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ADMAS UNIVERSITY POST GRADUATE OFFICE MBA PROGRAM

DETERMINANTSOF EMPLOYEES' PERCEPTION OF SERVICE QUALITY IN ADDIS ABABA COMMERCIAL BANKS BY: ETAFERAHU SHIFERE ABEGAZ

ADVISOR: ANDINET ASMELASH (ASSIST. PROF.)

A PROPOSAL SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTERS OF ARTS IN BUSINESS ADMINISTRATION (MBA)

ADMASS UNIVERSITY MEKENISA CAMPUS

MARCH, 2021 ADDIS ABABA, ETHIOPIA

DECLARATION I, Etaferahu Shifere Abegaz, the under signed, declare that this thesis entitled: “Determinants of Employees' Perception of Service Quality in Addis Ababa Commercial Banks” is my original work. I have undertaken the research work independently with the guidance and support of the research advisor. This study has not been submitted for any degree or diploma program in this or any other institutions and that all sources of materials used for the thesis has been duly acknowledged.

Declared by Name___________________________ Signature: ____________________ Department ___________________________ Date ___________________________

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CERTIFICATE OF APPROVAL OF THESIS SCHOOL OF POSTGRADUATE STUDIES ADMAS UNIVERSITY This is to certify that the thesis prepared by Etaferahu Shifere Abegaz, entitled “Determinants of

Employees' Perception of Service Quality in Addis Ababa Commercial Banks ” and submitted in partial fulfillment of the requirements for the Degree of Masters of Arts in Business Administration /MBA/ complies with the regulations of the University and meets the accepted standards with respect to originality and quality.

Name of Candidate: _____________; Signature: _______________Date: _____________. Name of Advisor: _____________; Signature: _______________Date: _____________.

Signature of Board of Examiner`s: External examiner: ____________________Signature: ____________Date: _____________. Internal examiner: ____________________Signature: ____________Date: _____________. Dean, SGS: _________________________ Signature: ____________Date: _____________.

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TABLE OF CONTENTS Contents

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DECLARATION..................................................................................................................................i CERTIFICATE OF APPROVAL OF THESIS..................................................................................ii TABLE OF CONTENTS...................................................................................................................iii LIST OF TABLES...............................................................................................................................v LIST OF FIGURE..............................................................................................................................vi LIST OF ABBREVIATION..............................................................................................................vii ACKNOWLEDGEMENT...............................................................................................................viii CHAPTER ONE..................................................................................................................................1 INTRODUCTION...............................................................................................................................1 1.1.

Background of the Study.......................................................................................................1

1.2.

Statement of the Problem.......................................................................................................4

1.3.

Research Questions................................................................................................................6

1.4.

Objectives of the Study..........................................................................................................6

1.4.1.

General Objective..........................................................................................................6

1.4.2.

Specific Objectives........................................................................................................7

1.5.

Research Hypothesis..............................................................................................................7

1.6.

Scope of the Study.................................................................................................................7

1.7.

Significances of the Study.....................................................................................................8

1.8.

Organization of the Study....................................................................................................10

CHAPTER TWO...............................................................................................................................11 LITERATURE REVIEW..................................................................................................................11 2.1.

Introduction.........................................................................................................................11

2.2.

Theoretical Literature..........................................................................................................11

2.2.1.

Overview of Banking Sector in Ethiopia......................................................................11

2.2.2.

Determinant Factors of Growth....................................................................................12

2.2.3.

Dimensions of Service in Commercial Banking..........................................................14

2.2.4.

Role of Customer Service Employees..........................................................................14

2.2.5.

Internal Service Factors...............................................................................................15

2.2.6.

Market, Service and Customer Orientation..................................................................22 iii

2.3.

Empirical Literature.............................................................................................................23

2.4.

Conceptual Framework........................................................................................................26

2.5.

Summary and Knowledge Gap............................................................................................27

CHAPTER THREE...........................................................................................................................29 RESEARCH METHODOLOGY.....................................................................................................29 3.1.

Introduction.........................................................................................................................29

3.2.

Research Design..................................................................................................................29

3.3.

Research Approach..............................................................................................................30

3.4.

