(www.gjmst.com) Vol. 1 Issue. 3 ISSN 2277-5978 (Online)

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Global Journal Of Management Science and Technology (www.gjmst.com)
ISSN 2277-5978 (Online)
April|2012
www.gjmst.com
Vol. 1 Issue. 3
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Menoufia University
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April|2012
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Vol. 1 Issue. 3
TABLE OF CONTENT
5
Banking Sector Reforms And Smes Financing In Nigeria
IORPEV, LUPER
Effect of Using Molecular Models on Students’ Achievement Scores in Structure and Chemical
Bonding in Kenyan Public Secondary Schools
13
Mulavu Wycliffe Garanja, Vincent Maurice Omolo, Ronald Michieka
Corporate Governance and Ethical Sensitivity of Directors of Listed Companies: Evidence
from Nigeria
20
Dr. Jafaru Jimoh, Dr. (Mrs.) Philipa O. Idogho, Dr. Francis O. Iyoha
28
Climate Change: Challenge to Agricultural Extension Practice in Nigeria
G.E. Ifenkwe
Assessment of Students’ Understanding of Chemical Bonding Concepts in Secondary Schools
of Bungoma West District, Kenya
32
Mark Wanyonyi, Maurice O. Omolo, Ronald Michieka
38
Women Working In Construction Management Roles: Is It Worth It?
Dr Jacqueline H. Watts
45
Banks’ New Products And Customer Satisfaction In The Nigerian Banking Industry
Alabar, T. Timothy
Factors Affecting Micro Enterprise Accessibility To Business Development Services In Arusha
Tanzania
54
Ikandilo Kushoka
Effective Crm Practices Could Be The Competitive Advantage: Case Of Two Indian EBusinesses Firms
60
Prof. Dibyendu Choudhury
An Assessment Of Fixed Assets Maintenance And Replacement Decisions In A Government
Owned Transport Company
74
Dr. Paul Aondona Angahar
Econometric Modeling Of Queueing System Originated At A Customer Care Center: A Case
Study At Nokia Customer Care Center Gulshan Branch, Dhaka
81
Mina Mahbub Hossain, Sayedul Anam
88
A Study On Micro Insurance For Rural Andhra Pradesh
(Poverty Is Not Just A State Of Deprivation But Has Latent Vulnerability)
Muneer Sultana
Customer Satisfaction and Customer Loyalty-An Analytical Study on the Indian Domestic Air
Passengers
Prof. Richard Remedios
April|2012
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91
Vol. 1 Issue. 3
Banking Sector Reforms And Smes Financing In Nigeria
IORPEV, LUPER
Department of Accounting, Benue State University, Makurdi, Nigeria
Email : [email protected]
Abstract
This paper examines banks financing to small and medium scale enterprises (SMEs) in Nigeria, with a view to
determining if there is any difference between SMEs financing in Nigeria before and after banking sector
reforms (bank consolidation in 2005). The descriptive and sample t- test statistics were used to analyze data
collected on commercial banks loans to SMEs as percentage of total credits provided by the CBN statistical
bulletin from 2001-2010. The findings revealed that banking sector reforms in Nigeria has led to a decline in
SMEs financing from 5.78 percent to less than one (O.47) percent on average in the study period and there is
no significant improvement in SMEs financing in Nigeria after bank consolidation. It recommends that, banks
should focus more on SMEs by conducting extensive market research to learn the needs of SMEs, to identify
the financing gap and to develop a number of specific products to meet their financing needs to reduce the risk
of SMEs. The CBN should come up with a guarantee scheme for risk sharing of all SMEs financing by banks in
Nigeria. SMEs should keep proper records of their financial statement as a matter of necessity to help reduce
information asymmetry in their businesses. This will assist SMEs in the country to gain more credits thereby
improving its financing and at same time assist SMEs to create jobs to the high rate of unemployed youths,
reduce the challenges of poverty and insecurity in some places in Nigeria as many youths will not be idle but
productively engage.
Key words: Banking Reforms, Bank consolidation, SMEs financing, unemployment, Nigeria
1. Introduction
The banking system is very important for any nation due to its vital role to the growth and socio-economic
development of any economy, such as the mobilization of funds from surplus units, allocation of credit to the
deficits units of the economy, the payments and settlement of debts, and the implementation of the monetary
policy among others. However, the effectiveness of banks to perform these services depends on the stability
and soundness of the banking system, which in turn determines the state of the economy. Osaze (2000) assert
that the health of the banking system of a nation determines the well- being of the economy. In Nigeria, the
banking system has undergone several reforms such as free banking era, indigenization, deregulation,
introduction of prudential guidelines, universal banking, removal of credit ceiling and bank consolidation
(Iganiga, 2010). The modification of universal model, which classified banks into international, national,
regional, and specialized banks (i.e. micro finance, non- interest banks and developmental banks) and the
establishment of Asset Management Corporation of Nigeria (AMCON) among others ( Aboh, 2011).
Prominent among these reforms is the bank consolidation program of 2005.
The Central Bank of Nigeria (CBN) in 2004 announced the recapitalization of banks capital base from N 2
billion (US $ 0.0166 billion ) to a minimum of N 25 billion (US $0.2 billion) with a deadline of 31st
December,2005; which reduced the number of banks from eighty nine ( 89 ) to twenty five (25) in 2006. This
was the outcome of the first phase of the most extensive and intensive banking reforms in post-independence
Nigeria (Achua, 2008). The reforms undertaken is influenced by the quest for sounder banking industry,
globalization of operations, technological innovations and the adaptation of supervisory and prudential
requirements that conform to international standards (Donwa and Odia, 2011). According to Soludo (2004) the
reform ( bank consolidation) was designed to ensure a diversified, strong and reliable banking sector which
will ensure the safety of depositors‘ money, play active developmental roles in the Nigerian economy, be
competent and competitive players in the African regional and global financial system. This means when the
banks are strong they will perform their functions more effectively.
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The banking sector consolidation worldwide has brought significant changes in the business of banking in
terms of efficiency of operation, competition, innovations, technology and the size of the banks among others.
Wagenvoort (2003) believe that these changes – in particular: the restructuring, consolidation, and reorientation
of banking - are likely to affect the financing of small and medium-sized enterprises (SMEs) which include
availability of fund for the SMEs (Danwa & Odia, 2011), the banks become more competitive which might
likely increase SMEs lending because it forces banks to search for additional profitable opportunities. With
bank consolidation, there is the fear that, larger banks emerging from consolidation will be less likely to lend to
SMEs (Marsch, Schmieder, Aerssen, 2007). Nevertheless, are these changes being experience in the Nigerian
banking Sector a blow or a blessing for SMEs finance? In addition, do banking sector reforms (Consolidation)
result in less credit for SMEs in Nigeria?
The aim of this paper is to examine and evaluate to ascertain if there is any difference between SMEs financing
in Nigeria before and after consolidation in 2005. This study is important because it will add to the literature on
the impact of consolidations with particular emphasis on SMEs financing in Nigeria. The ongoing reforms in
the Nigerian banking sector are target at improving the economy and financing of SMEs is critical (because
SMEs are the engine growth of any economy). As it will assist SMEs in the country to contribute, more in
creating jobs to the teaming unemployed youths thereby reducing the challenges of high unemployment rate,
poverty and insecurity in some places in Nigeria, as many youths will not be idle but productively engage.
More so, this will in no small measure assists to the attainment of the Nigerian vision 2020 goal of being one
among the top 20 largest economics in the world by the year 2020.
The remainder of this paper is as follows: Section two (2) takes a brief review of related literature; Section
three (3) is the methodology; Section four (4) discusses the results of the study; Conclusion and policy
recommendations are presented in section five (5).
2. Literature Review
2.1. Banking sector reforms: Bank Consolidation
A reform is predicated upon the need for reorientation and repositioning of an existing status quo in order to
attain an effective and efficient state (Ajayi, 2005; Bernard 2006, Iganiga, 2010; Somoye, 2008). Okeke
(2007) argued that reforms are deliberate actions by the government to fast track, jump-start and consolidate
specific sector of the economy to achieve desired objectives. The bank consolidation in Nigeria was to correct
the problem of the banking sector to make it more stable and efficient. Somoye (2008) posits that the
consolidation of banks has been the major policy instrument adopted in correcting deficiencies in the financial
sector.
Bank Consolidation can be the fusion of assets and liabilities in whole or in part of two or more business
establishments to form an entirely new establishment. This may lead to the reduction in the number of banks
and other deposit taking institutions with simultaneous increase in size and concentration of the consolidated
entities in the sector. Somoye (2008) stressed that bank or corporate consolidation could be achieved by way of
mergers and /or acquisition, recapitalization and proactive regulation.
The driving motive for bank consolidation is technology innovations, deregulations of financial services,
enhancing intermediation and increase emphasis on shareholders‘ value, privatization and international
competition (De Nicole et al, 2003; Somoye, 2008). Bank consolidation will enhance synergy; improve
efficiency through cost reduction thereby increasing revenue in the long- run, reduce the industry‘s risk by
eliminating weak bank and acquiring of smaller ones by the bigger and stronger bankers as well as creating
opportunities for greater diversification and financial intermediation. It will also induce investors focus, trigger
productivity and welfare gains (Nnanna, 2005).
It can take two different perspectives namely: market driving and government led consolidation. The market
driving consolidation that is more pronounced in developed countries is a way of broadening competitiveness
with added corporate advantage in the global context and eliminating excess capacity, enhancing more
efficiency than bankruptcy or other means of exist (Ajayi, 2005). While a government led consolidation, comes
because of the need to resolve problem of financial distress in order to avoid systematic crises as well as
restrict inefficient banks (Ajayi, 2005). Bank consolidation in Nigeria was induced by government but not
market driven (Somoye, 2008), because the banking system was highly oligopolistic with remarkable features
of market concentration and leadership. For instance, the top ten (10) banks control more than 50 % of
aggregate assets, 51% of aggregate deposit liabilities, and more than 45 % of the aggregate credits (Lemo,
2005). Thus the system was characterized with generally small size banks with very high overhead cost, low
capital base averaging less than $10 million or N 1.4 billion, heavy reliance on government patronage ( with
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20% of industry deposits from governments and its agencies sources) . More so, twenty four (24) out of the
eighty- nine (89) money banks that existed exhibited one form of weakness which was not limited to: under
capitalization, and/or insolvency, illiquidity, poor assets quality, weak corporate governance, boardroom
squabbles, dwindling earnings and loss making ( Lemo,2005).
It was based on this and other reasons that the Governor of Central Bank of Nigeria on July 6, 2004
announced the requirement for Nigerian banks to increase their shareholders‘ fund from N 2 billion (US $
0.0166 billion ) to a minimum of N 25 billion (US $0.2 billion ) with a deadline of 31st December,2005. The
13 point reform that culminated in sieving the ―wheat‖ (viable) from the chaff (non- viable) banks with
twenty five (25) new banks emerging from the eighty nine (89) banks previously in existence (Ferare,2011).
Iganiga (2010) assert that, other components of the reform agenda include: phased withdrawal of public sector
funds from banks, adoption of a risk- focused and rule-based regulatory framework, adaptation of zero
tolerance in the regulatory framework especially in the area of data and information rendition /reporting, the
automation of the rendition processes of resources by banks and other financial institutions through the
electronic financial analysis and surveillance system (e-FASS), establishment of an Asset Management
Company as an important element of distress resolution , promotion of the enforcement of dormant laws
especially those relating to the issuance of dud cheques and the law relating to the vicarious liability of the
Board of banks in the case of bank failure, a closer collaboration with the Economic and Financial Crimes
Commission (EFCC) in the establishment of the financial Intelligent Unit (FIU) for the enforcement of the anti
- money laundering and other economic crime measures, the rehabilitation and effective management of the
mint .
2.2. Small and Medium Scale Enterprises (SMEs) Financing
SMEs is any enterprise with a total capital employed of not less than N1.5 million but not exceeding N 200
million ( including working capital but excluding cost of land ) and with the staff strength of not less than 10
and not more than 300 workers (Obamuyi, 2010; Azende,2011). SMEs all over the world play important role in
the process of industrialization, economic growth and sustainable development of any economy (Ariyo, 2005).
According to CBN (2011), SMEs are critical to the development of any economy, as they possess great
potentials for employment generation, improvement of local technology, output diversification, development of
indigenous entrepreneurship and forward integration with large-scale industries. Kpelai (2009) stressed that,
SMEs are the engine room for economic growth. However, there has been gross under performance of SMEs
subsector and this has undermined its contribution to economic growth and development in Nigeria. As
SMEs contributes as low as one percent to GDP in Nigeria in contrast to countries like Indonesia, Thailand and
India where SMEs contributes almost 40% to the GDP (Azende, 2011). The low performance of SMEs in
Nigeria is due to the major challenges of facing SMEs in the country namely: unfriendly business environment,
poor funding, low managerial skills and lack of access to modern technology. Among these challenges,
shortage of finance occupies a very central position (CBN, 2011).
The commercial banks, which remain the major source of finance to SMEs world over in most instances, are
unwilling to grant credit to SMEs due to the perceived risk and uncertainties associated with SMEs. In Nigeria,
the poor, fragile economic environment and absence of requisite infrastructure has rendered SMEs practice
costly and inefficient thereby worsening their credit competitiveness (CBN, 2011). This may be an indication
for the steady decrease in SMEs financing in the country over the years.
The CBN (2010) statistics show that, commercial banks loan and advances to SMEs have been on the decline
side over the years. For instance, commercial banks loans to SMEs as a percentage of total credit decreased
from 48.79 % in 1992 to 32.18% in 1993 and to 22.19% in 1994. The trend slightly increased to 22.94% in
1995 and 25.00% in 1996. There was a sharp decrease from 25.00% to 16.96 % in 1997 and to 15.49% in
1998. The decreased continued until it reached 0.17% in 2009 and 0.15% in 2010. Similarly merchant banks
loans to SMEs as a percentage of total credits reduced from 31.2% in 1992 to 9.0 % in 2000 (Azende,2011). A
careful look at CBN statistics on commercial bank financing to SMEs reveal that before 1996 total credit to
SMEs did not fall below 20 % of their overall total credit. Commercial banks were operating in this period
under a stipulated guideline that required them to grant credit to SMEs (wholly owned by Nigerians) that is not
less than 20% of their total credit. This means they were adhering to this guideline as none of their total credit
fall below 20% when the policy was operational. However, this was abolished on 1 st October, 1996 (Aruwa,
2004). Since then SMEs credit has been on the decline in Nigeria (Azende ,2011).
To improve access to finance by SMEs the government and its agencies had established micro credit institution
over the years namely: Nigerian Bank for Commerce and Industry (NBCI), and National Economic
Reconstruction Fund (Nerfund). The Peoples Bank of Nigeria (PBN), the Community Banks (CB), the
Nigerian Export and Import Bank (NEXIM), the liberalization of the banking sector, Micro Finance banks, the
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Small and medium equity investment Scheme that is the bankers‘ initiative and CBN N 200 billion refinancing
/ restructuring of banks loans to Nigerian SMEs among others. At the global level, many economics like
Canada and Croatia have acknowledged that SMEs are crucial for industrial restructuring and have formulated
national SMEs financing policies, targeted at developing the sector (Azende, 2011). This is to enable the subsector perform effectively, hence the take-off and efficient performance of any industrial enterprise, be it small
or large will require the provision of funds for its capitalization, working capital and rehabilitation needs as
well as creation of new investment opportunities with positive net present value (NPV).
2.3. Bank consolidation and SMEs financing
There are various evidences that have shown that banking sector consolidation has many benefits, which
include but not limited to increased liquidity, efficiency and better diversification that may also support
macroeconomic stability (Craig & Hardee, 2004; De Haas et al, 2010; Fadare, 2010; Peek & Rosengren, 1996;
Somoye, 2008).
Concern is however being raised that, the consolidation of banks into larger and complex banks will adversely
affect the financing of (availability of credits to) SMEs, since, the consolidation in most countries has involved
a large number of small banks that traditionally specialized in providing credits to SMEs. According to
Marsch, Schmieder, and Aerssen (2007) the main argument for this reasoning is that larger banks typically
have a smaller propensity to lend to SMEs i.e. SMEs lending generally make up a smaller share of larger
banks total loans. Based on this it is believed that smaller banks initially constrained in lending to SMEs may
once again reorganized (due to consolidation) into larger banks, shift their portfolio of loans in favour of larger
borrowers or even shift their assets composition away from traditional lending activities aimed at financing
SMEs. Craige and Hardee (2004) assert that one reason advance for why larger banks are less likely to lend to
SMEs is that larger banks tend to rely on formal formulaic methods for determining whether to grant credit and
amount . He further stressed that to the extent that SMEs are less able to fulfill these formal requirements, they
may be less likely to obtain credit from large banks.
The Information asymmetric between SMEs and banks arising from SMEs‘ lack of accounting records,
inadequate financial statements or business plans makes it difficult for creditors and investors to assess the
credit-worthiness of potential SME proposals.
According to Marsch, Schmieder, & Aerssen (2007) SMEs are more opaque in terms of information than larger
ones and smaller banks overcome these due to their comparative advantage and relationship banking. Smaller
banks enjoy comparative advantage in overcoming information problem (Jiaobing & Yuanyi, 2011). This
explains why a market with small banks SMEs financing is high (Kauffmann, 2005; Marsch, Schmieder, &
Aerssen , 2007). As bank consolidation is believed to reduce the number of smaller banks, there will be
decrease in SMEs financing because these loans are considered to be less profitable for larger banking
organizations that emerged due to consolidation (Marsch, Schmieder, and Aerssen, 2007; R De Haas et al,
2010).
Another argument put forward is that consolidation of banks may lead to banks efficiency through cost
synergies or by takeover of inefficient banks by efficient one and increase market power, any of these may
influenced the supply of credits to SMEs (Degryse, Masschelelein, & Mitchell, 2005). Competition,
organizational structure changes which may be due to the dynamics effects of these changes may outweigh the
negative effects of consolidation (Marsch, Schmieder, and Aerssen ,2007) . For instance, in a competitive
market, efficiency gains through cost savings due to technological advances ( use of credit scoring and credit
factories) or better risk diversification are likely to be passed on to borrowers, small businesses who may
benefit from more favourable loan conditions due to banking consolidations (Baumol, 1982, Bearger & Udell,
1996; Mester,1997; Wgenvoort, 2003).
More so, competition might also increase SMEs financing because it forces banks to search for additional
profit opportunities (Dietseh, 2003; Somoye, 2008). For instance, the potentials of new entries will restrain the
competitors from exploiting their market power. These new competitors may enter the market and pick up any
SMEs loan dropped by consolidated (merge) institutions and so in equilibrium there would be no change in
SMEs financing.
A careful look at previous literature showed both positive and negative effects of banks consolidation on SMEs
financing. It is important to assess the impacts of consolidation on SMEs financing in Nigeria.
3. Methodology
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This study adopts an ex-post facto research designed to examine the impact of bank consolidation on SMEs
financing in Nigeria. Data from the Central Bank of Nigeria statistical Bulletin on loans and advances of
Commercial banks to SMEs spanning for a period of 2001-2010 are collected. The period covered in this study
is that of universal banking in Nigeria. The study used simple percentages and paired sample t-test statistics to
analyze the data collected. The commercial bank loans to SMEs as percentage of its total credit from 20012005 was taken as a separate pair (X) which relates to the period before consolidation of banks in Nigeria.
whereas banks loans to SMEs as percentage of its total credits for the period of 2006- 2010 was taken as the
second pair (Y) which relates to the period after consolidation of banks in Nigeria. Percentages was used to
ascertain the extent of the changes to SMEs financing after consolidation and the paired sample t-test statistics
was statistically applied to test if there is a significance difference between SMEs financing by commercial
bank before and after consolidation in Nigeria. The hypothesis for this study was stated in a null form thus;
Ho1: There is no significant difference between SMEs financing by commercial bank before and after 2005
consolidation in Nigeria.
4. Data presentation, Analysis and Discussion
The results presented below is based on the data collected from CBN statistical bulletin on the ratio of
commercial banks loans to SMEs as percentage to total credits in Nigeria between 2001to 2010.
Table 1: The Ratio of Loans to SMEs and other Sector by Commercial banks to the Total Credits
Before
After
consolidation
consolidation
Periods
Periods
Commercial
Commercial
Commercial
Commercial
Bank loans to Bank loans
Bank loans to Bank loans
SMEs
as to
other
SMEs
as to
other
percentage of sector
as
percentage of sector
as
Total Credits percentage
Total Credits percentage
(%)
of
Total
(%)
of
Total
Credits (%)
Credits (%)
2001
6.59
93.41
2006
8.63
91.37
2002
2007
7.45
92.55
2003
2008
3.62
96.38
2004
2009
2.67
97.38
2005
2010
Average
5.79
94.21
Average
Source: Secondary Data Computation (December 2011).
1.02
0.85
0.17
0.17
0.15
0.47
98.98
99.15
99.83
99.83
99.85
99.53
Table 1 above show percentage of commercial banks loans to SMEs and other sectors as percentage of total
credits before and after consolidation in Nigeria. Table 1 indicates that the average credits to SMEs before
Consolidation was 5.79% and 0.47% after consolidation. Meaning that the difference between before and after
consolidation financing to SMEs by commercial bank decrease by 5.31% (i.e 5.78% - 0.47%) See Table 1
above. This represent 91.88% (5.79-0.47/5.79*100) decline in the total credit to SMEs by commercial banks in
Nigeria after consolidation. However, there is a corresponding increase of 5.31% (99.53-94.21) to loans to
other sector after consolidation.
A paired sample t-test is used to test this study hypothesis, data on banks loans to SMEs as a percentage of total
credit of commercial banks is used to calculate the paired sample t-test presented in table 2 below:
Period
2001/2006
2002/2007
2003/2008
2004/2009
2005/2010
Table 2: Computation of Paired sample t-test Statistics
Before
After
Bank D (X-Y)
Bank consolidation
consolidation
(X)
(Y)
6.59
8.63
7.45
3.62
2.67
1.02
0.85
0.17
0.17
0.15
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5.57
7.78
7.28
3.45
2.52
D2
31.02
60.53
53.00
11.90
6.35
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Total
Source: Secondary Data Computation (December 2011).
26.6
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162.80
The result of computation of paired sample t-test is shown in Table 2 above. X represents the percentage of
loans to SMEs before banking sector reforms (bank consolidation) from 2001 to 2005, while Y represents the
percentage of loans to SMEs from 2006 to 2010; D is the difference between X and Y. Using the formula for
calculating the t- test and then compared the result with the critical value at 5% significant level.
Before the banking sector reform (bank consolidation of 2005) in Nigeria there was a decline in loans to SMEs
as percentage of total commercial banks loans, this may be due to the abolition of 20 percent mandatory credit
to SMEs and inadequate capital by Nigerian Banks among others. With the consolidation of banks in 2005,
there was increase in the liquidity position of banks and one would expect a significant improvement to SMEs
financing (i.e loans to SMEs as percentage of Total Credits) by banks. This would have been so if the values of
the difference (D) between X (bank loans to SMEs before consolidation) and Y (bank loans to SMEs after
consolidation) in table 2 above were mostly if not all negative. The computed t-value would have been
negative value greater than the critical value at 5 percent significant level.
Based on the above, the computed value of t = 9.996 and the critical value is 2.776 at 0.05 significance level,
and the degree of freedom (df) is four (4). Since the value of t calculated is positive, it then means that there
was no significant increase in credit to SMEs in Nigeria after bank consolidation. Therefore, the study accepts
the null hypothesis that there is no significant difference between SMEs financing by commercial bank before
and after 2005 consolidation in Nigeria. This could mean that there is no improvement in SMEs financing after
consolidation as indicated by the average decrease of SMEs credit from 5.78% before consolidation to 0.47 %
after consolidation.
This may be due to but not limited to the large and complex nature of the banks because of consolidation,
which consider SMEs loans as not profitable (Peek & Rosengren, 1996), and as result of the credit crunch due
to financial crises. BIS (2011) argue that due to the credit crunch, all firms in risky sectors find it difficult to
get finance and SMEs are more affected as banks restrain lending to them. This study findings supports the
studies of Berger & Udell,1996; Elyasiani & Goldberg, 2004; and Peek & Rosengren,1996) who found that
consolidation will lead to reduction in SMEs financing and Dongarawa (2009) who indicates that bank
