Identifying dimension of BIDVs trade finance services quality in Hochiminh city Area.pdf

1. MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HOCHIMINH CITY
------------------------
BI VU THANH XUAN
IDENTIFYING DIMENSIONS OF BIDV’S
TRADE FINANCE SERVICES QUALITY
IN HOCHIMINH CITY AREA.
MASTER THESIS
Ho Chi Minh City, 2011.

2. MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HOCHIMINH CITY
------------------------
BI VU THANH XUAN
IDENTIFYING DIMENSIONS OF BIDV’S
TRADE FINANCE SERVICES QUALITY
IN HOCHIMINH CITY AREA.
MAJOR: BANKING AND FINANCE
MAJOR CODE: 60.31.12
MASTER THESIS
INSTRUCTOR: DR. TRUONG QUANG THONG
Ho Chi Minh City, 2011.

3. i
ACKNOWLEDGEMENT.
I would like to express my heartfelt gratitude and deepest appreciation to my
research supervisor, Dr. Truong Quang Thong for his precious guidance, share of
experience and highly valuable suggestions throughout the course of my research.
My special gratitude is extended to all instructors and staff at Postgraduate
Faculty, University of Economics Ho Chi Minh City (UEH) for their support and
the valuable knowledge during my study in UEH.
I also wish to thank to my colleagues in BIDV’s branches, who help me
during the collection of data. My thanks would also extend to the respondents,
without them, my thesis could not have been done.
Specially, my thanks go to Ms. Vu Thi Bich Ngoc for their valuable and
enthusiastic support for this research study as well as for their comments of
English from early draft of my thesis.

4. ii
Abstract
Maximizing customer satisfaction through service quality has been
described as the ultimate weapon. This study applied the SERVQUAL model of
Parasuraman (1988) to test the dimensions to have relationship to BIDV’s trade
finance service quality in Ho Chi Minh City area. A study of 150 respondents from
branches was conducted. Multiple linear regression technique was used to test the
hypotheses and research model. The chosen model is modified from SERVQUAL
model. According to the results, empathy, responsibility, assurance, reliability
were confirmed to have positive impact on service quality. Some independent
variables such as tangibility, price, portfolio have no enough evidence to conclude
to have relationship to service quality.
Recommendations for related regression results are suggested to improve
trade finance services quality and therefore BIDV can serve customers better.
Keywords: Customer satisfaction, Service quality, trade finance, SERVQUAL

5. iii
CONTENTS
Acknowledgement.....................................................................................................i
Abstract.....................................................................................................................ii
Contents...................................................................................................................iii
List of tables ............................................................................................................vi
List of Figures and Charts ......................................................................................vii
Chapter I: INTRODUCTION TO THE STUDY ................................................1
1.1. Rationale of the study........................................................................................1
1.2. Problem statement .............................................................................................1
1.3. Research objectives ...........................................................................................2
1.4. Scope .................................................................................................................2
1.5. Research methods..............................................................................................2
1.6. Structure of the study.........................................................................................3
Chapter II: RELATED LITERATURE REVIEW.............................................4
2.1. Understand service quality ................................................................................4
2.1.1. Definition of service quality...........................................................................4
2.1.2. The role of banking service quality................................................................4
2.1.2.1. A significant source of competitive advantage and customer retention......4
2.1.2.2. Increase Bank brand ....................................................................................5
2.1.2.3. Profitability..................................................................................................5
2.2. Empirical evidence ............................................................................................6
2.2.1. Models ............................................................................................................6
2.2.2. Summary and comparative evaluation of service quality models................13

6. 2.2.3. Applications models in some countries........................................................15
Chapter III: OVERVIEW TRADE FINANCE SERVICES IN VIETNAM..18
3.1. Trade finance in Vietnam ................................................................................18
3.1.1. Exports..........................................................................................................18
3.1.1.1. Some highlights in 2010............................................................................18
3.1.1.2. First haft of 2011 .......................................................................................19
3.1.2. Imports..........................................................................................................20
3.1.2.1. Some highlights in 2010............................................................................20
3.1.2.2. In the first half of 2011..............................................................................21
3.1.3. Vietnam trade balance ..................................................................................22
3.2. Trade finance services in BIDV ......................................................................23
Chapter IV: DATA ANALYSIS AND FINDINGS ...........................................28
4.1. Methodology....................................................................................................28
4.1.1. Data collection..............................................................................................28
4.1.2. Sample size...................................................................................................28
4.1.3. Questionnaire design ....................................................................................28
4.1.4. Variables.......................................................................................................29
4.1.5. Measurement and scales..............................................................................30
4.1.6. Tests Used for Data Analysis .......................................................................30
4.2. Data analysis....................................................................................................30
4.2.1. Preliminary results........................................................................................30
4.2.2. Hypotheses development..............................................................................32
4.2.3. Regression results - test and analyze...........................................................32
4.2.3.1. Basic regression model..............................................................................32
4.2.3.2. Optimal regression model..........................................................................34

7. 4.3. Findings ...........................................................................................................40
Chapter V: CONCLUSION AND RECOMMENDATIONS...........................41
5.1. Conclusions .....................................................................................................41
5.2. Implications and recommendations.................................................................41
5.3. Assessment ......................................................................................................42
5.3.1. Strength.........................................................................................................42
5.3.2. Limitations....................................................................................................43
References ..............................................................................................................44
Appendix ................................................................................................................48
Appendix I. Database .............................................................................................49
Appendix II. Questionnaire ....................................................................................55
Appendix III. General statistic index......................................................................59

