UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Phan Thanh Bình FACTORS CONTRIBUTING TO CUSTOMER LOYALTY IN VIETNAM INDUSTRIAL GASES MARKET MASTER OF BUSINESS (Honours) Ho Chi Minh City – Year 2014 TIEU LUAN MOI download : skknchat@gmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Phan Thanh Bình FACTORS CONTRIBUTING TO CUSTOMER LOYALTY IN VIETNAM INDUSTRIAL GASES MARKET ID: 21110002 MASTER OF BUSINESS (Honours) SUPERVISOR: Dr. VŨ THẾ DŨNG Ho Chi Minh City – Year 2014 TIEU LUAN MOI download : skknchat@gmail.com i CONTENTS CHAPTER 1: INTRODUCTION .6 Structure of Research. 7 CHAPTER 2 : LITERATURE REVIEW AND HYPOTHESIS .1 Definitions of Constructs .2 Perceived service quality .2 Relationship between the constructs .1 The relationship between relationship quality, customer satisfaction and customer loyalty .2 The relationship between perceived service quality, customer satisfaction and customer loyalty .3 The relationship between customer satisfaction and customer loyalty. 19 TIEU LUAN MOI download : skknchat@gmail.
21 CHAPTER 3 : RESEARCH METHODOLOGY .2 Perceived service quality. 30 CHAPTER 4 : DATA ANALYSIS AND RESULTS .1 Data Statistical Analysis .3 Exploratory Factor Analysis.4 Multiple Linear Regression .2 Multiple Linear Regression analysis .5 Simple Linear Regression. 46 TIEU LUAN MOI download : skknchat@gmail.com iii CHAPTER 5 : CONCLUSION, IMPLICATION AND LIMITATION. 53 APPENDIX 1A: Survey form (in English).
57 APPENDIX 1B: Survey form (in Vietnamese). 60 APPENDIX 1C: List of companies answering the survey. 63 APPENDIX 2: Data analysis result - EFA. 67 APPENDIX 3: Data analysis result - MLR.
70 APPENDIX 4: Data analysis result - SLR. 74 TIEU LUAN MOI download : skknchat@gmail.com iv LIST OF FIGURES Figure 1.1: Typical production plant, facilities and vehicles of industrial gases industry.2: Main industrial gases manufacturers in the South of Vietnam.1: Conceptual model of business-to-business professional service quality.2: Chosing a loyalty strategy .3: The conceptual framework of customer loyalty .4: The relationship between customer satisfaction and loyalty .5: The conceptual model. 31 LIST OF TABLES Table 2.1: Loyalty Phases with Corresponding Vulnerabilities .2: Comparison between B2C and B2B by Narayandas.3: Loyalty typology by Dick and Basu .1: Measurement of relationship quality .2: Measurement of perceived service quality .3: Measurement of customer satisfaction.4: Measurement of customer loyalty .2a: Cronbach alpha test. 34 TIEU LUAN MOI download : skknchat@gmail.2b: Cronbach alpha test (cont.3: KMO and Bartlett's Test.4: Total variance explained .5: Rotated Component Matrix .6: Correlations between RQ, PSQ and CL .7: Correlations between RQ, PSQ and CS .8: Correlations between CS and CL.
47 TIEU LUAN MOI download : skknchat@gmail.com 1 Abstract The concept of customer loyalty has been researched and applied widely in marketing, especially in consumer market. However, in business-to-business context, there are not many sufficient studies to investigate deeply into this concept and its implications. This paper discusses about the factors contributing to customer loyalty in Vietnam industrial gases market. Among several factors found to be the antecedents of customer loyalty, this study focuses on the two main crucial factors which are considered as most significant to achieve customer loyalty: relationship quality and perceived service quality.
This study proposes a conceptual framework, in which these two constructs positively and directly impact on customer loyalty. Besides, relationship quality and perceived service also indirectly affect customer loyalty through the customer satisfaction. A tailor-made questionnaire has been sent to 241 companies who are using industrial gases or gases service in the South of Vietnam with 149 sufficient responses. The finding of this study consists with previous research that customer loyalty can be achieved and maintained through relationship quality, perceived service quality and customer satisfaction.
This study also points out to the industrial manufacturers in Vietnam a sufficient overview of a new approach to maintain the customer and business in the strong competition situation. TIEU LUAN MOI download : skknchat@gmail.com 2 CHAPTER 1: INTRODUCTION 1.1 Research Background Industrial Gases have been an integrated part of a variety of industries. For example, among many types of industrial gases, Carbon Dioxide (CO2) is used in carbonated soft drinks and beer, Oxygen (O2) and Acetylene (C2H2) are used in metallurgy and shipyard, Nitrogen (N2) is used for food freezing, packaging, etc. There are hundreds of industrial gases applications.
As a result, the industrial gases market is very large and attracts a lot of competitions. There are thousands of industrial gases companies all over the world. It requires a huge investment for manufacturing plants, facilities, and vehicles. Therefore, just a few multi-national industrial gases corporation take most the market shares while the others enjoy the remaining of the market acting as the distributors.
Some typical names can be listed, such as Messer, Air Liquid, Vijagas, Linde, SIG (100% foreign investment company), Sovigaz (state-owned company), etc. In Vietnam, the industrial market started several decades ago. More and more production facilities have been established along with the fast development of metallurgy and shipyard industry. On the market, there are the attendances of several multi-national industrial gases corporations mentioned above, who are leading the industrial gases market.
