Total quality management in the banking industry a case study of joint stock commercial bank of viet nam

MEIHO UNIVERSITY Graduate Institute of Business and Management MASTERS THESIS Total Quality Management in the Banking Industry - A Case Study of Joint Stock Commercial Military Bank of Viet Nam In partial fulfillment of the requirements for the degree of Masters of Business Administration Advisor: Dr Shao-Hsi Chung Co-advisor: Dr Vo Phuoc Tan Graduate Student: Tong Quoc Thinh December, 2010 AKNOWLEDGEMENTS First of all, I would like to express my greatest appreciation to the Principal Office of The HCMC Industrial University and MEIHO University The cooperation between the two universities has provided us an EMBA program that is very practical, effective and very useful not only for myself but also for Vietnamese Business community The program gives us opportunity to approach modern management technology and skills which are very useful for our contribution to our country development Furthermore, I would like to thank all professors and classmates who not only extends their best sharing of knowledge and experience but also provides greatest help and encouragement during the program Specially, I am truly appreciated the help from the following people who have helped me to complete my graduation thesis: - Professor/ Doctor: SHAO - HSI CHUNG - MEIHO Institute of Technology He is the advisor and the mentor for me during the internship, writing and completion of my thesis in Vietnam and Taiwan - Professor/ Doctor: VO PHUOC TAN - The HCMC Industrial University He has provided greatest help during this EMBA With limited time and knowledge, I am sure that there will be many areas for improvement in the thesis itself Therefore, I am very appreciated and opened for all comments from all professors and classmates Your inputs are very valuable to make my thesis practical and help my career development in the future Once again, best wishes to all I Total Quality Management in the Banking Industry - A Case Study of Joint Stock Commercial Bank of Viet Nam ABSTRACT Vietnam has recently become the 150th member of the World Trade Organization (WTO), hence goods made in Vietnam have a greater chance to go to every country on the world However, the penetration into the marketplace, from the negotiations to the visits for placing an order, the Western and American customers often have some requirements for the companies, factories and banks for their services With over hundreds banks in Viet Nam economy, and several awaiting issuance of commercial banking licence, the market is tough A bank can only have an edge over the other in the deliverance of better service since all banks are selling the same products practically In recent years past, it is obvious that good, effective service delivery has been key issue in most banks The major objectives of the study is to enquire into problems encounterd in the provision of good quality services to customers in commercial banks with focus on Joint-stock Commercila Military Bank and to determine specfically the impact of the introduction of Total Quality Mnagement (TQM) on the services of Military Bank to the banking public Instument of data collection is questionnnaire and research questions The method of analysis is the tables, percentage and chi-quare The major finding of the resaerch is that problems encountered in the provision of services in Military Bank include finanace, manpower among others Keywords: Total Quality Mnagement (TQM), World Trade Organization (WTO) II Total Quality Management in the Banking Industry - A Case Study of Joint Stock Commercial Bank of Viet Nam Contents AKNOWLEDGEMENTS I ABSTRACT II Contents III Tables V Chapter Introduction 1.1 The Background of the Study 1.1.1 The background theories 1.1.2 The process of establishment of commercial joint stock military bank 1.1.3 Targets of commercial joint stock military bank 1.2 Statement of the Problem 1.3 Objectives of the Study .5 1.4 Research Questions 1.5 Scope and Limitation of Study 1.6 Significance of the Study 1.7 Definition of Terms Chapter Literature Review .8 2.1 Commercial Banking in Viet Nam: 2.2 Introduction to the Concept of Tqm (Total Quality Management) 2.3 Definition of Total Quality Management 11 2.4 Basic Concepts of Total Quality Management .13 2.5 Roles of Services in Banks .14 2.6 Summary of Chapter 15 Chapter Research Methodology 16 3.1 Research Design 16 3.2 Data Sources 18 3.3 Data Collection .18 3.4 Research Objects 18 3.5 Research Scope .18 III 3.6 Sample