Type and Sources of Data....................................................................................................30

3.5.

Population, Sampling Technique and Sample Size..............................................................30

3.5.1.

Population of the Study................................................................................................30

3.5.2.

Sampling Technique.....................................................................................................31

3.5.3.

Sample Size.................................................................................................................31

3.6.

Data Collection Tools..........................................................................................................31

3.7.

Data Analysis Method..........................................................................................................31

3.8.

Variables Description and Measurement..............................................................................32

3.8.1.

Dependent Variable......................................................................................................32

3.8.2.

Independent Variables..................................................................................................32

3.8.3.

Model Specification.....................................................................................................32

3.9.

Reliability Test.....................................................................................................................32

3.10.

Time and Budget Schedule..............................................................................................33

3.10.1.

Time Schedule.............................................................................................................33

3.10.2.

Budget Schedule..........................................................................................................34

REFERENCES..................................................................................................................................35

iv

LIST OF TABLES Table 1: Time Schedule............................................................................................................29 Table 2: Budgetary Plan...........................................................................................................29

LIST OF FIGURE

v

Figure 1: Conceptual Framework.............................................................................................24

LIST OF ABBREVIATION CBE:

Commercial Bank of Ethiopia

EPSQ:

Employee perception of service quality vi

GDP:

Gross domestic product

SPSS:

Software Package for Social Sciences

ACKNOWLEDGEMENT

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viii

CHAPTER ONE INTRODUCTION This chapter presents a general background of the study, Objectives of the study as well as statement of the problem. The chapter further describes the scope of the study, significance of the study and organization of the study.

1.1.

Background of the Study

Not many items are absolutely benefits or simply actual merchandise; they are isolated relying upon the substance of the center contribution. A vehicle for instance, is an actual item to the individual proprietor, though a visit organization utilizing vehicles gives and sells visiting administrations. Appropriately, the organizations are ordered as having a place with the assembling area or administration area, despite the fact that these areas are associated and interrelated (Kotler, 2002). Despite the fact that administrations are significant for both assembling and administration associations, they are essential for the assistance area as they establish the embodiment of the business. For those kinds of organizations, disappointment of administration implies disappointment of the item bringing about complete disappointment of the client. Besides, administration area is getting progressively prevailing in the economy because of the developed client complexity and rise of new help needs. The size of the assistance area is expanding in practically all economies around the planet. "As a public economy builds up the overall portion of work among farming, industry and administrations changes drastically. Indeed, even in arising economies, administration yield is developing quickly and frequently addresses in any event half of the GDP" (Lovelock, Wirtzand Chatterjee, 2006). Subsequently, understanding the measurements and keeping up steady help quality, especially in the assistance area, has become the focal point of organizations. As the economy and profitability of a nation develop, so builds the significance of its administration arrangement capacities in each area. Administrations, regardless of whether in a help giving association or some other type of association assume a huge part in the advanced business or public exchanges. Be it a help selling organization, an actual decent selling

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organization, an administration foundation or a non-legislative establishment, they all need administrations as a connection among client and supplier. In a business setting, the fruitful collaboration of clients and associations is characterized by the organizations' and its workers' degree of administration direction. It isn't sufficient to have the best item contributions. How the item is introduced to clients with every one of its highlights and advantages decides its worthiness by the clients, and their definitive fulfillment (Lovelock, Wirtz and Chatterjee, 2006). Ethiopia isn't yet a created country yet lately it has recorded a consistent monetary development. Truth be told, it is one of the quickest developing economies of the world averaging 10.6% yearly increment for the time frame 2004-2012 contrasted with the territorial normal of 4.9% (World Bank, 2013). It is likewise significant that the primary drivers of this development are the assistance area and the horticultural area while fabricating has recorded an unobtrusive increment. For the time frame 2011/2012 help area covered 44.9% of the General Domestic Product of the country (National Bank of Ethiopia Annual Report, 2011/2012). It is fundamentally made out of lodgings, retailers, wholesalers, transport organizations and monetary establishments. The monetary foundations are among the drivers of the area's ceaseless development since 1994 after the becoming effective of the Licensing and Supervising Banking Business declaration no 88/1994. The quantity of banks working in Ethiopia has arrived at 19 by end of September 2013 of which 16 are exclusive. These banks have opened an aggregate of 1832 parts of which 33.5% are situated in Addis Ababa (National Bank Quarterly report, 2013). Albeit Automated Teller Machines have as of late been presented, business banking exchanges in Ethiopia are prevalently founded on individual to individual communication of workers. Along these lines, keeping up predictable assistance quality will be testing and it ought to be an essential worry for the monetary foundations. Appropriately, the subject has become the focal point of various explores. Singular analysts just as foundations have perceived the significance and meaning of the help area in Ethiopia. Subsequently, one can discover numerous investigations led nearby help quality and its effect on consumer loyalty. A decent number of these investigates are contextual analyses of monetary establishments, especially banks and insurance agencies. Contingent upon the goals of the separate investigates, some have endeavored to gauge administration quality from the clients viewpoint, others from the association's perspective. A couple have additionally centered 2|Page