There are also some local state-owned or private owned industrial gases companies with small scale production or focusing on niche market, such as the Carbon Dioxide from fermentation source. TIEU LUAN MOI download : skknchat@gmail.1: Typical production plant, facilities and vehicles of industrial gases industry (Source: Messer Group) 1.2 Research Problems According to a research of Rauyruen, Miller & Barrett (2006), the concept of loyalty has been explored and developed for years in the consumer context and service market. However, there are not many research about such concept in the business-to- business (B2B) context. It is even difficult to find a clear definition of customer loyalty in B2B market.
It means that deep research about customer loyalty is obviously rare in a certain section of the industry. Despite its importance and history, there is also no academic research in the industrial gases market. For years, the industrial gases companies have collected the TIEU LUAN MOI download : skknchat@gmail.com 4 information and perform their own study about the market for their internal use only. Without the support of academic research, people who work in this industry do not have sufficient background theory to support their business.
Therefore, the need of doing research in B2B market as well as the industrial gases section becomes more and more imperative. It will help the industrial gases companies to set up their competitive strategies in such a tough competition.3 Management Problems The outstanding development of Vietnamese economy has gone. In the recent years, almost all sections of the economy face serious problems. In such circumstances, the industrial gases market has experienced its difficulties as consequences of the economic downturn.
In order to maintain its market share, the competition becomes tougher and tougher in several ways. Many industrial gases companies over-invest in building new production facilities which lead to the excess industrial gases supply. According a market study of Messer Vietnam (see Figure 1.2), the ratio between sales and production capacity of most of the air-gas (consisting of oxygen, nitrogen and argon) manufacturers are less than 50% of their production capacity. The bigger the capacity is, the smaller ratio of production utilization is.
Searching for the cause of such excessive supply of industrial gases market, it was supposed that the booming development of the Vietnamese economy during the period 2003-2008, people predicted a huge demand of industrial gases in the near future. Unfortunately, the TIEU LUAN MOI download : skknchat@gmail.com 5 economic situation has kept going down since 2013 until now, which seriously affects the industry.2: Main industrial gases manufacturers in the South of Vietnam (Source: market research data of Messer Vietnam). Due to recently invested high technologies of production, the product quality among the industrial gases companies on the market, especially multi-national companies are not very different from one another. Therefore, product differentiation is no longer an ideal strategy of any gases company, except the food-beverage carbon dioxide product which has very limit source.
Safety issues, vehicle, facilities, storage tanks or cylinders are also standardized between the competitors. In such situation, some companies decided to dump the price to take customers of their competitors, TIEU LUAN MOI download : skknchat@gmail.com 6 which made the competitions become stronger and stronger. In fact, there are a certain number of customers who simply purchase the gases as a commodity and easily switch to another supplier who offers cheaper price. In such situation, keeping the current customers and maintain profitability of the business is the vital mission of the industrial gases companies who are not able to apply price-dumping strategy.
Price- dumping seems to be effective within a short period for the new manufacturer to enter the market. However, it may lead to unfair competition. In order to overcome the price competition, among several combined solutions, achieving customer loyalty becomes the most applicable and effective solution to the current problems. In fact, it is widely proved that loyal customers help maintain the business and profitability.
Therefore, investigating the factors contributing to customer loyalty is the fundamental purpose of this study.4 Research Objectives Firstly, this study will aim to identify the key factors that influence customer loyalty. Price, service quality, product quality, customer relationship and customer satisfaction are among the considered list. However, only some of the above factors are discovered in this paper. Secondly, the author will analyze and explore the impact of such factors on customer loyalty through a conceptual model.
In this study, the conceptual model defined in other empirical studies will be modified, applied and tested with the Vietnam industrial gases market context. TIEU LUAN MOI download : skknchat@gmail.com 7 Finally, an applicable strategy will be proposed for the industrial gases company to maintain its customer loyalty and achieve the business target in the competitive situation.5 Research Scope This research will be implemented to the industrial gases market in Vietnam, regardless the geographical, business size or ownership of the business. The subjective customer in this research will include the industrial gases distributor and the end-users in several industries where industrial gases are used for their production.6 Structure of research This paper consists of five chapters: Chapter 1: Introduction. This chapter introduces about the current situation of the industrial gases market in Vietnam, the management problems, research problems and research objectives of the study.
Chapter 2: Literature review. This chapter review the previous studies related to the topic of this paper, especially the definition of literature constructs and conceptual models. Chapter 3: Research Methodology. This chapter explains how to design the measurement scales, the survey and collect the data.
Chapter 4: Data Analysis and Results. This chapter shows the analysis result using the software SPSS with Cronbach alpha test, EFA and MLR analysis. TIEU LUAN MOI download : skknchat@gmail.com 8 Chapter 5: Conclusion, Implication and Limitation. Upon the data analysis results, the relationship between the research construct will be concluded.
Then the author suggests the implication of this study into the actual industrial gases market in Vietnam. Finally, there are limitations of the study that could be improved to enhance the quality of the research. TIEU LUAN MOI download : skknchat@gmail.com 9 CHAPTER 2: LITERATURE REVIEW AND HYPOTHESIS This chapter discusses about the definitions of the constructs: relationship quality, perceived service quality, customer satisfaction and customer loyalty and the relationship between these constructs discussed in other research. From the literature review of previous studies, the author proposed a conceptual framework which is more appropriate to the industrial gases context in Vietnam.
Finally, there is a description of the hypothesis used in the conceptual framework.1 Definition of constructs 2.1 Relationship Quality Rauyruen et al. (2007) proposed four aspects of relationship quality: trust, commitment, satisfaction and service quality. Enhancing the relationship quality helps the supplier maintain customer loyalty. They also emphasized that service quality would strongly enhance both purchase intentions and attitudinal loyalty.
Henniq-Thurau and Klee’s (1997, p.