consolidation in Nigerian has no positive impact on the size of credit available to SMEs.
5. Conclusion and Recommendations
The study findings indicates that banking sector reforms (consolidation) in Nigeria has led to a decline to SMEs
financing to less than one percent (i.e 0.47%) on average and there is no significant difference between SMEs
financing by commercial bank before and after 2005 consolidation in Nigeria. This result challenge previous
studies, which show that banks consolidation will not lead to any decrease in SMEs financing and are
supported by empirical findings in some economies. This suggests evidence that banking reforms
(Consolidation) will lead to contraction in SMEs financing even in developing economies like Nigeria and
further lends credence to theories that show that consolidation will lead to reduction to SMEs financing.
The study recommends that despite the relative stability in banking sector due to Banking Sector Reforms,
further diversification in SMEs financing is desirable in Nigeria due to the steady decline in SMEs financing.
This may be in form of improving the business condition of SMEs by creating more credit bureau supplying
information on the solvency of firms in Nigeria. Banks should focus more on SMEs by conducting extensive
market research to learn the needs of SMEs. The findings of this research can help in identifying the financing
gap or problems related to SMEs activities and microenvironment, and to develop a number of specific
products to meet their financing needs, reduce the risk of SMEs and improve financing of SMEs in Nigeria.
The CBN should come up with a guarantee scheme with risk sharing for all SMEs financing by banks in
Nigeria. This will not only reduce the potential risk banks face by granting credits to SMEs but will in no small
measure increase SMEs financing by banking sector in Nigeria.
More so, the CBN and other regulators should ensure that existing micro institutions are effective and efficient
in their operations, encourage the entry of other small banks and review the N25 billion capital to pave way for
the emergence of small- medium size banks out of the existing ones that will concentrate on SMEs financing in
Nigeria. This will not only help in picking up any SMEs credits drop due to banking sector reform
(consolidation) in Nigeria, but on improving SMEs financing that is on the steady decline over the years. As
smaller banks have better technology for servicing SMEs.
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Finally, SMEs in Nigeria as matter of necessity should keep proper accounting records, financial statements or
business plans to make it easier for banks, creditors and investors to assess the credit-worthiness of their
proposals. This will not only reduce the problem of information asymmetry on SMEs but will improve SMEs
financing in Nigeria. Thereby assisting SMEs in the country to contribute more in creating jobs to the teeming
unemployed youths, as well as reduce the challenges of high unemployment rate, poverty and insecurity in
some places in Nigeria as many youths will not be idle but productively engage.
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Effect of Using Molecular Models on Students’
Achievement Scores in Structure and Chemical Bonding
in Kenyan Public Secondary Schools
Mulavu Wycliffe Garanja
Science Teacher
Keveye Girls‟ High School
P.O Box 856, MARAGOLI,
KENYA.
E-mail: [email protected]
+254725730206
Vincent Maurice Omolo
PhD, Lecturer
Department of Pure and Applied
Chemistry,
Masinde Muliro University of
Science and Technology
P.O Box 190, KAKAMEGA,
KENYA
+254771607574
Ronald Michieka
Lecturer. Masinde Muliro
University of Science and
Technology
Department of Science and
Mathematics Education,
P.O Box 190, KAKAMEGA,
KENYA
+25472553089
Abstract
Structure and chemical bonding is a challenging topic to both teachers and learners owing to its abstract
nature. Ineffective pedagogy often leads to poor understanding and dismal achievement scores. The study
sought to find out if using molecular models in instruction could affect students‟ achievement scores in the topic.
It employed the quasi-experimental design. Stratified random sampling was used to classify the schools as
provincial or district and thereafter as boys‟, girls‟ or co-educational. Simple random sampling was used to
select 831 students from eight sampled public secondary schools in Sabatia district, Vihiga County, Kenya. The
control group was taught structure and bonding in the traditional way while the experimental group received
instructions using molecular models in addition to the traditional teaching methods. Both groups learnt the
same content lasting twenty lessons in each school. The Structure and Bonding Students‟ Achievement Test and
Structure and Bonding Multiple Choice Test were used for data collection. Descriptive and inferential data
analysis was carried out using means, F-Test and t-test. The achievement scores showed no significant
difference between the two groups (Me= 40.24, SD=5.45) and (Mc=40.08, SD=4.99) before treatment (t=0.53,
p=0.654).However, the experimental group performed significantly better (Me= 51.34, SD=6.97) than the
control group (Mc=46.15, SD=5.01) after treatment (t=3.23, p=0.002). This suggests that molecular models
promoted students‟ achievement scores in the topic.
Key Words: Molecular models, Structure and Chemical Bonding, Science Education
1.0 Introduction
Chemistry, as a subject, is concerned with the composition, structure, properties and reactions of matter. The
latter consist of an aggregate of particles (atoms, molecules, ions, etc) and the type of chemical bonding between
them determines their physical and chemical properties (Nahum et al, 2004).
Such properties as physical state (liquid, solid or gas), solubility, melting and boiling point of a substance
depend on the type of bonding in the substance. Nearly everything in chemistry depends on an understanding of
the world of particles and their interaction. The latter can not be experienced or felt easily but is deduced from
macroscopic phenomena (Boo, 1998).
The instructional process adopted during learning can easily exacerbate the difficulties that learners experience.
Concepts and models tend to be presented as real, factual and final, rather than what they are – scientific notions
or explanatory constructs which are subject to revision and change.
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Many studies at all levels of schooling to determine students‘ ideas about basic chemistry concepts suggest that
for students who did not acquire a satisfactory understanding of scientific concepts, this occurred as a result of
the use of traditional teaching methods such as simple lecturing. Such teaching requires students to sit passively
and does not engage students actively in learning (Morgil and Nuray, 2006). In such a traditional teachercentered classroom, the students thus become listeners, and the teacher gives out the facts and defines important
ideas. Students‘ participation is often limited to listening to the teacher and perhaps raising their hand to answer
questions (Nakhleh, 1992).
Pedagogical approaches adopted do influence students‘ attitudes, cognitive development and achievement in
science education (Nahum et al., 2007; Demircioglu and Norman, 1999). Consequently, it is suggested that
science and chemistry teachers may need to consider alternative approaches – particularly to difficult and
abstract science concepts, including structure and chemical bonding. Learner-centered approaches and
particularly those that employ modern information and communication technologies have been shown to be
more effective. These technologies can help facilitate knowledge-construction in the classroom and guide
student activities, leaving teachers with the opportunity to interact with small groups and to diagnose difficulties
(Hofstein et al., 2009).
Scientists represent chemistry knowledge at three levels; the macroscopic (physical phenomena), the
submicroscopic (particles) and the symbolic (chemical language) levels (Harrison and Treagust, 2000; Nahum et
al., 2007; Özmen, 2004). Interactions between molecules and atoms occur at the submicroscopic level and
chemists refer to the objects and processes which they can not observe directly at a symbolic level (Nahum et
al., 2007).
Despite much research and curriculum development, it seems students still have problems learning many
chemistry concepts (Nakhleh, 1992; Martin et al., 1989). Wanyonyi (2010) reported important misconceptions
in structure and bonding among students of chemistry in Bungoma West, Kenya. However, little has been
published on the problems students face when learning fundamental chemistry concepts in Kenya (Inyega,
2005).
Mulavu (2011) investigated the effect of using molecular models on students‘ perceptions. Science education
reforms have in the recent past focused more on the need to integrate computer technologies into learning and
teaching (Hofstein et al, 2009; Özmen, 2008; Akwee, 2010).
In line with recent research findings, many educators now advocate the use of computers in teaching chemistry
(Morgil et al., 2003). Computer-Assisted-Learning (CAL) environments attempt to make explicit the
information embedded in traditional physical representations as well as to provide a visual representation of the
physical interactions for students. The use of integrated video media (Nahum et al., 2007) has been shown to
enhance students‘ achievement and attitude to chemistry.
The building blocks of matter – atoms, molecules and ions – can not be naturally perceived by the senses. As
early as 1811, Dalton introduced the use of models in chemistry teaching. In the 1930s Stuart developed the
space-filling models. All these attempts have been prompted by a desire to reveal ‗the world of the invisible‘
and has spawned attempts over the years to visualize ideas on the nature of matter by building concrete models
(Savec et al., 2006)
Generally, models are a representation of a phenomenon, an object or idea (Gibert et al., 2000). In science,
however, a model is the outcome of representing an object, phenomenon or idea with a more familiar one
(Tregidgo and Ratcliffe, 2002). Among the many models in chemistry literature are the space-filling, ball-and
stick, Lewis structural formula, electron cloud, metallic, composition atom, solar system and the Lewis formula
models and molecular models (Dumon and Cokelez, 2005).
In the recent past, more sophisticated views of models have emerged particularly based on advances in
technology. Models fall into two broad categories: conceptual models (mathematical models, computer models
and molecular models) and mental models. (Greca and Moreire, 2000; Coll and Treagust, 2001). They are more
than communicative tools. They are important links to the methods and products of science (Harrison and
Treagust, 2000).
Coll and Treagust (2002) investigated secondary school, undergraduate and graduate learners‘ mental models of
ionic bonding and found that secondary school learners identified ionic bonding as an attraction between
charged particles. The electrostatic model, too, was the preferred model for ionic bonding among the
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undergraduate students but they placed more emphasis on lattice structure and the use of domain-specific
terminology than their secondary school counterparts.
Graduate students‘ (Coll and Treagust, 2002) preferred mental model for the ionic bond was the electrostatic
model and their reasons were similar to those of the undergraduate and secondary school counterparts. All
students, regardless of their academic grade levels, showed a preference for simple models to explain chemical
bonding.
Models are used to help learners visualize otherwise abstract ideas and to emphasize the main points. When well
used, they greatly help learners to understand as well as retain useful information (Harrison and Treagust, 2000).
Molecular models are generally easy to prepare and use. The theory and practice of using molecular models in
classroom instruction ought to be well understood through research findings (Greca and Moreire, 2000; Hurst,
2002).
The main purpose of this study was to investigate the effect of using molecular models on students‘ achievement
scores in structure and chemical bonding among students in public secondary schools in Sabatia district, Vihiga
County, Kenya. The null hypothesis formulated for the study was that there is no significant difference between
students‘ achievement scores in structure and bonding when molecular models are used alongside the traditional
method of instruction to teach the topic and when only the traditional method is used. The hypothesis was
tested at α = .05.
The theoretical framework for this study was based on the Dual-Coding Theory (DCT). This is a theory of
learning with roots in constructivism. The DCT of information storage postulates that knowledge is stored in
two forms – a linguistic and an imagery (also called non-linguistic) form (Paivio, 2006). Imagery is expressed as
mental pictures or even physical sensations, such as smell, taste, touch, kinesthetic association and sound
(Richardson, 1983).
The theory further postulates that the human cognition consists of two subsystems that process knowledge
simultaneously. One subsystem processes verbal information and the other deals with visual objects. The two
subsystems have different functions; the verbal subsystem processes and stores linguistic information whereas
the visual subsystem processes and stores images and pictorial information. While the two subsystems can be
activated independently, their interrelations and connections allow dual coding of information.
Meaningful learning is enhanced when information is presented both visually and verbally. Moreover, when
designing and using instructional materials, it is important to consider that proper application of this principle
could result in enhancement of recall and recognition of subject content (Marzano et al., 2001, Paivio,
2006).Presenting verbal information while also providing images, however, has the potential of improving
learning because the visual and verbal cues reinforce each other (Marzano et al., 2001).
The DCT also suggests that cognition involves the activity of two distinct but related sub-systems. When the
method of instruction employed by the teacher match the learners‘ cognitive abilities, then learning is effective.
Conceptual difficulties in a topic result when there is a mis-match (Erduran, 2003). Learning takes place when
new information becomes part of the existing knowledge base. If the new knowledge is well elaborated and
integrated then learning becomes meaningful and useful (Huitt, 2003). Marzano et al (2001) proposes that when
both linguistic and nonlinguistic representations were used, learners are able to think about and recall
knowledge better.
Gerlic and Jausovec (1999) demonstrated that engaging students in the creation of nonlinguistic representations
explicitly stimulates and increases the activity of their brains. Robinson and Kiewra (1996) and Welch (1997)
also found out that varieties of activities produce and promote the development of nonlinguistic faculties in
students and, therefore, enhance their understanding of scientific content.
2.0 Procedure
The study adopted a quasi-experimental design. According to Gall et al (1996) a quasi-experimental design is
used as a substitute for advanced experimental studies and is effective in affecting outcomes as a sure way to
establish cause-effect relationships. Random assignment of subjects to the experimental and control groups was
done in the participating schools followed by treatment in actual classroom setting. Standardized pre-test and
post-test were administered to both the experimental and control groups accordingly. The experimental group
was taught structure and bonding using molecular models alongside the traditional teaching method. This
constituted sample treatment. The control group received instruction in the traditional way only. The groups
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were instructed by their regular teachers for twenty lessons in each school. The results before and after treatment
were compared to find out the effect of the molecular models on students achievement scores.
Table 2: Research process
Group
Pre-test
Experimental group
01
X
02
Control group
01
θ
02
Key:
Treatment
Post-test
01= Pre-test
02=Post-test
X = using molecular models for instruction plus traditional instruction
θ = Using traditional instruction only
The study was carried out in Sabatia district, Vihiga County, Kenya and targeted a population of 2,771 form two
chemistry students in public secondary schools. Participants in the study were drawn from 8 public secondary
schools. Stratified sampling was used to classify the schools as either provincial or district and thereafter as
boys, girls or co-education secondary schools. This was done to allow for proportionate representation of all the
groups of schools and also to ensure that all students in the study had an equal and known probability of being
included in the sample and are equivalent throughout the study (Mugenda and Mugenda, 2003; Best and Kahn,
2004).
Table 1 the sampling frame.
School category
Number of students sampled
Percentage (%)
Provincial girls‘
214
25.75
Provincial boys‘
196
23.59
District Co-education
Girls: 230
Boys: 191
50.66
Total
831
100.00
3.0 Statement of the problem
Structure and chemical bonding is a high-cognitive-demand concept in chemistry and is widely recognized by
students and teachers as particularly challenging to teach and learn. Traditional approaches to teaching the
concept have compounded the problem leading to poor student achievement scores in the topic. The pervasive
influence that structure and chemical bonding has on nearly all the other topics in chemistry demands that the
topic be handled with great care. It is against this background that this study sought to investigate if using
molecular models in instruction could affect students‘ achievement scores.
4.0 Research Instruments
A standardized Structure and Bonding Students‘ Achievement Test (SBSAT) - as a pre-test and a Structure and
Bonding Multiple Choice Test (SBMCT) -as a post-test were used as instruments for data collection. Each of the
instruments was prepared in consultation with experts in chemistry education and teachers of chemistry with
vast teaching experience. During the entire study period, the experiences of the experimental and control groups
were kept as nearly similar as practically possible.
5.0 Results and discussion
Table 3 Independent sample t-test for pre-test and post test scores
Levene’s Test for Equality of Variances
t-test for Equality of Means
F
Sig.
t
df
Sig.
Mean
Std.
95%Confidence
(2tailed)
Differen Error
Interval of the
ce
Differe
Difference
nce
Lower Upper
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Pre-test Equal variances
assumed
Equal variances
assumed
Post-test
1.80
.180
Vol. 1 Issue. 3
.465
829
.642
.169
.363
-.544
.881
.465
823
.642
.169
.363
-.544
.881
12
829
.000
5.189
.421
4.362
6.016
12
829
.000
5.189
.421
4.362
6.016
not
Equal
variances
assumed
Equal
variances
not assumed
17.5
.000
Independent sample t-test show that while there is no significant difference between the experimental and
control groups in the pre-test (F=1.80, t= 0.465, α=0.642). However, the post-test results showed a significant
difference between the experimental and control groups (F=17.5, t=12, α=0.001). This indicates that the
experimental group outperformed the control group in the post-test and suggests that the experimental group
(M=51.34, SD=6.97) exhibited a better understanding of the topic than the control group (M=46.15, SD=5.01)
upon treatment (t=12, p=0.002).
Table 4: Descriptive and inferential statistics for the pre-test and the post-test
Test
Pre-test
Post-test
Group type
Experimental
Control
Experimental
Control
N
416
415
416
415
Mean
40.24
40.08
51.34
46.15
S.D
5.45
4.99
6.97
5.01
df
415
414
415
414
t
.46
P
.62
Remark
Not significant
12
.002
Significant
Data in table 4 shows that there was no significant difference between the experimental (M= 40.24, SD=5.45)
and the control group (M=40.08, SD=4.99) before treatment (t=0.46, p=0.62). This shows that respondents in
the two groups were equivalent, fairly matched and also exhibited similar entry behavior. However, the
experimental group performed significantly higher (M= 51.34, SD=6.97) than the control group (M=46.15,
SD=5.01) after treatment (t=12, p=.002). The null hypothesis was thus rejected and the alternative hypothesis
accepted. The significant difference between the two groups in the post-test after treatment could be attributed to
the use of molecular models in classroom instruction with the experimental group. The mean score of the
control group improved by 5.07 while that of the experimental group improved by 11.1. The difference in
improvement of achievement of 6.07 between the two groups could be attributed to treatment that the
experimental group received.
Teichert and Stacy (2002) and Kinyanjui (1993) found that improved instructional approaches tend to lead to
improved students achievement scores. This agrees with the findings of this study. Ndirangu (2002) reached a
similar conclusion regarding the use of teaching practice materials in classroom instruction
6.0 Recommendation
On the basis of the findings of this study and to mitigate the problems that students and teachers encounter with
the structure and bonding concept, alongside other abstract topics in chemistry, a variety of instructional
approaches ought to be employed. In particular, novel instructional interventions that promote students‘
understanding of the topic should be used. During teacher training, for example, emphasis should be put on
teachers‘ preparing instructional materials using locally available materials and involve the learners in their
preparation and use. Moreover, the use of new, computer-based instructional strategies such as DVDs,
‗simulation softwares‘ and web-based techniques should be encouraged.
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Vol. 1 Issue. 3
Corporate Governance and Ethical Sensitivity of Directors
of Listed Companies: Evidence from Nigeria
Dr. Jafaru Jimoh
Auchi Polytechnic, Accountancy
Department
Office Of The Head Of
Department,
P.M.B. 13, Auchi, Edo State,
Nigeria
[email protected]
Dr. (Mrs.) Philipa O. Idogho
Auchi Polytechnic, Office Of The
Rector,
P.M.B. 13, Auchi, Edo State,
Nigeria
+2348069035625 &
+2348069035675
[email protected]
Dr. Francis O. Iyoha (Phd, Fca)
Department Of Accounting,
Covenant University, Ota, Nigeria
[email protected]
+234-8033515869
+2348033567995 &
+2348084690398
Abstract
This study investigates the ethical sensitivity of Directors of listed companies on the corporate governance
landscape of Nigeria. The study is motivated by the perceived lack of accountability by director (including
Chief Executive Officers CEOs) of listed companies in Nigeria. The perception seems to have strong root in the
Nigerian brand name both within and outside the shores of the country which has become so grossly debased
that in the minds of many, the country (Nigeria) is synonymous with crookedness and fraud. Using a sample of
directors of listed companies in Nigeria and survey instrument that contains ethically sensitive business
scenarios, the results show that there is no significant difference in the ethical sensitivity of directors across
listed companies in Nigeria, either in terms of religion or sex. The results are not in agreement with similar
previous studies and thus have serious implications for corporate governance in Nigeria. The major limitation
of the study is the small sample size. There is the need to enlarge the scope of future studies to include nondirectors whose job roles and schedules also have ethical content and implications for corporate governance.
Key words Corporate Governance, Ethical Sensitivity, Religiosity, Accountability, Listed Companies.
1.Introduction
The main issues usually discussed as having stunted the growth and progress of Nigeria are the lack of ethical
conduct and accountability in the management of the country‘s resources. Thus, Emenyonu (2007) observed that
Nigerian brand name both within and outside the shores of the country has become so grossly debased that in
the minds of many, it is synonymous with ―crookedness and fraud.‖ This paper examines this assertion in the
context of the ethical sensitivity of managers and directors of listed companies in Nigeria since they have prime
responsibility for promoting ethical behaviour and accountability in the management of the resources of their
companies.
The roles, duties and importance of the Company Directors are well spelt out in the Companies and Allied
Matters Act 2004, CAP 20 LFN. The directors and managers represent the directing mind of the companies
they represent. In order to further strengthen the position of the directors in the management of their various
firms, the Code of Corporate Governance 2011 was enacted to replace the 2003 edition which had become
obsolete. The 2011 Code clearly emphasized that the principal objective of the Board is to ensure that their
companies are managed in line with good corporate governance practices.
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In-spite of the elaborate provisions in the various corporate governance enabling instruments, there are still
cases of unethical conduct (real and perceived) among some directors and management of companies in Nigeria.
Some of the unethical practice were pronounced in all the sectors of the Nigerian economy. The country had the
failure of some Nigerian banks in the last decade, the case of lever Brothers (Now Unilever) in 1998 where
overvaluation of stocks running into billions of Naira was discovered. Another was the case of the African
Petroleum (AP) Plc in which the company‘s Board of directors concealed indebtedness to the tune of twenty two
billion Naira in its year 2000 offer for sale. We had yet the case of Cadbury Plc as well as that of Evans
Medicals Plc in which the company‘s record unsupported inventory balance of about five hundred and fifty
million Naira in its year 2008 financial statements.
The unethical acts were perpetrated in a quest to maintain a ―giant‖ corporate image to deceive the investing
public. Though corruption and unethical practices are rampant in Nigerian organizations as discussed above, but
the degree to which the practices are influenced by religious and gender are not well understood. Thus, the
relevant question is: are unethical practices among company directors and managers religion and gender
dependent? The question is relevant because it will enable a proper understanding of how directors who belong
to any of the major two religious faiths in Nigeria (Christianity and Islam) respond to ethical issues. It is also
important to determine whether gender influences ethical sensitivity in the context of Nigeria.
More specifically, two hypotheses will be tested: first, whether there are significant differences between
Christians and Muslims in their acceptability of questionable business practices and second, whether there are
significant differences between the acceptability of questionable business practices between male and female
directors. The reminder of this paper is organized as follows. The next section reviews the extant literature and
presents the hypotheses to be tested. This is followed by the methodology and results and a discussion of the
findings. Finally, the last section presents the conclusions, limitations, and implications of the study.
1. Literature Review
Unethical Practices and Corruption Scourge in Nigeria
There is no doubt that corruption exists in every country of the world and thus, a universal human problem.
However, there are countries where corruption is so pervasive that it makes impossible any effort at progress.
Unfortunately, Nigeria is one such country. For instance, corporate misconduct has continued to destroy firm
value as it shakes the market confidence and thus has continued to be a key concern for investors and regulators.
Thus, the issue of corporate governance is being accorded serious attention by all sectors of the Nigerian
economy. For instance, the Securities and Exchange Commission (SEC) set up the Peterside Committee on
corporate governance in public companies, the aim of which is to build credibility while ensuring transparency
