Customer service quality at floor tiles and slab company no 1 in Ho Chi Minh city – Viet nam

CUSTOMER SERVICE QUALITY AT FLOOR TILES AND SLAB COMPANY NO 1 IN HO CHI MINH CITY – VIET NAM by Lam Tuong Thoai 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 William Swierczek Dr. Clemens Bechter Nationality Vietnam Previous degree B. Eng. In Computer Sciences HCMC University of Technology Ho Chi Minh City, Vietnam Scholarship Donor Self-support Asian Institute of Technology School of Management Bangkok, Thailand April 2001 ACKNOWLEDGEMENT No one can do anything alone. For me, this is true. In fact, if there were no support of everyone throughout time of carrying out this research, I could not fulfill it. Therefore, at this first page, I would like to express my sincere gratitude to people who helped me in accomplishing the research. First of all, all my veneration and thankfulness, I would like to send to my advisor - Dr. Do Ba Khang - whose acceptance me as advisee, valuable guidance, and constructive comments to my efforts are strong encouraging for me to make the research fulfilled. I would like also to send my gratefulness to Dr. Fredric William Swierczek and Dr. Clemens Bechter for their valuable contribution in serving as committee members. Maybe, they did not understand that, their friendliness and willingness in playing the role as a committee member is important factor in lessening the strain and anxiety of a graduating student like me. My sincere thank also goes to Dr. Hans Stoessel – Director of SAV program - for his encouragement when I studied at SAV-Viet Nam as well as during the time of my studying at AIT. I would like to thank all faculties and staffs of SAV and AIT for their teaching, assistance and supporting me in studying and fulfilling the research. Unforgettable gratitude to my friends whose faithful cooperation and moral supports extended to me to complete my study at AIT. I am very grateful to Management and employees of Floor Tiles and Slab Company No 1 who helped me by providing data, information and gave me their valuable time during the time of data collection in Viet Nam. And my last grateful words at this page – not meaning unimportant but on contrary – are sent to my beloved mother, my parent-in-law, my wife, and my little daughter who have consistently sacrificed their happiness to support and encourage continuously me in my career. ABSTRACT In Viet Nam, in 1999, ceramic tiles market, after bright years, is going to come to shakeout stage. Demand increases slowly, competition is fiercer than before due to participating of more players. Besides this, players have possessed the same manufacturing technology, so product quality has no longer been viewed as just one way of gaining competitive advantage. Hence, Floor Tiles and Slab Company No 1 (FTSC) – one of a few of the first movers in this field – decided to turn its business strategy. FTSC’s investment is to be oriented toward customer service. This research carried out, firstly, to capture the management’s view and employees’ perception on the existing customer service in FTSC. Measuring of expectation and perception of FTSC’ customers on attributes of service quality are also figured out in the research. Then, based on findings, a strategy and an action plan of improving service quality developed. How good customer satisfaction is good enough? This answer depends on FTSC’s objectives. However, the quality journey is a long-term progress, and FTSC has to identify first what should be improved, how to implement improvement every day in the company. This strategy is proposed as a suggestion in its road to continuous improvement of FTSC. LIST OF TABLES Tables  Title  Page   2.1  Data collection methodology  6   4.1  Growth of FTSC (1990 – 1992)  15   4.2  Decreasing in profit in FTSC’s business operation (1992-1994)  16   5.1  Differences between views of management board and of employees  33   8.1  Practical action plan  60   LIST OF FIGURES Figures  Title  Page   4.1  GDP in industry and construction (1990-1999)  15   4.2  Sales volume of FTSC (1994-1999)  16   4.3  Segmentation of ceramic tiles market by size in Viet Nam (1999)  18   4.4  Organization structure in FTSC  19   4.5  Market share of ceramic tiles manufacturing companies in the South of Viet Nam (1999)  20   4.6  Turnover and expense of FTSC (1993-1999)  21   4.7  The process of ordering  23   4.8  The process of tiles delivery  26   4.9  The process of problem solving  28   7.1  Rating of customers on common attributes  40   7.2  Comparison between perception of current customers and perception of mystery shoppers on common attributes  41   7.3  Comparison between expectation and perception on common attributes of current customers.  