8. vi
List of Tables.
Table 2.1: Definition of service quality...............................................................................4
Table 2.2: Impact of quality improvement ..........................................................................6
Table 2.3. Comparative evaluation of service quality models ..........................................13
Table 2.4. Comparing service quality dimensions with past research (by rank) ...............17
Table 3.1: Top 10 import products in Vietnam in 1st
haft 2011 ........................................22
Table 4.1: General information of customers ....................................................................30
Table 4.2: Gap score for seven dimensions .......................................................................31
Table 4.3: Compare service quality dimensions with Parasuraman’s research (by rank) .40
Table 5.1. The hypotheses testing results ..........................................................................41

9. vii
List of Figures and Charts
Figure 2.1. Service quality model........................................................................................8
Figure 2.2. Gap analysis model..........................................................................................10
Figure 2.3. Attribute service quality model .......................................................................12
Figure 2.4. Model of service quality, customer value and customer satisfaction..............13
Figure 2.5. Model of service quality in internet banking...................................................14
.
Chart 3. 1: Major Export product of Vietnam in 2010 ......................................................21
Chart 3.2. Top ten main exports of Vietnam in first quarter 2011.....................................22
Chart 3.3: Vietnam import year 2010 ................................................................................23
Chart 3.4: Exports, imports and trade balance of Vietnam................................................25
From Jun 2010 to March 2011
Chart 3.5: Comparison export and import turnover of BIDV with some banks...............29

10. Page 1
CHAPTER I: INTRODUCTION TO THE STUDY.
1.1. Rationale of the study:
In a more globalized and integrated economy with increasing deregulation,
competition in the banking industry has become significantly fiercer. Banking industry in
Vietnam has also grown rapidly especially in the growth of foreign banks. This makes
customers have many choices and compare the service quality among banks that they
perceive. Satisfying customers is one of the main objectives of every business.
Businesses recognize that keeping current customers is more profitable than having to
win new ones to replace those lost. Therefore, customer satisfaction and service quality
are compelling to the attention of all banking institutions. Service quality is the core
problem for banks to differentiate, retain customers, make revenues and expand market
share.
Besides, since Vietnam joints in WTO, bilateral agreements, multilateral
conventions, trade barriers have been loosen. This encourages the international trade to
grow rapidly. Vietnamese businesses have opportunities to trade with foreign partners is
very high. Therefore, banks in Vietnam has focused their interest in trade finance services
to serve better the demand of customers. This is the potential field business that banks
should continue to explore.
Among many kinds of banking services, trade finance services bring a large
source of fees for banks. It is better when Vietnamese banks wants to increase the fees
from services and decrease the fees and commissions from credit. This is completely
suitable to international trends. Beside, developing trade finance services also increase
the Vietnamese banks position in international market.
However, customers perception of service quality is a complex process. Therefore,
multiple dimensions of service quality have been suggested. It is agreement that there is
no standard model to adapt to banking service quality measurement in a specific country.
Because of the role of service quality and optimism of trade finance development, this
research aims to identify dimensions of BIDV’s trade finance services quality in Ho Chi
Minh City area.
1.2. Problem statement:
Service quality is an elusive concept. It attracted the interest of academics and
practitioners as well. Service quality is a dynamic, multidimensional concept. For
instance, ‘… quality is what the customer says it is’ (Webster & Hung 1994) or ‘… a
measure of how well the service level delivered matches the customer’s expectations’
(Lewis and Booms, 1983). Thereafter, some researchers suggest that service quality

11. Page 2
stems from a comparison of customers’ performance perceptions with expectations
(Parasuraman, 1988) or from perceptions of performance only (Cronin & Taylor 1992).
In today’s competitive banking environment, delivering services with high quality
to customers is a must for success and survival. With the significant findings in the
financial service industry, it is important to understand how BIDV’s trade finance service
quality is perceived by customers, and what are the elements considered to make sense to
them. Therefore, the thesis try to identify the dimensions that affect to BIDV’s trade
finance services quality in Ho Chi Minh City area.
1.3. Research objectives:
Objectives are understood to express the purpose of the research in measurable
terms. It defines standards of what the research should accomplish. The research applied
the SERVQUAL model proposed by Parasuraman (1988) and tests the model in a
specific service (trade finance) at the branches of a specific bank (BIDV).
The objectives of the study are as follows:
 To examine how the customers perceive the BIDV’s trade finance service
quality.
 To determine the elements that influence to the BIDV’s trade finance service
quality.
 To contribute to the suitable recommendation for management implications.
To serve these tasks, three research questions need to be answered:
 Does there exist the gaps in customers’ expectation and perception?
 What are the dimensions that correlate to the BIDV’s trade finance service
quality?
 What are the main factors that have a high correlative relationship to the BIDV’s
trade finance service quality?
1.4. Scope:
Because the limitation of time and budget, survey is done in BIDV’s branches in
Ho Chi Minh City area for corporate customers.
1.5. Research methods:
This study was conducted in two stages: pilot study and survey – a quantitative
approach.
In the first phase, a group of customers is selected to answer the questionnaire to
make sure that the questionnaire is comprehensive and suitable. Some amendments have
been made where needed.

12. Page 3
In the second phase, a quantitative approach was used. Data were collected by
interviewing bank’s customers. The purpose of this phase was to answer three research
questions.
Multiple Linear Regression analysis was employed to test the research model and
hypotheses. Chapter IV will discuss the methodology for this study in more detail. In this
chapter, the author used data analysis tools to implement the research such as: descriptive
statistics, multiple regression models with Eviews 7 for Windows
1.6. Structure of the study:
The structure of the study consists five chapters:
Chapter 1: Introduction
This chapter presents the rationale of the study, as well as, research problems, research
objectives, research methodology and scope.
Chapter 2: Literature Review
This chapter summarizes the related literature review and presents the fundamental ideas
on finding out the model that can be applied in this thesis.
Chapter 3: Overview on trade finance in Vietnam
Some highlights in Vietnam export – import recently express that trade finance
service is the potential field for BIDV to focus more. This chapter also provides trade
finance operation in BIDV with its strengths and weaknesses as well as the opportunities
and threats.
Chapter 4: Data analysis and findings
This is the main chapter of this study with the clear regression results. This chapter
aims to answer three research questions as above mention.
Chapter 5: Conclusions, Recommendations
Chapter 5 presents main conclusions and recommendations based on the results of
the previous chapters. Besides, it gives the limitations of this study.