and accountability as well as maintaining an effective channel of information disclosure that would foster good
corporate performance. Notwithstanding these efforts at ensuring corporate governance, the survey conducted
by the Securities and Exchange Commission (SEC: 2003) in Nigeria showed that corporate governance is at an
elementary stage and thus corporate misconduct remains unabated.
The preceding assertion is supported by the evidence provided by Transparency International (TI) in its annual
ranking of countries with regard to levels of corruption. It is curious to know that as from 1996 when TI started
including Nigeria in those rankings, she has always emerged as one of the most perceived corrupt nations on the
face of the earth as shown in the table below.
Table 1: Corruption Perception Index Rankings (Nigeria)
Year
Ranking
1996
54 out of 54
1997
52 out of 52
1998
81 out of 85
1999
98 out of 99
2000
90 out of 90
2001
90 out of 91
2002
101 out of 102
2003
132 out of 133
2004
144 out of 146
2005
152 out of 158
2006
150 out of 163
2007
143 out of 178
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Vol. 1 Issue. 3
2008
143 out of 178
2009
143 out of 178
2010
143 out of 178
Source: Annual Corruption Perception Index prepared by Transparency International
Out of fifteen years, Nigeria ranked last three times (1996, 1997 and 2000). She has ranked second to the last
four times (1999, 2001, 2002 and 2003). There is hardly any other country that has performed as bad so
consistently.
The evidence presented above indicates that corruption has eaten so deep into the fabric of the Nigerian society
that there is hardly any segment that is free from its effects. This is further evidenced from a World Bank
survey of the level of corruption in selected agencies and institutions in Nigeria. The above assertion is
buttressed by the details of the corruption levels in selected institutions in Nigeria as shown in the table below
Institution
Table 2 Assessment of Levels of Corruption in Some Nigerian Institutions
Year
Year
Year
Year
Year
Year
Year
2004
2005
2006
2007
2008
2009
2010
Political Parties
4.5
4.5
4.5
4.3
N/A
4.2
4.5
Legislature
4.2
4.1
4.1
3.8
N/A
3.8
4.2
Police
4.8
4.7
4.9
4.5
N/A
4.5
4.7
Judiciary
3.8
3.8
4.1
3.4
N/A
3.4
3.7
Public officials/civil servants
3.8
3.6
3.5
3.7
N/A
3.4
3.5
Military
3.9
3.8
3.7
3.3
N/A
3.5
3.1
Educational System
3.8
3.8
4.3
3.3
N/A
3.6
3.8
Business/Private Sector
3.4
3.2
3.7
3.2
N/A
3.3
2.9
Media
3.0
2.8
3.2
3.1
N/A
3.0
2.7
NGO‘s
2.7
2.5
3.0
2.9
N/A
3.0
2.4
Religious Bodies
2.4
2.3
3.0
3.5
N/A
2.9
2.2
Source: Compiled by the authors from World Bank Governance and Integrity Study (2004-2010)
The details in the table above show for instance that on a scale 1 to 5, with 5 representing extreme or total
corruption and one signifying minimal or low level of corruption, government departments and agencies led by
the Nigerian Police Force was ranked the most corrupt with a score of 4.9 in 2006. This is not surprising, noted
Emenyonu (2007), especially since the Police degenerated to the extent of giving change to commercial vehicle
drivers when they drivers don‘t have the customary passage bribe of N20.00
Individual characteristics and Ethical Sensitivity
There are a number of individual factors which have implications for ethical decision making that have been
studied in an attempt to understand why people make certain decisions. Loe, Ferrell and Mansfield, (2000);
O‘Fallon and Butterfield, (2005), Dean, Beggs and Keane, (2010) provide insight into some of those factors
which include religion, gender and locus of control.
Religiosity in Nigeria
There is enormous amount of details in the literature of the role of religion in affecting ethical behaviour.
According to Conroy and Emerson (2004) there is significant positive correlation between religiosity and
perception of ethical behaviour. Similarly, Lehman (2004) notes that key institutions such as religion play a
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―central role‖ in the formation of a civil society committed to the highest good in the form of honesty, trust and
the cultivation of virtue. Given the above assertions, it can be inferred that religion has a role to play in the predisposition of human beings towards doing that which is adjudged ‗right.‘ This can further be supported by
Weaver and Angle (2002), who found that perceptions of ethical decision-making interact with important
aspects of one‘s perception of self, in their case, religiousness. The motivation to behave ethically as noted by
Spiceland, Sepe and Tomassini (2001) must come from ―within oneself‖ and this is what religion ought to
facilitate. The table below indicates the level of religiosity of Nigerians.
Table 3 Religious Adherents In Nigeria, Ad 1900-2025
1900
1970
Mid-1990
Mid-1995
mid-2000
mid-2025
Christians
176,000
21,728,000
39,550,000
45,200,000
51,123,167
86,000,000
Muslims
4,200,000
21,750,000
38,199,700
43,435,000
48,999,663
82,107,000
Traditionalists
Non Religious
11,824,000
0
5,970,000
100,000
9,000,000
200,000
9,959,150
270,000
10,963,809
326,339
14,000,000
700,000
Atheists
0
20,000
32,500
34,000
39,000
100,000
Baha‘s
0
11,400
25,000
27,000
27,031
80,000
Buddhists
0
500
5,000
5,900
5,953
15,000
Chinese-Religion
0
0
3,000
3,300
3,291
7,000
Jews
0
0
800
850
803
2,000
Others
0
11,100
15,000
16,800
16,726
30,000
Country‘s
16,200,000
49,591,293 87,031,000 98,951,865, 111,506,000 183,041,000
population
Source: World Christian Encyclopedia (2000)
The table above indicates that Nigeria does not lack religious adherence either in the Muslim or the Christian
faith and can be inferred that majority of directors and managers of firms in Nigeria belong to either of the two
main religious denominations. Though we claim that we have a "religious" society, but have little spirituality
hence, corruption persists in the country. In other words, despite the proliferation of mosques and churches,
adherents still get involved in anti-social behaviour and corrupt practices. Moreover, the general move towards
religious fundamentalism both among Christians and Muslims increases preaching of prosperity in Nigeria.
Both phenomena occur and expand with the increasing frustration and despondency among the unemployed
citizens, who have lost hope about their future. Thus, religion has become an industry for making fast money by
the clergy, religious imposters and scholars.
Consequently, the tendency to move away from the values that were once found in religious experience have
created an ethical vacuum which cannot be directly traceable to any of the major religious groups without
empirical evidence. Thus, we propose the following null hypothesis of the effect of religion on the ethical
sensitivity of directors towards acceptability of questionable business and accounting practices.
H1: There are no significant differences between directors who are Christian or Muslim adherents
concerning the acceptability of questionable business and accounting practices.
Gender
Besides religiosity, there are other individual characteristics that have been found to influence ethical behaviour
and perceptions. One of these is gender. Males and females have been found to make moral judgments in quite
different ways. A number of studies which include Eyon, Hill and Stevenson (1997), Borkowski and Ugras
(1998), Conroy and Emerson, (2004), Emerson, Conroy and Stanley (2007) found that females exhibit stronger
ethical sensitivity than their male counterparts. The import of this is that males are more comfortable accepting
ethically questionable situations because males and females are believed (based on past work) to bring different
sets of values to the workplace, thus causing them to respond differently to the same set of circumstances.
According to Coate and Frey (2000), for instance, males view achievement as competition while females are
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more concerned with their own performance and with maintaining harmony in the workplace and thus, males
are more likely to break rules to achieve competitive success than their female counterparts. In essence, females
are less likely to break rules and are less tolerant of those who do break rules. Previous research appears to
support these claims. In terms of moral development, for instance, women are deemed to be more idealistic and
less relativistic than are men (Atakan, Burnaz and Topcu, 2008; Oumlil and Balloun, 2009; and Vermier and
Van Kenhove (2008) found women to be less likely than men to use double standards when dealing with
questionable conduct against business misconduct. No wonder therefore that the main ―whistle blowers‖ at
Enron, Sherron Watkins, and WorldCom, Cynthia Cooper, were women. Taken as a whole, these findings
suggest that women are more ethically sensitive than men. But is this the situation in Nigeria where some
woman in positions of trust have been found to compromise the integrity of their offices and callings? In the
light of the preceding question, the following hypothesis is formulated.
H2: There are no significant differences between male and females directors concerning the acceptability
of questionable business and accounting practices.
2. Research Method
A number of characteristics such as age, race, sex and religion have been shown in prior research in ethics as
good predictors of ethical attitude (Emerson and Conroy,2004 and Eyon, Hill, and Stevens,1997). Two of the
characteristics (religion and sex) were considered in this study. The study employed a survey instrument which
consists of four scenarios. Each of the scenarios describes a brief situation involving ethical dilemma in the
context of accounting and business settings and the decision taken by a relevant officer. The scenarios aptly
replicates some common business situations and actions prevalent in Nigeria. The four scenarios include the
material misstatement of net income to evade tax liability, the payment of illegal fees to secure a huge contract
job; the reclassification of loans to avoid penalty from regulatory authorities and the falsification of age to
secure a well paid job.
The respondents were asked four questions; two of which measured the attitude of the respondents. The other
two questions measured the intention of the respondents towards taking the actions described in the scenarios. In
both cases, the respondents were asked to rate their responses based on a Likert type scale of the range 1–7. The
attitude questions relate to the seriousness (high score suggest seriousness) and ethicality of the actions (low
score suggest action unethical). The behavioural questions relate to whether respondents or their peer would
undertake similar actions. Low scores in each case suggest that neither the respondents nor their peers would
undertake the action.
The study adopted a quantitative research methodology using an ex post facto design. This design is useful in
studies in which questions about people‘s past experiences are asked (Krishnaswami, 2003; Kibanja and
Munene, 2009). The design was considered suitable for this study because respondents were asked questions
about their past experiences as directors of listed companies and thus avoid social desirability bias. A sample of
320 respondents (non-executive and executive directors) who had been on the board of companies for at least
three years and whose tenure expired by December, 2010 were included in the survey. Of the total number of
three hundred and twenty (320) questionnaires administered, eighty one (81) responses could not be used due to
incomplete information. The structure of the respondents is
shown in Table 4 below:
Table 4 Demographic Information of Respondents
Christians
Muslims
Total
Total Number of respondents
117
112
229
Gender Male
62
60
122
Female
65
62
107
=====================================================================
Results and discussion
Estimation results for each of the four scenarios and for each of the four questions are presented in Tables 5 (a
and b). Table 5 shows the results of the One way ANOVA test for statistical differences between Christian and
Muslim company directors concerning the acceptability of questionable accounting and business practices.
There are marginal differences in the mean scores between the directors of the Christians faith and those of the
Muslim faith. Overall, only three of the 16 questions have statistically significant differences. This implies that
there are no marked differences between Christian and Muslim directors concerning the acceptability of
questionable accounting and business practices. These results give credence to hypothesis 1. Therefore,
hypothesis 1 is not rejected. The implication of this result is that the various religious faith which the directors
profess do not influence them positively when it comes to business transactions.
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Vol. 1 Issue. 3
Table 5b shows the results of the ANOVA test for statistical differences between male and female directors
concerning the acceptability of questionable accounting and business practices. The likelihood that the
respondent would take similar action in respect of scenarios 2 and 4 is lower for male than females. The
likelihood that a peer would take similar action in scenario 4 is lower for male than female. Similarly, the males
also consider the action in scenario 2 less ethical than the females.
Table 5 Results and Discussion (Analysis of Variance)
______________________________________________________________________________
a
b
_______________________________ _______________________________
Individual Christians Muslims
Christians Muslims
Scenarios
mean
mean F-ratio P-v
mean
mean F-ratio P-v
Seriousness of the action
______________________________________________________________________________
Scenario 1
5.39
2.37
2.55
0.032** 4.93
5.71
1.04
0.483
Scenario 2
4.68
3.63
2.13
0.069* 4.84
Scenario 2
0.816
5.70
2.49
0.89
0.52
4.87
4.74
0.66
0.422
4.50
0.43
Scenario 2
5.90
4.53
0.48
0.85
5.48
5.34
0.82
0.526
______________________________________________________________________________
Respondents would take similar action
______________________________________________________________________________
Scenario 1
1.47
1.69
1.25
0.286
1.42
1.66
1.07
Scenario 2
3.47
3.87
2.26
0.047** 3.65
Scenario 3
2.35
2.22
1.34
0.242
3.92
2.29
0.488
4.41 0.001***
2.41
1.85 0.215
Scenario 4
2.18
3.27
0.33
0.988
2.02
2.55
2.38 0.033**
______________________________________________________________________________
A peer would take similar action
______________________________________________________________________________
Scenario 1
3.84
3.22
1.07
0.384
3.11
3.30
0.95
0.494
Scenario 2
4.27
3.24
0.80
0.540
4.36
4.56
0.83
3.35
4.07
0.42
0.819
3.74
3.73
0.84
0.526
Scenario 3
0.543
Scenario 4
3.10
4.77
0.83
0.533
3.56
4.40
2.86
0.014***
___________________________________________________________________________
Ethicality of the action
______________________________________________________________________________
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Scenario 1
Vol. 1 Issue. 3
2.19
2.36
0.46
0.852
2.09
2.45
0.35
3.37
3.77
0.47
0.856
2.25
2.84
2.12
2.58
2.62
1.11
0.393
2.46
3.79
1.63
0.901
Scenario 2
0.068*
Scenario 3
0.145
Scenario 4
1.69
1.93
0.37
0.848
1.92
1.83
1.164
_____________________________________________________________________________
1781
Notes: *significant at the 10% level, **significant at the 5% level, ***significant at the 1% level
4.Conclusions and implications
This study provides evidence of the ethical sensitivity of directors of some listed companies in Nigeria in terms
of religion and sex. Based on the empirical evidence, we conclude that there are no significant differences
between Christian and Muslims directors of companies concerning acceptability of questionable accounting and
business practices. We also found no significant differences between male and female directors in respect of
acceptability of the ethical issues presented in the various scenarios.
For policy implication however, the results of this study cannot be generalized because it is constrained by the
small sample size of the sample and a number of other factors not controlled for. It would therefore be
inappropriate to draw inferences that could have implications for policy under the circumstance. However, to
enable policy implications to be drawn, we encourage future research that could expand the sample size and
comparison groups to include atheists, humanists, freethinkers and more industry segments.
References
 Atakan, M. G. S., S. Burnaz and Y. I. Topcu (2008), ‗An Empirical Investigation of the Ethical Perceptions
of Future Managers with a Special Emphasis on Gender – Turkish Case‘, Journal of Business Ethics, 82,
573–586.
 Borkowski, S and Ugras, Y. (1998) ‗Business students and ethics: a meta-analysis‘, Journal of Business
Ethics, Vol. 17, pp.1117–1127.
 Coate, C. J. and K. J. Frey: (2000), ‗Some Evidence on the Ethical Disposition of Accounting Students:
Context and Gender Implications‘, Teaching Business Ethics 4(4), 379–404.
 Conroy, S. J. and Emerson, T. L. (2004) ‗Business ethics and religion: religiosity as a predictor of ethical
awareness among students‘, Journal of Business Ethics, Vol. 50, pp.383–396.
 Eyon, G. N., Hill, T. and Stevens, K. T. (1997) ‗Factors that influence the moral reasoning abilities of
accountants: implications for universities and the profession‘, Journal of Business Ethics, Vol. 16, pp.1297–
1309.
 Dean, K. L.; Beggs, J. M. and Keane, T. P. (2010). Mid-level managers, organizational context, and
(un)ethical encounters. Journal of Business Ethics (2010) 97:51–69
 Emerson, T. N., Conroy, S. J. and Stanley, C. W. (2007) ‗Ethical attitude of accounts: recent evidence from a
practitioners‘ survey‘, Journal of Business Ethics, Vol. 71, pp.73–87.
 Kibanja, G. M. and Munene, J. C. (2009). A gender analysis of banks loan negotiations in Uganda. Journal
of African Business, 10 (1), 105-11.
 Krishnaswami, O. (2003). Methodology of research in social sciences. New Delhi. Himalay Publishing
House.
 Lehman, G. (2004) ‗Accounting, accountability and religion: Charles Taylor‘s catholic modernityand the
malaise of a disenchanted world‘, Accounting and the Public Interest, 4, 43–61.
 Loe, T. W., L. Ferrell and P. Mansfield: (2000), ‗A Review of Empirical Studies Assessing Ethical Decision
Making in Business‘, Journal of Business Ethics 25(3), 185–204.
 O‘Fallon, M. J. and K. D. Butterfield (2005), ‗A Review of the Empirical Ethical Decision-Making
Literature‘, Journal of Business Ethics 59(4), 375–413.
 Oumlil, A. B. and J. L. Balloun (2009), ‗Ethical Decision- Making Differences Between American and
Moroccan Managers‘, Journal of Business Ethics 84(4), 457–478.
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 Vermeir, I. and P. Van Kenhove (2008), ‗Gender Differences in Double Standards‘, Journal of Business
Ethics 81(2), 281–295.
 Weaver, G. R. and B. R. Agle: (2002), ‗Religiosity and Ethical Behavior in Organizations: A Symbolic
Interactionist Perspective‘, Academy of Management Review 27(1), 77–97.
 World Christian Encyclopedia: (2000), A Comparative Survey of Churches and Religions in the Modern
World 2nd Edition, Ed. David B. Barrett & Todd M. Johnson
 Spiceland, J. D., Sepe, J. F. and Tomassini, L. A. (2001) Intermediate Accounting, McGraw-Hill,New York.
Appendix
Scenario 1
Okoro Ltd. employs the firm of Green and Co. as auditors for the year ended 31st December, 2010. Green and
Co. discovered that the client materially misstated net income on the previous year‘s tax return. The client is
advised to prepare amended tax returns.
Action: The client failed to take appropriate action.
Scenario 2
The Minister of a foreign country where extra ordinary payments to influence the decision making process are
common, asks you as a company Director for a fee of N5million to secure a contract of N100million that would
yield after tax profit of N25million. If the contract is not secured, a fair share of the market would be lost.
Action: The fee is paid to secure the contract.
Scenario 3
A commercial bank, XYZ Ltd has just offered its share for public subscription following the increase in capital
base of Nigerian banks. Against banking laws, XYZ Ltd granted loans to its customers to buy the shares to
ensure full subscription. The Managing Director (whose job is predicated on the full subscription of the shares)
asks the Finance Director to reclassify the loan as ―Agricultural credit loan‖ to beat sanctions from regulatory
authorities.
Action: The finance director reclassified the loans.
Scenario 4
A young man with a good university degree and has been unemployed for several years suddenly found an
opportunity of a good job, but failed to meet the age requirement. Friends asked him to understate his age by
five years. If he is caught, he could be charged for forgery and could go to jail for ten years.
Action: He understates his age and secured the job.
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Climate Change: Challenge to Agricultural Extension
Practice in Nigeria
G.E. Ifenkwe
Department of Rural Sociology and Extension
Michael Okpara University of Agriculture, Umudike
E-mail: [email protected].
Abstract
This paper analysed the vulnerability of various parts of Nigeria to climate change using such parameters as
human activities and weather-related activities as baseline. It observed that human activities generally impact
negatively on both the physical and social environment leading, in extreme cases, to such devastating effects as
flooding, global warming, ozone layer depletion and climate change. The score cared technique was used to
determine the proneness of each land resource zone to direct or collateral climatic effect. Findings show that
the very humid land resource zone (93.3%) was the most vulnerable to climate change, followed by the subhumid (90%) and humid zones (90%). For effective adaptation and motivation, extension messages on climate
change should be location –specific to achieve maximum attitudinal and behavioural effects. Given that farmers
are favourably disposed to messages that address the realities of their situation and peculiar circumstances, the
paper suggests that the various communities be educated about, in and though, and for the environment to
enhance climate change adaptation, whilst promoting food security in Nigeria.
Keywords: Environment, Global warming, Ozone layer, Greenhouse effect, Radiation.
Introduction
Climate has been described as a key driver for food security (Gregory et al, 2005; Verdin et al., 2005)
worldwide. Atmospheric conditions that constitute climate (wind, temperature, rainfall, sunshine etc) vary with
time, and from place to place. Climatologists and meteorologists use averages of these weather conditions to
characterize climate. Dupriez and De Leener (1988) identified six types of climate on the African continent,
namely, Guinea, Sudan, Sahelian, Equatorial, Arid and Mediterian.
Climate influences both the agricultural cycle (annual reoccurrence of farm activities) and agricultural calendar
(division of year into days and months with farming activities such as clearing, tilling, sowing, weeding and
harvesting, taking place as determined by pattern of rainfall life cycle of crops, custom and labour availability).
Sometimes, unusual weather conditions are experienced and this is referred to as climate change. Climate
change results from natural variability or human activities that emit greenhouse gases that tend to blanket the
earth and lead to ozone layer depletion, global warming and flooding (MacNeil et al, 1991). Its long-term
devastating effects include desertification, skin cancer, eye cataract, sea food depletion and rapid rusting of roof
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Vol. 1 Issue. 3
tops. Gases implicated in this change are carbon dioxide (55%), chlorophenol, carbon (24%), methane (15%)
and nitrous oxide (6%). These are emission from automobiles, air conditioners, foam materials, food
preservatives, agro-chemicals, gas flaring and ruminant animals deposits or wastes. Since the severity of climate
change varies from one geographical location to another, adaptation and mitigation procedures should also vary.
This paper examined the relative vulnerability of the various land resource zones of Nigeria to climate change
effects, and discussed the implications of this for extension message production and delivery.
Methodology
The study adopted the descriptive approach to data analysis. Primary sources of data were research reports,
maps, books and newspapers. The first step was the study of the agricultural profile and potentials of the eight
land resources zones of Nigeria. Relevant technical literature was thereafter examined to identify the possible
causes of climate change and its effects. This was followed by an appraisal of the proneness of each zone to
climate change. This entailed ordering the causative factors according to perceived level of occurrence in the
different zones. The score card technique was used in which case perceived occurrence attracted numerical
values 3 (to a large extent), 2 (to a little extent ) and 1 (collateral effect), and weighted score summed up for
each zone. The extent to which each zone possessed these attributes was thus used to determine its proneness to
direct or collateral climate effects.
Results and Discussion.
Climatic variation
The review shows glaring differences in agro-climatic data (rainfall, temperature), as well as in crop and
livestock diversity. (Table1). Whereas rainfall increased from the semi-arid to very humid zones, temperature
declined following the same trend. Variation in human and social environment usually affects land use patterns
and was found to have had serious implications of varying magnitude for climate change within the zones.
Table 1: Agro-Climatic Data and Agricultural Potentials of Land Resources Zones in Nigeria.
States
Human population Major crops
Major livestock Rainfall
Mean (max)
density
quantity
monthly
(mm)
Tem. (0C)
Adjacent to 27,071,962
Millet,
Cattle
sheep, 400-600
40
Semi
Chad
and
Sorghum,
goat,
camel,
arid
Niger
Barley,
donkey
Republic
Vegetables
Millet, Beans, Sheep, Goat
600-1000
39
Dry sub- Kano, Borno, 29,257,073
Sokoto,
Onion,
Rice,
humid
Yobe,
Groundnut,
Zamfara,
Cotton, Maize,
Jigawa
Vegetable
sorghum
Kaduna,
26,078,361
Sorghum,
Cattle,
Sheep, 1000-1300 37
Sub
Niger,
Maize,
Yam, Goat
humid
Katsina,
Cotton,
Goat,
Bauchi,
Vegetable
Gombe,
Kebbi
Osun, Oyo, 30,000,469
Yam, Cassava, Sheep,
Goat, 1100-1400 37
Humid
Kogi, FCT,
Upland rice
poultry, Cattle
Kwara,
Benue,
Adamawa,
Taraba, Ekiti,
Nasarawa
Ebonyi, Imo, 46,690,283
Yam, Cassava, Fish farming
1200-2000 33
Very
Edo, Delta,
Rice,
Maize,
humid
Abia, Ogun,
Plantain,
Cross River,
Cocoyam, Oil
Ondo, Enugu,
Palm, Vegetable
Anambra,
Akwa Ibom,
Lagos
Zones
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Swamp
Plateau
Montane
Bayelsa,
Rivers
Plateau
6,888,758
Obudu (Cross
River)
Mambilla
(Taraba)
Part of very humid
and humid zone
Swamp
rice,
Raffia palm
Maize, sorghum,
Irish
potato,
millet,
vegetables
Maize,
Cocoaym,
Avocado,
Vegetable
3,178,712
Vol. 1 Issue. 3
Marine resources
2000+
32
Small
cattle
1400-1500
31
14002000+
36
stock,
Cattle
Total
140,003,542
Sources: ODA, 1989
National Population Commission 2006 provisional census.
Human Factor
The human population density is highest in the very humid zones, and least in the plateau zone (Table 2).
Although population growth favours allocation of financial resources, political representation and control
(UNDP (Nigeria), 2006), it puts pressure on resource use, causes forest deforestation (Adedire, 2002) which in
turn leads to global warming (Akachuku, 2000; Awosika et al, 1994). Very high human population causes rapid
increase in Carbon dioxide (CO2) and Nitrous oxide (N2O) accumulation, and both are greenhouse gases that
cause global warming (MacNeil et al, 1991). It also depletes fuel wood supply forcing households to use
alternatives including animal dung with resultant environmental hazards (Barbier, 1997).
Although all the zones were vulnerable to climate change, the very humid land resources zone was the most
vulnerable followed by the sub-humid and humid zones (Table 2). The swamp and plateau zones had least of
factors that precipitate climate change.
Table 2: Nigeria Land Resources Zones: Vulnerability to Climate Change.
Zone
Agro
Contin
Over
Anima
Swamp
Burnin
Gas
Cement
Industri
Deforest
Vulner
chemi
uous
grazi
l
rice
g
flari
producti
alization
ation
ability
cal
croppin
ng
droppi
product
bush/cr
ng
on
ng
ion
op
g
of
rate
(%)
wastes