41   7.4  Rating of customers on attributes of showroom  42   7.5  Comparison between perception of current customers and perception of mystery shoppers on attributes of showroom  42   7.6  Comparison between expectation and perception on attributes of showroom of current customers.  43   7.7  Rating of current customers on attributes of business support activities  43   7.8  Comparison between perception of current customers and perception of mystery shoppers on some attributes of business support activities  44   7.9  Comparison between expectation and perception on attributes of business support activities of current customers.  44   7.10  Rating of current customers on attributes of ordering process  45   7.11  Comparison between perception current customers and perception of mystery shoppers on attributes of ordering process  46   7.12  Comparison between expectation and perception on attributes of ordering process of current customers.  46   7.13  Rating of current customers on attributes of delivery process  47   7.14  Comparison between expectation and perception on attributes of delivery process of current customers.  48   7.15  Rating of current customers on attributes of problem solving process  48   7.16  Comparison between perception current customers and perception of mystery shoppers on attributes of problem solving process  49   7.17  Comparison between expectation and perception on attributes of problem solving process of current customers.  49   TABLE OF CONTENTS Chapter Title Page Title Page i Acknowledgement ii Abstract iii List of tables iv List of figures v Table of contents vi Chapter 1 Introduction 1 1.1 Background 1 1.2 Rationale of the research study 2 1.3 Problem statement 2 1.4 Objectives 2 1.5 Scope of research 2 1.6 Limitation 3 1.7 Presentation of the research report 3 Chapter 2 Research methodology 4 2.1 Research framework 4 2.2 Conceptual framework of the research 5 2.3 Data collection methodology 6 2.4 Survey framework (for outsiders) 7 2.5 Survey framework (for insiders) 8 2.6 Limitation of methodology 9 Chapter 3 Literature review. 10 3.1 Introduction 10 3.2 Service in the manufacturing firm: current practice 10 3.3 Service as a determining factor in competitive intensity. 11 3.4 Elements of a service-based competitive strategy 11 3.5 Measuring service quality 12 3.6 Service quality measuring model: 12 Chapter 4 Profile of floor tiles and slabs company no 1 15 4.1 Introduction 15 4.2 Vision and goal 17 4.3 Product 17 4.4 Service 17 4.5 Organization structure 18 4.6 Customers 18 4.7 Competitors 18 4.8 Achievement 21 4.9 Concept of customer service in ftsc. 21 4.10 Service delivery process 22 Chapter 5 FTSC management board’ s view and employees’ perception on service 29 5.1 View of management about the role of customer service 29 5.2 Employees’ perception 31 5.3 Comparing between views 33 Chapter 6 Attributes of a high quality customer service 35 6.1 Common quality attributes 36 6.2 Attributes for showroom and customer’s business support actives. 36 6.3 Attributes of ordering process. 37 6.4 Attributes of delivery process. 38 6.5 Attributes of problem solving process. 39 Chapter 7 Expectation and perception of customer. 40 7.1 Common attributes. 40 7.2 Attributes of showroom. 42 7.3 Attributes of business support activities. 43 7.4 Attributes of ordering process. 45 7.5 Attributes of delivery process. 47 7.6 Attributes of problem solving process. 48 7.7 Summary 50 Chapter 8 Developing strategy 52 8.1 Service strategy 52 8.2 Detailed plan 57 8.3 Practical action plan 60 Chapter 9 Conclusions and implications 64 9.1 Conclusion 64 9.2 Implication 64 9.3 Future research 65 Reference 66 Appendix A 67 Appendix B 73 Appendix C 83 Appendix D 84 Appendix E 85 Appendix F 86 CHAPTER 1 INTRODUCTION BACKGROUND Ceramic tiles were introduced to Vietnam market since 1992. It has replaced the use of cement tiles because those no longer met the increasing requirement of customers in terms of aesthetics. At that time, with the opening of Viet Nam economy, the construction industry has grown fast, many commercial and civil building were build in the height of fashion of interior decoration. As a result, the demand for a product, what substitutes for cement floor tiles, is very high. It was ceramic tiles itself. In terms of aesthetics, surface quality, and absorption, ceramic tiles exceed that of cement tiles. Additionally, resistance of abrasion of ceramic tiles is also much better than cement tiles. In a word, ceramic tiles are more superior product in all aspects than that of cement tiles. Market demand for ceramic tiles is potentially