RVICE: Q E ADVANTAG

INANCIAL INSTITU A STUDY ON LOCAL C

A Research Paper Submitted in Partial Fulfillment of the Requirement For the Degree of Corporate Master in Business

Administration (CMBA) Faculty of Economic and Business (FEB) University Malaysia Sarawak (UNIMAS)

2002

Supervisor UNIMAS

my and

This research paper was submitted to the of Economic and Business (FEB), University Malaysia (UNIMAS) and

DECLARATION

SIM:ON HON LIT MIN

00 - 02 - 0509

my own investigations, except

Date

© Copyright and Malaysia Sarawak (UNIMAS)

2002

is to

This study was accomplished the help and assistance of many people. Sincerely, I my gratitude and appreciation to :

guidance this I wish to express deepest appreciation his patience and guidance, I definitely could not have completed this dissertation his

would assistance in one

to other ... "rnA"

or another. Thank you,

IV

customers of data

who extended their

ABSTRACT

Managing Service

current consolidate financial institutions anchor banks

to towards 10

commercial

through a on customer's perceptions together with the management's perceptions services being provided commercial Kuching, Sarawak Consequently, a set of regarding quality of commercial bank

the adoption insight as to the local

v

customer-oriented a better understanding

banks in

ABSTRAK

Pengurusan Kualiti Perkhidmatan Sebagai Keutamaan Persaingan Dalam Pasaran Bagi Institusi Kewangan Tempatan : Kajian Bank

Perdagangan Tempatan di Kuching, Sarawak.

Krisis Kewangan yang melanda negara kita diikuti oleh usaha kerajaan Malaysia untuk memperkukuhkan kedudukan entiti dan institusi kewangan atau bank perdagangan tempatan ke arah 10 buah bank utama (anchor bank) di negara ini memaksa bank perdagangan tempatan berusaha meningkatkan kualiti perkhidmatan sebagai sumber utama ke arah kelebihan atau keutamaan persaingan dalam pasaran kewangan. Untuk bersaing dengan jayanya dalam pasaran yang semakin sengit, bank perdagangan tempatan perlu mengenal pasti kualiti perkhidmatan yang ditawarkan dan bagaimana pelanggan mempersepsikan kualiti perkhidmatan tersebut. Pelanggan­pelanggan bank pada hari ini adalah lebih berpengetahuan dan mempunyai pelbagai permintaan terhadap perkhidmatan dan produk bank berbanding zaman dahulu. Dalam kajian ini, alat penyelidikan pemasaran SERVQUAL telah digunakan untuk mengumpul data mengenai jangkaan dan persepsi pelanggan terhadap kualiti perkhidmatan untuk bank perdagangan tempatan di Kuching, Sarawak. Satu set soal selidik tentang kualiti perkhidmatan bank perdagangan tempatan diedarkan kepada pengurus bank, staf bank dan pelanggan-pelanggan bank. Alat soal selidik SERVQUAL digunakan untuk menganalisis punca kelemahan atau kekurangan kualiti perkhidmatan. Lima konstruk tentang dimensi kualiti perkhidmatan dilaksanakan melalui analisis jurang (Gaps Analysis) . Seterusnya, dengan mengukur dan menafsirkan saiz jurang antara jangkaan dan persepsi pelanggan terhadap kualiti perkhidmatan, maka kelemahan atau kekurangan bahagian tertentu dalam kualiti perkhidmatan dapat dikenal pasti dan diatasi untuk bank perdagangan tempatan. Pemyataan masalah dalam jurang untuk kualiti perkhidmatan merupakan titik permulaan bagi bank perdagangan tempatan untuk menilai dan menentukan punca kelemahan dalam menawarkan perkhidmatannya. Fleksibiliti ini adalah perlu memandangkan bank perdagangan tempatan menghadapi banyak halangan dan cabaran. Kombinasi kedua-dua kaedah penyelidikan kuantitatif dan kualitatif ditafsirkan melalui penggunaan Software SPSS (Statistical Package for Social Science), dengan mana ia menyediakan satu gambaran yang lebih mendalam dan terperinci tentang kualiti perkhidmatan dalam industri kewangan di negara kita. Akan tetapi, strategi kejayaan kritikal ke arah peningkatan daya saingan ialah melalui komitmen keseluruhan daripada pihak pengurusan serta keupayaan pihak pengurusan dalam mengadaptasikan budaya berorientasikan pelanggan.