X

X
X

X
73.3






X


X
86.7






X



90.0
Humid


+



X



90.0
Very


+
+






93.3
Swamp


X
X

+

X

X
70.0
Plateau


+
+
X

X X

X
66.7
Monta


+
+




73.3
Semi
arid
Dry
sub
humid
Sub
humid
humid
X
X
ne
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Source: ODA, 1989
Key:
 = To a Great Extent
+ = To a little extent
x = Never
Conclusion /Recommendations
Climate change is a real problem that has attracted global attention. The Kyoto, Montreal and Copenhagen
protocols/conferences addressed issues of adaptation to and mitigation of this problem through such strategies as
regulating deforestation activities, environmental impact assessment, surveillance to avoid sabotage,
sensitization for purpose of attitude change, and use of alternative sources of energy. Others are incorporating
the phenomenon in school curricula, dedicating national institutes for climate change research, constant
electricity supply, formulating policy on waste recycling and sensitizing industries on proper waste disposal.
The advocacy function of a few national and international organizations is noteworthy. The Nigeria
Environmental Study/Action Team (Nest) has been playing an invaluable role in sensitizing and empowering
Nigerians on issues of the environment and sustainable development through research, dissemination of
information, policy dialogue and public awareness creation.
The climate change adaptation for Africa (CCAA), a joint programme of International Development Research
Centre (IDRC) Canada, and Department for International Development (DFID) United, Kingdom; has also
contributed immensely toward reduction of vulnerability enhancement of adaptive capacity to climate change at
the grassroots level. These organizations should, however, make provision for proactive measures including
surveillance and reporting of signs of environmental abuse or threat.
Education authorities at all levels (federal, state and local government) should be part of this campaign.
Environmental protection should be in the school curriculum and environmental protection clubs should be
formed in schools. Posters, handbills, jingles and slogans should be used to create awareness and educate
members of the public about, in and through , and for environment. Environmental management should be made
part of general studies in the universities just as we have Peace and Conflict Resolution, Entrepreneurial studies
etc, while the political class should integrate environmental issues into their programme.
Although the credibility rating of the Agricultural Development Project (ADP) as a source of agro-technological
innovation is currently high in Nigeria, there is need for the organization to adopt a more pragmatic approach
towards communicating climate change innovations to communities.
Organized extension efforts that involves isolating location –specific causes of climate change and selecting
appropriate content or packages on zonal land resources basis is recommended. This template should include
information on indigenous knowledge (IK) and geographic information system (GIS), both of which will
provide data for predicting climate change in the various land resources zones. Featuring them at monthly
technology review meeting (MTRM) and fortnightly training sessions will facilitate acceptance of and
compliance with climate change regulations. Therein lies the challenges of climate change to agricultural
extension practice in Nigeria.
References
 Adedire, M.O. (2002). Environmental Implications of Tropical Deforestation. International Journal of
Sustainable development and World Ecology. 9(1):33-40.
 Akachuku, A.E. (2005). Disappearing Forest: The Consequences and Challenges of Sustainable
Development in Nigeria. Proceedings of Forestry Association of Nigeria. Pp 48-61.
 Awosika, L.T.; Ojo, O. and Ajayi T.O. (1994). Implications of Climate Changes of Sea Level Rise on the
Nigeria Delta. Nigeria Phase 1. A. Report for the United Nations Environment Programme
(OCAPA/UNEP).
 Babier, E.B. (1997). The Economic Determinants of Land Degradation in Developing Countries. Phil. Trans.
R. Sco. Land B. 352:891-899.
 Gregory, P.J.; Ingram, J.S. and Braklacich, M. (2005). Climate Change and Food Security. Philos trans R.
Soc. London B360 (1463) 2139-2148.
 MacNeill, J. Winsemius, P. and Yakushiji, T. (1991). Beyond Independence: The Meshing of the World‟s
Economy and the Earth‟s Ecology, A trilateral Commission Book Oxford university Press, New York.
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 ODA (Overseas Development administration ) (1989). Nigeria: Profile of Agricultural Potentials. Overseas
Development Natural resources Institute.
 UNDP Nigeria Country Office (2006). Census 2006 Project Background http://www.ng.undp.org/index2585.
 Verdin, J; Funk, C; Senay, G; and Choularton, R, (2005). Climate Science and Famine early warning philos
Trans R. Soc. London. B. 360 (1463): 2155-2168.
Assessment of Students’ Understanding of Chemical
Bonding Concepts in Secondary Schools of Bungoma West
District, Kenya
Mark Wanyonyi*
Assistant Lecturer, Department of Pure
and Applied Chemistry,
Masinde Muliro University of Science
& Technology, Kenya
P. O BOX 190 -50100, Kakamega,
Kenya
Phone No: +254735828195
Maurice O. Omolo
Senior Lecturer, Department of Pure
and Applied Chemistry,
Science & Technology, Kenya
Kenya
E-mail:[email protected]
Phone No: +254726366378
Ronald Michieka
Lecturer, Department of Science
and Mathematics Education,
Science & Technology, Kenya
Kenya
Phone No: +254733553089
Abstract
Chemical bonding is a principal concept and key area in secondary school chemistry and even higher levels of
learning. The main purpose of this study was to investigate secondary school students‟ understanding of
chemical bonding concepts. A Chemical Bonding Concepts Test (CBCT) was administered to a sample of Form
Three students, which is level 11 with average of 17 years. Some misconceptions were identified, which were
mostly associated with girls and low achievers. There was a significant difference in mean scores of the CBCT
between boys and girls (F = 9.912; p = 0.002), indicating gender gap in understanding of these concepts. It was
established that learners have some difficulties and often confuse some concepts such as ionic, covalent and
metallic bonding. The evidence presented in the findings suggests that students in secondary schools have some
learning difficulties and lack a proper understanding of structure and chemical bonding concepts.
Key words: Chemical Bonding, Structure, Concepts
1.0 Introduction
A substance in chemistry is understood in terms of aggregations of particles, and the nature of bonding between
them is used to explain the properties of substances such as the physical state at a given temperature and
pressure (Nahum, et.al., 2004). Chemical substances exist as salts or molecules and, their melting and boiling
points, chemical stability, toxicity, reactivity and virtually every property is explained using models of chemical
bonding (Coll & Treagust 2003). Understanding of chemical bonding concepts is developed through diverse
scientific models, and students therefore, are expected to understand and interpret a big range of symbolic
representations of chemical bonds (Coll & Treagust, 2002; Gilbert, 1998; Taber & Coll, 2002). Chemical
bonding is considered by teachers, students and chemists to be a very complicated concept (Gabel, 1996; Taber,
1998). The concepts associated with structure and chemical bonding such as covalent bonds, molecules, ions,
giant lattices and hydrogen bonds are abstract for students to understand (Nahum, et. al., 2007). It is a central
concept in the teaching and learning of chemistry and a thorough understanding of it is essential for
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Vol. 1 Issue. 3
understanding of most chemistry topics including organic chemistry, acids and bases, solubility of substances,
electrochemistry, the mole concept and even thermochemistry among others (Fensham, 1975; Boo, 1998). It is
essential to the understanding of molecular structure, chemical equilibrium, chemical reactions and some
physical properties such as boiling points. Concepts such as structure and chemical bonding, rate of reactions
and internal energy apply to all chemical systems. Therefore, understanding of these concepts has implications
regarding the understanding of the whole chemical process, mainly chemical reactions and properties of
substances which involve breaking and forming of chemical bonds (Taber & Coll, 2002).
According to Coll & Taylor (2002) secondary school students have been reported to prefer the sea of electrons
model, in which bond formation is based on the notion of an array of metal ions in a mobile or delocalized ‗sea‘
of electrons in explaining metallic bonding. For ionic bonding, they posses a number of metal models, with the
preferred target model for the bonding in ionic compounds being the electrostatic model in which bond
formation is based on the attraction of a cation and an anion. However, they do not appear to hold any clear
preferred metal model for the bonding in molecular compounds. The single consistent idea being that they
involve covalent bonding and that covalent bonding involves sharing although views on what was actually
shared are highly variable (Coll & Taylor, 2002). Boo (1998) found out that, for students who seemed to have
some scientifically acceptable views of ionic bonds, there were numerous other misconceptions which were
identified. For instance, the perception of ionic bonds as not being affected by dissolving process, and that only
weaker bonds between ionic molecules, that is, Van der Waals bonds, are broken in the dissolving process. The
study revealed clearly the lack of understanding about chemical bonds and there seemed to be confusion in the
students‘ minds about concepts related to particles and their interactions. Students visualized a chemical reaction
as a process of adding or gluing of reactants to form products, rather than as a process of bond breaking and
bond making involving collisions of many particles (Ben-Zvi, et. al., 1987; Cros & Maurin, 1986). Taber (1997)
reported confusion about ionic bond formation and electron transfer, suggesting that some learners believe the
formation of ionic bonds occurs as a result of direct transfer of electrons. Additionally, many students have a
poor understanding of bonding in metals, seeing it as weak or in some measure inferior to other forms of
bonding (De Posada, 1997; Taber, 1998).
Despite the very crucial importance of chemistry, students continue to perform poorly in Kenya Certificate of
Secondary Examinations (KCSE). This trend is also observed where girls have not been performing as well as
boys over some time. The Kenya National Examination Council, KNEC, (2004-2007) reports indicate that
students often have various problems in answering questions on many topics such as the mole concept,
electrochemistry, thermochemistry, organic chemistry, and properties of matter. Most of these topics require
proper understanding of chemical bonding concepts. It is therefore important that learning and understanding of
chemical concepts such as structure and chemical bonding are investigated to establish the exact conceptual
problems that secondary school students encounter in learning chemistry. The study sought to determine the
learning difficulties that students encounter, the influence that gender has on the understanding of chemical
bonding concepts among secondary school students and the difference in understanding of chemical bonding
concepts between low, average and high achievers.
2.0 Methodology
A survey was carried out targeting Form Three students (average age of 17 years) and a sample of 688 (30.0%)
involving 55.2% girls and 44.8% boys was randomly selected. Students were selected in categories of high,
average and low achievers in their respective schools using previous records of their performance. Students
whose scores were between 0 and 15 (below 30%) were grouped into the low-achieving group; students whose
scores were above 16 and below 30 (31 – 60%) were grouped into the medium-achieving group, the average;
and students whose scores were between 31 and 50 (above 61%) were grouped into the high-achieving group. A
Chemical Bonding Concepts Test (CBCT) was used as an instrument for data collection which was piloted and
its reliability and validity established. Data analysis and presentation was done through descriptive and
inferential statistics. Inferences were based on analyzed percentages, means, standard deviations and
frequencies. One way ANOVA at α = 0.05 level of significance was used. ANOVA and F – test were preferred
because the F – test is a more versatile statistical technique than a t – test (Ary, et. al., 1972). In this kind of
study, this was done using SPSS 11.5 program computer software.
3.0 Results
3.1.1 Understanding of ionic bonding concepts
Students‘ understanding of ionic bond formation and sizes was below average. It was found that 40.7% of the
students identified the type of bonding in both lithium fluoride (LiF) and sodium chloride (NaCl) as ionic while
25.4% and 23.0% identified the types of chemical bonds in these compounds as covalent and co-ordinate,
respectively. Moreover, 41.0% recognized that the transfer of electrons from potassium to bromine atoms would
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result in the formation of an ionic bond. On the other hand, 46.8% of them failed, with 23.5% and 21.8%
proposing that the bond would be co-ordinate and covalent, respectively. In a reaction between sodium and
bromine to form sodium bromide, 30.4% of students noted that electrons are lost by sodium with 35.9%
indicating that electrons are lost by both sodium and bromine. A proportion of 32.1% indicated that ionic solids
usually conduct electricity. Furthermore, 45.8% indicated that HCl, dissolved in water would conduct
electricity, and 34.4% of the sample population correctly noted that an aqueous solution of sodium chloride
(NaCl) conducts electricity due to the presence of mobile ions. However, 42.0% of them attributed this property
to mobile electrons.
The results as presented in figure 1 show the distribution of students‘ understanding of an ionic bonding model
and 34.6% of the students did not attempt the question. A further 44.8% attempted but registered poor
understanding on the item. Only 6.1% correctly answered the question as expected. Electron transfer and
representation of charges was not well understood as indicated by a lower proportion (6.1%) of students
showing adequate understanding.
3.1.2 Understanding of covalent bonding concepts
Covalent bonding was not clearly understood as students performed poorly on items that tested on this type of
bonding. Notably, 31.4% of them identified the chemical bond within a molecule of iodine as being covalent.
However, 28.2% could not differentiate between the intermolecular forces, Van der Waals and covalent
bonding. They proposed that the type of bond that exists in a molecule of iodine would be Van der Waals forces.
A good level of understanding of the properties of molecular substances was obtained. For instance, 66.0% of
the students associated a compound with low melting point and does not conduct electricity in either solid or
liquid with a molecular substance. Additionally, 50.0% showed good level of understanding of the properties of
molecular substances. An average level of understanding on aspects of intermolecular forces of attraction was
noted. This was illustrated by the identification of intermolecular forces of attraction between hydrogen
molecules in liquid state, whereby, 51.3% correctly identified them as Van der Waals forces. However, 27.3%
of them indicated that the forces are hydrogen bonds. A fairly good level of understanding of the strengths of
intermolecular interactions between molecules was recorded, whereby, 49.9% of the students recognized that as
the distance between two iodine molecules increases, the attraction of Van der Waals between them decreases.
Also, co-ordinate bonding is not well understood by most learners. This was evident from the fact that 16.3% of
students recognized that carbon monoxide (CO) has this bond, with 78.8% failure and 48.1% of them
identifying carbon tetra chloride (CCl4) as the compound with co-ordinate bonds. The results in figure 1 showed
that 50.9% of the students demonstrated poor understanding in covalent bonding model. Moreover, 36.9%
attempted but could not score any mark. Similarly, only 5.1% had adequately understood the concept.
3.1.3 Understanding of metallic bonding concepts
It was determined that 37.9% of the students identified the type of bonding in magnesium as metallic, while a
failure of 58.0% was recorded, with 27.5% of them proposing that the bonding is covalent. Additionally, 24.1%
of them suggested that metallic bonding is the type of bonding that involves positive ions immersed in a sea of
mobile electrons. However, 28.8% attributed this property to ionic bonding. Furthermore, 29.4% of them
recognized that mobile electrons are a distinguishing characteristic of metallic bonding. The results also showed
that there was a good level of understanding from the fact that 70.6% of the students indicated that the free
electrons in the metallic structure are the property that best accounts for the conductivity of metals.
3.1.4 Gender differences in understanding of chemical bonding concepts
Performance on various concepts in chemical bonding revealed that students have some misconceptions. It was
however observed that a higher proportion of boys showed better understanding of these concepts than girls.
There were some variations in the level of understanding of these concepts. The results showed that higher
proportions of girls have the misunderstandings as compared to boys as shown in table 1. The results showed
that most of the girls (37.3%) have a view that a solid which is soft, a non conductor and melts at low
temperatures has a giant atomic structure. On the other hand, 31.9% of the boys suggested that a bond that exists
in a molecule of iodine is called Van der Waals force, against 27.9% of the girls. It was also found that 22.7% of
the boys and 27.8% of the girls believed that a compound that is formed between potassium and chlorine would
be a good conductor of electricity in solid state.
The distribution of students‘ abilities on representation of ionic and covalent bonding models are summarized in
tables 2. The scores were defined as levels of understanding in the concept as presented in table 2. The results
indicate that students of either gender have relatively similar levels of understanding on this item. Those who
showed adequate level of understanding of an ionic model constituted 9.3% of the boys and 9.4% of the girls.
However, most of them consisting of 69.9% (boys) and 67.1% (girls) were found to have poorly understood this
aspect of drawing a model representing ionic bonding. The results in table 2 show that learners of either gender
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have relatively same levels of understanding on this item. It was found that only 10% (boys) and 10.7% (girls)
had the required level of understanding on this aspect. Also, there were higher proportions of students of either
gender, consisting of 76.5% (boys) and 73.8% (girls) having the lowest level of understanding of this concept.
Compared to girls, boys had a higher mean score in the scores obtained from the CBCT. The one way ANOVA
results at α = 0.05 level of significance obtained in table 3 showed that there is a significant mean score
difference between boys and girls in terms of students‘ understanding of chemical bonding concepts. The F –
value (9.912) from ANOVA on gender differences between and within groups in students‘ scores in the CBCT
was statistically significant at α = 0.05 and df = 1, 686 (table 3).
3.1.5 Understanding of the concepts among high, average and low achievers
It was established that boys‘ schools had the majority of the average students (68.8%) but with least proportion
of low achievers. This could be due to the fact that boys‘ schools were provincial, and students in these schools
had better entry behaviour. It was further determined that 40.1% and 39.7% of the students in provincial and
district schools, respectively are low achievers, while high achievers constituted 3.8% and 7.5% accordingly.
However, district schools had a higher proportion of high achievers (7.5%) than the provincial ones (3.8%).
These results could have been influenced by the composition of the two categories of schools. For instance,
most of the mixed schools fall into district schools category and have a higher proportion of high achievers. The
results revealed that most of the misconceptions are highly associated with students of low learning abilities as
shown in table 4. It was found that 34.6% of the low achievers believe that a strip of magnesium ribbon contains
covalent bonds. On the other hand, 27.9% of average students had the same view, while none of the high
achievers possessed this misconception. However, on some other items, higher proportions of the high achievers
harbuored certain misunderstandings. About 40.9% of the high achievers indicated that ionic bonding involves
positive ions immersed in a sea of mobile electrons. On the same aspect, 35.4% (average) and 21.7% (low
achievers) held this misconception.
4.0 Discussion
It was found that learners had fairly understood the concepts of structure and chemical bonding, though with
some learning difficulties. There is confusion in the use of ‗mobile‘ and ‗free‘ electrons. Whereas 70.6% of
them were able to recognize that free electrons in metallic structure are responsible for the conductivity in
metals, 29.4% of the students were able to indicate that mobile electrons are a distinguishing characteristic of a
metallic bond. It was contrarily found that many of them could not be able to inter-changeably use free and
mobile electrons. Most of them could not correctly relate earlier knowledge learned about the atom and atomic
structure, periodic table and properties of elements with chemical bonding. These results were in agreement
with findings by Nahum, et. al.,(2004), who found out that students usually confuse intermolecular bonds and
intra-molecular bonds. Also, no clear distinction was made between Van der Waals forces and hydrogen bonds.
In this study, 29.4% of learners showed good understanding of the metallic bonding concept. Learners confused
covalent bonding between iodine molecules with Van der Waals forces between the molecules. It was also
reportedly found that students often know how to define the concepts but do not understand their meaning and
relevance.
Moreover, learners were found to posses very little knowledge about mechanisms of bonding in various
compounds. This was observed with poor performance on questions regarding formation of bonds. For instance,
5.1% and 6.1% of students clearly showed sound understanding of the ionic and covalent bonding models,
respectively. For ionic compounds, charges were in most cases not indicated properly. In various studies done in
this work, students showed poor understanding of various concepts in the subject.
Morgil and Nuray (2006) determined that the rate of students with partial understanding and specific
misconception is large at various age groups. However, this was a cross- age study unlike the current one which
is cross-sectional. In their study, learners confused about various concepts in science such as suspension and
emulsion. For instance, it was determined that 71% of 14 year-old students had misconceptions about
transformation of ice into water and vice versa. They were understandably unwilling to suggest what types of
interactions are present in metals such as magnesium. In the study, it was observed that there was a
misinterpretation between ion formation and ionic bonding. Relatively low understanding level was also
observed in ionic bonding and identification of various elements that likely form this type of bond.
In contrast Coll and Treagust (2002) found that secondary school learners identified ionic bonding as an
attraction between charged species. For instance, students drew ions and related the bonding in sodium chloride
to electron transfer and the resultant electrostatic attraction between oppositely charged species. Students
referred to ionic bonding as a situation where atoms donate and receive electrons. In their study, students related
the periodic table with the type of bonding involved. This, however, was not clearly understood by learners in
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the current study. According to Coll and Treagust (2002) the secondary school level learners seemed to hold
different views about ionic size in which a number of learners asserted that chloride ion is larger than sodium
ion. Generally, the secondary school students‘ metal models were dominated by the view that ionic bonding
consists of attraction of oppositely charged species. They recognized the fact that formation of ions occurs
through electron transfer, which is in turn driven by the octet rule of full–shell stability. These findings were in
agreement with the current study as indicated by the responses to items on these concepts. The results further
revealed that students have various misconceptions as evidenced from the kinds of answers they suggested in
some questions. For instance, 25.4% of students believed that lithium fluoride (LiF) and sodium chloride (NaCl)
have covalent bonds. Similarly, 21.8% of the students proposed that transfer of electrons from potassium to
bromine atoms would result in the formation of covalent bonding. It was also revealed that 42.0% of students
indicated that aqueous solutions of ionic substances such as NaCl, conduct electricity due to the presence of
mobile electrons. Similar results were reported by Nahum, et. al., (2004), who indicated that students had
difficulties regarding the type of particles in aqueous solutions. For instance, students suggested that in an
aqueous solution, RbCl is decomposed into its ions. Thus, there are free electrons so the solution conducts
electricity.
In this study, there was confusion between ionic and covalent bonding concepts. However, learners showed
good level of understanding of the properties of molecular substances. This was indicated by a 66.0% pass
recorded, for the students who identified the properties of molecular substances correctly. Similarly, in another
item on the same concept, 50.0% of the students demonstrated sound understanding. These findings, however,
contradict those reported by Nahum, et. al., (2004), who found out that, students confused ionic and molecular
compounds. For example, they reported that students suggested that magnesium oxide (MgO) is a polar
molecule, so the electrostatic forces between the molecules are stronger. The results show that boys performed
better than girls in test items, suggesting some gender gap in the understanding of structure and chemical
bonding concepts. Similarly, Eriba and Ande (2006) reported that boys performed better than girls in chemistry
problem solving which required the use of mathematics. They further suggested that masculinity of science is
one of the reasons which girls tend to give when avoiding the subjects at school and those that do it tend to
perceive science as a difficult subject with little relevance to their future, which, of course accounts for their
performance. Both studies are in agreement in most of the aspects in terms of their findings. Morgil and Nuray
(2006) in their study reported that the sound understanding rates of chemistry concepts were higher in girls than
boys at 11- year old age group. Most 11-year old girls were classified as being successful in science. Similarly,
sound understanding level of girls at the age of 12 was higher than the boys. This was however, not the same
trend at the age group of 13 and 14. The boys‘ level of understanding was found to be higher than girls. These
findings were not in agreement with those of age group 11 and 12. They were however similar to those found
among the age group of 13 and 14. Boys performed better than girls in the current study. However, a different
situation was observed in some cases where girls showed better level of understanding than boys. Therefore, it
can be concluded that gender differences generally exist between boys and girls in secondary schools.
Moreover, Afuwape and Oludipe (2008) investigated gender differences in the integrated science achievement
of graduating pre–service teachers and their findings revealed no statistical significant difference in academic
performance between male and female students. The findings were not in agreement with the current study as
there was a significant mean difference in scores between boys and girls.
Various differences among the categories of students were revealed. The distribution of student scores on
various concepts revealed some varied trends. It was observed that most of the learners lacked sound
understanding of these scientific concepts. The results provide a basis for concluding that there are significant
differences in the understanding of structure and chemical bonding concepts among different categories of
students. It was also revealed that most of the misconceptions are found among students of low learning
abilities, with a few exceptions as presented in table 1 and 4. It was observed that high achievers also harbuor
some misconceptions, especially in ionic bonding properties. Therefore, it is evident that structure and chemical
bonding concepts have not generally been well understood by the majority of the learners in secondary schools.
5.0 Conclusion
It was found that learners do not have clear understanding of chemical bonding concepts. The results further
revealed that students have various misconceptions in learning of these concepts as evidenced from the kinds of
responses suggested in some questions. Gender differences in the understanding of these concepts were found to
exist. Most of the girls harbuor more of the misunderstandings than boys, hence, gender has some influence on
the students‘ understanding of chemical bonding concepts. The results indicated that most of the misconceptions
are found among students of low learning abilities, with a few exceptions, where in some cases, higher
proportions of high achievers showed certain misunderstandings as compared to average and low achievers. The
evidence presented in the findings suggests that some students in secondary schools have some learning
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difficulties and lack a proper understanding of these concepts. This implies that students are not constructing
appropriate understanding of such fundamental chemical concepts from their classes. This might lead to further
poor understanding of other or more advanced concepts. Because of the role of misconceptions in the learning
process, the description, identification and overcoming of such problems are of vital importance to science
education. Chemistry teachers should therefore review, diagnose and think about possible misconceptions or
students‘ prior knowledge before teaching a class in which a new concept or idea is introduced. They should
probe their students‘ conceptions of each chemical concept in order to evaluate the learners‘ difficulties and
comprehension of mastering that concept before introducing a new related concept. It is therefore recommended
that teachers should try to help learners‘ link prior knowledge such as chemical families to chemical bonding
concepts while teaching chemistry in secondary schools.
References