and Sampling Procedure/Techniques 18 3.7 Validation of the Instrument 19 3.8 Reliability of the Instrument 19 Chapter Presentation and Data Analysis 20 4.1 Data Analysis 20 4.2 Hypothesis Review 26 Chapter Summary, Proposal and Conclusion .29 5.1 Summary of Results 29 5.2 Proposal 29 5.3 Conclusion 30 5.4 Further Research Fields 30 References .32 APPENDIX - English Questionnaire 34 IV Tables Table 4-1 The Age of the Participants Answering Questions 20 Table 4-2 The Gender of the Participants Answering Questions 21 Table 4-3 Marital Status of the Participants Answering Questions 21 Table 4-4 Educational Background Of The Participants Answering Questions .22 Table 4-5 Position of the Participants Answering Questions in the Office, Organisation 22 Table 4-6 The Level of Service Quality 23 Table 4-7 The Factors Affecting Service Quality .23 Table 4-8 The Issues in Providing Customers with Service Quality at Commercial Banks, Especially Military Bank 24 Table 4-9 The Effects Of Total Quality Management’s Introduction Of Military Bank .25 Table 4-10 The Evaluation of Bank’s Response Capacity to the Market’s Changes 25 Table 4-11 The Relationship between Total Quality Management’s Introduction and the Improvement of Service Provision of Military and Bidv Bank .26 V Figures Figure 3-1 The Research Process 17 I Total Quality Management in the Banking Industry - A Case Study of Joint Stock Commercial Bank of Viet Nam Chapter Introduction This chapter includes: the background of the study, statement of the problem, objectives of the study, research questions, scope and limitation, significance of the study, definition of terms 1.1 The Background of the Study 1.1.1 The background theories According to Udeagha (1999), banks are considered as trusty keepers of belongings for most citizens, foreigners, groups, organizations and government Banks receive money in the form of deposits, transfers or payment from individuals, organizations and government for safe-keeping or transferring, ensuring that money is always available to their clients Various organizations, groups and government also get loans from the banks According to Shorage (1990), banks mobilize the funds that are not used yet for manufacturing, and therefore the banks have to make people feel safe when they entrust money to them Udeagha (1992) observed that banks hardly ever had faced challenges before 1986 At that time they didn’t put more attention to their management, so people didn’t put repose trust in them But nowadays, there is more competition in the market because of changes of policies facilitating to open more banks Banking in Nigeria is now towards a buyers market However, because of extreme competition in the market, the banks’ customers no longer optimistically hold the trust in them In the early 1990’s there were more changes in the financial and banking market, resulting in demands of new ways for banks to compete At that time, the top management of banks found out that customers were willing to pay for high-standard products and services The successful people were the ones that changed their processes and permitted their staff to approach total quality management standards and techniques They also found out that high-standard services play an important role for their customers and that the successful business requires courteous, responsible, well-trained as Table 4-4 Educational Background of The Participants Answering Questions EDUCATIONAL BACKGROUND No OF PARTICIPANTS PERCENTAGE WASC/ GCE 5 OND 5 BA/ HND 50 50 ACA/ ACIB 30 30 Others (Master of Arts/ MBA) 10 10 TOTAL 100 100 Source: done by the researcher From the above table we can show that the participants answering questions have different educational background (e) Position of the Participants Answering Questions in the Office, Organisation The answer about position of the participants answering questions in the office, organization is shown in the table 4-5: Table 4-5 Position of the Participants Answering Questions in the Office, Organisation POSITION No OF PARTICIPANTS PERCENTAGE SECRETARY 5 SUPERVISOR 10 10 STAFF 70 70 MANAGER 15 15 TOTAL 100 100 Source: done by the researcher From the above table we can show that the participants answering questions hold different positions in the office, organization Staff occupies 70%, managers – 15%, supervisor – 10%, secretary – 5% 22 (f) The Level of Service Quality The answer about the level of service quality is shown in the table 4-6: Table 4-6 The Level of Service Quality POSITION No OF PARTICIPANTS PERCENTAGE POOR - - UNACCEPTABLE 10 10 GOOD 80 80 EXCELLENT 10 10 TOTAL 100 100 Source: done by the researcher From the above table we can show that the participants answering questions give different ideas about the level of service quality at Military Bank Vietnam, 80% of the participants think it is good, 10% regard it excellent and 10% consider it unacceptable, which is the same with VIDB Bank (g) The Factors Affecting Service Quality The answer about the factors affecting service quality of Military Bank and BIDV Bank is shown in the table 4-7: Table 4-7 The Factors Affecting Service Quality FACTORS No OF PARTICIPANTS PERCENTAGE BUREAUCRACY 40 40 TECHNIQUE 20 20 HUMAN RESOURCES 30 30 FINANCE 5 OTHERS 5 TOTAL 100 100 Source: done by the researcher From the above table we can show that the participants answering questions give different ideas about the factors affecting service quality, 40% of the participants think it is 23 bureaucracy, 20% think it is technical process, 30% think it is human resource, 5% think it is finance that affects best (h) The Issues in Providing Customers with Service Quality at Commercial Banks, Especially Military Bank The answer about the issues in providing customers with service quality at commercial banks, especially Military Bank is shown in the table 4-8: Table 4-8 The Issues in Providing Customers with Service Quality at Commercial Banks, Especially Military Bank FACTORS No OF PARTICIPANTS PERCENTAGE FINANCE - - HUMAN RESOURCES - - TECHNIQUE - - BUREAUCRACY - - STAFF’S LACK OF DEDICATION - - POOR COMMUNICATION - - STAFF’S LACK OF MORALE - - ALL THE ABOVES - - TOTAL 100 100 Source: done by the researcher From the above table we can see that 100% the participants answering the questions all agree with the idea, in which the issues in providing customers with service quality at commercial banks, especially Military bank include finance, human resources, technique, bureaucracy, staff’s lack of dedication (i) The Effects Of Total Quality Management’s Introduction Of Military Bank The answer about the effects of total quality management’s introduction of Military Bank is shown in the table 4-9: 24 Table 4-9 The Effects Of Total Quality Management’s Introduction Of Military Bank LEVEL PERCENTAGE No OF PARTICIPANTS MILITARY BANK BIDV BANK VERY LITTLE 1 LITTLE 2 NORMAL 29 29 58 MUCH 13 13 26 VERY MUCH 5 10 SUBTOTAL 50 50 100 TOTAL 100 100 Source: done by the researcher From the above table we can see that 56% the participants answering the questions think that the total quality management’s introduction of Military Bank and BIDV Bank affects National Bank normally while 26% ones think it affects much and 10% ones think it affects very much; 2% ones, however, think it affects very little (j) The Evaluation of Bank’s Response Capacity to the Market’s Changes The answer about the evaluation of bank’s response capacity to the market’s changes is shown in the table 4-10: Table 4-10 The Evaluation of Bank’s Response Capacity to the Market’s Changes LEVEL No OF PARTICIPANTS PERCENTAGE MILITARY BANK BIDV BANK YES 50 50 100 NO - - - TOTAL 100 100 Source: done by the researcher From the above table we can see that 100% the participants answering the questions think that the bank has capacity of responding to the changes of the market 25 (k) The Relationship between Total Quality Management’s Introduction and the Improvement of Service Provision of Military and Bidv Bank The answer about the relationship between total quality management’s introduction and the improvement of service provision of Military Bank and BIDV Bank is shown in the table 4-11: Table 4-11 The Relationship between Total Quality Management’s Introduction and the Improvement of Service Provision of Military and Bidv Bank LEVEL PERCENTAGE No OF PARTICIPANTS MILITARY BIDV BANK BANK YES 27 27 54 NO 23 23 46 SUBTOTAL 50 50 100 TOTAL 100 100 Source: done by the researcher From the above table we can see that the participants answering the questions have different ideas about the relationship between total quality management’s introduction and the improvement of service provision of Military and BIDV to National Bank Just 54% participants thinks there is, and the rest not think so 4.2 Hypothesis Review ALTERNATIVE HYPOTHESIS There is the relationship between the usage of total quality management and the improvement of service quality provided by Military Bank NULL HYPOTHESIS There is the relationship between the usage of total quality management and the improvement of service quality provided by Military Bank and BIDV