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 1.4 Scope of the research 1.5 Expected contributions of research 1.6 Organization of thesis Chapter LITERATURE REVIEW AND HYPOTHESES 2.1 Literature review 2.1.1 Service experience 2.1.2 Service Quality 2.1.3 Customer Satisfaction 2.2 Research Model and Hypotheses Chapter RESEARCH METHOD 3.1 Quantitative research: Pre-test 3.2 Quantitative research: Main survey 3.2.1 Measurement scales 3.2.2 Sampling 3.2.3 Data analysis Chapter DATA ANALYSIS AND RESULTS 4.1 Data statistical analysis 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 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 LEVEL OF AGREEMENT Part 1: Potential quality of the Ready-Mix Concrete company The company has capability to offer full service The company has required personnel The company has required facilities 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 (keep time schedules) The service is delivered according the agreed budget The service delivered meets deadlines 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 Part 5: Buyer – Supplier Relationship Quality (Buyer: industrial customer; Supplier: Ready-Mix Concrete company) The Ready-Mix Concrete company delivers initiatives for 78 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 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 scale: = very dissatisfied; 10 = very satisfied company? 01 10 scale: = much worse; 10 = much 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 better 10 79 Appendix C The boxplot for indentifying and addressing outliers 80 Appendix D Cronbach’s Alpha coefficients for each measurement scale Items PQ1 PQ2 PQ3 PQ4 PQ5 PQ6 HPQ1 HPQ2 HPQ3 HPQ4 HPQ5 SPQ1 SPQ2 SPQ3 SPQ4 SPQ5 SPQ6 OQ1 OQ2 OQ3 OQ4 OQ5 Buyer-supplier relationship quality (BSRQ1 > BSRQ8) BSRQ1 BSRQ2 BSRQ3 BSRQ4 BSRQ5 BSRQ6 BSRQ7 BSRQ8 Overall customer satisfaction (CS1 > CS3) CS1 CS2 CS3 81 Appendix E Exploratory factor analysis (EFA) result 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 82 Appendix F EFA analysis results after restructuring measurement scales 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 83 84 Appendix G Cronbach’s Alpha coefficients for each measurement scale after restructuring Items 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 Buyer-supplier relationship quality BSRQ3 BSRQ5 BSRQ7 BSRQ8 Overall customer satisfaction CS1 CS2 CS3 85 Appendix H: Frequency distribution for all variables 86 Appendix I: Independent Samples Test Overall Customer Satisfaction Equal variances assumed Equal variances assumed 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. .. particularly the international customers These customers follow the high quality of service and require the best comprehensive solution In the South of Vietnam, the market demand of Ready- Mix Concrete