOWLEDGEMENT ABSTRACT LIST OF TABLES LIST OF FIGURES Chapter INTRODUCTION 1.1 Ready-Mix Concrete industry in Vietnam 1.2 Service Quality and Customer Satisfaction in B2B context 1.3 Research Objectives 11 1.4 Scope of the research 12 1.5 Expected contributions of research 12 1.6 Organization of thesis 13 Chapter 14 LITERATURE REVIEW AND HYPOTHESES 14 2.1 Literature review 14 2.1.1 Service experience 14 2.1.2 Service Quality 16 2.1.3 Customer Satisfaction 27 2.2 Research Model and Hypotheses 31 Chapter 36 RESEARCH METHOD 36 3.1 Quantitative research: Pre-test 36 3.2 Quantitative research: Main survey 37 3.2.1 Measurement scales 37 3.2.2 Sampling 40 3.2.3 Data analysis 42 Chapter 46 DATA ANALYSIS AND RESULTS 46 4.1 Data statistical analysis 46 4.2 Identifying and addressing outliers 47 4.3 Cronbach’s Alpha coefficient of reliability test 48 4.4 Exploratory Factor Analysis (EFA) result 48 4.5 Research Model test 50 4.5.1 Multiple regression 51 4.5.2 Chow test for moderating effect 56 Chapter 60 DISCUSSION AND CONCLUSIONS 60 5.1 Discussion of research results 60 5.2 Contribution and managerial implications for the research 63 5.2.1 Contribution for the research 63 5.2.2 Managerial implications of the research 64 5.3 Limitations and directions for further research 64 5.4 Conclusions 66 REFERENCES 67 APPENDIX 73 ACKNOWLEDGEMENT Foremost, I would like to express my sincere gratitude to my supervisor Dr Vo Thi Ngoc Thuy for her continuous support, for her patience, motivation, enthusiasm, and immense knowledge Her guidance helped me over the time of research and writing this master thesis Besides my supervisor, I would like to thank the ISB Research Committee: Prof Nguyen Dinh Tho, Prof Nguyen Dong Phong, Prof Nguyen Thi Mai Trang, Prof Nguyen Thi Nguyet Que and Prof Tran Ha Minh Quan, for their encouragement and insightful comments My sincere thanks also go to all of respondents, without whom, this research would have been impossible Le Thi Binh Phuong February 2014 ABSTRACT This study empirically examines the different impacts of B2B Service Quality’s determinants on Customer Satisfaction in Vietnam Ready-Mix Concrete industry and explores the moderating role of Ready-Mix Concrete Company Type variable on these relationships Whereby, it provides a comparison of these impacts extent between two types of Ready-Mix Concrete Company, local company and foreign company Chow test was used to test these impacts, utilizing a sample of 122 industrial customers of three Ready-Mix Concrete Companies The results indicate that all determinants of B2B Service Quality including Potential quality, Hard process quality, Soft process quality, Output quality and Buyer-supplier relationship quality play important role in explaining Overall Customer Satisfaction toward Ready-Mix Concrete service Furthermore, the results also support that ReadMix Concrete Company type moderates the relationship between each determinant of B2B Service Quality and Overall Customer Satisfaction Accordingly, that degree of Overall Customer Satisfaction for Foreign Company is higher than Local Company is appropriate with the current situation in Vietnam Ready-Mix Concrete service Indeed, it is a meaningful implication for manager in contributing into cost leadership strategy in case he has to make decision on selecting best solution for service quality improvement with limited budget The research findings also engage with some limitations in the strength of measurement scale, the sampling method as well as the fitness between the research model and data which results in the valuable directions for further researches in future LIST OF TABLES Table 2.1 - B2B Service quality determinants over the time 20 Table 4.1 - Descriptive statistics of multiple regression 51 Table 4.2 – Inter-correlations 52 Table 4.3 - Model Summary 53 Table 4.4 - ANOVA 53 Table 4.5 - Coefficients 54 Table 4.6 - Group Statistics 56 Table 4.7 - Summary table for Chow test 59 LIST OF FIGURES Figure 1.1 - B2B Service quality determinants over the time Figure 2.1 - Measurement dimensions in SERVQUAL and INDSERV 21 Figure 2.2 - The conceptual framework and its dimensions displayed in middle column 26 Chapter INTRODUCTION 1.1 Ready-Mix Concrete industry in Vietnam In this era of intense competition and difficult