Bank 26 No OF PARTICIPANTS PERCENTAGE MILITARY BIDV BANK MILITARY BANK BANK STAFF 26 (23) 24 (27) 54 MANAGER 20 (23) 30 (27) 46 TOTAL 46 54 100 Do not reject H1 (alternative hypothesis) and conclude that There is the relationship between the usage of total quality management and the improvement of service quality provided by Military Bank e: estimative frequency e = 46 × 50 = 23 100 e = 54 × 50 = 27 100 e = 46 × 50 = 23 100 e = 54 × 50 = 27 100 O E (O – E)2 O–E (O – E)2 E 26 23 0.3913 20 23 -3 0.3913 24 27 -3 0.3333 30 27 0.3333 X2 1.4492 X2(r – 1)(c – 1) r = 0.05 X (2 – 1)(2 – 1) r = 0.05 X2df = r = 0.05 X2df = = 3.84 27 DECISION RULE Reject H1 if X2 cal = X2 tab As X2 cal < X2 table 1.44a2 < 3.841 28 Chapter Summary, Proposal and Conclusion In previous chapters we have presented and analyzed data In this chapter, we will point out more clearly and focus on discussing key points of the subject results and make recommendations accordingly 5.1 Summary of Results From the results of comparative analysis we can see the issues in providing good quality services to customers in the commercial banks, mainly the Military Bank, including financial matters, human resources, technology, bureaucracy, lack of dedicated staff, poor communication and no morale The research also indicates that the impact of total quality management’s introduction of Military Bank services to state banks is only in moderation Apart from this theme, we see that clearly can Military Bank meet the market’s changes Additionally, the study also showed that the service at Military Bank is very good 5.2 Proposal In the opinion of the above mentions we would like to offer a few suggestions for improving the total quality management in the banking sector (according to the study of Military Bank) a It is necessary to limit the levels for updating new ideas quickly and frequently while restraining habits, old rules b Try to establish teams and build relationships Employees have the right to be provided with tools and equipment for their jobs Also, there are compensation and bonuses to motivate and encourage staff c There is convenient environment to improve their skills In addition, staffs are also trained to work and have suitable and full authorization d Management style is to let all lower-level employees have the opportunity to participate in their work In other words, employees also participate in management e Material and modern equipment should be supplied, which will help to optimize the time, working processes and integration on system of all the departments f Information, especially its purpose and goals of the agency and the tasks to be achieved, 29 needs to be conveyed quickly and effectively to all employees g There is a fair system for evaluating and assessing the work of staff h Managers should encourage the professionalism of staff and point out the best way of career development for employees, which will help employees have a commitment of long-termed job 5.3 Conclusion Service quality is increasingly a competitive matter of this decade There is much pressure for enterprises The small or large financial services industries are equally affected as well In most financial institutions, especially the banking sector, there is a tendency to manage quality and implement total quality management rules better, which is now accepted as a way of keeping a competitive edge or simply surviving on a fiercely competitive market The implementation of quality management rules must be received full supports and commitment from the management In the implementation of total quality, there are maybe resistances from employees It is difficult to remove the old way, especially in Military Bank, the nature of the quality management principles is to demand long-term management activities and it shows that not all the staff will easily update this cultural change However, employees’ resistance is not a long-term obstacle for the total quality management, and it is the total quality management that is a modern tool to achieve competitive advantage There have been many benefits from applying concepts of total quality management Therefore, it is very important for the banking industry to reconstruct their company by using total quality management tools and they will get benefits such as: - Improving product or service - Increasing customer loyalty - Better customer service - A long-time market share - More effective - Communication - Group work - Above all, satisfying customers and others concerned 5.4 Further Research Fields Fields which