13. Page 4
CHAPTER II: RELATED LITERATURE REVIEW.
This chapter searches and reviews the relevant theories in the literature. The aim of this
review is to understand the conceptual service quality and to seek a research model of
service quality that can be applied in the Vietnamese banks in general and in BIDV in
particular to answer the research questions.
2.1. Understand service quality.
2.1.1. Definition of service quality.
There are many opinions of quality. It is a wide and difficult category. Depending
on different positions, different opinions may be raised.
Many researchers define service quality as follows:
Definition Author
Service quality: as the difference between customers’
expectations for service performance prior to the service
encounter and their perception of the service received.
Asubonteng (1996)
Service quality: as the comparison that customers make
between the quality of the service that they want to
receive and what they actually get.
Gefan (2002)
Service quality: as the difference between customer’s
expectations of services provider’s performance and their
evaluation of the services they receives.
Parasuraman (1985, 1988)
Table 2.1: Definition of service quality (cited in Parmita Saha, Yanni Zhao, 2005, p.15)
In general, service quality is defined as how well the service meets or exceeds the
customers’ expectations on a consistent basis. However, the difficulty is that service
quality, unlike product quality. It is more abstract and elusive, because of unique features
to services: intangibility, inseparability, heterogeneity and perish ability. Therefore,
service quality is difficult to measure.
2.1.2. The role of banking service quality.
2.1.2.1. A significant source of competitive advantage and customer retention.
The banking industry is highly competitive. Banks not only compete among each
other, but also with non-banks and other financial institutions. Most of products that
banks provide are nearly similar. Therefore, they can only distinguish themselves based
on price (charges and interest rate) and quality - the important factor that customers can
perceived. When customers satisfy with the bank service quality, they stay to long term
transaction with a bank. They become loyal and use more and more services. So, service

14. Page 5
quality is considered as an essential determinant that allows one organization to
differentiate from the others. It helps an organization to gain sustainable competitive
advantage.
Cronin and Taylor (1994) also found that service quality has a significant effect on
repurchase intention. Moreover, many studies proved that the costs of acquiring new
customers to replace those who have been lost are high. Rust and Zahorik declared that
the cost of attracting new customers may be five times of keeping existing customers.
(Cited in Mostafa Ghazizadeh, Ali Soleimani Besheli, Vajiheh Talebi, 2010, Assessing of
bank Customers retention and loyalty, p.275).
2.1.2.2. Increase Bank brand.
One way for differentiation is through the development of brand. Satisfied
customers may create positive bank image by word of mouth promotion. In Gronroos
model (1984), the author pointed out the causality between the technical quality and
image, also functional quality and image.
2.1.2.3. Profitability.
The relationship between service quality and profitability has attracted many
researchers, managers. According to Reichheld and Sasser (1990), profits increased
between 25 to 125 percent when a company retained just 5 percent or more customers
(Anthony Perrone and Antony Ward,1998, p.3).
Service quality actually affects on business profitability. Some studies has been
done to test this relationship. The empirical study was in UK. Newman and Cowling
(1996) used SERVQUAL model and reported that profit increases substantial if service
quality is improved. It is estimated that an increase of 5 percent in customer retention is
potentially worth £100 million per year.
With respect to the quantitative benefits, a study was also conducted in 1988 of a
particular US banks regarding the impact of service quality improvement on
performance. Before the quality had been improved, the bank had to pay for the cost of
failures and corrections. However, after the bank prevented errors and mistakes in serving
customers or, in other words, improved its service quality, the cost of services
systematically decreased while profit margins and earnings finally increased.
Accordingly, there was an increase in return on assets (ROA) from 1.05 per cent before
improvement to 1.38 per cent after improvement and also a return on equity (ROE) from
16.10 per cent to 21.22 per cent respectively as shown in the following table (Harvey,
1996)

15. Page 6
Bank Performance Before Improvement After Improvement
ROA 1.05% 1.38%
ROE 16.10% 21.22%
Table 2.2: Impact of quality improvement
(Source: Harvey, T. 1996, The Banking Revolution: Positioning Your Bank in the New
Financial Services Marketplace, Irwin Professional Publishing, USA, p. 11 cited in
Chaisomphol Chaoprasert, 2002, p.83)
In the Taiwanese banking industry, Zeithaml (2000) also found evidence about the
influence of service quality on profits and Heskett et al. (1997) argued that a “direct and
strong” relationship exists among service quality, customer satisfaction and profitability.
2.2. Empirical evidence.
2.2.1. Models.
Because of the role of service quality and changes in the business environment,
service quality actually becomes an interesting issue that takes attention to practitioners,
researchers, managers. There has been continued researches on the definition, models to
measure the service quality. During the period (1984 – 2003), nineteen conceptual service
quality models were reported [Nitin Seth and S.G. Deshmukh, Prem Vrat,2005, p.914].
This paper attempts to review some selected models that can be applied in this practical
thesis.
Model no.1. Technical and functional quality model (Gronroos,1984)
Gronroos pioneered to propose and define the dimensions of service quality in
global terms as comprising technical and functional parts . According the author, three
components of service quality are: technical quality, functional quality and image. A
service organization’s image functioned as a filter in the perception of service quality.
Finally, the model showed that service quality leads to customer satisfaction.