economic environment, all industries in Vietnam have faced many challenges It is no doubt that construction area in generally and Ready-Mix Concrete industry in specifically is in the same situation In today’s global marketplace, the key to sustainable competitive advantage lies in delivering service with high quality that will in turn result in customer satisfaction (Shemwell et al., 1998) Concrete is a mixture of three basic ingredients: sand, gravel (crushed stone) and Ready-Mix Concrete, as well as chemical compounds known as admixtures Combining this mixture with water causes the Ready-Mix Concrete to undergo an exothermic chemical reaction called hydration, turning Ready-Mix Concrete into a hard paste that binds the sand and gravel together Moreover, ready-mix concrete is concrete mixed with water at a plant and transported directly to a construction site Ready-Mix is a perishable product that needs to be delivered within an hour and a half before it becomes too stiff to be workable (Alan, 2010) Figure 1.1: Ready-Mix Concrete Supply Chain Source: Insights (2013) – an internal newspaper in Holcim Vietnam Ready Mixed Concrete is also referred as the customized concrete products for commercial purpose The Ready-mix Concrete Company offer different concrete according to user's mix design or industrial standard Associate with the growth of Ready-Mix Concrete companies in Vietnam in quantity and quality, customers have more choices for their experiencing services Although almost these companies aim to serve the construction industry better, to offer high quality products, comprehensive solutions and services to many projects from individual houses to large projects (Insights, 2013), customers complaints are unavoidable At every turn, customers are assessing how the company performance as an insurance provider matches their expectations To be able to compete better in the market, most of Ready-Mix Concrete companies are trying to observe customers satisfaction level and then improve their service quality 1.2 Service Quality and Customer Satisfaction in B2B context In recent years, substantial research has examined the level of quality (and its dimensions) in the performance of a service Ekinci (2003) indicates that the evaluation of service quality leads to customer satisfaction Rust and Oliver (1994) define satisfaction as the “customer fulfillment response,” which is an evaluation as well as an emotion-based response to a service Research has found empirical support for the relationship between perceived service quality and business performance (Athanassopoulos et al., 2001; Caruana et al., 1995), probably reflecting the difficulty to imitate (e.g Hiseand Gabel, 1995) Consequently, a validated instrument to measure the customer’s perceptions about the service being delivered is crucial, especially since there is evidence which show that the customer’s evaluation of service quality and the resulting satisfaction/dissatisfaction is connected to repurchase, loyalty, and willingness to maintain a long-term relationship with the provider (Iacobucci et al., 1994; Athanassopoulos et al., 2001) Responding to this need, researchers have devised and examined various instruments to measure perceived service quality However, most of the research has focused on measuring service quality in the end consumers and particularly using the SERVQUAL scale as developed and subsequently modified by Parasuramanet al (1991) or some variation In the other hand, dimensions of businessto-business customer service differ to individual service (Gregory.L, 2010) Evidence has shown that SERVQUAL appears to perform less admirably than B2B contexts (Babakus and Boller, 1992; Durvasula et al., 1999) Accordingly, researchers have made some recent attempts to investigate and develop alternative B2B specific scales APPENDIX Appendix A Questionnaire before pre-test You have experienced the service of a Ready Mix Concrete Company First of all, please clarify which type of Ready-Mix Concrete Company (service provider) that you will give your evaluation/comments in this survey Foreign company Local company Kindly give your agreement level about service quality of this company as the below statements Please cross-check your suitable choice for the agreement level: Totally