 Afuwape, M. O., & Oludipe, D. I. (2008). Gender Difference in Integrated Science Achievement among PreService Teachers in Nigeria. Educational Research and Review, 3(7), 242- 245.
 Ary, D., Jacobs, L., & Razaviel, A. (1972). Introduction to Research in Education. Rinehart and Livingston,
New York, NY, pg 140 – 150.
 Ben- Zvi, R., Eylon B. S., & Silberstein, J. (1987). Students‘ Visualization of a Chemical Reaction.
Education in Chemistry, 24 117- 120.
 Boo, K. H. (1998). Students‘ Understanding of Chemical Bonds and Energetics of Chemical Reactions.
Journal of Research in Science Teaching, 35(5), 569- 581.
 Coll, R. K., & Taylor, N. (2002). Mental Models in Chemistry: Senior Chemistry Students‘ Mental Models
of Chemical Bonding. Chemistry Education: Research and Practice in Europe, 3(2), 175-184.
 Coll, R. K., & Treagust, D. F. (2002). Investigation of Secondary School, Undergraduate and Graduate
learners‘ Mental Models for Ionic Bonding. Journal of Research in Science Teaching. 40 (5), 464- 486.
 Coll, R. K., & Treagust, D. F. (2003). Learners' Mental Models of Metallic Bonding: A Cross-Age Study.
Sci Ed. 87, 685-707.
 Cros, D. J., & Maurin, M. (1986). Conceptions of First- Year University Students of the Constituents of
Matter and the Notions of Acids and Bases. European Journal of Science Education, 8, 303- 313.
 De Posada, J. M. (1997). Conceptions of High School Students Concerning the Internal Structure of Metals
and Their Electric Conduction: Structure and Evolution. Science Education, 81, 445 – 467.
 Eriba, J. O., & Ande, S. (2006). Gender Differences in Achievement in Calculating Reacting Masses from
Chemical Equations Among Secondary School Students in Makurdi Metropols. Educational Research and
Reviews, 1(6), 170- 173.
 Fensham, P. (1975). Concept formation. In Daniels, D. J (Ed.) New Movements in the Study and Teaching of
Chemistry. Temple Smith; London. Pg. 199-217.
 Gabel, D. (1996). The complexity of chemistry: Research for teaching in the 21 st century. Paper presented at
the 14th International Conference on chemical Education. Brisbane, Australia.
 Gilbert, J. K. (1998). Explaining with models. In M. Ratcliffe (Ed). ASE Guide to Secondary Science
Education, London: Stanley Thorne.
 KNEC, (2004 - 2007). Examinations Report for Kenya Certificate of Secondary
Examinations
 Morgil, I., & Nuray, Y. (2006). Cross- Age Study of Some Concepts in Chemistry Subject in Science
Curriculum. Journal of Turkish Science Education, 3(1), 15- 27.
 Nahum, T. L., Hofstein, A., Mamlok, R., & Bar- Dov, Z. (2004). Can Final Examinations Amplify Students‘
Misconceptions in Chemistry? Chemistry Education: Research and practice. 5(3) 301-325.
 Nahum, T. L., Hofstein, A., Mamlok, R., & Krajcik, J. (2007). Developing a New Teaching Approach for the
Current Scientific and Pedagogical Knowledge. Science Education, 91, 579- 603.
 Taber, K.S. (1997). Student Understanding of Ionic Bonding: Molecular versus Electrostatic Framework.
School Science Review, 78, 85 – 95.
 Taber, K.S. (1998). An Alternative Conceptual Framework from Chemistry Education. International Journal
of Science Education, 20, 597-608.
 Taber, K. S, & Coll, R. (2002). Chemical Bonding in Gilbert, J. K., (Eds.) Chemical Education: Research –
Based Practice,Dordrecht: Kluwer Academic Publishers BV, Pg. 213 -234.
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Women Working In Construction Management Roles:
Is It Worth It?
Dr Jacqueline H. Watts, The Open University, UK
Abstract
Although women‟s experience of working in management has been the subject of extensive comment, the
particular challenges they face in this role within male-dominated professions continue to be under-reported.
Drawing on ethnographic research into the career experiences of women civil engineers in the UK, this article
critically discusses how women perceive management careers in construction in light of what some regard as
limited financial rewards for the high levels of stress and the long hours expected in this highly competitive
industry. A feminist theoretical framework has been used to thematically analyse data from thirty-one in depth
interviews with women working in both the consulting and contracting parts of the business. The study
highlights cultural issues of visibility and the presenteeism ethos of the sector. It also draws attention to the
material constraints of construction sites where women in authority roles are „embattled‟ and not taken
seriously because the hostile work environment enables men to put women in a subordinate place in the
construction hierarchy. Women are taking up senior management posts in construction but only in very few
numbers. Their success depends on assuming „male‟ behavioural norms and intensified work patterns because
„belonging‟ in construction workplace cultures is highly gendered.
Key words: construction; diversity; management; women; work-life balance
Introduction
Recent critiques of work offer a very mixed picture of the contemporary labour market both in the UK and
global context, with issues such as the growing long hours culture (Chatzitheochari and Arber, 2009), work-life
balance (Rigby and O‘Brien-Smith, 2010) and the dominance of market individualism (Edwards and Wajcman,
2005) discussed as areas of particular concern. Despite these negative associations, work continues to be a
significant source of personal satisfaction for many, contributing positively to a sense of self worth with Doherty
(2009: 84) arguing that ‗work remains an important source of identity, meaning and social affiliation‘. For
women, who have entered the labour market in huge numbers in recent decades, work has come to be seen as an
expected and personally important role alongside family caring responsibilities such that Bolton and Houlihan
(2009) argue that women are more likely than men to feel satisfied with their work and have job security. They
also, however, point out that women are less likely than men to ‗enjoy promotion opportunities, earn adequate
pay, be a member of a company pension or be a member of a trade union‘ (Bolton and Houlihan, 2009: 8). They
are also less likely than men to be in corporate leadership roles with Collinson and Collinson (2004) arguing that
there has been a ‗remasculinization‘ of management in which women managers at all levels will only survive if
they follow the example of their male counterparts to subordinate home and family to company and career.
Whilst these concerns have exercised commentators across a broad range of industries and occupations for some
time, there has in more recent years been increased research attention on the fate of the aspiring female manager
in male-dominated occupations. Exploring the alleged feminsation of law and management, Bolton and Muzio
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(2008) highlight how the gendered processes of professional projects marginalise women and lead to the
downgrading of their contribution to corporate success. Lee and Faulkner (2010), writing about engineering
culture, highlight the subtle organisational dynamics that undermine the progress of women into senior posts.
Extending this critique to construction, Evetts (1993, 1996), Greed (2000), Watts (2009) and Powell et al (2006)
are all pessimistic about the opportunities for women to tread the ‗high road of management‘ (Bolton and
Houlihan, 2009: 3) within the construction industry where ninety-nine per cent of those employed are male
(Michielsens et al, 2001). They draw attention to a number of barriers to women‘s progress highlighting sexual
harassment, inflexible approaches to working arrangements and a routine reliance on long working hours to
complete projects on time and on budget. The issue of managing on construction sites is particularly difficult
with crude humour (Watts, 2007a) and a potentially disaffected and unruly male workforce (Druker and White,
1996) making this an uncomfortable and hostile setting for women. This is due to the particularly complex
economic and social relations of the sector that is characterised by a culture of mobility and self-employment
which has become embedded in the industry over a long period.
This article builds on earlier writing about the sector (see Watts, 2007a; 2007b; 2007c; 2008; 2009) and directs
attention to the experience of female managers in the industry, focusing on the specific question of whether
taking up these roles against a culture of resistance is worth it. Qualitative research data is explored to reveal,
through the voices of women participants that attitudes to gender politics within construction are resistant to
change resulting in management work for women as conflicted and draining, with many also regarding the
financial rewards as insufficient.
The article proceeds in six parts beginning with a brief discussion of visibility and the ideas of Cohn (2000) and
Kanter (1993) that point to features of ‗otherness‘ in the corporate workplace context. This is followed by detail
of the UK construction industry to give material context to the discussion of the research on which this article
draws. Information about research methods and participants follows as an introduction to the presentation of
findings that have the key themes of choosing a management pathway and the challenges for women of working
in authority roles on construction sites. In conclusion, the article points to the need for culture change within the
industry that hitherto has remained resistant to adopting modern working practices.
Gendered visibility
Kanter‘s (1993) seminal work on the sociology of gender explores the mechanics of corporate behaviour as
well as the particular problems minorities face in achieving workplace advancement. The term ‗minority‘ refers
to any cohort that represents less than fifty per cent of the total and, to which the feature of standing out as
different attaches. Kanter argues that minority status always involves the attribute of visibility that can have both
positive and negative effects. Central to this ambivalence is the issue of risk; high visibility is positive when
things are going well and targets are achieved but, in the face of poor performance or costly errors, visibility
becomes problematic under the watchful gaze of critical colleagues and superiors. When newcomers who are
different (for example, in terms of culture, gender or ethnicity) join an established homogeneous group they can
represent a potential challenge to the majority. One response to reinforce the dominant culture of the majority is
what Kanter terms boundary heightening that can be understood as actions by the majority to emphasise their
group characteristics to make the newcomer feel as different and ‗outside‘ as possible. Thus, for example, when
a woman enters a male-dominated workplace sexual jokes and crude language may become overt rather than
repressed. In some settings, the physicality of the workplace can border on sexual harassment – this holds
particular resonance for women working on construction sites where women and other highly visible minorities
are the butt of lewd jokes and comic innuendo (Watts, 2007a). Similarly, in the setting of the boardroom where
a woman finds herself in the minority of one within an otherwise all male team, talk before the main business
begins may be centred on male sport interests leaving her outside this social discourse (Cohn, 2000).
Cohn (2000) develops Kanter‘s (1993) critique to argue that boundary heightening behaviour on the part of the
majority is intended to test the newcomer, to gauge their resilience, their willingness to conform and fit in. Such
behaviour has as its primary effect the isolation of the entrant. If the newcomer is defiant or non-compliant this
isolation is increased with their being further deprived of social support from colleagues. In these circumstances
the likelihood that the newcomer will fail is increased. Within the business context being without friends is
professionally dangerous (Cohn, 2000: 100) and can soon escalate into a profound handicap that cumulatively
may result in a damaged reputation, a position from which it is difficult to recover. The consequences for
women in a workplace where men define themselves as the norm are varied and contextual, but these can be
usefully summarised as the necessity to overcome their ‗otherness‘ (Davies, 2003).
An extreme form of ‗otherness‘ is where women have the ‗only woman‘ status becoming tokens, accruing on
the one hand, the advantage of being different and visible but, on the other hand, having to face the loneliness of
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outsider estrangement from male peers. The potential for outsider estrangement, however, is not solely
determined by gender demarcations and the work of Kerfoot and Knights (2004) and Connell (1995; 2002) has
contributed to understandings of the ways in which ‗male‘ and ‗masculinity‘ are socially constructed resulting in
heterogeneous masculinities.
Context
Civil engineering is one of several built environment professions serving the UK construction industry,
operating as part of a huge sector that employs well over a million people (Social Trends, 2010). Although the
multi-disciplinary and social nature of the industry has received limited attention in the literature, its products
and cultural stereotypes have been well documented (Watts, 2007a; 2007b; Greed, 2000; Paap, 2006),
highlighting its strongly competitive and unequivocally male-dominated features. Women are poorly
represented, particularly at senior levels (NCE, 22 May 2008) and currently comprise only five per cent of the
total (ICE, 2010). The ‗place‘ of women in construction remains a contested issue (see NCE, 2 December 2010)
and an industry salary survey reveals that women earn 32% less than their male colleagues (NCE, 15 May
2008). The UK profession has experienced great structural change over the past twenty years in response to the
shrinking size of its localised traditional market and the commercial realities of globalisation that include high
labour mobility (Fellini et al, 2007). The need to adapt to a new business climate has coincided with a shortage
of entrants to the profession and has resulted in an associated drive to encourage greater numbers of men and
women to join this and other construction professions. Some of these measures have been directed particularly
at women (Powell et al, 2006) but have failed to attract them in significant numbers.
The development of an international market for construction services has led to the rise of the non-technical
corporate manager whose expertise has been ‗grown‘ on MBA programmes and other management training
courses making them a highly marketable cross-industry functionary. A new breed of highly skilled manager is
not ‗company-bound‘, often moving from one organisation to another, adopting the role of trouble-shooter. The
proliferation of business advisers and marketing gurus are now an established feature of construction
specifically to promote greater efficiency and sharper project management. How in the longer term, the advent
of the ‗super manager‘, who comes without engineering training, will be received by the wider industry is
uncertain but Evetts (1996) notes that, increasingly, engineers and scientists find themselves in competition with
management specialists (often accountants) for some of the most senior posts.
Method and participant profile
The qualitative research discussed in this article adopted an ethnographic approach to data collection, with semistructured interviews as the principal method. My work in the sector as an independent training and technology
consultant over a seventeen-year period involved visiting projects and construction sites as well as bringing me
into contact with senior industry figures. The aim of the research was to explore women‘s professional
experience of working in construction. A range of subjects was covered and management and leadership were
discussed under the umbrella topic of career advancement. Discussion of the study‘s methodology has been
outlined in earlier work (see Watts, 2006) but is briefly revisited below, highlighting the participant profile and
conduct of the research.
The thirty-one participants ranged in age from twenty three to fifty six years and were employed in both the
design and building sides of the business. As shown in other research (Peel and Boxall, 2005, for example),
becoming self-employed can increase work autonomy and three participants had left senior employed posts to
set up their own consultancies for this reason. The group included three women in main board director posts and
a further two in associate director positions. A majority of the rest were in junior/middle management roles and
only five participants indicated that they were not attracted to the management side of the business. Of the
thirty-one respondents, sixteen were married, five were living with a partner, eight were single, one was
separated and one divorced; thirteen participants had school age children.
A series of semi-structured interviews with participants in their workplaces formed the main data-gathering tool.
Interviews were audio taped, manually transcribed and then coded yielding the categories for analysis. My
knowledge of the operational structures within the profession underpinned my research credibility (see Watts,
2006) suggesting to interviewees that I had a legitimate reason to be interested in them and what they do. The
study‘s findings are now discussed below developing the themes of uncertainty about the sufficiency of
management rewards and the challenging experience of being a female manager on construction sites.
Taking a management pathway – an ambivalent choice for some
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With management as a key signifier of success, a majority of participants had chosen a career management
pathway. This choice, in many cases, was an ambivalent one despite the significantly higher financial rewards of
management work (Langford et al, 1995). Doubts about the benefits of becoming a manager centred on two key
issues: insufficient remuneration given the high pressure and stress levels associated with construction
management roles and the expectations of employers that managers would be constantly available as a function
of the dominant presenteeism culture of the building industry (Watts, 2007c). The following comments from
three participants illustrate these concerns:
The nuts and bolts of engineering give it a competitive almost antagonistic culture and as a manager, especially
a senior manager, you are always going to get it in the neck and I don‟t think it can be worth it, not when you
see what you get at the end of the month for all the hours you‟ve worked and the aggravation.
(Gillian, aged 32, married with three children, project manager)
I just don‟t think it‟s worth it for the sort of money you‟re paid. Working seventy hours a week with all the
travelling and hassle plus all the aggravation on site. I‟ve seen so many colleagues driven into the ground and I
don‟t want that to be me. (Naomi, aged 26, single, early career graduate engineer)
All the senior managers at our place are there til late in the evening; I think haven‟t they got homes to go to?
They don‟t have a life, not a proper life and I couldn‟t do that.
(Helen, aged 36, single and mid-career with the intention of leaving the profession)
Working part-time in a management function was regarded as problematic and virtually impossible to sustain.
Where such arrangements are connected to other non-work roles such as parenting they invoke negative
visibility and are viewed with suspicion (Cohn, 2000). Cockburn (1991) found that working motherhood is
punished in the workplace with women unable to gain acceptance as serious professionals because juggling the
demands of paid and unpaid work compromises what Davies (1996: 669) terms the ‗masculinist vision‘ of
professions. Two participants in middle-management positions described their experience of trying to combine a
management role on a part-time basis with caring responsibilities following the birth of their children. One of
these women, after a year, was persuaded by her employer that engineering management and motherhood do not
mix and left the company. The other woman found herself gradually removed from the decision-making arena
and was told by a company director ―her career was going nowhere”. As might be expected these women spoke
with disillusion about the construction industry that one described as ‖just swallowing you up‖, driven by
organisational expectations that hard-working means long-working and that the ‗personal‘ takes place outside
the process of labour exchange. For a majority of participants in management roles the demands of the job
appeared overwhelming forcing some to choose between being an engineering manager and having a family.
Other research has shown that women managers are far more likely to be single and/or childless than their male
colleagues (Wajcman, 1998).
Whilst there was almost universal agreement about the pressure on construction managers to, as one participant
put it, ‗deliver the business‟ in a highly competitive industry, the cut and thrust of directing projects and
managing people was enjoyed by some participants who had decided to prioritise their careers almost as a life
project. In one case the pleasure of taking charge was expressed thus:
I really enjoy having the overview of the project and getting the best out of the team. It‟s very stressful at times
but lots of management is like that; at least for us there is something to show for it.
(Miriam, aged 37, partnered with no children, associate company director)
Another participant, having achieved the post of joint managing director of a major consulting firm before
leaving to set up her own independent practice, commented on the ways in which she was never allowed to
‗fully join the male club‘. She spoke with great enthusiasm about the her management work that she found
fulfilling but was of the view that the consistently long hours she was forced to work may have contributed to
the breakdown of her marriage, leading her to note that ‘marriage and motherhood in this business are often
difficult to sustain‟.
Family issues and insufficient remuneration were not the only factors influencing participants‘ choices. One
interviewee described the culture of senior management as ‗bleeding people dry‘ and her discomfort with the
person she might become if she advanced her management career further. A further factor affecting the choice
of career path was the extent to which a move into management involved separation from science and
engineering practice. This was of concern to some of the newer recruits who had chosen engineering to practise
and develop their technical and scientific skills rather than manage others to do this. Kanter (1993:301) found in
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her research into corporate organisational life in the USA that some companies have established formal career
paths for professionals to enable them to concentrate on their specialism without moving into management.
Kanter notes, however, that for engineers and scientists these dual ladders carry a suspicion that they are secondrate and are often seen as a compromise.
The issue of construction sites
The particular power relations that operate in the setting of the construction site continue to provide the arena
for macho gender display that has significant impacts on women. Working on site appeared to require
regimented visibility criteria with all grades of worker knowing their place and having discrete but clear levels
of incorporation. Roles on site for civil engineers revolve mainly around the position of resident engineer who
has the responsibility for directing the actual building process (laying out of site plans, checking measurements
and overseeing the delivery and installation of materials) that always retains an element of experimentation
(Schinzinger and Martin, 2000). The words of one respondent sum up the difficulty ―I think this thing about
managing manual labour, that is the big one”. (Pauline, aged 45, single with no children, senior manager)
Most participants had valued their experience of being a manager on site, particularly contributing to the live
building process. For most, however, this came at a price with the often-harsh physical conditions preferable to
the abrasive social environment (Watts, 2007a). The main problems appeared to stem from the site subculture
that was imbued with the use of crude language, displays of pornographic imagery in site offices and the
resistance to any kind of managerial control (Watts, 2007b). The acute nature of some of these problems for
women is explored more fully below through the voices of the participants themselves.
Women talked about the intimidation they felt particularly connected to rectifying problems on site. The
following two extracts illustrate this:
I used to worry very much about talking to steel fixers who were twice the size of me and telling them that this
steel isn‟t fixed right and they were quite intimidating. They would use their height and their size and say what
are you talking about and I would say actually I don‟t think that this is right. (Geena, aged 36, married with two
children, group manager)
I had awful trouble with one site foreman. He wanted me to sign off the setting out but I couldn‟t. It didn‟t meet
the spec and I told him it would all have to be done again. He got so angry and said he wouldn‟t let me forget it.
And he didn‟t. He was awkward about everything and made my life hell. (Mary, aged 28, married with no
children, resident engineer)
Disputes of the kind described above, where site staff openly challenge decisions of managers, can seriously
undermine the latter‘s credibility. Where managers are women there is a heightened visibility creating an
overwhelming pressure to perform successfully (Cohn, 2000). In some cases this meant adopting some of the
behaviour of the dominant ‗laddish‘ culture as noted below:
There were good times and bad on site but my general approach was to give as good as I got so I ended up
swearing with the best of them. In one way I think it raised my standing with the lads. (Pauline, aged 45, single,
senior manager)
Being one of the lads, however, was not a survival strategy adopted by all as the comment below demonstrates:
If you rose above it and kept saying I am not going to lower myself to their level, you know be distant, you were
OK but if you thought about it or were a sensitive person you couldn‟t cope with it. It would just destroy you.
(Susan Leyton, aged 47, married with two children, chartered principal engineer)
Not all participants spoke negatively of their managerial site experience but they were a minority. For most,
their daily endeavours seemed to involve varying degrees of confrontation, close surveillance due to heightened
visibility, sexual harassment, intimidation and wider safety issues, all experienced as emotionally draining and,
for one participant, was the reason for deciding to leave the profession.
Conclusion
The issue of visibility was an underpinning theme of much of the data. Women within construction, particularly
those in supervisory/management roles, are highly visible. On building sites this takes the form of embodied
spectacle and appears difficult to negotiate. Embodied visibility contrasts with women‘s continuing cultural
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invisibility adding to their frustration with an industry that is notionally modernising but in reality is very
resistant to change. The discourses of construction are shaped by a masculine hegemonic view that reinforces
and supports the invisibility of women with all grades of management heavily controlled by men (Fielden et al,
2000). Because of the business pressures of ensuring projects do not overrun, women can be motivated to fit in
rather than challenge the status quo, though this often has a high personal cost in terms of emotional strain. The
accounts above suggest that women who succeed in senior management posts are more motivated to fit into the
existing hierarchy than to dismantle it.
Those who want to work in management positions taking advantage of part-time or flexible working are viewed
with suspicion and are made highly visible by what is seen as their less than full commitment to the job. Despite
the debate in the sector about the legitimacy and potential benefits of more flexible work practices (NCE, 22
May 2008), the assumption that senior management can only be a full-time undertaking usually involving very
long hours, prevails. There was agreement that, as managers, attempts to create a positive work/life balance
would cast them as ‗slackers‘, making them readily visible targets for criticism from colleagues. Resisting the
heroic narrative of staying late is incompatible with management in construction because a culture of
‗competitive presenteeism‘ (Simpson, 1998) has developed leaving the existing power relations largely
unchallenged. The discursive power of male primacy is reinforced by management practices and women have to
adjust their work styles to accommodate the challenges they face arising from the visibility continuum (Cohn,
2000).
Existing literature offers insight into the experiences of women in management roles across a broad range of
male-dominated occupations and professions. There is, however, a gap in respect of the built environment
sector, and this article, having identified a number of cultural barriers to women establishing and sustaining
management careers in construction, goes some way towards filling that gap. Like all ethnographic research, the
data, observations and interpretations presented are bounded by the context from which they are drawn and thus
are specifically located.
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Banks’ New Products And Customer Satisfaction In
The Nigerian Banking Industry.
Alabar, T. Timothy
Department of Business Management
Benue state university, Makurdi- Nigeria
+2348065313110
Abstract
The Nigerian banking industry appears to extremely susceptible to the issue of new products and their
complexities. However as banks develop and introduce increasingly sophisticated and complex financial
instruments and products, the danger is that are customers really benefiting or deriving value from these new
products. It is against this backdrop that the study is sets to examine the relationship that exist between banks‟
new products and customer satisfaction. The study adopts an empirical survey design in which relevant primary
data was obtained from 400 respondents. Regression analysis was used in testing our hypothesis. The finding
shows that: New products had significant influence on customers‟ satisfaction in Nigeria. The study therefore
recommends that: banks‟ should continue to develop new products/services in tune with the peculiarities of the
operating environment; to invest heavily in ICT based systems and services, massive enlightenment of people
about the new products/services and a regulatory framework set in motion to help customers address emerging
crises arising from the usage of the new products
Key words: Banks‘ new products, customer satisfaction, Nigerian banking industry.
Introduction
The banking industry is a very important sector of socio-economic development of any nation. The sector strives
basically on trust and confidence reposed in it both by regulatory authorities and its customers. However,
banking in Nigeria in the twentieth (20th) century was characterized by the traditional core function‘s of
accepting deposits, credit extension and payment facilitation. With the passage of time, and most especially in