VI

Approval

Declarati on Copyright Page

Dedication

Abstrak

Table

1.0: INTRODUCTION

I

II

III

VI-VII

VIII - X

I 2 3 3

4

THE LOCAL FINANCIAL INSTITUTIONS OR LOCAL COMMERCIAL BANKS

LITERATURE REVIEW ON QUALITY 3. Defining Quality 8

3.4 ",""'-HH'P' Quality .l.Vnj'u",

3.6 Search of Competitive Advantage 3.7 Relationship Between Service Quality and

Advantage 3.8 of Service

4.1 Introduction 4.2 Research Objectives 4.3 Instrument Measurement 4.4 Design and

5.1 5.2

RELATIONSHIP BETWEEN BANK CUSTOMER, MANAGER BANK STAFF

Introduction Relationship Between

BANK AND BANK MANAGEMENT: EXPECTATION AND PERCEPTION GAP ANALYSIS

Introduction

The Perception Importance by of the Local Commercial Bank The Opportunity Bridge Gap 1

.... ',.'UAU''"' ... and Management

9 11 13

17

19 20

23 23 24 24

27

7.0 MANAGEMENT IMPLICATION AND RECOMMENDATIONS

7.1 7.2 7.3 7.3.1 7.3.2 7.3.3 7.3.4 7.3.5 7.3.6 7.4

7.4.1 7.4.2 7.4.3 7.4.4 7.5 7.5.1. 7.5.1 7.5.2 7.5.3 7.5.4 7.5.5 7.5.6 7.6 7.6.1 7.6.2 7.7

Introduction Service Quality Management Gap 1 Suggestions on Ways to Bridge Gap 1 Customer-Oriented Marketing Research To Use Suggestion Box Effectively To Improve Upward Communication To Reduce the Level of Management To Establish Marketing Information System (MIS) To Respond Positively to the Customer Complaints The Management Perception - Service Quality Specification Gap-Gap 2 Management Commitment to Service Quality Goal Setting Task Standardization Perception of Feasibility Service Quality Specification-Service Delivery Gap- Gap 3 Teamwork Employee-Job Fit Technology-Job Fit or On-Job Fit Perceived Control Supervisory Control System The Role Conflict The Role Ambiguity Service Delivery-External Communication Gap-Gap 4 The Horizontal Communication Propensity to Over-Promise Conclusion

8.0 : FUTURE RESEARCH SUGGESTIONS ON SERVICE QUALITY AND CONCLUSION

8.1 Future Research 8.2 Conclusion

Bill LOGRAPHY

APPENDICES

x

39 39 39 40 40 40 41 41 42

42 42 42 43 43 43 43 44 44 44 45 45 45 46 46 47 47

49 51

Table No.

2.1 a

2.1 b

2.1 c

4.1

4.2

4.3

4.4

6.1

6.2

6.3

6.4

6.5

LIST OF TABLES

List of Commercial Banks in Kuching, Sarawak

List of Financial Companies in Kuching, Sarawak

List of Other Financial Institutions in Kuching, Sarawak

The Allocation of the Questionnaires

Target Respondents and Its Survey Questions

The Five Service Quality Dimensions, Items and Questionnaires

The Sample Profile for Carrying The Survey

Gap 5 : Commercial Bank Customer Service Shortfall By Service Dimensions

Chart : Comparison on the Customer Expectation and Customer Perception

The Opportunity to Bridge the Gap 5

The Top Ten Smallest Gaps Between the Customers' Expectation and Customers' Perception of Local Commercial Banks

The Top Ten Largest Gaps Between the Customers' Expectation and Customers' Perception of the Performance of the Local Commercial Banks

XI

Page

6

6

7

24

24

25

26

31

31

31

32

33

6.7 : Comparison on Expectation Management Perception on Customer Expectation 37

to 1

XII

3.

3

15

8.

1.1 Background

The modem industrial economies are denominated by employment in the service sector. Manufacturing sector has been displaced the by service industry as forms of activity in the fmal decade of the twentieth century.

Service industries are playing an increasingly important role in the Malaysian economy. Various incentives and policies were formulated by the government to promote the growth of the financial sector with the hope that Malaysia will become the centre of financial products and services in this region. However, the current financial crisis has hightighted the vulnerability of the smaller banks. The local financial institutions or local commercial banks now understand the rationale of the Government push to consolidate as to become big and strong business entity towards 10 anchor banks under revised merger programme. In order to survive, all financial institutions or local commercial banks must increasingly deal with new and complex technologies such as home delivery system, network, telecommunications, multimedia, security, client/server computer, customer service and a host of other new area in dealing their (fmancial institutions) daily business with customers. Each financial institutions or local commercial bank is forced to look at ways to achieve efficiency and competitiveness in the marketplace. Each of the financial institutions or banks tries to convince the potential customers through providing better or rather excellent service than its competitors. Therefore, interest in the measurement of customer's service quality is understandably high. The effort of local financial institutions or banks to delivery higher level of service quality is the strategy to reposition themselves to more efficient, effective and gain more market shares in the marketplaces. However, service quality is an abstract construct and elusive because it is difficult to defme and measure. Until today, the importance of relationship between service quality, customer expectation, customer satisfaction and management perception are largely unexplored. Management of the service providers in the local financial institutions or local commercial banks who wish to attract more customers need to know how to define and measure the service quality as perceived by customers. Hence, any difference in the service quality perceived between services providers (local financial institutions) and customers need to be identified and addressed.