16. Page 7
Figure 2.1. Service quality model
Technical quality is the quality of what consumers actually receive as a result of
the interaction with the firms.
Functional quality is as the manner in which the customer receives the service
product (sometimes called the ‘process-related dimension’) (how customers get the
technical outcome) .
Image is very important to service business. Image is an asset for any firm because
image has an impact on customer perception of the communication and operations of the
firm in many respects. Image can be expected to build up mainly by technical and
functional quality of service including the other factors (tradition, ideology, word of
mouth, pricing and public relations).
Through the model, to manage perceived service quality, the firm has to match the
expected service and perceived service to each other so that customers are satisfied.
Model no.2: GAP model (Parasuraman, 1985)
Expected service Perceived service
quality
Perceived
service
Image
Technical quality Functional quality
Traditional marketing activities
(advertising, field selling, PR,
Pricing) and external influence
by traditions, ideology and word
of mouth
What? How?

17. Page 8
Gap 4
Gap 2
Words of
mouth
communication
Service delivery
(including pre and post
contacts)
Perceived
service
Expected
service
Personal needs Past experience
Translation of
perceptions into service
quality specifications
External
communications
to the consumer
Management perceptions
of the consumer
expectations
Consumer
Gap 1
Marketer
Gap 5
Gap 3
Parasuraman proposed that service quality is a function of the difference between
the expectation and performance. The author developed the model based on gaps
analysis.
Figure 2.2. Gap analysis model
Here, I’d like to focus on gap no.5. expected service – perceived service gap
which is defined as a method of service quality measurement.

18. Page 9
Originally, Parasuraman et al (1985) introduced ten dimensions of service quality
including reliability, responsiveness, tangibility, assurance, communication, competence,
credibility, courtesy and security, empathy. Later (1988), these dimensions collapsed into
five named: reliability, responsiveness, tangibility, assurance and empathy. The model of
Parasuraman was also called SERVQUAL.
Parasuraman et al. (1988) identified a number of potential applications for the
SERVQUAL model, including:
 It can be used on a regular basis to track customer perceptions of service quality
of a particular firm compared to its competitors.
 It provides the opportunity for a firm to assess its service quality performance on
the basis of each dimension individually as well as the overall dimensions.
 It allows the firm to classify its customers into different segments based on their
individual SERVQUAL scores.
 It allows multi-unit retail companies to assess the level of service quality offered
by individual stores and to group them into different sectors with different quality
images.
The SERVQUAL technique has attracted a lot of attention for its
conceptualization of quality measurement. However, it has also attracted criticism.
One of those is that the instrument mainly focuses on the service delivery process.
Therefore, Bahia and Nantel developed a specific new scale for perceived service quality
in retail banking. The bank service quality (BSQ) model is an extension of the original
ten dimensions of the model of Parasuraman. They added some items such as Courtesy
and access and items representing the marketing mix of the 7Ps (Product/ service, Place,
Process, Participants, Physical surroundings, Price and Promotion) (cited in H. Emari, S.
Iranzadeh and S. Bakhshayesh, 2011, p. 58).
Ladhari (2008) summarised a list of theoretical and empirical criticisms of the
model. First, he argued that the use of gap scores is not the right method because of the
lack of the support in literature to consumers evaluating service quality in terms of
perception-minus-expectation. He recommended that service quality is more precisely
and correctly evaluated by measuring only perceptions of quality In addition, he pointed
out that the previous research suggested using perception-only scores rather than gap
scores for the overall assessment of service quality.( cited in Tameem Al Bassam,
Sarmad Al Shawi 2009, p.7)
Model no.3: Attribute service quality model (Haywood-Farmer, 1988)

19. Page 10
This model stated that a service organization got high quality if it met customer
preferences and expectations consistently. The separation of attributes into various
groups step by step improves service quality. Generally, services have three basic
attributes: physical facilities and processes, people’s behavior and professional judgment.
Each attribute consists of several factors. Too much concentration on any one of these
elements to the exclusion of others may lead to a disaster.

20. Page 11
Figure 2.3. Attribute service quality model
Model no.4: Performance only model (Cronin and Taylor, 1992)
The authors investigated the conceptualization and measurement of service quality
and its relationship with consumer satisfaction and purchase intentions. They argued that
Performance instead of “Performance-Expectation” determines service quality as
SERVQUAL model. However, Cronin and Taylor (1992) did not conclude that it was
Professional Judgment
Diagnosis, competence, advice,
guidance, innovation, Honesty,
confidentiality, flexibility,
discretion, knowledge
Physical facilities and
processes:
Location, layout, décor, size
facility reliability, process
flow, capacity balance,
control of flow process
flexibility, timeliness, speed
ranges of services offered
communication
Behavioral aspects:
Timeliness, speed
communication (verbal, non
– verbal), courtesy, warmth,
friendliness, tact, attitude,
tone of voice, dress,
neatness, politeness,
attentiveness, anticipation,
handling complaints,
solving problems
1 2
3
4
5
1. Short contact/interaction intensity – low customization, for e.g. hardware/grocery shop
2. Medium contact/ interaction intensity – low customization.
3. High contact/ interaction intensity – low customization, for e.g. education
4. Low contact/ interaction intensity – high customization, for e.g. Clubs
5. High contact/interaction intensity – high customization, for e.g. Health care services

