Table 1: Reliability Testing
DIMENSION CRONBACH ALPHA
1.Bank strength 2.Customer service
3.Products and services offered 4.Competitiveness with other banks
0.740 0.779 0.325 0.671
Based on Table 1, three dimensions (1, 2 and 4) recorded an Alpha of more than 0.60, which indicated that these dimensions were accepted for further analysis. The third dimension, products and services offered had an Alpha of less than 0.60, which indicated that the items under this dimension do not really measure what it should be measuring and thus was omitted.
LITERATURE REVIEW
This industry has changed since the mid-1980s in the form of increasing competition in the marketplace, growing financial awareness by customers, economic pressures on traditional markets and government legislation. These changes have contributed in making the market for retail financial services more open (Davis, 1994). Birch (1995) warns that "Fierce competition will lead to fewer financial service organizations ... smaller banks will merge with larger ones, and many may disappear altogether". Ellwood (1994) suggests that: in the year 2000, the customer will see a banking marketplace where the blurring of identity between banks, insurance companies, and of other possible competitors that will enter in the market, will have accelerated... Customers will shop around more than ever and profitability will come under pressure. The result of this "shopping around" culture will be a higher mobility among customers buying financial products. Differentiation will continue to lead the marketing strategy of banks, but it will be centered neither on products, as they are about the same, nor on price, as price differentials are minimal. Therefore, how will a financial institution, such as a retail bank, compete in such an environment? How will it differentiate its offerings from those of its competitors (Birch, 1995; BMA, 1991)?
Financial institutions are acknowledging that unless customer needs are taken into account in designing and delivering services, technical superiority will not bring success (Zeithaml and Bitner, 1996). New marketing concepts and strategies (Ennew et al., 1993) are paying greater attention to identifying customer needs and expectations (Morgan, 1989) and offering high levels of service quality (Lewis, 1991; 1993; Thwaites and Vere, 1995). As argued in the literature (Brown and Swartz, 1989; Buzzel and Gale, 1987; Edvardsson et al., 1994; Grönroos, 1990; Lewis, 1989; 1991; Lewis et al., 1994; Parasuraman et al., 1988; 1991; Zeithaml and Bitner, 1996; Zeithaml et al., 1990), it is probably the effective measurement, management and improvement of service quality which will enable financial institutions to achieve a differential advantage over their competitors (Lewis, 1989; 1991).
The literature of bank marketing shows that little attention has been paid by researchers to business customers (sometimes called corporate customers). One early study was undertaken by Kaufman (1967) to determine the important criteria judged by retail and corporate customers influencing their selection and patronization of specific banks. The study found that the majority of the sampled respondents selecting the most convenient bank to their home, place of business, or both. Other few studies were conducted among corporate customers in Hong Kong to explore their banking behaviour and bank selection decisions (Chan and Ma, 1987, 1990; Kong and So, 1981). One study by Edris (1997) highlighted the determinant factors a bank in Kuwait by business firms. The ranking were size of bank assets (1), efficiency of personnel (2), help in financial emergencies (3), banking experience (4), friendliness of staff (5), reputation (6), communications with staff (7), knowledge of firm's business (8), prompt provision of services (9), and availability of branches abroad (10). The lowest-ranking determinant factors, on the other hand, were: effective advertising (27), interests on deposits (26), lending policy (25), Islamic banking practices (24), attractiveness of branches (23), parking areas and facilities (22), hours of operation (21), Kuwaiti ownership (20), fees/interest charges on loans (19), and convenience of location (18).
METHODOLGY
In general, this research attempts to determine the main criteria international business operators look for when deciding which banks to patronize. The research was conducted closely in accordance to similar researches in bank selection put forth by Edris, T.A. (1997), Nielsen,Terry and Trayler (1998) and Haron,Ahmad and Planisek (1994). The research was conducted using survey approach that consisted of multiple-choice questionnaires requiring respondents to give fixed responses to the statements or questions asked. The sources of the research
data were a combination of both primary and secondary data. The primary data for this research were gathered through the distribution of questionnaires to selected international business operators; namely logistics service providers, forwarding agents and other operators of the same nature in Klang Port, Selangor, Malaysia. The list of international business operators located in Klang Port, Selangor was obtained from the Federation of Malaysian Manufacturers (FMM) e-directory. A questionnaire was replicated from the earlier researches done by Edris, T.A. (1997), Nielsen,Terry and Trayler (1998) and Haron, Ahmad and Planisek (1994).
The population for determining the main criteria for bank selection among international business operators was every international business operators in the vicinity of Klang Port, Selangor, Malaysia. Due to time and resource constraints, nonprobability sampling method, more specifically, convenience sampling was applied for this research. The researcher conducted convenience sampling method by randomly selecting international business operators listed in the e-directory of international business operators. According to Sekaran (2000), if the population of a study is about 270, the sample is equivalent to 159. However, in this study, the researcher has distributed 170 questionnaires to international business operators located in Port Klang, Selangor listed in the Malaysian Manufacturers e-directory. Out of the 170 questionnaires distributed, 52 were returned back to the sender and 4 of the returned questionnaires were incomplete leaving the researcher with only 48 valid responses. According to Roscoe (1975), sample sizes larger than 30 and less than 500 are appropriate for most research thus this research was carried out although the response rate was quite low. Descriptive Statistical Technique was used to show the variables in terms of their frequency, percentages, standard deviation and mean. It was applied to analyze all the statements and questions from Section A and Section B of the questionnaire to draw statistical conclusions from the responses. The descriptive analysis techniques were used to answer research questions 1, 2 and 3.