disagree Disagree Neutral Agree Totally agree Part Potential Quality No Statement The company has capability to offer full service The company has required personnel The company has required facilities The company has required management philosophy Personnel turn-over of company is below a certain level The network of the company has an interesting portfolio of Level of Agreement (other) services Part No Hard process quality Statement The service is delivered according the agreed planning The service is delivered according the agreed budget 73 Level of Agreement The service is delivered as the deadline The process of delivering service is detailed followed up A response to a request is given within an agreed period Part No Soft process quality Statement Level of Agreement Communication between front-line staff and customer is effective Complaints of the customer are effectively dealt with Complaints/ contribution of the customer are effectively dealt with Front-line staff has pleasant personality Front-line staff is ready to argue if needed to clarify the problem Front-line staff is willing to share the interests with the customer Part Output quality No Statement The service delivered help the customer reach objectives The service has a notable effect on a certain parameter (e.g Level of Agreement market share, brand recognition) The service is delivered contributing into customer’s image The service delivered is creative offering The service delivered is consistent with customer’s strategy Buyer – Supplier Relationship Quality Part No Statement Level of Agreement The company delivers initiatives for improvement at the customer The company innovates to meet future customer demands The company delivers relevant information from the market to the customer The contact persons at the company are friendly, helpful, approachable, "on the same level" The industrial customer and the company have an effective 74 mix of organization cultures and management philosophies Personnel at the company is trained to improve their service delivery potential There is a sufficient amount of trust between the industrial customer and the company The company is sufficiently interest in delivering services to, and building a relationship with the industrial customer Part Overall Customer Satisfaction No Statement Comparing service performance to the expectation: Service has been provided relatively well or poorly; or Service was suitable or unsuitable for its use/purpose Customer’s emotional response based on comparison between service performance with some pre-purchase standards Customer has repeat purchase intention after using the service 75 Level of Agreement Appendix B Questionnaire modified after pre-test QUESTIONNAIRE My name is Le Thi Binh Phuong, student of International School of Business (University of Economics) This questionnaire is to collect information for my master thesis: “Service Quality and Customer Satisfaction in B2B The case of Ready-Mix Concrete industry in Vietnam: A comparison between local and foreign companies” The output of this survey is to help Ready-Mix Concrete companies understand obviously about the components of their service quality affecting satisfaction of their customers whereby they can improve their performance to increase the level of customer satisfaction Your information provided in this questionnaire is extremely valuable for me to finish my thesis I assure that your provided information is for the master thesis research purpose only.Therefore, all the information provided by you will be confidential and disclosed without indicating specific name of company or individual (if any) Thank you so much for your cooperation 76 You have experienced the service of a Ready Mix Concrete Company First of all, please clarify which type of Ready-Mix Concrete Company (service provider) that you will give your evaluation/comments in this survey Foreign company Local company Kindly give your agreement level about service quality of this company as the below statements Please circle only ONE suitable letter indicating your choice Strongly disagree Strongly agree Neutral 10 LEVEL OF AGREEMENT Part 1: Potential quality of the Ready-Mix Concrete company Level of agreement The company has capability to offer full service 10 The