21. Page 12
unnecessary to measure customer expectations in service quality. The research did not
actually suggest that service quality fails to affect purchase intentions.
Model no.5. Service quality, customer value and customer satisfaction model (Oh,
1999).
The model mainly focused on post purchase decision process. The authors pointed
out incorporates key variables such as perceptions, service quality, consumer satisfaction,
customer value and intentions to repurchase. And the final result is word of mouth.
Results also indicate that perceived price has a negative influence on perceived customer
value and no relationship with perceived service quality .
Figure 2.4. Model of service quality, customer value and customer satisfaction
Model no.6. Internet banking model (Broderick and Vachirapornpuk, 2002)
With the development of technology, internet serves as a modern delivery channel.
The research used participant observation and narrative analysis of UK internet web site
community to explore how internet banking customers perceive and elements of this
model. Five key elements are treated as central influence on perceived service quality
including: customer expectations of the service; the image and reputation of the service
organization; aspects of the service setting; the actual service encounter; and customer
participation.
Actual price
Perceived price
Perceived
Service quality
Perceptions
Perceived
customer value
Customer
satisfaction
Repurchase
intention
Word of mouth

22. Page 13
Figure 2.5. Model of service quality in internet banking
2.2.2. Summary and comparative evaluation of service quality models.
Model no. Features Limitation Evaluation
(criteria)
Item (criteria)
Model no.1:
Technical
and
functional
quality model.
+ Scale: five
point Likert
+ Method of
analysis: Basic
statistical
analysis
+ Measurement
through:
Functional and
technical quality
The model does
not offer an
explanation on
how to measure
functional and
technical quality
1 – 2 – 3- 4
- 11
1. Identification of factors
affecting service quality.
2. Suitability for variety
of services in
consideration.
3. Flexibility to account
for changing nature of

23. Page 14
Model no.2:
GAP model
+ Scale: Seven
point Likert
+ Method of
analysis:
principal axis
factor.
+ Measurement
through: 5
elements
The model does
not explain the
clear
measurement
procedure
for the
measurement of
gaps at different
levels.
1 – 2 – 4 –
6 – 7 - 8 -
11
customers’
Perceptions.
4. Directions for
improvement in
service quality.
5. Suitability for
developing a link for
measurement of customer
satisfaction.
6. Diagnosing the needs
for training and education
of employees.
7. Flexible enough for
modification as per the
changes in the
environment/conditions.
8. Suggests suitable
measures for
improvements of service
quality.
9. Identify future needs
(infrastructure,
resources).
10. Accommodates use of
IT in services.
11. Capability of being
used as a tool for
benchmarking.
Model no.3:
Attribute
service
Quality
model
+ Measurement
through:
Physical
facilities and
processes,
people’s
behavior and
conviviality,
professional
judgment
It does not offer
the measurement
of service quality
It does not offer
a practical
procedure
capable of
helping
management to
identify service
quality problems
or practical
means of
improving
service quality
2 – 4 – 7 -
11
Model no.4:
Performance
only
model
+ Scale: Seven
point semantic
differential
+ Method of
analysis:
principal axis
factor
+ Measurement
through: same as
SERVQUAL but
with
performance
only statements
Need to be
generalized for
all types of
service settings
Quantitative
relationship
between
consumer
satisfaction and
service quality
need to be
established
1 – 2 – 4 –
5 – 6 – 7 -
8 - 11
Model no.5: + Scale: Six Model needs to 1 – 3 – 4- 5

24. Page 15
Service
Quality,
Customer
value and
Customer
Satisfaction
model
point
+ Method of
analysis: Path
analysis using
LISREL
+ Measurement
through:
Through single
item for
perceived price
and
eight items for
perceptions
be generalized
for different
types of service
settings
Model variables
are measured
through
relatively fewer
items
- 9
Model no.6:
Internet
banking
model
+ Method of
analysis:
Qualitative
approach
+ Measurement
through:
Through service
setting,
services
encounter,
customer
expectation and
image
Not much
empirical work
carried out
The model is
based on the
experience of
one web site
only,
needs to be
validated with
other
experiences
4 – 9 - 10
Table 2.3. Comparative evaluation of service quality models (source: Nitin Seth and S.G.
Deshmukh, Prem Vrat,2005, p.943].
2.2.3. Applications models in some countries.
As mentioned in table 2.3, model no.2 - GAP model and model no.4 –
Performance only model satisfy more criteria than others. In practice, SERVQUAL has
considered as the most popular measurement of service quality, special in banking
industry. SERVQUAL model has been applied in many countries.
In retail banking - a case of Qatar, the authors applied the SERVQUAL model
but modified to be suitable in this case. They constructed four dimensions (reliability,
competence, tangibility, and empathy) and designed 18 questions. The result shows that
the highest customers’ perceptions was demonstrated in the tangibility such as

25. Page 16
infrastructure facilities of the bank, modern equipment, followed by the empathy area
such as convenient time of transaction. On the other hand, the lowest perceptions was in
the competence, such as the method of imposing service charges followed by reliability,
such as customers’ guidance.
In Malaysia, the authors also employed the SERVQUAL scale to measure the
customer’s satisfaction and loyalty. Regression analysis shows that tangibility had no
significant impact on customer loyalty. Reliability is found to have positive relationship
with customer loyalty but not significant to customer satisfaction. Findings also indicate
that the relationship between responsiveness and customer loyalty was insignificant
despite responsiveness found to have positive relationship with customer satisfaction.
Empathy, assurance had significant positive relationship with customer loyalty and
customer satisfaction.
In India, there was a research study on service quality gap in private sector banks.
The study evaluates the customers’ perceptions based on service quality gap analysis.
Data was collected from 200 customers of Private Sector Banks using structured
questionnaire. The result showed that the dimensions of service quality such as empathy
and accessibility had more gap because the customers’ expectations were higher than
their perceived service. The result also indicated that empathy-reliability-assurance
positively influences the service quality.
In Canada, based on BSQ model, Bahia and Nantel (2000) conducted a research to
develop a valid measurement of perceived service quality. The questionnaire comprises
31 items classified across six dimensions as: effectiveness and assurance, access, price,
tangibles, range of services offered and accuracy and reliability.
Nowadays, with the strong technological development, business practices has
changed. Electronic banking is the result of the pressure from the increasingly
competitive business environment and customers’ demand. Many researchers examined
the service quality in an e-banking environment by providing a review of how traditional
service quality perceptions have evolved. A specific study was done in Australia with
database of 2500 business. The authors showed how the expectation rank of the five
service quality dimensions is compared to that of Berry and Parasuraman’s (1991)
original research. The results pointed that reliability remains to be the top most important
aspect of service quality for the customer. Responsiveness has moved down to third place
while assurance has moved up to second place in terms of importance rank.
Similarly, empathy has moved down a rank, while tangibles has moved up a rank.
Comparing the perceived performance ranking with the expectations ranking of this
research, however, shows much larger discrepancies. For the top two expectations,