very large. For example in 1992 consumptive level was only 195,000 m2, but in 1995 it reached 2,100,000 m2. It is also estimated that total demand for ceramic tiles in Vietnam in 2000 was around 30 million, and in 2010 from 35 million to 40 million square meter per year. The average demand per capita of Vietnam in 2000 was about 0.5 square meters per year, compared with other countries in the region, this figure is still low. For example, in 1994, average demand for ceramic tiles was 0.66 square meters per capita per year in China and 25 square meters per capita per year in Taiwan. From these figures, it is easy to realize that the demand of ceramic tiles has been growing very fast during that time. However, at that time of the 90’s early years, to meeting the demand, ceramic tiles were major imported from China with great quantity. (Source: Dr. Le Van Thanh, 1999, “Ceramic tiles manufacturing in Viet Nam: Present and Future”, Oct 1999.) Recognizing market demand for premium quality of ceramic tiles to cement floor tiles and the bright future of this market since 1993, a few companies, which have specialized in producing cement tiles, decided to invest in production chain to produce ceramic tiles to neutralize domestic demand for ceramic tiles. This decision received strongly support from Ministry of Construction. One of them is Floor Tiles and Slab Company No 1 (FTSC). Up to know, the ceramic tiles market exploded by many companies that joint and compete in the field. Operating in free market mechanism, every firm has to build its own competitive edge over its competitors to prosper. This is not an easy task, however. The only way to survive for all players in the market is their ability to continuously meet their customers by attempts to improve product quality, reduce cost and other services. This never-ended process is often initiated by the assessment of internal capability of a company. For producers as FTSC using much technology in manufacturing process, major competitive weapon of FTSC in years 1996-1999 was quality of product. Having possessed an advanced technology that was transferred from an Italy Company - Sacmi Imola, FTSC has produced ceramic tiles having quality better than Chinese ceramic tiles. Therefore for consecutive years since 1996, FTSC’s ceramic tiles were granted title of Vietnamese High Quality Products in the annual survey conducted by Saigon Marketing magazine. Thank to this thing and with competitive edge of being one of a few first companies in ceramic tile field, FTSC’s business has grown noticeable. In 1999, in Vietnam South Region, FTSC’s market share was 14% and it was ranked third biggest company in ceramic tiles field after Dong Tam Company (market share 17%) and Thanh Thanh Company (market share 15%). (Annual report of FTSC in 1999) RATIONALE OF THE RESEARCH STUDY As mentioned above, in early years of penetrating into ceramic tiles market, FTSC concentrated on producing of high quality products and used it as a strategic competitive weapon. However, since 1999, this competitive edge has been fading away because there are more and more players entering this field. At that time, there were about 22 companies producing ceramic tiles in the whole Vietnam. One important thing worth while note down is that FTSC’s competitors have also possessed the same technology as FTSC’s, so product quality is no longer a major competitive weapon. To be survived and developed, beside continuing maintenance one’s concentrating on quality of product, FTSC’s management board decided to turn its strategy to focus on quality of customer service, to offer a customer service that is far superior to its competitors. In this respect, a research of what type of customer service and its attributes of customer service quality in customer expectation is necessarily for FTSC. The other objective of the research is to help FTSC’s management board knowing about evaluation of customer on its current customer service. Employees’ perception about customer service in their company was also explored in the research. Hence, FTSC will be able to adjust its customer service activities in a way to satisfy its customers’ needs better. PROBLEM STATEMENT For this research, there are four problems need to be identified as below: What is the role of customer service for business strategy of FTSC? How will customer contact employees perceive on this customer service? What are attributes of a high quality customer service in FTSC? How will the customers evaluate quality of the current customer service in FTSC? OBJECTIVES According to statement of the problem, the objectives of this research are to: Assess the importance of customer