The study is carried out for local financial institutions or banks in Sarawak. Parts of it success has been due to a scrupulous concern of its products and services. Then, it hope that the study described would assist

1

quality

dramatic change service economy coupled with Asian financial crisis and current economy downturn in the is affecting the

institutions or only main fundamental factors to create the competitive advantages in an ever demanding and competitive marketplace, The

banks of

It is because services are overall performances an object where is difficult for any servIce

the to

delivered to customers. Furthermore, the performance of often differs among the employees and the customer

Traditionally, the marketing approach local commercial is tactical in nature

customers

UU'CU .... 'HU institutions or has been weak in devising a

not

greatest challenge customers

is called expectations understanding customers' expectation

local financial institutions or customer is always and right

train their employees

2

as

3

banks

most to evaluate its quality, Thus, this study is to identify the of quality model and relevance local financial or

1.5 Limitation

may banking

be or

to

Study

be

servIce industry as well.

customers only. Permission to conduct management and local

a

out, the

can

a possibility of

1

Local financial institutions or Banks in these research are referred to

4

OR

(

""",UH.'" as business mean 'the business money on current accounts, and collecting making Central

drawn or paid AU",'AU",,, other banking Finance Minister.

customers, uu.uu'w"'., as the

(a)

(b) money.

of savmgs other financial

facilities for

of various banking

expansion of the ClO1ne!mC competition although banking policy; commercial bank is

current, savmg

and services.

Banking and Institutions Act, comprehensive, giving wide the Central Malaysia) ensure the orderly of the banking, UHOkU,,,,,,

merchant discount house money-broking UU.,HU,_O.".

divided Sixteen parts, touching comprehensively

progressed. Domestic banks commercial incorporated banks) not only the banking contribute significantly towards eC()ll()mJlC development regulated expansion of branch domestic vV""-''''V',"'UH

contributed towards a wider and spread banking .I.< ...... 'UA •• ;."'''

5

deposit

receIve

2.2 Institutions or Banks Distribution in Sarawak.

No Branch Total office ... _--"_._-

1 1 0 1 2 2 0 2 3 1 0 1 4 1 0 1 5 1 0 0 1 6 5 1 6

6 0 6 3 0 4 6 0 6 1 0 1 6 0 7 2 0 2 1 0 1 1 0 1 6 0 0 6 2 0 2 1 0 1 1 0 1 1 0 1

48 51

Table of Finance

No Total

1 2 2

2 4 2 5 2

0 Mayban Finance 2 0 2 MBF Finance 0 Public Finance 0 RHB Delta Finance 2 0 2 Southern Finance 1 0 Total 8

6

Table 2.3 List 0 0 erFmancla f th . I InstItutIons m uc 19, . K hin S araw ak Number of

No Name Branch Regional Total

Office 1 Central Bank (Bank Negara Malaysia) 1 0 1

Merchant Bank 2 Arab-Malaysia Merchant Bank Berhad 1 0 1 3 MIMB 1 0 1 4 Utama Merchant Bank Berhad 1 0 1

Other Financial Institutions 1 0 1 1 Bank Industri & Teknologi Malaysia Bhd 2 0 2 2 Bank Kerjasama Rakyat Malaysia Bhd 1 0 1 3 Bank Pembangunan dan Infrastruktur

Malaysia Bhd 1 0 1 4 Bank Pertanian Malaysia 9 1 10 5 Bank Simpanan Nasional 1 0 1 6 Malaysia Industry Development Finance

Total 19 1 20

Source: Institute ~fBank-Bank Malaysia, IBBM, Sarawak.

2.3 The Service Supply by Local Financial Institutions or Banks

In banking industry, the service can be tangible and intangible. The tangible aspect would be that which is associated directly with the product and service, whereas the intangible elements of service and quality service would be those associated with the provision of the banking services related to bank staff-customer interactions.

The local financial institutions or banks are offering the following banking services; (a) the acceptance of deposits, (b) the making ofloans, (c) foreign currency exchange, (d) the provision of bill fmance and handling of documentation of foreign trade, ( e) investment management and corporate finance, (f) collecting and pay cheque drawn by customers, (g) give advances to customers and (h) other banking services.

The types of banking services and products such as current account, saving account, Automated Teller Machines (ATM) services, debit and credit cards, telephone banking, budget account, revolving credit or cash flow account, personal loans, mortgage loans, tenn loans, home improvement loan, interest bearing products, unit trust, stock broking service, investment management and investment advice, leasing, factoring, insurance broking, electronic banking, travellers cheque and many other banking services.

7