company has required personnel 10 The company has required facilities 10 10 10 10 The company has required management philosophy (Management philosophy is a kind of idea that is used to express a company's judgment on best management exercise) Personnel turn-over of the company is below a certain level The company well utilizes network of partners/associates Part 2: Hard process quality of the Ready-Mix Concrete Service The service is delivered according the agreed planning 77 Level of agreement 10 (keep time schedules) The service is delivered according the agreed budget 10 The service delivered meets deadlines 10 10 10 The process of delivering service is followed up in a detailed way A response to a customer's request is given within an agreed period Part 3: Soft process quality of the Ready-Mix Concrete Service Communication between front-line staff and customer is effective Front-line staff always listens to customer's problem Complaints/ contribution of customer are effectively dealt with Front-line staff has pleasant personality Front-line staff is ready to argue if needed to clarify the problem Front-line staff is willing to share the interests with customer Part 4: Output quality of the Ready-Mix Concrete Service The service delivered helps customer reach objectives The service has a notable effect on a certain parameter (e.g market share, brand recognition) The service delivered contributes into customer’s sales/ image The service delivered is a creative offering The service delivered is consistent with customer’s strategy Level of agreement 10 10 10 10 10 10 Level of agreement 10 10 10 10 10 Part 5: Buyer – Supplier Relationship Quality (Buyer: industrial customer; Supplier: Ready-Mix Concrete Level of agreement company) The Ready-Mix Concrete company delivers initiatives for 78 10 improvement at the customer The Ready-Mix Concrete company innovates to meet future customer demands The Ready-Mix Concrete company delivers relevant information from the market to the customer 10 10 10 10 10 10 10 The contact persons at the Ready-Mix company and the industrial customer are on the same level (fit between people) The customer and the Ready-Mix Concrete company have an effective mix of organization cultures and management philosophies Personnel at the Ready-Mix Concrete company is trained to improve their service delivery potential to customer There is a sufficient amount of trust between the customer and the Ready-Mix Concrete company The Ready-Mix Concrete company is sufficiently interest in delivering services to, and building a relationship with the customer Please circle only ONE suitable letter indicating your overall satisfaction with service provided by this Ready Mix Concrete Company Part 6: Overall Customer Satisfaction How satisfied are you with Ready-Mix Concrete service of this company? Compared to your expectations for the Ready-Mix Concrete service, how you actually rate the service of this company? What are the chances in ten (10) that you would choose to use the Ready-Mix Concrete service of this company once again 79 scale: = very dissatisfied; 10 = very satisfied 10 scale: = much worse; 10 = much better 10 scale: = no chance, 10 = certain 10 Appendix C The boxplot for indentifying and addressing outliers 80 Appendix D Cronbach’s Alpha coefficients for each measurement scale Items Scales Mean if Item Deleted Scales Variance if Item Deleted Potential quality (PQ1 > PQ6) PQ1 PQ2 PQ3 PQ4 PQ5 PQ6 39.478 39.652 39.707 39.696 39.989 39.576 10.846 10.471 10.473 10.500 11.549 10.049 Hard process quality (HPQ1 > HPQ5) HPQ1 HPQ2 HPQ3 HPQ4 HPQ5 26.609 27.815 27.337 28.054 28.359 32.424 32.837 32.554 31.761 32.000 31.793 Output quality (OQ1 > OQ5) 0.711 0.671 0.896 0.785 0.710 0.874 0.880 0.834 0.871 0.872 0.753 0.737 0.760 0.712 0.755 0.664 0.874 0.876 0.872 0.880 0.877 0.889 Cronbach's Alpha = 835 27.000 9.421 27.246 8.848 27.197 8.953 27.262 8.939 27.230 8.773 Buyer-supplier relationship quality (BSRQ1 > BSRQ8) 49.910 28.529 BSRQ1 49.943 28.468 BSRQ2 50.713 23.661 BSRQ3 50.697 29.420 BSRQ4 50.557 25.588 BSRQ5 50.139 27.261 BSRQ6 50.320 25.145 BSRQ7 50.508 24.682 BSRQ8 Overall customer satisfaction (CS1 > CS3) 11.238 12.500 11.852 0.850 0.833 0.833 0.859 0.863 0.841 Cronbach's Alpha = 897 11.368 11.545 10.733 11.788 