the 21st century, banks were compelled by regulatory bodies to develop and introduce innovative products in
order to satisfy the needs of their customers (Ebong, 2005).
But it should be realized that, customer satisfaction has for many years been perceived as key in determining
why customers leave or stay with an organization. Storbacka, Strandvik and Gronroos (1994) however observed
that, increasing customer satisfaction in an organization like the banking industry to a large extent is dependent
on a number of factors ranging from wider range of products/services choices, greater convenience, better
assurance, and availability/responsiveness to clientele needs. In a similar vein, Ioanno (2002) asserts that, a new
product in the banking industry, should be seen as a multi-variable concept with differing types of convenience,
reliability, timeliness, and critically, the staff delivering the service in order to create value to customers.
With globalization however, banking business is becoming interconnected with global standards, and is
experiencing unprecedented need for innovative products. Specifically, products that create confidence in the
minds of customers as well as impact on their satisfaction levels. In keeping with this global trend, and ensure a
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stable banking practice in Nigeria, the Central Bank of Nigeria (CBN) introduced the following policies among
others as captured by Alabar, (2011a).
i.
ii.
iii.
iv.
v.
vi.
The adoption of Know Your Customer (KYC) rule.
Stipulation of N25 billion minimum capital base for banks
Increased emphasis on mergers and acquisition to enhance stability of the sector.
The introduction of Universal Banking which further heightened competition and efficiency in
the industry.
Increased attention on modern information technological infrastructure to enhance service
delivery.
And above all, directives to introduce new products/services, and adopt strategies that may
attract more customers to their businesses.
In complying with the CBN directives, and positioning themselves to compete favourably, Nigeria banks have
come up with new products/services in their core banking areas such as; retail banking, corporate banking,
treasury services, foreign operations, corporate finance and electronic banking.
It is on the basis of these developments in the industry that, the study seeks to empirically examine the impact of
these new products on customers‘ satisfaction in the industry.
Literature Review
The review of this study will be basically situated on some selected new products in the Nigerian banking
industry.
Internet Banking
Internet banking also forms part of what is generally known as new product in the Nigerian banking industry.
This is given the overwhelming success of online banking in other developed societies of the world. It is on this
wise that, banks in Nigeria are gradually embracing the product and radical changes are taking place in the
Nigerian financial landscape (Ovia, 2003). The growth of this product has been unprecedented especially
immediately after the consolidation exercise of the Nigerian banking system. This according to Arua (2007) is
in line with the CBN directives of 2005, that banks must have a global reach and be competitive at the
international level.
With internet banking, opportunities are also created for small banks to compete on more equal footing with
other larger banks in the world (Akingbola, 2006). Customers who are increasingly raising the stake of
expectations for quality products and customers service can quickly find it at a click of the mouse. Chang, Chan
& Leck (1997) observed that, banks and customers could engage in dialogue and learn from each other through
this product. Kayode (2008) found that with this product, customers can also access the balance and transactions
on their account and perform other banking services such as transfer of funds from one account to the other,
carry out transactions with other bank customers etc. Studies by Ovia (2005), Muse (2006) and Oboh (2005)
have revealed that, at least 50% of the over 800 banks in Africa offer one form of online banking service or the
other.
Although the internet has become highly fashionable, the developing countries are still struggling hard to catch
up with their counterparts in the developed countries. According to reports released in 2006 by the National
Space Research and Development Agency, only about 2% (about 2.4 million) of Nigeria‘s over 140 million
populations actively use the internet (Ovia 2006 and Kayode 2008). The report put internet access points in the
country at 685,459, with offices having 530,968 of this, representing 77.4%; homes, 122,431 points,
representing 18.9%; and cyber cafes accounting for the remaining 32060 points, representing 4.7% of the total
internet access points available in the country.
Nigeria has performed dismally in internet usage generally; and so performance in internet banking can not be
an exception. In fact, among the 5 top economies in the continent (South Africa, Egypt, Morocco, Algeria)
Nigeria has the poorest internet usage record, when compared with its huge population (Ovia, 2005).
Despite the fact that banks have taken this innovative step in adding value to customers, some environmental
factors are affecting banks in achieving the desired level of their intentions. According to Ezekiel (2008)
financial institutions on a global scale have lost over N650 billion ($5 billion) to internet banking fraud from
2005 to 2007. He further stressed that, when such losses are incurred, banks are very fast in passing the bill to
the final consumer (bank customers) which doesn‘t create any value to them. This situation heightens fear
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amongst consumers of this very product. Chidi-maha (1997) however maintained that consumer apathy to new
age banking is not a problem limited to Nigeria. Consumers did not readily embrace techno-banking when it
was first offered in the US in the 1980‘s but the advent of increasingly common two-career couples, business
travels rising and workdays lengthening led consumers to place a growing premium on convenience and
flexibility in holding their finances.
Nwaze (2009) however identified the basic constraints of Internet banking in Nigeria as:
i.
Inadequate ICT infrastructure
ii.
Inadequate funding
iii.
Absence of appropriate legal and regulatory framework
iv.
High cost of bandwidth/telephone lines/internet access
v.
Service inter-exchange congestion and slow internet connectivity due to high inter-national
tariffs
vi.
Unexpected system failure
vii.
Complacence/illiteracy
viii.
Security (Cyber security, data integrity, protection of customer‘s confidential information and
identity theft).
Onwuegbuchi (2007) contended that as the internet grows towards becoming a standard for information access,
retrieval and exchange, a need has arisen to take ―a safe‖ level of participation in the emerging product in the
banking industry in Nigeria.
Electronic Card
According to Ahmedu (2005) and Akingbola (2006) as we witness the globalization of markets, a major
instrument of it is the development in communications and information technology. This development has
therefore made the introduction of electronic purse a reality in banking and is redefining what a legal lender is in
monetary terms (Akingbola, 2006).
As noted by Aigbiremolen and Aigbiremolen (2004), there are two major card business services providers that
implement and manage electronic card scheme in Nigeria. They are Valucard and GEM card. They further
stressed that as at March 2004, Valucard card had a consortium of forty three banks while Gem card, had about
twenty banks in her consortium. As at 2004, about 184,924 cards have been issued (Hilili, 2005). Valucard
Nigeria plc, which acts as the clearing institution for the card scheme, also coordinates the hardware and
software procurement.
Currently in Nigeria, banks under the valucard consortium have joined the Visa International Network, the
largest e-payment service provider. Visa is a membership association owned by more than 21000 financial
institutions around the world that provides member institutions with global payment platform development.
While research findings showed that, while about 5000 Nigerians carry e-cards (30,000 Valucard and 20,000
Smart card) only about 50,000 actually use them due to insecurity and the use of different cards on one terminal
(Babajide and Emma, 2004). To effectively correct this problem, Ovia (2003) opined that, Nigeria should
replicate the South African success story where tremendous progress has been made in the use of smart cards.
He enunciated that, the estimated 44 million people in South Africa use smart cards about 40 million times per
day. This he said is very impressive and worthy of emulation. Shokan (2005) in a similar vein noted that in
South Africa, smart cards are being put to use in various areas: salaries, pensions, car parks, post offices,
cinemas and stadia.
Because of the pervasive use of the smart card in that country, security measures which are linked to biometric
verification, usually the electronic reading of finger print fraud is usually non- existent (Ovia, 2003).
Debit Cards
Debit cards are e- purses and most Nigerian banks now issue them. They are linked to savings or current
accounts. The use of debit cards has grown from less than 2000 cards in 2003 to 1.5 million in February 2006
with a total average monthly transaction of over 1,757,271 (Ovia, 2006). He further asserts that, even though
the value of transactions has grown exponentially from a mere N630, 754 million in 2002 to N61.3 billion in
2004, less than 2% Nigerians are debit card holders.
Automated Teller Machines (ATMs)
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Automated Teller Machines (ATMs) are card enabled automated and customer operated machines which
dispense cash as their primary functions. They can also be used to make enquiries as well as funds transfers
(Iroche, 2007).
ATMs were first introduced into the Nigerian financial services sector in the late 1980 by Societe General Bank
(Oboh, 2005). First Bank and Equity bank followed suit in what was a short-lived venture. The venture was
hamstrung by factors which included offline mode of transaction resistance to technology, inadequate and
inefficient power supply and high cost of deployment and dearth of qualified support staff (Ovia, 2006). Before
ATMs, withdrawing funds, account inquiries, and transferring funds between accounts all required face-to-face
interaction between the customer and a bank teller. But the machine has long filled that gap and made banking a
convenient and efficient experience (Madueme, 2009 and Sampson, 2005). Available data from the CBN in
(2010) indicated that, the number of ATMs in the country increased from 352 in June 2005 to over 900 as at
March 2010. This growth according to CBN is attributed to increased public awareness, introduction of shared
ATMs and increased confidence in the system.
Oboh (2005) however observed that, despite the deployment of over 900 ATMs by Nigerian banks, we still have
a lot of customers reluctant to patronize this product. He further asserted that in Lagos area that has about the
most sophisticated of banking customers, less than 10% of customers (in number, not in value) currently
patronize the product. Findings by Ovia (2006) showed that, despite the ascending usage of ATMs in Nigeria, it
is still negligible compared to ATM statistics from other countries and emerging economies as shown in the
table below.
Table1, ATM Density from Selected Countries
COUNTRY
POPULATION
ATM PENETRATION
Nigeria
140 million
1:300,000
Singapore
4.5 million
1:2,000
South Africa
44 million
1:6,079
Malaysia
24.3 million
1: 5,714
Source: Ovia Jim (2006) IT deployment as corporate strategy in repositioning Banks in Nigeria. Zenith
Economic Quarterly.
As ATMs usage continues to grow in Nigeria, Nwaze (2008) observed that, it is pertinent to consider the major
security risks associated with the usage of ATM as: skimming, fraudulent applications, never received issue,
card data manipulation, ATM video fraud.
Mobile Banking Product
Following the launch of Global Systems for Mobile (GSM) services in Nigeria in 2001, few banks in Nigeria
have launched mobile banking products that enables customers to carry out simple transactions based on SMS
technology with customers‘ mobile phones serving as the terminals (Ikechukwu, 2000, & Ovia, 2006). The
kinds of transactions that can be done using this product are:
i.
Account balance enquiries
ii.
Funds transfers between customers own accounts and to other accounts with the same bank.
iii.
Transaction tracking and third party payments such as bill payments.
iv.
Cheques book request and balance confirmation
According to BIS (2004) the security controls used are PIN code and pass code identification.
Major Causes of New Product Failure
According to Ulrich and Eppinger (2004), Alabar (2011b), Adeleye (1998), Baker (1985) and Oliver (1980), the
major causes of product failure are; poor timing of product introduction into the market, misreading customer
needs, production of ―me too‖ products, poor marketing communication leading to lack of awareness on the part
of the customers, where a wrong group might have been targeted, inadequate marketing research leads to the
failure of new products in the market place
According to Rice (1994), an organization that effectively manages product innovation can expect to reap a
variety of benefits-differential advantage, higher sales and profits, and a solid foundation for the future. On the
contrary, Onwuchuruba (2003) and Sonnenburg (2004) noted that, new products sometimes are taken with little
resistance; and as every marketer asks a consumer to buy a new product, another marketer is asking the same
consumer to resist change and remain loyal to the existing product.
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New Product Success Factors
The quest for new product success has led to numerous studies into what makes winners and what distinguishes
successful new products from unsuccessful ones (Baker, 2000). The critical success factors uncovered by
various experts such as Booz-Allen and Hamilton (1982), Onah and Thomas (1993), Cooper and Kleinschmidt
(1987) include the followings:
A differentiated product that delivers unique benefits and superior value to the customer, a strong market
orientation, utilization of existing company know-how, the development of successful new products is achieved
through the combined efforts of all departments of an organization, top management support is a necessary
ingredient for getting the product to the market and a well-conceived, properly executed ―launch‖ is quite
central to new product success.
Evidence however, indicates that a systematic process of development helps to reduce the risk of failure when
new products are launched. In reality however, there is evidence that most firms do not have a formal new
product development strategy. In affirmation to this assertion, Kelly and Storey (2000) conducted a study and
came out with the findings that, only half of a sample of firms in banking, telecommunications, insurance and
transportation had a formal new product development strategy, that only a quarter had a culture in which ideas
were continually generated, and only a third had an idea search methodology.
Essential Ingredients In Delivering Exceptional New Products/Services
Studies by Williams (1992), Tarver (1987), Uhiene (1998) and Walter (1974) put forward the following
ingredients as being essential in an organization bid to deliver exceptional new products.
Strategy – It is fundamental that a bank becomes customer – focused. It must identify the specific target market
it wishes to serve. The essence of this strategy is to segment the customers and appropriately design products to
suit the group needs or expectations.
Leadership – To develop new product excellence into a corporate culture, top management of the bank must
demonstrate in practical terms its commitment to it as a desirable and achievable ideal. When management is
visibly in pursuit of quality and excellence in serving customers, the philosophy is readily engendered in the
employees.
Personnel - Service to customers is basically delivered by a bank‘s employees. The totality of the interaction
with the employees, their attitude, knowledge and competence are the factors that create the customer‘s
perception about the quality of product/service he receives.
Design – The customer must be the primary focus in the conceptualization, design, development and production
of the product or service. The bank‘s operations must be structured to make it customer – friendly and customer
– focused.
Infrastructure – The infrastructures available to support customer services is of vital importance. The
infrastructures include the physical facilities namely, building premises, motor vehicles, information
(computers) systems etc. Although, a lot of expenditure is required to put facilities in place for the customer‘s
convenience and safety, it is worth doing in order to attract customers for the product/service.
Measurement - While a bank service performance or quality is difficult to measure with certainty, it is possible
to devise a means of credible feedback from the customers about their perception of the service and satisfaction
therewith.
The foregoing review has indicated how new products have afforded banks the opportunities to impress
customers and maintain competitive advantage in the marketplace. The hypothesis is therefore proposed.
H1; There is no relationship between banks’ new products and customer satisfaction
Methods
Data was obtained through a questionnaire survey sent to a sample of 400 customers of some selected banks
(namely First Bank of Nigeria, United Bank for Africa, Access Bank, Diamond Bank, Guaranty Trust Bank and
Ecobank) across six zones in the country (Abuja the federal capital city inclusive). The target respondents were
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chosen randomly as they entered the banks, or waited in the bank for their banking transactions. The sample
size (n = 400) was calculated using the Taro Yamane formula (1967) .
i.e.
n
=
N
1 + N (e)2
Of the 400 survey questionnaire administered, 394 were returned, but only 391 were properly filled for final
response rate of 97.8%.
The constructs in the study were captured by a number of items in the questionnaire with each of the item
measured on a five point Likert scales, where 1 = ―strongly disagree‖, 3 = ―neither disagree nor agree‖, and 5 =
―strongly agree‖. A bivariate frequency distribution of the respondents according to gender, age, educational
level, the length of stay with the banks and the banks‘ the customers operated with is presented. This provides a
summary of the respondents. The hypotheses formulated were then tested using Regression Analysis (RA).
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Demographic
Table 2: Demographics of Respondents
Frequency
Valid percent
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Cumulative
percent
Panel A: Gender
Male
240
61.4
61.4
Female
151
38.6
100
391
100
Total
Panel B: Age Group
Under 18 yrs
15
3.8
3.8
19-25 yrs
79
20.2
24.0
26-30 yrs
86
22.0
46.0
31-35 yrs
78
19.9
66.0
Over 35 yrs
133
34.0
100.0
391
100.0
Total
Panel C:Educational level
FSLC
9
2.3
2.3
WASC/GCE
60
15.3
17.6
NCE/OND
101
25.8
43.5
Degree/HND
144
36.8
80.3
Master Degree
61
15.6
95.9
Doctorate Degree
10
2.6
98.5
Others
6
1.5
100.0
391
100.0
Total
Panel D: Length of Stay
0-5 yrs
219
56.0
56.0
6-10 yrs
103
26.3
82.4
11-15 yrs
42
10.7
93.1
16-20 yrs
11
2.8
95.9
Over 20 yrs
16
4.1
100.0
391
100.0
Total
The length of time (LoS) customers have been with their banks is also an important parameter that can be
applied in determining customers‘ satisfaction with an organization or the industry in general. Panel D of table 1
shows that over 82% (82.4%) of the respondents reported LoS at less than 11 years. The figures are generally
high, perhaps reflecting new entrant rate or high number of first time accounts. This is a reflection owing to the
recent introduction and adoption of new products/services in Nigerian banking industry occasioned most
especially by the capitalization and consolidation of the industry in recent time. This appears to demonstrate the
relative overall contentment will banking services as opposed to some decades ago.
Table 3. Banks Served With Questionnaire
Cumulative
Valid
Frequency
Percent
Valid Percent
Percent
Fist Bank
94
24.0
24.0
24.0
UBA
95
24.3
24.3
48.3
Access
101
25.8
25.8
74.2
Ecobank
75
19.2
19.2
93.4
Diamond
12
3.1
3.1
96.4
GTB
14
3.6
3.6
100.0
Total
391
100.0
100.0
A profile of the respondents showed that the sampled respondents comprised of 24.0% from FBN, UBA
accounted for 24.3% and Access Bank stood at 25.8%. While Ecobank accounted for 19.2%, Diamond Bank
accounted for 3.1% and GTB accounted for 3.6% of the total sampled respondents. The difference in the
response is as a result of the customers‘ base of the respective banks to the industry baseline.
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Results and Discussion
Hypothesis: Attempts to determine the relationship between banks’ new products and customer satisfaction
Table 4: Test of relationship between banks new products and customers satisfaction.
Item
N
Banks‘ new products
391
Customer satisfaction
391
Dependent variable: Customer satisfaction
P< 0.05
r-cal
r-tab
Alpha
Sig
0.200
0.195
0.05
0.000
Table 3 shows the relationship between new product and customer satisfaction of some selected banks across
some zones in Nigeria. The result obtained from the analysis shows that the value of r-calculated (0.200) is
greater than t-tabulated (0.195) at 0.05 level of significance. Therefore the null hypothesis is rejected. That is,
there is a significant relationship between the new banks‘ products and customer satisfaction in Nigeria.
The result of the finding is in line with that of Shokan (2005) who reaffirmed that customer satisfaction has a
positive relationship with banks‘ new products. Observing that banks new products are used in South Africa in
paying workers salaries, pensions, cinema and stadia. With these new products there is less man-hour spent in
banks, there is improved customer services, and above all, improved profitability of banks.
The findings of the present study are at variance with those of Nwaze (2008), Babajide and Emma (2004),
Onwuegbuchi (2007) who noted that most banks new products in Nigeria are not well patronized as a result of
the high insecurity menace associated with it. This further prompted Onwueguchi as saying: ―there is a need to
take a safe level of participation in the emerging products in the banking industry in Nigeria‖.
Managerial Implications
The study sets to determine the relationship that exists between banks new products and customer satisfaction in
Nigeria. The finding of the study shows that new products had significant influence on customer satisfaction.
This however raises some managerial issues that need to be addressed by Nigerian banks.
Firstly, management must make concerted efforts at developing new products/services that take into
consideration the peculiarities of the operating environment hence the responses obtained showed that most of
these products are transferred from the West. In any case, the respondents feel that even if they are borrowed
products from the Western world (giving example of Master cards, ATM, e-purse etc), they needed to be
modified to suit demands of Nigerians.
Another critical area of concern from respondents was the failing nature of infrastructures such as electricity,
telecommunication, and security threats among others. Most of these customers are stranded using products like
ATM due to failure of network, which has actually caused a lot of untold hardships. Efforts should therefore be
intensified in averting this ugly trend in the system.
Another worrisome area is the high level of total and semi-literacy in the country. It is difficult to imagine how
an ordinary Nigerian citizen on the ―mole Omnibus‖ will be able to access some of these products either as a
customer or a merchant. Massive enlightenment and awareness campaigns by the banks are required in this
regard. Such could be done through radios, televisions, newspapers, seminars, churches, mosque, opinion
leaders, and traditional rulers amongst others. The medium of communication should be through ―Pidgin
English‖ and local language.
On the part of government, a regulatory framework should be erected to deal with emerging crises arising from
the usage of some of these products. Example, the Ethics and professional committee of the Chartered Institute
of Bankers (CIBN) saddled with the responsibility of handling customers‘ complaints whose membership is
made up of mostly bankers be expanded. This expansion should bring in representative from the judicial arm of
government, consumers representative and human rights activists so as to give fair decisions to customers
claims based on the mutual sympathy that would exist among them.
Banks should forge partnerships and alliances with both local and international renowned ICT Institutions to
boost their cutting edge in the delivery of service to customers. A similar attempt was anticipated by FBN and
Omatek computers in 2007. Under this arrangement, FBN was supposed to support Omatek with N1billion as
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part of efforts to computerize Nigeria and Nigerians. This was meant to enhance the provision of high quality
services and ensure rapid access to accurate, timely and current information to customers and other stakeholders
in the industry, and the economy at large.
Conclusion
Since the banking industry represents an important variable in the socio-economic development of a nation,
ensuring its value stability needs to be guaranteed. Just like any other banking system, the Nigerian banking
system is dependent on the financial system of other nations of the world. And today, the banking industry
worldwide is experiencing unprecedented need for innovative products. Specifically, products that create
confidence in the minds of customers as well as impact on their satisfaction levels, and reach global standards.
However, as Nigerian banks roll out new products to meet consumers‘ needs/aspirations, they must ensure that
these products meet the increasing requirements of customers as well as international standards to ensure the
stability of the system.
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Factors Affecting Micro Enterprise Accessibility To
Business Development Services In Arusha Tanzania
Ikandilo Kushoka
PhD Candidate, Kampala International University, Dar es Salaam College; Tanzania
Phone: + 255 754 290 251; Email: [email protected]
Abstract
This article discusses factors affecting Micro Enterprises (MEs) Accessibility to Business Development Services
(BDS). The urge to conduct a research on Micro Enterprises access to Business Development Services is driven
from the findings on Micro Enterprises in Tanzania which indicate the challenges faced by Micro Enterprises
which include lack of support services, very limited managerial capacity, and limited access to business
premises, all of which has resulted into limited competitiveness (Beck, et al. 2005). The study combined both
descriptive and explanatory approaches and Judgmental sampling was employed to select a sample of 100
Mitumba traders.
The study found that factors affecting Micro Enterprises accessibility to Business Development Services
include: Business Development Services not known and not accessible to Micro Enterprises, lack of demanddriven services, limited range of services offered by Business Development Services, and Micro Enterprises‟ low
level of affordability. The researcher concludes that Business Development Services are key players in
enterprise development; and recommends that Business Development Services should be accessible and reduce
fees.
Key words: Enterprises, Micro Enterprises, Business Development Services
Introduction
This study evaluates factors affecting Micro Enterprises (MEs) accessibility to Business Development Services
(BDS). As used in this study the term Micro Enterprise refers to an undertakings employing between 1-4
employees and have a capital investment of up to 5 million shillings (URT, 2003).
Business Development Services (BDS) comprise a wide range of non-financial services provided by public and
private suppliers (BDS providers) to entrepreneurs who use them to efficiently operate and make their
businesses grow. The types of services in a functioning BDS system are determined by the demand articulated
on the part of the businesses (Nelson and Bruijin, 2005).
Business Development Services, according to Gagel (2006) include training, consultancy and advisory services,
marketing assistance, information, technology development and transfer, and business network promotion. A
distinction is sometimes made between ―operational‖ and ―strategic‖ business services. Operational services are
those needed for day-to-day operations, such as information and communications, management of accounts and
tax records, and compliance with labor laws and other regulations.
Strategic services, on the other hand, are used by the enterprise to address medium- and long-term issues in
order to improve the performance of the enterprise, its access to markets, and its ability to compete. For
example, strategic services can help the enterprise to identify and service markets, design products, set up
facilities, and seek financing. However, very little is available for this purpose in Tanzania, and when it is
available, it is a supply - driven and very expensive to micro enterprises.
Micro enterprises do not conceive that they need to buy the services of BDS, such as technical or management
training, counseling or marketing information. But lack of sales for their products is perhaps the most serious
problem affecting microenterprises. If their access to finance enables them to purchase more Mitumba bales for
sale, but they cannot sell Mitumba to customer, they will be worse off than if they had never taken a loan. The
market for Mitumba is already becoming saturated in Tanzania; this problem is likely to spread as micro-loans
become more widely available. It is much easier, however, to buy from or sell to a micro enterprise than to
improve the business person‘s ability to sell or buy on her own. Micro Entrepreneurs are familiar with selling to
customers; they need to be persuaded that the use of consultancy and information services will help them do it
better.
Balkenholl (2008) found that micro enterprise being closer to the poverty line are more risk averse than large,
medium and small enterprises with separate accounts and limited liability. Risk aversion restrains the
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propensity to invest in new production technologies. Because of risk aversion micro-enterprises also tend to
hang on to their bundle of income generating activities. While understandable as a strategy of risk
diversification and risk management it means that productive assets are spread too thin, not yielding any
productivity improvements.
The importance of training, as packages of BDS, has been recognized worldwide as one tool for MEs‘ growth.
Several studies have revealed that training contributes significantly in the growth of enterprises. For example,
Kessy and Temu (2010) established that training has significant impact on participant characteristics and final