26. Page 17
only assurance is perceived to be doing well, while in the bottom two expectations,
Tangibles seem to be overrated.
Service quality
dimension
Berry and Parasuraman
(1991) Importance rank
The research
Expectation rank Perception rank
Reliability 1 1 3
Responsiveness 2 3 4
Assurance 3 2 1
Empathy 4 5 5
Tangibles 5 4 2
Table 2.4. Comparing service quality dimensions with past research (by rank)
(cited in David H. Wong, Nexhmi Rexha and Ian Phau, 2008, p. 536)
Chapter conclusion
To sum up, this chapter gives the general knowledge of service quality. It includes
opinions, selected research models and practical researches in some countries. It is very
useful for shaping in my mind a model of Vietnamese banking service quality
measurement: A case of BIDV trade finance services quality in Ho Chi Minh City area.

27. Page 18
CHAPTER III:OVERVIEW ON TRADE FINANCE
IN VIETNAM.
This chapter provides the overview on trade finance in Vietnam from 2010 and specially
in BIDV. The analysis of BIDV’s strengths, weaknesses, opportunities, threats helps the
readers understand the BIDV trade finance service position. It is also one of reasons to
measure the trade finance service quality and focus on enhancing the service quality.
3.1. Trade finance in Vietnam.
After the reformation in 1986, international trade had become an increasingly
important part of the Vietnamese economy. Vietnam promotes trade with various policy
instruments such as implementing trade liberalization, including tariff reductions and
other measures designed to relax import and export restrictions. Trade liberalization of
Vietnam results from bilateral and multilateral commitments. With the release of trade
barriers, the demand of international trade and Viet Nam’s economy target, trade finance
development has still been interested in.
3.1.1. Export.
3.1.1.1. Some highlights in 2010.
Export turnover of 2010 is estimated reaching USD 71.6 billion, increasing by
25.5% against 2009. The domestic economic sector gains USD 32.8 billion, up by 22.7%;
the FDI sector (including crud oil): USD 38.8 billion up by 27.8%. If crude oil is
excluded, the FDI sector’s export turnover is USD 33.9 billion up by 40.1% against 2009.
There is also a change in the export turnover structure for some groups of
commodities. Textile garment is the leading export industry. Followings are footwear,
aquatic products and crude oil .

28. Page 19
Chart 3. 1: Major Export product of Vietnam in 2010 (source: www.vietpartners.com/Statistic-
imex.htm)
For exportation market, the United States is still Vietnam’s largest market with
estimated export turnover of USD 12.8 billion, accounting for 17.9% of the total export
turnover and up by 25.4% against the same period of 2009. Main exported items to this
market are textile (USD 5.5 billion), wood and wood products (USD 1.3 billion), shoes
and sandals (USD 1.3 billion), seafood. Followed by EU with USD 10 billion, accounting
for 13.9% and up by 15.9% with exported footwear turnover of USD 2 billion;
textile USD 1.64 billion; sea food USD 1 billion; wood and wood products USD 594
million. Exported goods to ASEAN gains USD 9.3 billion, accounting for 13% up by
19.6%, of which exported rice reached USD 1.5 billion; crude oil USD 1.4 billion;
gasoline USD 653 million. Exported goods to Japan reaches USD 6.9 billion, accounting
for 9.6% and up by 23.6% against the same period last year; exported goods to China
gains USD 6.3 billion, accounting for 8.8% and up by 48.6%.
3.1.1.2. First haft of 2011.
Customs statistic shows that in the 1st quarter of 2011, the total value of export is
up by 36.4% and reaches US$ 19.64 billion. The main exports outpacing the threshold of
US $ 1 billion are: textiles and garments, crude oil, foot wears, fishery products and
coffee. The total value of these main exports was approximately US $ 8 billion,
accounting for 40.6% of Vietnam total export value.

29. Page 20
Chart 3.2. Top ten main exports of Vietnam in first quarter 2011 (source: www. customs.gov.vn)
Total export revenue for the first six months of this year is estimated to reach
US$41.5 billion, up 27.8 per cent against the same period last year. Export average
monthly turnover of over US$7 billion, which was higher than the average target of US$
6.6 billion. Exports to a number of large markets including the US, EU, Japan and China
rose between 22-40 per cent.
For the whole 2011, Vietnam is forecasted to earn $74.8 billion from exporting
goods, up 10% from a year earlier.
The group of processing industry would bring the highest export turnover of about
$43.5 billion. Seafood export still meets difficulties due to criteria, rules…However, it is
expected to increase lightly and brings about $5.2 billion in 2011, up 5 percent year-on-
year. Vietnam's traditional markets would be still maintained.
3.1.2. Import.
3.1.2.1. Some highlights in 2010.
Import turnover of 2010 is estimated to reach USD 84 billion, up by 20.1% against
2009. The domestic economic sector gains USD 47.3 billion, up by 8.3%; and the FDI
sector with USD 36.7 billion, up by 39.9%.
China is still the largest market for Vietnam’s importation with total turnover of
USD 17.9 billion, up by 23.4% against the same period in 2009; ASEAN with USD 14.5
billion, up by 18%; Republic of Korea with USD 8.7 billion, up by 42.4%; Japan with
USD 8.1 billion, up by 21.7%; EU with USD 5.5 billion, up by 9%.