10.044 12.671 OQ1 OQ2 OQ3 OQ4 OQ5 CS1 CS2 CS3 0.649 0.751 0.747 0.606 0.569 0.701 Cronbach's Alpha = 890 17.230 16.658 15.457 12.513 16.716 Soft process quality (SPQ1 > SPQ6) SPQ1 SPQ2 SPQ3 SPQ4 SPQ5 SPQ6 Corrected Item- Cronbach's Total Alpha if Item Correlations Deleted Cronbach's Alpha = 869 0.599 0.813 0.651 0.798 0.651 0.798 0.636 0.802 0.800 0.645 Cronbach's Alpha = 884 0.882 0.515 0.541 0.879 0.791 0.854 0.505 0.882 0.770 0.857 0.530 0.882 0.732 0.861 0.833 0.850 Cronbach's Alpha = 846 4.761 3.508 3.598 81 0.685 0.725 0.764 0.827 0.781 0.734 Appendix E Exploratory factor analysis (EFA) result Factor Potential quality PQ1 PQ2 PQ3 PQ4 PQ5 PQ6 HPQ1 HPQ2 HPQ3 HPQ4 HPQ5 SPQ1 SPQ2 SPQ3 SPQ4 SPQ5 SPQ6 OQ1 OQ2 OQ3 OQ4 OQ5 BSRQ1 BSRQ2 BSRQ3 BSRQ4 BSRQ5 BSRQ6 BSRQ7 BSRQ8 CS1 CS2 CS3 Hard process Soft process quality quality Output quality Buyer supplier relationship quality Overall customer satisfaction 0.723 0.905 0.890 0.701 0.610 0.731 0.696 0.706 0.849 0.798 0.683 0.405 0.798 0.848 0.841 0.769 0.795 0.698 0.500 0.655 0.561 0.535 0.521 0.879 0.869 0.847 0.653 0.882 0.461 0.736 0.790 0.430 0.456 82 0.532 0.585 0.591 Appendix F EFA analysis results after restructuring measurement scales Factor Potential quality PQ1 PQ2 PQ3 PQ4 PQ5 PQ6 PQ7 (BSRQ1) PQ8 (BSRQ2) HPQ1 HPQ2 HPQ3 HPQ4 HPQ5 SPQ1 SPQ2 SPQ3 SPQ4 SPQ5 SPQ6 SPQ7 (BSRQ4) OQ1 OQ2 OQ3 OQ4 OQ5 BSRQ3 BSRQ5 BSRQ7 BSRQ8 CS1 CS2 CS3 Hard process Soft process quality quality Output quality Buyer supplier relationship quality Overall customer satisfaction 0.720 0.901 0.890 0.705 0.614 0.736 0.882 0.867 0.701 0.706 0.854 0.795 0.679 0.409 0.796 0.849 0.842 0.768 0.798 0.702 0.646 0.495 0.650 0.559 0.531 0.524 0.850 0.883 0.734 0.792 0.459 0.450 0.427 83 0.539 0.598 0.593 84 Appendix G Cronbach’s Alpha coefficients for each measurement scale after restructuring Scales Mean if Item Deleted Items Scales Variance if Item Deleted Potential quality 55.414 55.686 55.700 55.686 55.929 55.514 55.743 55.729 PQ1 PQ2 PQ3 PQ4 PQ5 PQ6 PQ7 (BSRQ1) PQ8 (BSRQ2) 16.594 16.132 16.677 16.335 17.980 16.080 16.513 16.838 Hard process quality 17.230 16.658 15.457 12.513 16.716 Soft process quality SPQ1 SPQ2 SPQ3 SPQ4 SPQ5 SPQ6 SPQ7 (BSRQ4) BSRQ3 BSRQ5 BSRQ7 BSRQ8 39.315 39.728 39.446 38.652 38.891 38.685 38.674 14.020 14.398 13.283 14.449 12.669 15.647 16.024 0.711 0.671 0.896 0.785 0.710 0.874 0.880 0.834 0.871 0.872 0.769 0.718 0.781 0.736 0.750 0.641 0.588 0.876 0.882 0.874 0.880 0.882 0.892 0.897 Cronbach's Alpha = 835 27.000 27.246 27.197 27.262 27.230 9.421 8.848 8.953 8.939 8.773 Buyer-supplier relationship quality 21.674 21.587 21.272 21.489 6.640 7.168 7.695 7.352 Overall customer satisfaction CS1 CS2 CS3 0.890 0.874 0.878 0.898 0.899 0.887 0.872 0.879 Cronbach's Alpha = 899 Output quality OQ1 OQ2 OQ3 OQ4 OQ5 0.628 0.799 0.761 0.575 0.509 0.667 0.851 0.763 Cronbach's Alpha = 890 26.609 27.815 27.337 28.054 28.359 HPQ1 HPQ2 HPQ3 HPQ4 HPQ5 Corrected Item- Cronbach's Total Alpha if Item Correlations Deleted Cronbach's Alpha = 898 0.599 0.651 0.651 0.636 0.645 0.813 0.798 0.798 0.802 0.800 Cronbach's Alpha = 894 0.882 0.882 0.923 0.898 0.797 0.899 0.840 0.887 Cronbach's Alpha = 846 11.238 12.500 11.852 4.761 3.508 3.598 85 0.685 0.725 0.764 0.827 0.781 0.734 Appendix H: Frequency distribution for all variables 86 Appendix I: Independent Samples Test Levene's Test for Equality of Variances F Equal Overall variances Customer Satisfaction assumed Equal variances not assumed Sig t-test for Equality of Means t df 605 438 6.100 95% Confidence Sig Std Error Interval of the Difference (2Mean Differenc tailed) Difference e Lower Upper 120 000 93295 15294 63013 1.23577 6.022 108.918 000 93295 15492 62590 1.24001 87 ... dimensions of B2B service quality in affecting customer satisfaction in the context of Ready- Mix Concrete industry in Vietnam with the different type of ReadyMix Concrete companies: local and foreign The. .. to obtain following objectives: (1) To investigate the different impacts of B2B service quality? ??s determinants on customer satisfaction in Vietnam Ready- Mix Concrete industry (2) To examine the. .. most of Ready- Mix Concrete companies are trying to observe customers satisfaction level and then improve their service quality 1.2 Service Quality and Customer Satisfaction in B2B context In recent