participant outcomes. Training adds to the skills of MEs owners, change their behavior on how they perceive
and conduct business activities and in turn enhance their ability to perform better. With the right skills; the MEs
owners can gain important edges even under stiff competitive environment. Through training, the enterprise
owners/managers can acquire networks, transfer technology, develop commercial entities and acquire new and
better management techniques. This is because business training is mainly geared towards building
entrepreneurial skills and traits of the recipients in order to better their businesses practices (Roomi et al., 2009).
Limited access to soft productive resources (particularly basic management and financial literacy) can restrict
the capacity of business owners to participate effectively in business activities. This study tries to evaluate
factors affecting MEs accessibility to Business Development Services.
Objective of the Study
The main objective of the study was to evaluate factors affecting MEs accessibility to BDS in Tanzania.
Specifically, the study aimed:1. To evaluate the ability of MEs to recognize the need for BDS
2. To evaluate factors affecting MEs accessibility to BDS
3. To evaluate the sustainability of MEs without BDS support.
Review of related literature
The International Finance Company (IFC) estimates that there are approximately 2.7 million enterprises in
Tanzania (Olomi, 2007). 98 per cent of these employ less than 5 people and 66 per cent have annual turnovers
of less than US $2,000. They are labour-intensive in nature, and have been established using savings or grants
from family and friends. They typically operate from homes or from the roadside. Some 43 per cent of micro
enterprises are owned by women. MEs are dominant in trade (54 per cent) followed by services (34 per cent).
Micro enterprises are critical for supporting livelihoods as well as overall prosperity and progress. They create
employment at relatively low levels of investment per job; utilize and add value to local resources; foster
equitable income distribution; and are better positioned to meet local needs in small markets. The technologies
used by them are easier to acquire, transfer and adopt, even for people with little education and training. They
have the potential to complement large enterprises through partnerships and subcontracting relationships. MEs
also serve as a training ground for entrepreneurship and managerial development (Olomi, 2007).
ILO (2001) asserts that BDS operational services on one hand are those needed for day-to-day operations, such
as information and communications, management of accounts and tax records, and compliance with labor laws
and other regulations. BDS strategic services, on the other hand, are used by the enterprise to address medium
and long-term issues in order to improve the performance of the enterprise, its access to markets, and its ability
to compete.
The delivery of BDS as part of business-to-business relationships including supplier/buyer, subcontracting, and
franchise and licensing relationships is particularly common for micro enterprises. In these cases, BDS are
delivered as part of another transaction. For example, training received as part of the purchase of equipment. In
addition to different types of services and types of delivery mechanisms, there are different types of payment
mechanisms for BDS. The price of the service may be charged as a direct fee, as a component of the price of a
bundled service (e.g., when MEs accept a lower price for their products in exchange for technology assistance
from buyers), or on a commission basis (e.g., when marketing service providers are paid upon successful sale of
ME products). There is some evidence that MEs are more willing to use services offered on a commission basis
than on a fee basis, since this type of payment mechanism reduces risks and cash-flow requirements (Carney,
1998).
ILO (2001) findings revealed mixed views about the degree to which microentrepreneurs are aware of and use
business development services, and the extent to which the services of these business support providers are
accessible and appropriate to ME‘s needs. In some countries for cultural and social reasons women micro
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entrepreneurs may be restricted in their ability to network beyond their immediate family or female friends, and
many may not be aware of the existence of any of the formal support agencies (JUDAI and Associates, 2002).
ILO (2003) in Tanzania also noted this trend, stating that some of the BDSs were centralized in Dar es Salaam
making them inaccessible to many ME operations in the country, but particularly to microentrepreneurs in
upcountry regions and rural areas who experience greater mobility constraints. ILO in Pakistan also confirmed
this situation (Goheer, 2003). The ILO‘s pilot project in Gujarat, India highlighted that micro entrepreneurs
make up only 2–20 per cent of the clients of mainstream BDS providers (ICECD, 2002).
Different theories have been used to explain performance and growth of enterprises. The human motivation
view as one among them explains the effects of business owners‘ behavior on the performance of enterprises.
Subscribers of this theory assert that the social and psychological motive can significantly influence growth
seeking behavior and therefore growth of the enterprise (Benzing and Chu, 2009). They further argue personal
needs of owner managers motivate them to seek further growth and that these needs are socially generated,
sustained and changed. This implies that human motivation factors are very important for business growth
regardless of whether the business has enough capital or not. These human motivation factors and human needs
can be shaped through BDS. Other motivation for growth include the completion of challenging tasks, having
control over one's own job, upward movement of enterprises activities, creating more opportunities for
enterprises, learning new skills by working in challenging environments and sometimes poverty reduction
motive (Singh and Belwal, 2008).
In this respect, people including MEs owners with a high need for achievement, would value particular worktask situations and perform well in them, while their counterparts will perform poorly. Likewise, the clients of
BDS with high achievement needs for growth are expected to have higher growth than those with low need for
achievement. It should be however noted that some of these motivation characteristics can be acquired through
training and learning from others (Roomi et al., 2009).
Methodology
This is a cross-sectional study, which employed more than one strategy. The aim of the study was to evaluate
factors affecting MEs accessibility to support services from BDS. For this reason the study combined
descriptive and explanatory approaches to seek answers to the study question. The population for the study
included all Mitumba traders at Krokon market, Arusha Municipality, Arusha. Judgmental sampling was
employed to select a sample of 30 Mitumba traders.
Methods of Data Analysis
Data collected from the questionnaire were analyzed, summarized, and interpreted accordingly with the aid of
descriptive statistical techniques such as total score and simple percentage. Chi-square was used to measure the
discrepancies existing between the observed and expected frequency and to proof the level of significance in
testing stated specific objectives. Regression analysis and Analysis of Variance (ANOVA) were computed with
the help of Statistical Packages for Social Sciences (SPSS).
Presentation And Interpretation Of Findings
1.1: The ability of MEs to recognize the need for BDS.
The study findings shows that 35 per cent of the respondents were totally unable to recognize the need for BDS;
30 per cent of the respondents were unable recognize the need for BDS; 15 per cent of the respondents were
half-half (able and not able) to recognize the need for BDS. Those who were able to recognize the need for BDS
were 15 per cent of the respondents; very able to recognize the need for BDS 5per cent and no one of the
respondents were not sure to recognize the need for BDS
Table 1: As to whether MEs are able to recognize the need for BDS
RESPONSE
FREQUENCY
PERCENT (% )
Very able
5
5.0
Able
15
15.0
Half-Half
15
15.0
Not able
30
30.0
Totally Unable
35
35.0
Not Sure
0
0.0
Total
100
100.0
Source: Survey results, 2010
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This study finding is in line with Olomi (2007) who found that one of the most debilitating constraints in
recognizing the need for BDS is limited awareness and capacity of existing and potential microentrepreneurs, in
terms of exposure, values, attitudes, knowledge and skills. The result is that most simply copy what their
neighbours are doing and do not appreciate the importance of innovation, quality, credibility and customer care.
This constraint could be addressed by business development services (BDS) through training, advice and other
support services. However these services are unknown to MEs, (65 per cent do not know the BDS)
underdeveloped and have limited outreach.
1.2: Sustainability of MEs without support from BDS.
The study findings shows that 60 per cent of the respondents stated that they can not sustain themselves without
the BDS support, 40 per cent of the respondents were half-half (able and not able) to sustain themselves
without the BDS support. None were very able, able, totally unable and not sure.
Table 2: Whether MEs would be able to sustain themselves without support of BDS
RESPONSE
FREQUENCY
PERCENT (% )
Very able
0
0.0
Able
0
0.0
Half-Half
40
40.0
Not able
60
60.0
Totally Unable
0
0.0
Not Sure
0
0.0
100
100.0
Total
The study finding shows that 60 per cent of the respondents stated that they can not sustain themselves without
the BDS support. This is in line with ICECD (2002): who pointed out that BDS covers all areas of business
therefore, MEs sustainability and growth without BDS services is quite impossible.
1.3: Factors affecting MEs accessibility to BDS.
The study findings shows that 30 per cent of the respondents stated that they were not aware of BDS existence,
25 per cent of the respondents stated that BDS charge higher fees, 16 per cent stated that BDS offer limited
services, 15 per cent said the services BDS offers are not demand led (offer medium and long term services,
while MEs wants short term) and 14 per cent said the BDS are not easily accessible
RESPONSE
Table 3: Factors affecting MEs accessibility to BDS
FREQUENCY
PERCENT (% )
Not aware of the BDS
30
30.0
Not easily accessible
14
14.0
High fees charged
25
25.0
Services not demand-led
15
15.0
Limited range of Services offered
16
16.0
Total
100
100
Source: Survey results, 2010
These findings are in line with Gagel (2006) who asserted that most BDS do not favour MEs; instead they are
targeting medium and large enterprises because of lack of capacity or willingness of micro enterprises to pay for
management services. Micro enterprises are operating on a day-by-day (hand to mouth) basis without the
necessary medium or long-term resources. Micro enterprises do not have a diversified division of labour and
management like medium and large enterprises. A sole business owner has to spend his ―own personal‖ money.
Thus, trainings, consultancies and other support services can better be sold to medium and large enterprises than
to microenterprises which run their activities with a personal day-by-day budget. MEs want to see immediate
impact from the support services which are normally not the case with medium and long-term impact of
management and marketing trainings.
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Conclusion
The study found that factors which limit ME access to BDS are: lack of demand-driven services, limited range
of services offered by BDS, MEs‘ low level of affordability and BDS‘s inappropriate intervention strategies.
Other limiting factors include: BDS not known and not accessible to MEs, MEs not aware of the existence of
BDS and BDS‘s location which renders them not easily accessible. Other claims were that most BDSs are not
visible and are working for big companies (Medium and Large Enterprises).
However, since the study used a very small sample, further research is needed to better understand the most
critical factors apart from those mentioned by respondents. This could be done by Discriminant Analysis. At a
more specific level, researchers may study the relationship between the influence of economic factors on the
quality and number of MEs in different localities; trends in the prestige attached to BDSs and possible
explanations for this trend; and the relationship between the attitudes towards BDS and propensity to use their
services.
It is also important to have in-depth longitudinal studies of Tanzanian BDS providers so as to better understand
the process of BDS provisioning in the Tanzanian context. Most of the factors that are posited to influence MEs
access to BDS are also hypothesized to influence MEs success. Therefore studies relating the above factors with
success or failure would also generate useful information.
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Effective Crm Practices Could Be The Competitive
Advantage: Case Of Two Indian E-Businesses Firms
Prof. Dibyendu Choudhury
Associate Professor in the area of Marketing & Retail Management
Regional College Of Business- Autonomous, Bhubaneswar, India
B.E (Electronics Engineering),PGDBM (Marketing Management) Management & Technological Institute
(India), Calcutta, and PGDBM (System Management) IISWBM, Calcutta.
Fellowship (FPSM)CRIMM,IISWBM in association with IMM.
Abstract
Customer Relationship Management (CRM) as a field of study has gained recognition recently. Researchers
have developed various models of CRM to establish how CRM practices can provide competitive advantage to
the companies. Taking the reference from Resource Based View of CRM, this study tries to analyse the case of
two fast growing firms of India. The main aim of this study was to know whether the CRM could be used
effectively and how far it is beneficial for e-businesses (only offering services and migrating to product
businesses as backward integration as a business strategy). Taking two Indian firms (123 Greetings and
ClickSaltlake.info) as case study a theoretical analysis has been done to understand the CRM practice of the
studied companies and to know how far the CRM practices of the companies have given them competitive
advantage. The case study is based on in depth interview and the first hand consultancy experience of the
author.
Keywords: e-Business, resource-based view, Information Sytems, CRM
Introduction
In recent years, skepticism about the e-business and information technology based at the firm level has been
renewed in Indian business scenario. E-business channel been still ignored by the Indian consumers, off course
exceptions are there. In this sense, it is known that application of CRM within e-business scenario as a research
subject, still in its infancy in India, and in a phase of strong development. Many small sector e-businesses are
doing great even internationally. This reflects upon the usage of advanced applications in companies; not all are
aware of the possibilities that modern application of e-Business could bring profits to their operations especially
in a developing country like India, where retailing had not yet seen the shift to e-business mode so far. To
recognize the significance, the companies fully on e-business models have to understand that, it could be a
source of competitive advantage while practicing the effective Customer Relationship Management (CRM) and
engaging its own consumers or vendors in a process. Additionally, fast growth companies often argue that this
integration could limit their growth because of the high level of IT investment. Keeping this in view, two fast
growth companies have been studied here as cases. Hence, the main purpose of this study is to conduct a
theoretical analysis on the Customer Relationship Management (CRM) practices with respect to the Resource
Based View (RBV) and applications of CRM in e-business. And to investigate whether the case companies
(Two Indian e-business, globally recognized in SME segment) utilize the effective CRM practices that are
pointed out as a source of competitive advantage in the literatures.
The effective CRM practices and their issues in this study are limited to a strategic level. The case companies
are both expected to start online sales with physical products and or services after while they started for quite
sometime as a complete e-business within service segment, in order to enhance their business diversification.
Being the customer oriented organization and to cater the needs and wants of their own customers they are
doing this service portfolio extension.
A literature survey has been carried out in order to understand the concepts of effective CRM practices over ebusiness applications. Furthermore, a case study has been conducted in two fast growth companies in India
practicing pure e-business. On the basis of obtained data it has been analysed whether the companies utilize the
effective CRM practices suggested in the literature. Prior to selecting both the companies as cases, secondary
information about the case companies were collected. With this knowledge in mind, interviews were planned
and conducted in the case companies.
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The author had decided upon this subject of the research while conducting strategic consultation with both the
case companies. Building the functionality of fast growing company itself includes some major strategic
decisions for the management. Different services offering through the e-business, could play a great role in the
company‘s performance and possibilities for gaining the competitive advantage. Even the location of central
warehouse, could play a great role for gaining a competitive advantage (Christopher, 1998). It is commonly
known that CRM, as a research subject still in its infancy and in a phase of strong development. This reflects
upon the usage of advanced e-business applications in the markets. Many companies are not aware of the
possibilities that effective CRM practices could bring to their operations, and the competitive advantages it
offers. For more than a decade, researchers have been trying to quantify the benefits of information technology
(IT) at the firm level. The results of these studies were varied and the term ―productivity paradox‖ was coined to
describe such findings. Nonetheless, recent studies have found positive and stronger linkages, and have
attributed the productivity paradox to variation in methods and measures (Devaraj and Kohli, 2003).
There is a strong emphasis in many organizations to develop such composite or cross-functional information
systems that cross the boundaries of traditional business functions in order to reengineer and improve vital
business processes. These organizations view cross-functional information systems as a strategic way to share
information resources and improve the efficiency and effectiveness of a business, thus helping it attain its
strategic objectives. Business firms are turning to Internet technologies to integrate the flow of information
among their internal business functions and their customers and suppliers. Henderson and Venkatraman‘s
(1993) argues that IT is evolving from its traditional back office role towards a strategic role, supporting new
business strategies.
However, recently much controversy about the value of IT has been created by assertions of Carr (2003), in his
article ―IT Doesn‘t Matter‖. Carr‘s argument, in a few words, is that because every firm can purchase IT in the
marketplace, because any advantage obtained by one company can easily be copied by another company, and
because IT is now a commodity based on standards (such as the Internet) that all companies can freely use, it is
no longer a differentiating factor in organizational performance.
As businesses started automating more and more systems, more and more data became available. However,
collection remained a challenge due to a lack of infrastructure for data exchange or incompatibilities between
systems. Analysis of the data that was gathered and reports on the data sometimes took months to generate.
Such reports allowed informed long-term strategic decision-making. However, short-term tactical decisionmaking continued to rely on intuition. In modern businesses, increasing standards, automation, and technologies
have led to vast amounts of data becoming available. Data warehousing technologies have set up repositories to
store these data. Business intelligence has now become the art of sifting through large amounts of data,
extracting pertinent information, and turning that information into knowledge from which actions can be taken.
Most management information systems experts disagree with Carr‘s assertions. The technology itself will rarely
create superiority. For that reason, some research studies had found that IT spending rarely correlates to superior
financial results (Hoffman, 2002).
In a global marketplace, an increasingly tough competition results in companies striving to find strategies that
give them a competitive advantage over their competitors (Christopher, 1998). Competition is no longer
between companies, but among effective CRM among e-businesses. Without completely knowing the ebusiness strategies of their competitors, it is difficult to find the benchmark for the best solutions. In this sense,
some researchers have described this in terms of IT capabilities and argue that IT capabilities can create
uniqueness and provide organizations a competitive advantage (Bhardwaj, 2000, Bhatt and Grover, 2005; Mata
et al., 1995; Santhanam and Hartono, 2003). On the other hand, companies could hold some sustainable
competitive advantage without being able to self-recognize the source for the competitive advantage. If neither
the company itself nor the competitors are able to recognize the source, the competitive advantage will be
sustainable (Lippman & Rumelt, 1982). Furthermore, growing customer requirements are leading to an era in
which relationships with both customers and suppliers are crucial for corporate financial survival (Wines, 1996).
Resource Based View of CRM
Scepticism about the value of IT and e-business has been raised, due to the gap between IT investment –
particularly on Internet technologies- and the widespread perception about the lack of value from e-business
(Zhu and Kraemer, 2005). Thus, today information systems (IS) researchers face pressure to answer the question
of whether and how e-business creates value. Although showing recent signs of advance, much of the existing ebusiness literature still relies, to a great extend, on case studies, anecdotes, and conceptual frameworks, with few
empirical research directed to assess their impact on firm performance –especially in traditional companies
(Brynjolfsson and Kahin, 2002).
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The RBV has been used to answer one of the most researched questions within the management strategy field,
which is related to understand the sources of sustainable competitive advantages (Porter, 1985; Rumelt et al.,
1991). At the same time, this theory has become one of the standard theories to explain why firms in the same
industry vary in performance over time (Hoopes et al. 2003). This suggests that the effects of individual, firmspecific resources on performance can be significant (Mahoney & Pandian, 1992).
In this regard, the RBV is based on two underlying assertions: resource heterogeneity and resource immobility.
Resources and capabilities possessed by competing firms are heterogeneously distributed and may be source of
competitive advantage when they are valuable, rare, difficult to imitate, and non-substitutable by other resources
(Barney,1991; Schulze, 1992; Wernerfelt, 1984). At the same time, resources and capabilities are source of
sustained competitive advantage, that is, differences may be long lasting (resource immobility) when protected
by barriers to imitation (Mahoney & Pandian,1992) or isolating mechanisms (Rumelt 1984) such as timecompression diseconomies, historical uniqueness, embeddedness and casual ambiguity (Barney, 1991; Dierickx
& Cool, 1989; Peteraf, 1993).
The RBV generally tend to define resources broadly and include assets, infrastructure, skills, etc. While
resources serve as the basic units of analysis, firms create competitive advantage by assembling resources that
work together to create organizational capabilities. Grant (1991) suggests that the capabilities of a firm are what
it can do as a result of teams of resources working together. Teece et al. (1997) argued that capabilities cannot
easily be bought; they must be built. Thus, building capabilities is not only a matter of combining resources;
capabilities are deep rooted within processes and business routines. Also capabilities involve complex patterns
of coordination between people and between people and other resources (Grant, 1991), and between an
organization and other organizations. In this respect, Day (1994) describes capabilities as complex bundles of
skills and accumulated knowledge, exercised through organizational processes, which enable firms to coordinate
activities and make use of their assets. Day argues that capabilities and organizational processes are closely
entwined, because it is the capability that enables the activities in a business process to be carried out. Makadok
(2001) considers capability as a special type of resource. More specifically, he defines capability as an
organizationally embedded nontransferable firm-specific resource whose purpose is to improve the productivity
of the other resources possessed by the firm.
For the purposes of the present study, the above capability definitions allow us to identify three important
characteristics:
Capabilities are rooted in the processes and business routines, because it is the capability that enables the
activities in a business process to be carried out.
Capabilities are firm-specific, while an ordinary resource is not. Because of this embeddedness, ownership of a
capability can not easily be transferred from one organization to another.
The primary purpose of a capability is to enhance the productivity of the other resources that the firm possesses.
Extending the traditional notion of organizational capabilities to e-business, a firm‘s e-business capability is
defined here as its ability to mobilize and deploy Internet-based resources, in combination or co-present with
other valued resources. E-business capabilities are firm-specific (or inter firm-specific) and rooted in processes
and business routines. We differentiate between external and internal e-business capabilities. The former refers
to the ability to mobilize Internet-based resources and other corporate resources with external business agents
(e.g. supplier and customers), while the latter represents the ability to mobilize Internet-based resources and
other corporate resources within a firm‘s boundaries.
E-business resources and capabilities
The RBV provides a solid foundation to differentiate between IT and IS and study their separate influences on
performance (Santhanam & Hartono, 2003). Essentially, IT is a generic term for computers, hardware, software,
telecommunications, Internet, electronics and related technologies. Whereas, IS is a wider concept, which refers
to how information flows are established in an organization to fulfill its information needs (Gunasekaran et al.,
2001). In this respect, the RBV offers a useful distinction between IT and IS and which is relevant while we are
discussing about CRM capability. The former is asset-based, while the latter comprises of a mixture of assets
and capabilities formed around the productive use of IT. Thus, the concept of resource seems to be closer to IT,
while IS seems to be closer to capability.
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IT resources as defined above are not difficult to imitate. In general, physical technology is by itself typically
imitable, expandable and upgradable. If one firm can purchase these physical technologies and thereby
implement some strategies, then other firms should also be able to purchase these technologies, and thus such
tools should not be a source of competitive advantage (Barney, 1991). However, firms may obtain competitive
advantages from exploiting their physical technology in a better (and/or different) way than other firms, even
though competing firms do not vary in terms of the physical technology they possess. IT resources are
necessary, but not a sufficient condition, for competitive advantages (Clemons & Row, 1991). IT resources
rarely contribute directly to competitive advantage. Instead, they form part of a complex chain of assets (IS
capabilities) that may lead towards better performance. Thus, some researchers have described this in terms of
IT capabilities and argue that IT capabilities can create uniqueness and provide organizations a competitive
advantage (Bhardwaj, 2000, Bhatt &Grover, 2005; Mata et al., 1995; Ross et al., 1996; Santhanam & Hartono,
2003). For instance, Ross et al. (1996) provided illustrative case examples to underscore the idea that IT
capabilities can provide competitive advantages and enhance firms‘ performance. Within e-business literature,
although there is very limited research here, recent studies have found a significant positive relationship
between e-business capabilities and firm performance (Zhu, 2004; Zhu & Kraemer, 2005). However, very
limited work has been undertaken to identify e-business resources and capabilities and study their separate
influences on performance.
E-business value ( from a process approach)
The primary purpose of this paper is determining how e-business creates value through the RBV. Thus, this
research will test the RBV logic in the e-business context. Although much research using the RBV has focused
on aggregated dependent variables, namely, firm performance, this may not be the best way to test the RBV
(Ray et al., 2004). For example, because firms can have competitive advantages in some business activities and
competitive disadvantages in others, examining the relationship between resources and capabilities associated
with different processes within a firm and the overall performance can lead to misleading conclusions. Ray et al.
(2004) proposed the effectiveness of business processes as a way to test the RBV logic. Another issue is that
some IT investments may provide benefits after a certain period but increase operating costs in the short term
(Kauffman & Krieble, 1988).
Thus, using firm performance at the macro level is meaningless and can again lead to misleading conclusions.
Researchers suggest a process-oriented approach to overcome these confounding problems. Kauffman and Weill
(1989) hold that the locus of impact, that is, the business process, should be the primary level of value analysis
assessment. Within the literature on e-business, recent research also suggests a perspective based on processes to
overcome these problems (Subramaniam & Shaw, 2002).
E-CRM
Staying and building online customer relationship and providing them the customized product/services can
potentially provide distinct value propositions to the firm. These in turn increase the customer loyalty and
profitability, as well as help in establishing strategic networks with customers that allow effective and efficient
Customer Relationship Management (CRM), being the part of the Information Systems (IS) values, not under IT
investments.
Fast-Growth Company