service to the competitiveness and profitability of FTSC. Measure employees’ perception on matters related to customer service in their company such as purpose, important level, belief in success of customer service in building competitive advantage, and improvement in job. Identify types of customer service and their attributes what are offered to customer by FTSC based on understanding of service delivery process. Capture customers’ expectation as well as customers’ perception on attributes of service provided by conducting a survey. Develop service strategy based on existing strategy of FTSC and results of survey in order to improve quality of customer service in FTSC. SCOPE OF RESEARCH About customer, the research only considered the opinion of two major kinds of customer of FTSC. They are agents and constructors. Both of them account for about 90% sales volume of FTSC. The end consumers are excluded in this research because even though amount of this kind of customer is very large, but they often buy tiles average once per year with a very small order (average 300USD/order). About market, this survey focused on domestic market of FTSC – Ho Chi Minh City, some of provinces of Vietnamese Central Region and Mekong River Delta - because foreign market is very small and it is not target market of FTSC. For employees, this research focused on customer contact employees. The survey was not conducted on employees of other departments such as administration, R&D, manufacturing, and procurement etc. This was because the survey was carried out at the time of year-end, employees were very busy with accomplishing their yearly plan, therefore FTSC management board asked to conduct the survey only with customer contact employees. FTSC management board believes that these employees are closer to the customer than others, they are a key point in FTSC’s quality improvement programs, they interact with customers at every moment of truth, ensure for the successful of FTSC’s strategic change. Therefore, their perception is what FTSC management board needs to understand first. LIMITATION This research is limited at point it does not capture view of customers who used to be customer of FTSC as well as competitors’ customers. These views will be very important information for FTSC because it can help FTSC understanding why its customers left and comparing between its customer service and its competitors’. Besides this, perception of employees working in other departments was also not explored. Understanding their perception also helps FTSC management board improving service quality better. PRESENTATION OF THE RESEARCH REPORT Chapter 1 – Introduction This chapter discuss about Vietnamese ceramic tiles market, why research is carried out and its problems, objectives and scope. Chapter 2 – Research methodology In this section, matters related to carrying out research are presented. They include research framework, data collection methodology, determining target population, sampling procedure and building questionnaire for the survey. Chapter 3 – Literature review. Theories, studies relate to topic of research such as competitive advantage, service and quality, how to measure quality of service will be presented in the chapter. Chapter 4 – Profile of Floor Tiles and Slab Company No 1 (FTSC). Purpose of this chapter is to introduce Floor Tiles and Slab Company No 1 including establishment, mission statement, organization structure, products, services what are been providing to customers and these services delivery process, customers, competitors and achievement of FTSC. Chapter 5 – FTSC management board’s view and employees’ perception on service. Through description service delivery process in FTSC at chapter 4, this chapter analyses FTSC management board’s view about role of Customer Service. Perceptions of customer contact employees are also discussed in this chapter. Chapter 6 – Attributes of a high quality Customer Service Figuring out attributes of a high quality Customer Service based on customer’s view and management’s view will be showed in this section. Chapter 7 – Findings from survey This chapter analyses result of measuring of expectation and perception of customers on attributes of existing Customer Service in FTSC. Chapter 8 – Development strategy. Content of the chapter includes developing a strategy based on findings of surveys and building an action plan to implement improvement of service quality. Chapter 9 – Conclusion – Implication - Future research This chapter presents conclusion and implication of research. It also suggests other a direction of research in future related to this topic. CHAPTER 2 RESEARCH METHODOLOGY