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I am most grateful to Dr. Do Ba Khang, my Research Advisor and Chairman of Research Committee, for his invaluable guidance, constructive suggestions, and constant encouragement throughout the course of my research study.
A TWO-FACTOR MODEL FOR SERVICE QUALITY MANAGEMENT: THE CONCEPTUAL DEVELOPMENT AND AN APPLICATION TO CO-OP MART NGUYEN DINH CHIEU, VIET NAM by Ho Dac Nguyen Nga A research study submitted in partial fulfillment of the requirements for the degree of Master of Business Administration Examination Committee Dr Do Ba Khang (Chairman) Dr Fredric W Swierczek Dr Clemens Bechter Nationality Previous degree Vietnamese Bachelor of Civil Engineering HCMC University of Technology Ho Chi Minh City, Vietnam Scholarship donor Government of Switzerland /SDC (SAV) Asian Institute of Technology School of Management Bangkok, Thailand April 2001 ACKNOWLEDGEMENT I am most grateful to Dr Do Ba Khang, my Research Advisor and Chairman of Research Committee, for his invaluable guidance, constructive suggestions, and constant encouragement throughout the course of my research study His profound knowledge and boundless enthusiasm are a great inspiration for me to conduct this research I would like to express sincere thanks to Dr Fredric W Swierczek and Dr Clemens Bechter for their valuable contribution in serving as Research Committee members, as well as for their constructive comments and critical suggestions on the research study The sincerest thanks come to the Swiss-AIT-Vietnam Management Development Programme (SAV) and Asian Institute of Technology (AIT), all the faculty members, staffs, and friends who contribute greatly to my learning progress Thanks are also extended to Vietnam Asia Pacific Economic Center (VAPEC), managers and staffs of many supermarkets in Ho Chi Minh City, especially managers and staffs of Saigon Co-op, for helping me in data collection Last but not least, I would like to express my deep gratitude to my family and my girlfriend, who provide continuous supports to me during my learning process and the course of this research study i ABSTRACT The goal of this research is to investigate the quality level of Co-op Mart Nguyen Dinh Chieu in the perception of customers in order to help management improve the store’s quality properly For the purpose above, a new quality model, called “Two-factor model”, is developed This model measures customer perception towards two factors -attributes performance and shopping preference of customers- and identifies the relationship of these two factors to construct the quality perception of customers The results of this research reveal that Twofactor model is more appropriate than Servqual in recommending the attributes improvement priorities Primary data of the research is collected through two surveys, one is for supermarket customers in Ho Chi Minh City and one is for customers of Co-op Mart Nguyen Dinh Chieu The former is used to collect general perception about supermarket quality attributes and the latter is used to identify quality level of Co-op Mart Nguyen Dinh Chieu’s attributes Responses from these two surveys are analyzed by Two-factor model to derive characteristic curve of each attribute as well as current performance, contribution to current shopping preference of customers, preference gap, and improvement efficiency of each attribute of the store Based on the research findings, recommendations are made to improve the quality of the store Quality attributes are classified into main groups The first group includes attributes which should be improved The second group includes attributes which should be improved after all the attributes of the first group reach their potential The attributes of the third group are recommended to be unchanged Moreover, priorities for improvement of attributes in each group are also specified Among attributes which should be improved, quality of merchandise, agility of locker personnel, hospitality of personnel and variety of product lines are four attributes which have the highest priorities for improvement They are the keys to improve quality of Co-op Mart Nguyen Dinh Chieu ii TABLE OF CONTENTS Acknowledgement i Abstract ii Table of Contents .iii List of Figures v List of Tables vi Chapter 1: Introduction .1 1.1 Rationale of The Research 1.2 Problem Statement .1 1.3 Research Objectives 1.4 Research Framework 1.5 Scope of The Research .3 1.6 Organization of The Research Chapter 2: Co-op Mart Introduction 2.1 Background of Supermarket .4 2.2 Co-op Mart Introduction Chapter 3: Development of Two-factor Model 13 3.1 Review of Multi-attribute Concept 13 3.2 Review of Servqual Model .13 3.3 Review of Kano Model 15 3.4 Proposed Two-factor Model .19 Chapter 4: Research Methodology 25 4.1 Information Needed 25 4.2 Target Populations 25 4.3 Questionnaires Development 25 4.4 Sampling Procedure 27 4.5 Sample Characteristics .28 Chapter 5: Findings Analysis and Discussion 31 5.1 Facility Attributes Analysis 31 5.2 Goods Attributes Analysis .34 5.3 Personnel Attributes Analysis 39 5.4 Policy Attributes Analysis 42 5.5 Two-factor Model vs Servqual 46 iii Chapter 6: Conclusion 48 6.1 Present Customer Perception 48 6.2 Improvement Strategy 49 6.3 Two-factor Model 52 Appendix A: Questionnaire A 53 Appendix B: Questionnaire B 56 Appendix C: Interview Schedule .59 Appendix D: Data Analysis 60 Appendix E: Quality Attributes of a Supermarket 74 References 76 iv LIST OF FIGURES Figure 1.1: Research framework Figure 2.1: Proportion of merchandises sold through supermarket .5 Figure 2.2: Saigon Co-op organization chart .7 Figure 2.3: Old procurement procedure .9 Figure 2.4: New procurement procedure .9 Figure 2.5: Co-op Mart Nguyen Dinh Chieu Organization chart 10 Figure 2.6: Co-op Mart Nguyen Dinh Chieu sales volume (2000) 10 Figure 3.1: The Kano diagram 16 Figure 3.2: Three basic shapes of characteristic curve .20 Figure 3.3: Structure of characteristic curve 21 Figure 3.4: Two-factor model’s coefficients 23 Figure 4.1: Respondents’ age of sample A 28 Figure 4.2: Respondents’ frequency of shopping in supermarket of sample A 28 Figure 4.3: Respondents’ average spending for each shopping of sample A 28 Figure 4.4: Respondents’ age of sample B 29 Figure 4.5: Respondents’ frequency of shopping in supermarket of sample B 29 Figure 4.6: Respondents’ average spending for each shopping of sample B .29 Figure 5.1: Convenience of parking 32 Figure 5.2: Air condition 33 Figure 5.3: Store size 33 Figure 5.4: Quality of merchandise 35 Figure 5.5: Variety of product lines, variety of brand names and varieties for each product line 36 Figure 5.6: Convenience of products arrangement for finding and attractiveness of products display 37 Figure 5.7: Introduction of new products 38 Figure 5.8: Unique products which customers cannot find somewhere else .38 Figure 5.9: Agility and hospitality of locker personnel .40 Figure 5.10: Hospitality, expertise in product information, and helpfulness in finding of salesperson 41 Figure 5.11: Hospitality, accuracy, and agility of cashier 41 Figure 5.12: Price level compared with other supermarkets 43 Figure 5.13: Returning unqualified products policy 44 Figure 5.14: Attractiveness of promotion campaigns 44 Figure 5.15: Flexibility of paying method 45 Figure 5.16: Convenience of open hours 46 Figure 5.17: Convenience of open hours and quality of merchandise .47 v LIST OF TABLES Table 2.1: Co-op Mart stores .8 Table 2.2: List of Co-op Mart’s direct competitors 11 Table 3.1: Kano questionnaire combination table 17 Table 4.1: List of studied attributes 26 Table 4.2: Attributes classification 27 Table 5.1: Facility attributes 31 Table 5.2: Goods attributes 34 Table 5.3: Personnel attributes 39 Table 5.4: Policy attributes 42 Table 6.1: Present customer perception .48 Table 6.2: Improvement priorities of the first group 51 Table 6.3: Improvement priorities of the second group .51 Table C.1: Schedule of survey A .59 Table C.2: Schedule of survey B 59 Table D.1: Variables coding 60 Table D.2: Shopping preference contributed by very good performance 61 Table D.3: Shopping preference contributed by very bad performance 62 Table D.4: Current attributes' performance .63 Table D.5: Shopping preference contributed by current attributes' performance 64 Table D.6: Difference between current attributes' performance and very good performance 65 Table D.7: Difference between current attributes' performance and very bad performance 66 Table D.8: Difference between shopping preference contributed by very good performance and shopping preference contributed by current performance 67 Table D.9: Difference between shopping preference contributed by current performance and shopping preference contributed by very bad performance 68 Table D.10: Attributes' characteristics .69 Table D.11: List of attributes in the order of preference gap .71 Table D.12: List of attributes in the order of improvement efficiency 72 Table D.13: Pair test for difference in improvement efficiency 73 vi CHAPTER 1: INTRODUCTION RATIONALE OF THE RESEARCH After more than 20 years of planned economy, Vietnam entered to the market economy with a lot of new kinds of business imported to the country Among them, the concept of supermarket seems to be the one which has most impact on the lifestyle of Vietnamese While the knowledge of supermarket quality receives many attentions from researchers in other countries, the specific knowledge on Vietnam’s situation is scarce Saigon Co-op Mart is chosen for the research because it has the largest coverage in Ho Chi Minh City, the most dynamic city in Vietnam Saigon Co-op is a co-operative which used to operate in many businesses from manufacturing to trading, exporting and retailing In the recent years, it has a strategic move from a diversified portfolio investment to focusing on retailing especially the supermarket chain Many business units were divested for freeing resources to develop the supermarket chain From the beginning, Co-op Mart gains a significant market share thank to be one of the first movers However, it could not enjoy this advantage forever Recently, the competition on this kind of business increases rapidly in term of quantity as well as quality Many supermarkets have been opened with modern facilities and larger area in the last year In the near future, the competition will be more intensive as the result of the penetration of foreign supermarket chain and the co-operation of other chains For sustaining the market leader position, Saigon Co-op must improve its competitiveness and the basic for this competitiveness is quality Quality leads to customer satisfaction and loyalty; satisfied and loyal customers are a source of increasing future purchasing then the firm long-term profitability and market share (Anderson, Fornell, and Lehmann, 1994) On the other hand, for capturing the market quickly, Saigon Co-op Mart spreads its stores all over the city with very high speed As the result, the operation and quality level of the stores are not unified It creates a problem with customer perception of the brand Moreover, it makes the co-operation among stores having problems and the operation of the whole chain is not effective To overcome these problems, the management of Co-op Mart set up Co-op Mart Nguyen Dinh Chieu as the model for their