FINDINGS AND ANALYSIS
Out of the 48 respondents, 14 were forwarding agents, 14 others were logistics companies and another 14 were logistics companies. This constitutes 87.6% of the total respondents. 79.2% of the respondents were local companies and the majority of them were wholly owned companies (87.5%). More than one third of the companies (37.5%) had employees between 1 to 30 workers and 31.3% of them had the most number of employees (more than 120). From the 48 responses received, 68.8% of the respondents had business dealings around Asia while only one served the Middle East markets. More than half of the total respondents (58.3%) were in their 6th to 15th year in business. 60.4% of the respondents used two banks while 31.3% used 3 banks in their daily operations. 70.8% of the respondents indicated that they preferred banks of local origin.
Table 2: Means and Standard Deviations for Dimension 1
Variables Mean Std.Deviation
Bank Strength Bank’s reputation Innovative services
Reliability of personnel / staff Knowledge of firm’s business Banking expertise
Size of bank’s assets
Origin of bank (Local / Foreign banks) Availability of branches abroad
4.26 4.44 4.42 4.35 4.31 4.27 4.25 4.08 3.98 0.343 0.501 0.498 0.483 0.511 0.676 0.565 0.647 0.758
The table above indicated that all the variables under the bank strength dimension showed a favorable mean which showed that these variables were important as criteria for them to choose the preferred banks. Almost all variable had a mean of more than 4 with the exception of the variable ‘availability of branches abroad’.
Table 3: Means and Standard Deviations for Dimension 2
Variables Mean Std.Deviation
Customer Service
Safety of funds and confidence Efficiency in correcting mistakes Speed of service and decision making Efficiency of personnel / staff Friendliness of personnel / staff Operating hours
Ample nearby parking facilities Convenience of location Prompt services
E-banking / Online banking Attractiveness of branches Effective advertising 4.17 4.69 4.63 4.48 4.33 4.27 4.27 4.21 4.19 4.10 4.00 3.67 3.25 0.330 0.468 0.489 0.505 0.519 0.610 0.610 0.544 0.445 0.805 0.743 0.996 0.601
Under the customer service dimension, the majority of the variables recorded a response of 4 and above which indicated that variables under this dimension were important in selecting banks. The highest mean recorded was for the variable ‘ safety of funds and confidence’. Two variables, effective advertising and attractiveness of branches had means of 3.25 and 3.67 respectively.
Table 4: Means and Standard Deviations for Dimension 3
Variables Mean Std.Deviation
Competitiveness with other banks Flexibility in loan negotiations Lending policy
Interest on deposits
Fee / interest charged on loans
4.15 4.44 4.21 4.04 3.92 0.550 0.542 0.713 0.824 0.942
For the third dimension, all except one variable had means of more than 4. This indicated that the variables under this dimension were important in bank selection. However, the variable ‘fees/ interest charged on loans’ recorded a mean of 3.92, which pointed out that the respondents were unsure whether this variable is important, or not to depict the competitiveness of a bank with other banks.
Table 5: Ranking of Variables
Variables Mean Ranking
Safety of funds and confidence Efficiency in correcting mistakes Speed of service and decision making Flexibility in loan negotiations Bank’s reputation
Innovative services
Reliability of personnel / staff Efficiency of personnel / staff Knowledge of firm’s business Friendliness of personnel / staff Operating hours
Banking expertise Size of bank’s assets
Ample nearby parking facilities Lending policy
Convenience of location Prompt services
Origin of bank (Local / Foreign banks) Interest on deposits
E-banking / Online banking Availability of branches abroad Fees / interest charged on loans Attractiveness of branches Effective advertising 4.69 4.63 4.48 4.44 4.44 4.42 4.35 4.33 4.31 4.27 4.27 4.27 4.25 4.21 4.21 4.19 4.10 4.08 4.04 4.00 3.98 3.92 3.67 3.25 1 2 3 4 4 6 7 8 9 10 10 10 13 14 14 16 17 18 19 20 21 22 23 24
From Table 5, the variables with the highest mean were safety of funds and confidence, followed by efficiency in correcting mistakes and speed of service and decision making. This showed that in selecting which banks to patronize, international business operators rank safety of funds and confidence as the most important criteria that a bank should have. This indicated that the element of trust was very important to entice would-be customers to patron specific banks. Surprisingly enough, attractiveness of branches and effective advertising were the variables with lower means. This showed that customers would not choose a bank based solely on exterior factors and aggressive promotional activities.