around representatives' commitment towards the conveyance of administration quality. Regardless of their concentration and picked viewpoint, the aftereffects of these investigates underline and show closeness in distinguishing bleeding edge workers as significant donors for conveyance of administration quality. For example the Commercial Bank of Ethiopia actualized Business Process Reengineering during 2008/2009 monetary year zeroing in on representative strengthening which brought about improved effectiveness and consumer loyalty (Kebede and Eshetu, 2012). Mesay (2012), builds up the significance of representatives in conveying quality help in his investigation of Hawassa banks. The territories where these banks need to deal with to improve client impression of administration quality are responsiveness and sympathy. Counter staff should be ceaselessly prepared with legitimate expertise of offering mindful and brief assistance. Abdulmalik and Gurswamy (2007) assessed banks in Mekelle from an agricultural nation viewpoint and tracked down that the subsequent normal explanation behind clients to leave business banks is because of staff disposition and the helpless assistance related with it. From an overall assistance area perspective, it is tracked down that Ethiopian help representatives show sporadic conduct toward male and female clients, they will in general be mechanical and directly forthright and sometimes needed item information and critical thinking capacity prompting substandard degree of consumer loyalty. The trouble for administration workers to convey predictable quality radiates from the actual attributes of administrations. Administrations are theoretical and thus no actual great possession results from the exchange. They are variable on the grounds that each time an assistance is conveyed the consistency relies upon the specialist co-op's just as the client's disposition and conduct. Administrations require the client to be available at creation site and they are burned-through a similar time they are delivered, moreover once created they can't be duplicated. These highlights make it hard for associations and workers to keep up steady assistance quality to the normal degree of clients. Administration quality is profoundly reliant on human demeanor and conduct. This can be additionally clarified by the ten assistance quality measurements which administration specialists use to build up help quality: Access, correspondence, ability, kindness,believability, unwavering quality, responsiveness, security, physical assets and

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downplaying the client. These measurements are straightforwardly or by implication impacted principally by the workers conveying the help just as by other supporting back office representatives. Especially, because of the low degree of mechanization in Ethiopia, there is serious level of individual to-individual association among workers and clients (Polturi and Magnale, 2011). Thus, the representatives' degree of mindfulness and enthusiasm for administration quality will straightforwardly affect the genuine conveyance and consumer loyalty.

1.2.

Statement of the Problem

In a growing economy healthy business organizations, under normal circumstances, pursue a growth strategy as is the case of the banks in the financial sector of Ethiopia. Both government and private banks are increasing their number of branches in the capital Addis Ababa as well as other cities of the country to keep pace with the escalating demand. In this context, it should be noted that, one of the fundamental requirements of any strategy are planning, organizing as well as managing of internal resources and capabilities. A growth strategy, in particular, necessitates the commitment and engagement of financial and nonfinancial resources at an increasing and reliable flow. For service organizations, human resources are of special significance, as they are direct constituents of the product offerings. With the proper level of skills, capacity for communication and motivation they can become the source of strategic competitive advantage for their company. This is unfortunately, easier said than done as services cannot be produced in advance and put in inventory...