next generation stores After that, they standardize other stores based on this model The result of this research will give the company management a better understanding of the relationship between store’s performance and shopping preference of customers and also the perception of customer about Co-op Mart Nguyen Dinh Chieu Consequently, they can have more precise and systematic decisions to improve the quality of Co-op Mart Nguyen Dinh Chieu The result is not only the improvement of Co-op Mart Nguyen Dinh Chieu but also the improvement of the whole chain when they apply this model to other stores PROBLEM STATEMENT The goal of this research is to provide the management of Saigon Co-op a better insight of Co-op Mart Nguyen Dinh Chieu quality in the perception of customer in order to improve its quality RESEARCH OBJECTIVES For more detail to drive the research activities, this goal could be broken down into a series of objectives: Developing a new model to examine the quality of a service and set up priorities for quality improvement based on the influences of performance improvement on shopping preference of customers Identifying the attributes of a supermarket that affect perceived quality of customer and finding out how these attributes’ performance influence the shopping preference level of customers in an incremental manner Measuring customer’s perception about attributes performance of Co-op Mart Nguyen Dinh Chieu and how much these attributes contribute to shopping preference of customers Providing recommendations to improve Co-op Mart Nguyen Dinh Chieu’s quality in an efficient way: improving the right attributes in the right priorities based on the incremental contribution of these attributes performance to shopping preference of customers RESEARCH FRAMEWORK Figure 1.1: Research framework Previous research Quality attributes Focus group of customer Studied attributes Management interview Survey A Survey B Attributes characteristics Attributes' performance Management interview Shopping preference Observation Analysis Recommendation Quality attributes of a supermarket are discovered through previous research and focus group of customers Then an interview with the company management to decide which attributes will be studied After that, two surveys will be conducted to collect primary data The result of these two surveys will be used to characterize the attributes On the other hand, the second survey will be used to measure Co-op Mart Nguyen Dinh Chieu’s attributes performance and how much this performance level contributes to shopping preference of customers Based on these findings, some recommendations will be made to help company management improve their store’s quality Quality attributes are characterized, based on their impacts to shopping preference of customers The concept underlies this method is twofold Firstly, when an attribute is improved or declined, it does not affect shopping preference of customers by the same amount Secondly, this difference is not the same for every attribute but each attribute has its own property Some will have more impact on increase side and others will have more impact on decrease side SCOPE OF THE RESEARCH The research excludes all other kinds of complementary businesses in the area of supermarket and focuses on supermarket business (self-service area) only The research focuses on three delivery processes of Co-op Mart which are believed to be main processes of a supermarket They are preparation for shopping, self-shopping, and billing processes The research does not take into consideration the opinions of customers who visit supermarket less than times in the year since they are assumed not to be familiar with this kind of shopping In addition, customers who are under 15 are also excluded ORGANIZATION OF THE RESEARCH Chapter 1(Introduction) provides an introduction including the rationale of the research, problem identification, objectives, research framework, scope of the research, and organization of the research report Chapter (Co-op Mart introduction) presents the literatures of supermarket background and supermarket in Viet Nam and introduces the development, organization, and operation of Saigon Co-op and the Co-op Mart chain, especially Co-op Mart Nguyen Dinh Chieu store Chapter (Development of Two-factor model) provides the literatures review of multiattribute concept and quality measurement, especially the Servqual and Kano models This chapter also presents the development of Two-factor model, which is to be used in this research to examine service quality of Co-op Mart Nguyen Dinh Chieu and set up priorities for quality improvement Chapter (Research methodology) presents the information needed, target populations, questionnaire development, sampling procedure, and sample characteristics of the research Chapter (Findings analysis and discussion) contains the discussion and analysis of findings from customer surveys as well as management interview and observation Some recommendations are also discussed in this chapter Chapter (Conclusion) draws out the conclusions for current perceived quality of Saigon Co-op Mart Nguyen Dinh Chieu, quality improvement strategy, and Two-factor model .. .ACKNOWLEDGEMENT I am most grateful to Dr Do Ba Khang, my Research Advisor and Chairman of Research... improvement They are the keys to improve quality of Co-op Mart Nguyen Dinh Chieu ii TABLE OF CONTENTS Acknowledgement i Abstract ii Table of Contents .iii... identification, objectives, research framework, scope of the research, and organization of the research report Chapter (Co-op Mart introduction) presents the literatures of supermarket background and