30. Page 21
Chart 3.3: Vietnam import year 2010 (source: www.vietpartners.com/Statistic-imex.htm)
3.1.2.2. In the first half of 2011.
The main import products in the first quarter of 2011 are: petroleum products,
iron, steel, machine and equipment, plastics, textile, leather and foot wear material, and
computer, electrical products, spare parts and components thereof.
Total import revenue for the first six months of this year are up 26.4 per cent
compared with the same period last year, at $49 billion.
The country's import is expected at $93 billion in 2011, up 10.7 percent against
2010's.

31. Page 22
Top 10 imports First quarter of
2011(million USD)
Compared with
previous year (%)
Machine and equipment 3,425 15
Petroleum products 2,296 61
Iron and steel 1,350 20
Fabrics 1,466 48
Computer, electrical products, spare parts
and components thereof
1,311 32
Plastics 1,092 43
Animal fodders and animal fodders
materials
613 -1
Textile, leather, foot ware materials 638 25
Chemicals 593 32
Chemical products 531 27
Others 9,812 28
Total value 23,128 29
Table 3.1: Top 10 import products in Vietnam in 1st
haft 2011( source: www. customs.gov.vn)
3.1.3. Vietnam trade balance.
In the first half of this year, trade gap is estimated at around $7.5 billion to account
for 18 percent of the total export turnover.

32. Page 23
Chart 3.4: Exports, imports and trade balance of Vietnam From Jun 2010 to March 2011.
(source: www.customs.gov.vn)
Vietnam is forecasted to incur $14.6 billion of trade deficit in 2011, accounting for
19.5% of the total exports.
3.2. Trade finance service in BIDV.
Payments for exports and imports in 2009 were approximately USD 1,200 million
and USD 5,200 million, respectively. Accordingly, net fees from trade finance gained
over VND 230 billion, growing by 51% over that in 2008.
As 2010, export and import turnover got over USD1,184 million and USD 4,391
million respectively. Export turnover was down 3% and import turnover was down 14%,
compared with 2009’s. Fees from trade finance gained over VND 226 billion, decreased
by 2% in 2009.
At the end of 2010, export - import financing volume got 26,900 billion VND and
13,905 billion VND, increased 5.9% and 52% respectively compared with 2009’s.
Export and import financing outstanding was 9,250 billion VND and 6,400 billion VND
respectively. In general, in 2010, import and export loans increase remarkably. Export
and import financing outstanding growth was 22 % and 98% respectively.
Determining the key export products, BIDV provides an export package to
stimulate and share benefits with exporters. BIDV identifies that, in short and long term,
the bank has still focused on supporting the key industries to enhance trade finance

33. Page 24
services fee and to contribute in economy development. BIDV has financed continuously
some industries as follows:
 Textile and garment industry: To the end of 2010, BIDV textile – garment export
loans volume increases 60% with 2009, took 17% total volume. Textile and garment
export turnover increase continuously year on year ( about 20%). Vietnam is one of
the top five export countries of this industry in the world with 3 big partners: US, EU
and Japan. With the prediction of favorable conditions, the garment sector plans to
earn more than $13 billion from exports in 2011. With the development policy of this
industry and tariff barrier relaxation, Vietnam import and export prospect of textile
garment industry continues to go up.
 Rice industry: To the end of 2010, the number of customer set up the relationship
to BIDV is 45, increase 5 customers more than in 2009’s.While, up to date Vietnam
has more than 300 companies to joint in rice export activity. Clearly, this segment is
still potential for BIDV to develop trade finance services.
The main market is Asia, especially in ASEAN. Rice export is assessed to be
optimist thanks to following reasons:
+ World rice demand: According to prediction, the demand of world rice is still
high due to the disadvantageous climate in many countries.
+ The capacity of Vietnam rice production: The export and store quantity is about
11.4 million tons, in which the balance can be exported is 5.8 – 6.3 million tons in 2011.
+ Expansion markets: Africa, Middle East, America are the new target markets.
 Seafood industry: It is expected that seafood industry continues to have a
remarkable number thanks to world demand and expansion market to new area.
To keep the strong brand position, to increase the trade finance service quality,
BIDV continues to keep its promise as the slogan “share opportunities, share successes”.
BIDV takes opportunities, develops its strengths and gradually overcomes the
weaknesses as well as threats.
 Opportunities:
+ International Finance Corporation (IFC) has loaned a record US$505 million for
the fiscal year 2011. Now, Vietnamese banks can help local companies increase foreign
trade through its Global Trade Finance Program.
+ The HSBC surveyed Trade Confidence Index. Enterprises were asked about
their six-month outlook on trade volume; buyer and supplier risks; the need for trade
finance; access to trade finance; and the impact of foreign exchange and government
trade regulations on their businesses. The results were used to calculate an index ranging
from 0 to 200, where 200 represents the highest confidence level, 0 represents the lowest