other researchers can deeply study include an analysis for implementing researches on total quality management programs in Vietnam A large-scale study is also 30 guaranteed and there is the impact of the surrounding circumstances for the introduction of total quality management in Vietnam The productivity interrelation between banks with implementation of total quality management and banks without implementation of total quality management is also guaranteed 31 References Adekanye, F (1986), Element of Banking in Stock commercial bank, Lagos: F & F Pub Page Alile, H.I and Anaw, A.R (1992), The Stock commercial bank, Lagos; Jeromeh Inc and Asso page 16 Omulums, L.A (1993), Elements of Banking a Professional Approach, Lagos: Chapter ten pub Page 14 Crosse, H.D and Harnpel, C.H (1980), Management Policies for Commercial Banks, New Jersey: Prentice Hall Inc Roussathis, E N (1987), Management Commercial Banks Funds, New York: Prague Pub., page Hampton, J J (1989), Financial Decision Making, Concepts, Poblems and Cases, New Delhi: Pretice Hall Inc page 16 Lawer, P et al (1992), Employee Involvement and Total Quality Management Pratices and Results, San Francisco: Jossey Pub Sashkin, M Kiser, K (1993), Putting Total Quality Management to Work, San Francisco: Jossey Pub Onanusi, S.M (1997), Approaches to TQM Implementation, Lagos: The Swardian, May Harari, O (1993), Three very difficult Steps to Total Quality Management Review, tome 82/ № Webb J (1992), The Mismanagement of Innovation, Sociology, New York: McGraw Hill Dawson, P (1994), Business Process Reengineering, London: John Wiley Macdonald J (1992), Understanding Total Quality Management, New York: Mcgrani Hill Okolie, E E (1992), Total Quality Management: An Introduction, Lagos: Macmilan Pub 32 Crosby, P.B (I 980), Let's Talk Quality, New York: Mcgrani Hill Levine, P and Helper C (1993), A Quality Police for American Organization, New York: Mcgrani Hill Wsuch, P and Jensen, D (1994), Knowledge and Total Quality Management, Journal of Accounting and Economics Tull, D and Hawking (1983) Introduction to research methodology, London: Dryden press Osuala, E, C (1982) Introduction to Research methodology, Onitsha, African Rep pub 33 APPENDIX - English Questionnaire MEIHO UNIVERSITY GRADUATE INSTITUTE OF BUSINESS AND MANAGEMENT 23, Pingkuang Road, Neipu, Pingtung 912, Taiwan R.O.C Total Quality Management in the Banking Industry - A Case Study of Joint Stock Commercial Bank of Viet Nam QUESTIONNAIRES PART I : GENERAL INFORMATION What is your age? † 28-37 † 38-47 † 48-57 What is your gender? † Male † Female What is your marital status? † Married † Single What is your educational qualification? † College † Bachelor † Master † Doctor † Others PART II : OTHER DATA From your experince how would you assess the existing servises rendered by your organization? † Very good † Good † Near unaccaptable † Poor 34 What in your opinion is the overriding factor responsile for the existing level and quality of services? † Bureaucratic factor † Technology † Manpower † Finance What are the problems encountered in the provision of good quality services to customers in commercial bank of Viet Nam? † Finance † Manpower † Technology † Bureaucracy † Lack of commiment by staff † Poor communication flow † Low morale of staff †All of the above How would you rate the impact of the introduction of TQM on the services of Military Bank to the banking public? † Very low † Low † Moderate † High† Very high Do you think that Military Bank of Viet Nam respond to the dynamics of the market place? † Yes † No Do you think there is a relationship existing between the introduction of TQM and improved service delivery of Military Bank to the banking public † Yes † No 35 PART III: YOUR OPINION Please tell your opinion about what the Military Bank should to enhance its srevices for the customers ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… Thank you very much for your participation 36 ... practical and help my career development in the future Once again, best wishes to all I Total Quality Management in the Banking Industry - A Case Study of Joint Stock Commercial Bank of Viet Nam. .. Pingkuang Road, Neipu, Pingtung 912, Taiwan R.O.C Total Quality Management in the Banking Industry - A Case Study of Joint Stock Commercial Bank of Viet Nam QUESTIONNAIRES PART I : GENERAL INFORMATION... Bank include finanace, manpower among others Keywords: Total Quality Mnagement (TQM), World Trade Organization (WTO) II Total Quality Management in the Banking Industry - A Case Study of Joint