Table 6: Ranking of Banks
Name of Bank Frequency Percentage (%) Origin (L/F) * Ranking
Maybank 23 47.9 L 1 Standard Chartered 14 29.2 F 2 HSBC 14 29.2 F 2 Affin Bank 12 25 L 4 AmBank 11 22.9 L 5 RHB Bank 11 22.9 L 5 BCB 10 20.8 L 7 EON Bank 10 20.8 L 7 Southern Bank 4 8.3 L 9 Alliance Bank 2 4.2 L 10 Citibank 2 4.2 F 10 UOB 2 4.2 F 10 Bangkok Bank 1 2.1 F 13
Hong Leong Bank 1 2.1 L 13
Public Bank 1 2.1 L 13
Note: * L = Local , F = Foreign
Table 6 lists all the banks that the respondents used and their rankings. Maybank, a local bank was the most preferred bank among the international business operators. It garnered 47.9% votes, which indicated that almost half of the respondents used Maybank in their business operations. The second and third spots went to foreign originated banks, Standard Chartered and HSBC. The two banks that were least preferred by the respondents were Hong Leong and Public Bank. This was apparent from the responses collected whereby only one response was gathered for each bank. Two banks, namely Bank of China and Bank of America, both foreign-originated banks were not preferred by any of the respondents.
DISCUSSIONS
Due to the competitive nature of the banking industry, it is imperative that banking institutions pay closer attention to what the customers really want. Thus, knowing the criteria customers, in this case, international business operators look for in a bank is critical to maintain a healthy relationship between both parties. From the findings, it is concluded that the most important criteria international business operators look for in a bank is safety of funds and confidence. No doubt the element of trust should be present in order for a business customer to patronize specific banks. This criterion is followed by the second highest ranking criterion namely efficiency in correcting mistakes, which brought us to the conclusion that customers want any errors to be corrected promptly as to not loose precious business time. The third important criterion in bank selection identified was the speed of service and decision making. It can be inferred here that the underlying reason for the importance of this criterion is that customers do not want their smooth-sailing business operations to be disrupted by glitches in terms of banking services. These hiccups will eventually affect the relationship between both parties and might be an underlying excuse to change provider. On the other hand, the bottom three least important criteria identified were effective advertising, attractiveness of branches and fees / interest charged on loans. This implied that promotional efforts, decorative factors and competitiveness with other providers were unimportant in bank selection. Comparing the means for all three dimensions, it is concluded that the first dimension, bank strength had the highest mean (4.26). Therefore, this possibly showed that almost all the variables under this dimension were important in bank selection. In addition, possibly, a bank’s strength was the most important factor that distinguishes one bank from the other.
Tapping further into the identified criteria international business operators look for in selecting banks, I am of the opinion that since these companies’ daily operations normally involves a lot of cross-border activities and delivery of goods to most parts of the world, it is highly relevant for them to put confidence and trust as the key elements in selecting banks. To them, these banks will act as middlemen for giving and receiving funds and relevant documents, such as Letter of Credits to and from other banks and from their clients. Therefore, it is
highly important for these operators to have confidence in their chosen banks. Furthermore, when dealing in a business environment where timing is everything, you need to find banks, which can deliver what they promise as and when needed. Any glitches will result in extra cost such as paying for demurrage; which is charges paid to the port for goods / vessel that are not unloaded within the specified time frame and paying extra for storage for goods which are not released promptly. It gets worse if the operators are dealing with perishable goods like foodstuff. When compared with a similar study by Edris (1997), the top three identified criteria deemed important among business customers were size of banks assets, efficiency of personnel and help in financial emergencies. Meanwhile, the lowest ranking determinants identified by Edris (1997) were effective advertising, interest on deposits and lending policy. Although the findings have more dissimilarities than similarities, one criterion remained the same. It showed that effective advertising were ranked the lowest in both studies. Comparing with another similar study by Nielsen et al. (1998), the most important criterion in selecting banks was the willingness of the bank to accommodate the customers’ credit needs, followed by the efficiency of bank’s daily operations and bank’s knowledge of the company’s business.
LIMITATIONS
There were several limitations to this study, which should be noted. First, given that the sample comprised of international business operators in Port Klang, Selangor, the results may not be generalize to other populations. Second, there is an imbalance in terms of local and foreign companies as respondents, which suggest that, further investigations for other relevant factors to be included in future researches. This imbalance would probably lead to ‘Country-of-Origin’ biasness. Third, since the Federation of Malaysian Manufacturers (FMM) e-directory did not indicate whether the company was actually the head office or only the branch, this might have an impact to the responses given because normally the head office will handle the selection of banks.
CONCLUSION
Hopefully , this study has managed to answer all its objectives and contributed some input to the body of the relevant literature. As a conclusion, the most important criteria international business operators in Port Klang, Selangor look for in a bank is the safety of funds and confidence. The least important criteria in bank selection is effective advertising. The most important dimension in bank selection is the bank strength factors. The most preferred bank is Maybank, followed by Standard Chartered and HSBC. It is recommended that a comparative study be conducted to determine the services considered important to business customers and compare the rankings of important services among different types of businesses. The business firms could be categorized according to nature of business, origin, size and so forth. Another area that could be further studied is on the intention, attitudes and social influence in bank selection in a specific culture.
** This research was carried out with the funding obtained from the Faculty of International Studies, Universiti Utara Malaysia.
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