34. Page 25
and 100, neutral. The results shows a slight decrease in the confidence of traders in
Vietnam: in 1H10 Vietnam scored 132 (the peak in five survey periods), gradually
slipping 10 points to 122 in 2H10 and then six points to 116 in 1H11. However the
survey also shows that businesses in Vietnam are still optimistic about trade outlook and
expect their trade volume to grow. This clearly reflects the caution of Vietnam traders
regarding the challenges ahead, especially their rising concerns on fluctuating exchange
rates, high interest rates and buyer/supplier risks. Although there was a slight decrease in
the trade confidence index, Vietnam traders remain positive, with the majority of
respondents saying that they expect trade volume to increase (70 percent in 1H11)
 Strengths:
+ Place (network distribution): By 2010-end, BIDV has 120 branches and 483
transaction offices. The Bank’s network has covered 63 provinces/ cities, spreading from
crowded residential and urban areas to commercial and financial centers nationwide. To
traditional distribution, BIDV ranks 3rd
position in banking system.
Besides, BIDV has expressed its international cooperation experiences by
developing the correspondent banking relationship with over 1,600 financial institutions
worldwide. BIDV implements large projects with international financial institutions such
as WB, ADB, JBIC, IMF, ECB. The bank also expands its business into: Cambodia,
Myanmar, Lao, Russia…
+ People (human resource): BIDV has placed adequate emphasis on the
recruitment and placement of qualified and professional staff for all positions to ensure
sufficient staff to meet the demands of business development and network expansion. At
the end of 2010, the total number of employees was more 16,000. The quality of staff has
been improved educationally and professionally. The graduated and post-graduated
employees accounted for 85.3%, increased by 2.69% compared to those of 2009. Their
professional and managerial competence have been improved to enable them to master
modern banking technology and adapt to the competitive working environment.
+ Products: BIDV initially focus on diversification of trade finance products such
as: discount without recourse, Trade card discount, import L/C finance for agricultural
products through GSM 102 – 103 program of U.S Department of Agriculture.
 Weaknesses:
+ Poor services portfolio: Some trade finance products have not developed such as
export import factoring...
+ Place: Despite BIDV is ranked 3rd
position in banking system, the modern
distributions such as home banking, internet banking are still limited.
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35. Page 26
+ Policy: Foreign exchange rate is less competitive. The financing procedure is
complex. These prevent trade finance operation development and make some customers
leave BIDV.
 Moreover, BIDV encounters some threats from other competitors:
+ Foreign banks: Increased presence of foreign banks with the priority of capital,
technology, human resource, portfolio services…
+ Vietinbank: Vietinbank, Ho Chi Minh city branch gives a special package of
2.000 billion VND to finance export firms with the preferential interest. With this
program, exporters can borrow from the bank at the down interests in 2% per year for
VND loans and 1.5% per year for USD loans.
+ Vietcombank: The bank signs a memorandum with the largest Italia Bank.
Thanks to this, Vietcombank can support Vietnamese corporate customers who need to
set up or expand their business in international markets.
+ LienVietBank: The bank joints in Global trade finance Program with IFC.
Thanks to this program, LienVietBank has the opportunity to cooperate with more than
400 big banks in the area and on the world.
Chapter conclusion
Export – Import picture is opened little by little with the optimism in 2011. The
chart 3.5 indicate that BIDV should make efforts to increase trade finance services
quality to enhance its position with other competitors. BIDV will have opportunities to
serve export – import better if BIDV has a specific strategy for improvement of trade
finance services quality. It is one of the efficient business fields because it brings the big
fee income and contributes in the balance of the demand and supply of foreign exchange.
It is also quite suitable with the modern banking models in the area and on the world. The
point is that it increases the income from charges of services and gradually decreases the
ratio of credit.
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36. Page 27
0
5
10
15
20
25
30
35
VCB ICB BIDV Techcom Eximbank
Banks
Billion
USD
2008
2009
2010
Chart 3.5: Comparison export and import turnover of BIDV with some banks.
(Abbreviation note: VCB: Vietcombank, ICB: Incombank, BIDV: Bank for investment and
development of Vietnam, Techcom: Techcombank)

37. Page 28
CHAPTER IV: DATA ANALYSIS AND FINDINGS.
The previous chapters provide the theoretical framework for the research. Although
SERVQUAL has the limitations, it has been applied in many researches especially in
banking industry. Therefore in this thesis, initially the author uses the SERVQUAL
model with the available scale and questionnaire. Then, as mentioned in the literature
review, because the SERVQUAL has its flaw, it may be modified to be suitable. As the
result, I will consider to add two variables (price and portfolio) to reflect the practical
case study – trade finance services quality in BIDV, HCMC . Regression analysis based
on only the customers’ perception scores.
4.1. Methodolody.
4.1.1. Data collection.
Data for this study was collected using a quantitative survey technique. This study
was conducted in two stages. Stage one involved a pilot study which was conducted to
refine the test instrument. Pre-testing of the questionnaire shall be administered to a
sample size of about 8 respondents to ensure that there are no biases in the questions or
the questions are constructed clearly and understandably for the respondents.
Stage two involved the distribution of 150 surveys to BIDV’s branches in Ho Chi
Minh City.
4.1.2. Sample size.
The population for this study is limited to corporate customers of BIDV who use
the trade finance services of BIDV in Ho Chi Minh City. Due to the limitations of time
and budget, this study uses convenience sampling. It is said that there is no consensus in
the previous researches on how large the sample size should be to represent a population.
A formulas to calculate the sample size was provided. However it is not easy to apply.
The sample size for this study was intended to be 150 respondents. The researcher
gathered 123 questionnaires, yielding a response rate of 82 per cent. Finally, 100
questionnaires (81.3 per cent) were fully and correctly completed.
4.1.3. Questionnaire design.
A questionnaire was used to collect the data. The questionnaire is designed in part
1 with the profile information of respondents. In part 2, questionnaire based on 22- item
survey instrument of SERVQUAL model for measuring service quality. But it is short
description and also translated into Vietnamese. Two meaningful variables (price and
service portfolio) was considered to add in this study. The questionnaire focused not only
on the components of service quality but also on the overall quality. Respondents were
6674659