Fast growth companies are those that over the last five years had an organic growth of annual sales with at least
25%, annual turn over of atleast 5M USD and at least 50 employees (Growth 2005). And Europe‘s 500
(Europe‘s 500, 2004) defines fast-growth companies as high performing medium sized companies that have
increased their employment by more than 50% over the last three years, maintaining turnover growth at an
annual rate of at least 15%.
Researchers have given different perspectives for studying fast growth companies state that when studying fast
growth companies, the size of companies to be included as a critical consideration. The growth of companies
can be viewed from different angles, for example turnover, assets or numbers of people employed. If size and
growth were measured in numbers of those employed, it would make companies in employee-intensive business
areas to seem fast growing. Size and growth of turnover can be grown for example, by acquisitions, penetration
of markets, integrations or by diversifications. Furthermore, company‘s growth rates can be stable or varied
through the years. So, before considering a company fast-growing, the period measuring the growth must be
defined.
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Davidson et al. (2003) refer to several articles discussing the problems of measuring the amount of growth in a
neutral way. In spite of measuring problems, there are some generally accepted definitions of fast growth
companies. The author has chosen two definitions that are applicable to the case companies of this research
article. The main aspects of the definitions are the following.
Among all the new and already existing companies, there are only a few that try to grow, because of varying
reasons. Most companies will not grow at all. Young and small companies often grow organically, while older
and larger companies often grow inorganically through mergers and acquisitions. Therefore, many big
companies do not achieve organic growth as fast as in the beginning, although they are seen as fast-growth
companies by some definitions. Furthermore, in industries where many new companies are formed, fast-growth
companies are found more often (Davidsson & Delmar 2003).
Especially right now Indian economy is booming and many e-business companies are finding this part of the
earth more happening place than any where else because of available talents and resources. So, the frequencies
of incorporations are pretty higher being a developing nation as well as the growth.
The characteristic of the fast-growth companies vary internationally. In bigger countries like India where it is
growing economy, the domestic market as well as the International market is needed to be catered
simultaneously. The following characteristics mainly describe companies in the Indian market. The author
would focus more on the following fast-growth topics; strategy, resources and capabilities, markets and
implications of CRM in their e-business modalities.
Case Companies
The case companies had been chosen by the author on the basis of few criteria which the Author found it has
been met. Moreover, the author personally worked with these case companies during his consultation period
2007-2008. The set criteria included:
1. Very strong growth in turnover and number of employed people.
2. Early Internationalization
3. Good Ethics and Good morale.
ClickSaltlake.info
ClickSaltlake is the name of the business. It is having a website which evolved to help the people finding
directions and who used to get lost in Saltlake city back in late 1990‘s. Because, Kolkatans had no idea about
the planned city named Saltlake and it‘s demographics during that point of time, moreover population were few
to ask for help to know the exact address and location of a house in the roads. Less public transportations, least
ideas about the geographical demography, existing even amongst the people residing at Saltlake city inspired a
tech savvy guy named Mr. Saikat Das, who conceptualized the need of such site which had served well to the
population for more than 7 years in Saltlake City area. This was a simple site evolved as practice of html
scripting learning and as hobby. The map of saltlake city had been compressed and uploaded to the site, block
wise maps, for giving the people the exact idea of the location of a house in a block. Later with times few phone
numbers and few business addresses and phone numbers had been enlisted to serve the purpose of the people as
and when requested.
By this time the company slowly expanded and the site became huge and Mr. Das became full-time
entrepreneur after leaving a full time job as CRM functional Consultant with an US multinationals. During June
2007 the author met Mr. Das co-incidentally and the responsibilities of change in e-business applications been
entrusted upon the author. After studies most of the suggested business changes been brought by Mr. Das and
his technical teams, eventually which had brought the sea changes in the site architectures and opened up
different business avenues. The case company had been transformed from a simple infomediary company to a
complete E-Business company with having manifold service facilities for the viewers, which in turn enhanced
the targeted traffic and revenues.
123Greetings.com
In a society that has its foundations in the strength of interpersonal relationships, the technological revolutions
of the 21st century has taken the medium of personal expressions to a whole new dimension.
Since the inception in 1997, the strong foundations in human expressions has enabled them to understand
people, their emotions, their cultures, their religions and all that lies therein. This in turn has enabled them to
extend their creative line of offerings to a whole new array of expressional deliverables through sharing egreetings card for the world where sharing is caring and every season has got reasons to celebrate.
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Arvind Kajaria the founder and President of the company had seen the opportunities in relationships during his
studies in US. Which made them leaders not only in the world's largest celebratory events such as Christmas,
New Year and Valentine's Day but also have established a brand in country, religion and culture specific
celebrations. Their expertise continued to expand deep into personality behavioral studies, cultural implications,
current trends analysis and societal understandings.
Human Expressions is the soul of 123Greetings. A string of creative ideas holds together this chain of
specialized functionality to retain and enhance focus on human relationships. They're dedicated to delivering
seamless real time solutions through our on the edge server technology that delivers content and services to
users globally.
The author met Mr. Kajaria, when he was also feeling to expand the business and trying to understand the gap
which is not allowing the company to reach to the expected level and beat the competition. The author had been
given free hands to bring necessary changes into the business model to implement effective CRM practices to
leverage on returned and loyal customers.
Research Questions
When studying the literatures available, the author has defined the problem in the following question
Whether effective CRM practices offer competitive advantages to e-businesses?
The main research question will be investigated within the theories of RBV and the effective CRM practices
within E-business applications. The author will analyze the question of whether the case companies practice
CRM effectively and whether that had given them any competitive advantages and/or the CRM practices are in
line by the virtue of which they‘ve got the competitive edge within e-business framework. To lead the way the
main research question is divided into three sub-questions for which this research article is pursuing answer:
1. What is the effective CRM practices and it‘s drivers in an Organization and challenges of implementation
2. How it‘s being implemented and helped the organization in terms of achieving the higher revenues.
3. Why effective CRM practice is that important on top of having rugged e-business applications and its value
additions like strong back-end supply chain.
Delimitations
The Customer Relationship Management (CRM) issues in this research article are limited to a strategic level, in
accordance to the author‘s field of study being Systems Management. Therefore the interviewed persons in
these case companies hold the Directorship positions and professionally aware of CRM functional expertise.
However, to give a comprehensive picture of the CRM and the activities in operational areas are listed within
the theoretical framework and shortly described in Appendix. The study is limited within two Kolkata based fast
growing companies based in the Information Technology Hub of Eastern Zone of India. The companies are
expected to start trading with physical products and goods and add more service lines in order to fulfill the
requirements of their customers. Further the theoretical framework is limited to RBV and CRM. The theoretical
studies concerning RBV will mainly include the competitive advantage.
Methodology
The main research strategy for this research article is the case study. With a case study, the researcher is getting
a more detailed and multi-dimensional picture of the studied object. In a case study, the amount of studied
objects are very limited, often only one (Lundahl et al. 1982). Typically case studies focus on comprehensive
subjects in real life situations. According to Wiedersheim-Paul et al.(1991) case studies can be used for four
different functions: to illustrate reality, as a tool to create hypotheses, as a method in reforms or as a tool to
create new theories.
Two companies situated in Kolkota were selected as cases for this study. With a case study the author was
attempting to illustrate the situation in reality, by researching if the case companies utilize the practices found in
the literature. The case studies in this research article were conducted by first gathering information about the
case companies to learn their environment and the industry they are operating. With this knowledge in mind the
interviews were planned and the CEO/Presidents/process owners were interviewed.
A sub-strategy for this research was archival analysis. Relevant literature concerning RBV and CRM theories
are studied and presented in order to understand and develop a theoretical base before conducting the case study.
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Analysis of Case Companies
Firstly, characteristics of the case companies are researched on the basis of the descriptions of the fast-growth
companies in Chapter 3 and the accomplished interviews and hands on project work. Secondly, the structures of
these organizations are described from the CRM perspective.
123Greetings.com
The author has found that the organization fulfils several described characteristics of the fast growth companies
(Andersoon, 2003).The company history has visible roots of entrepreneurship. In the early days, the company
concentrated mainly on profiling business area. The company also aggressively went for the internationalization
and brought huge investments in the other technological developments (IT). The company seems to avoid fixed
costs investments any further in many areas, as they are using their scattered databases to be reconciled and the
unification process been initiated by the author. Employee benefits and retention are also a part of the strategies
to engage and motivate personnel to come in future. Furthermore, the fast decision making is usual in the
organization.
CRM practices implementation on the logistics seems to have limited possibilities to act in the strategic level of
decision making. This can be exemplified by the information flows between the management board and the
operational CRM department established by the author. As described in the literature (e.g. Olavarrieta et al.,
1997), to manage customer needs more successfully, the CRM practice managers need to participate more in
strategic decision making. However, the main role of the CRM department in the company is to develop the
group wide CRM practice and integrating all the processes under the unified database. For example the
advertiser‘s feedback and promotional offers are needed to be tracked to learn more and implement the desired
changes faster than at the present pace.
ClickSaltlake.info
Also CLickSaltlake (CSL) has several characteristics for the fast growth companies (Andersson, 2001a;
Andersson 2001b;). The founder of the company brought earlier experience from his previous employment
about the functional activities of the CRM practices and implementations to build up this new business. He also
attracted foreign collaborators from UK just after a short growth phase, in accordance to the characteristics
found in the literature. However, the growth rate of the company includes no acquisition so far, the company has
grown only organically and diversified into separate software solution development business. CSL also invested
in the technology because of demanding international market. In the beginning, the company focused on only
one category of customer need, also with the purpose to build up the knowledge inside the company. Later as
the business model changed, the company started focusing in different verticals and catering different services
needs. The personnel policy includes two clear characteristics for the fast-growth companies: employee benefits
and over dimensioned personnel. However, CSL has some characteristics that are opposite to the theories of
fast-growth companies, for example, no external investments.
Since the logistic operations are yet to be set for the new service business in consumer goods, they‘ve had plans
and clearly that‘s the support function. As the company has no own production, planning seems to include the
materials flow from the suppliers. It seems to the author that the CRM practices of the organization are properly
established to handle any customer queries to escalate issues properly to the different large scale suppliers.
Internally, the company seems to have plain logistical processes and streamlined customer relationship
approach. The outbound material flow in the future business would be mostly direct deliveries with the order
notes generated real time from the system with either online payment or confirmation by the buyer over the
phones in the local area to minimize the risks of return.
Customer Relationships
Li et al. (2004) state that all the practices for managing relationships within rugged supply chain could be source
of competitive advantage (see also Batt et al., 2004; Flint, 2004; Fynes et al.,2005; Rungusanatham et al., 2003).
They exemplify with practices like building long-term relationships and improving customer relationships and
improving customer satisfaction. Flint (2004) states that customer learning can ease predicting customer needs
and it would then create competitive advantage. He also states that customer relationships must be based on
customers‘ point of view. RBV literature describes ways to achieve value, which are always connected to being
customer oriented. Further it has been stated that customer relationships can create value, be rare, not imitable
and possible to organize in an effective way (Barney, 1995; Lambert et al., 1993; Olavarrieta et al., 1997;
Peteraf, 1993; Rumelt, 1984). The conclusion is that customer relationships may be source of sustainable
competitive advantage. However, like Olavarrieta et al. (1997) points out, finding suitable partners may be
difficult to find. Batt et al. (2004) adds that in order to have co-operations, the partners need to have common
goals.
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In CSL, the customers do not take part in product design, but their feedback and suggestions helped the author
to modify the business needs and select the dimensions. Their business areas have different level of customer
relations; however CSL offers its customers possibilities of new product launch and survey the market responses
first, prior adding any products/service line to any categories. The author feels that CSL fulfils the requirements
for customer relationships in order to have a source of competitive advantage.
In 123Greetings, the customers are not yet involved in product/service designing except customizations. Their
business areas would also have different level of customer relations; specially the profiling area and different
group activities through community building over internet. Company is striving to customer learning by offering
several services to support the customers business, for example, customer relationship structure for
advertisement business. Overall, the company also seems to use their customer relations in a way that the
literature suggests. Moreover, as per the author‘s directive the special CRM implementation team is working to
consolidate the database, by which the company would leverage upon more specific customer relationship
management. Therefore, the source of competitive advantage is lying in the customer relationship management.
Information Systems
Information systems can allow companies to effectively implement CRM and to communicate critical and
proprietary information between each other (Li et al., 2004). According to the literature, if ERP systems are
implemented optimally, they can enable a company to catch the valuable information sets. Consequently, this
would lead to enhanced performance and more efficient and effective CRM practices. Martin et al. (2003) state
that internal integration is a requirement for companies before being able to share information with external
partners. In accordance with RBV literature (Barney, 1995; Lambert et al., 1993; Olavarrieta et al., 1997;
Peteraf, 1993; Rumelt, 1984), information systems may add value, be rare, not imitable and optimally integrated
in the organization. However, the author argues that all these key questions are not automatically valid
simultaneously, and therefore do not always match the criteria for sustainable competitive advantage.
123Greetings is implementing group-wide ERP systems in-house as per the road map shown by the author, as
replacement for all the disparate systems available with them. They would perform the tasks mainly under the
guidance of the CRM practice team. The company is also offering many services available with them in internet.
All in all, the company seems to have the strategy to utilize information systems as the difficulties in it. Both the
companies CSL and 123Greetings seem to have designed the measurement systems for CRM as the literature
defines. Though, implementation time is very longer for 123Greetings only one factor is not in line with the
suggestions in the literature.
Summary of Analysis
The following figure will summarize the results of the analysis.
Clicksaltlake.info
123Greetings.com
Strategic Supplier Partnership
♫
Customer Relationship
♫
♫
Information Systems
♫
♫
♫
Co-operation with Competition
Performance Measuring
♫
♫
Customer Relating Capability
♫
♫
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Like CSL owner Mr. Das already declared that, the results of this study seem to indicate that their CRM strategy
may be a source of competitive advantage. For 123Greetings the Customer relationship is present, but this study
have compelled them to implement the CRM system faster to gain more competitive advantage by virtue of
customer relating capabilities.
Conclusions of 123Greetings
As the results in this research article have indicated, 123Greetings have just started the database consolidation
and already have gone far in implementing their CRM practices. This can be exemplified throughout their whole
line of existing as well as new lines of business from supplier, mainly situated at China Mainland. Several
customer learning processes seem to be a strategy for achieving tighter customer relations. Obviously it seems
that, CRM practices whatever they‘ve currently would have been a possible source of competitive advantage.
The author senses that, the future of effective CRM practices in 123Greetings will be very promising. Firstly,
they have captured huge historical data, it‘s just a matter of time to consolidate the databases and analyzing the
data from CRM perspective to know more about the customer‘s behavior, it will also consolidate the work
processes and optimize both internal and external information flow. Secondly, the author experienced the
advertisement revenue generation growth and customer relationship maintenance in the current scenario has
great potential to grow. The proper performance measurement mechanism and systems can help the company
and solve most of the bottlenecks in their business.
Conclusions of Clicksaltlake.info
When looking at CSL, it seems very clear that the company‘s most utilized the CRM practices for their organic
growth and customer loyalty is higher. Ideas for launching new business line and adding products are usually
presented by the end customers in their group activities. As described in the case study, some of the customers
can also be considered as competitors. Hence, co-operation with competitors are usually initiated by the end –
customers. Also CSL is having such a open platform computing practices, where even users can design and
develop many tools to plug-in and add services which in turn enrich CSL‘s other customers. The company has a
strategy to use internal CRM systems embedded from the business change initiative. Therefore a source of
competitive advantage may be found in CSL‘s CRM practices.
The author believes that, the company has more rooms to improve for further developing their inbound and
outbound traffic to offer high value products/services instead of supplying mere regional information to a
specific kind of customers. Information systems also seem to have possibilities for enhanced use in future CRM
practices, as they‘re currently only used internally. If they open the platform for their suppliers as well as the
customers, it would yield much better results.
Analysis of CRM Practices of the companies on different theoretical models
CRM is about managing different types of customer relationships. In this study we looked at four different types
of relationship: strangers, acquaintances, friends and true partners. As these relationship types evolve over time
they create very different demands on CRM programs and subsequent company value and profitability
Fig 1. CRM models on the basis of different relationships
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Strangers to acquaintances – strangers are customers that have not yet entered the market or are customers of
competing suppliers and hence do not require personalization. As soon as there is a business transaction, a
customer moves to a new level of awareness. At this point the supplier and customer become acquaintances. In
many cases, these customers are still yet to be convinced that entering into a ‗relationship‘ will be beneficial. In
this case, suppliers need only provide a value proposition to a customer that is on par with competitors, or parity
value. By listening to their customers and delivering on the basics, companies will gain experience and learn to
improve production efficiencies. As the supplier becomes better at providing the routine benefits that customers
expect to get when they make a purchase to begin the gain of a positional advantage over those with less
experience and volume.
Acquaintances to friends – by directing resources towards ensuring that all communication between the supplier
and the customers is relevant. Once we show customers that we remember them and that their business matters
to us. As the customer relationship evolves from acquaintance to friend, suppliers are increasingly required to
move from delivering value on par with the competition to creating differential value. This requires
development of trust in the relationship through provision of diversified products and services. A natural
consequence is that customers require more information, thereby placing greater demands on the company‘s
technology and the staff responsible for modeling customer data.
Friends to true partners – ultimately trust breeds‘ greater commitment that results in a shift from short-term
exchanges to long-term relationships. Customized information and products are required for true partners. This
implies that appropriate organizational structures are in place to ensure that the supplier treat the best customers
well. This implies that staff behaviors and values are tightly aligned with customer needs. From a resource
allocation perspective, organizations need to ensure that the delivery of parity value, differential value, and
customized value is tightly aligned with customer motivation to remain as strangers, acquaintances, friends or
true partners. Carte blanche approaches that seek to establish relationships with all the customers are unlikely to
be profitable. In this study, the firms that were most comfortable with customer relationship (CRM) programs
were the firms that knew what they wanted to get from their data systems and had a realistic appreciation for the
organizational constraints that exists.
In other words, the firm had a clear, unconstrained strategy aimed at identifying customer segments and
extracting the most value from their economic interactions with different types of customers. It is in this area, as
many organizations would agree, that considerable room for improvement exists (Coltman 2007, et.al).
CRM and Competitive Advantage
Literature has been presented in order to view the competitive advantage from resource based view and CRM.
To describe the company/supplier‘s internal structure of activities and IS values through which a firm develops
a competitive advantage, the value chain of Porter (1985) fig 2. was presented. RBV has been described with the
main questions that a firm should make when describing its resources and capabilities when trying to gain
competitive advantage: the question about value, the question about rareness, the questions about imitability and
finally the question about organization.
Fig2: Service Profit Chain (Heskett et al,. 1994 Harvard Business Review)
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CRM is described to present the company‘s external environment with suppliers and/or customers. Literature
was used to find characteristics of modern CRM. The following figure (fig. 3) is composed to illustrate the
service profit chain by Hardvard business review.
Fig. 3: Dimensions of Customer Relating Capabilities
While analyzing the competitive advantage of fast growing two Indian firms on the basis of aforesaid
conceptual model, the author has come to the following observations. To gain competitive advantage, the
company needs resources and the main resources discovered during this research article is the customer relating
capabilities. This is however, is the practices to be the source of competitive advantage according to RBV
literature. The author has recognized these practices in both the firms under study.
Sometimes the valuable resource is an adroit combination of capabilities, none of which is superior alone, but
when combined, makes a better package. Then competitive superiority is due to a weighted average effect - the
business does rank first on any asset or capability but is better on average than any of the rivals.
Conclusion and Future Research Agenda
The author recognizes the best practices for CRM from the literature which could be a source of competitive
advantage for these e-businesses. In the case studies, some of these practices could be identified within the
company. The author concludes that it is worthwhile for the case companies to utilize and try to develop
effective Customer Relationship management (CRM) to get more competitive advantages. The author believes
that it would be interesting to conduct this research with a wider sample of companies, either a quantitative
research of the effective CRM practices and their competitive advantages by questionnaire, or focusing on one
of them in detail. Another idea to analyze one of these case companies from the resource –based view and
broadened from CRM to find a source of competitive advantage. The author thinks that it would be interesting
to see the results from a quantitative research style, where a wider sample of companies would be involved. This
could be executed for example by a posted questionnaire that could include the concept of CRM practices
recognized in this research article.
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Annexure
The Interview Guide
The role of CRM and especially the CRM practices Manager if any, available in the company. The author
wants to know if CRM practice is a part of company‘s long term strategy.
1. The CRM Practice Manager has got any responsibilities in the strategic decision making?
2. Does a CRM practice department exist? How many employees? How old is the department?
3. The experience level of the CRM Practice Manager, if any? In this company and in the same domain
etc?
Strategic supplier partnership.
The authors asks questions to find out how well developed the relations with the partners in both up-stream and
down-stream.
1. Are the suppliers taking part in the product/service design process?
2. Is the company striving to decrease the amount of suppliers?
3. Do the suppliers of the company co-operate with each other?
4. Are there strategic supplier partnerships further upstream than only the first tier?
5. Is the company also buying any service and support of the upstream partners?
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Customer Relationships.
The author will ask questions to find out how well developed the relations with partners in both up-stream and
down-stream.
1. Are customers taking part in the product/service designing?
2. Are there strategic customer relationships further downstream than only first tier?
3. Is the company offering also service and support downstream partners?
4. Is company measuring customer satisfaction?
Information Systems.
Here the author will study how information systems are used in CRM practices.
1. Is the organization is using Enterprise Resource Planning systems?
2. Is the Organization using customer data segmentation using advanced customer demographics for
planning its retention strategies?
3. Are suppliers and or/ customers integrated to company‘s information systems?
4. Do the company‘s suppliers/customers share relevant information helping planning?
5. How do the CRM practice managers describe the quality of shared information?
CRM Functions
These questions would reveal if the company is utilizing external partners to CRM functions.
1. What‘ the motivational factors the company using for its providers?
2. Is there any role of customer relating capabilities to find customers involved in strategic planning?
3. Has the company control over the survey program or customer tracking programs internally?
4. Does the company own any CRM software?
Co-operation with competitors.
1.
2.
3.
4.
This section of questions will study if the company have strategic co-operation with its competitors?
Does the company co-operate with the competitors in the sourcing functions?
Does the company co-operate with the competitors in traffic generation?
Does the company co-operate with competitors in product/service development and/or business
development?
Performance Measuring.
1.
2.
3.
These questions are written to find out if the company uses performance measuring tools
internally/externally to measure customer satisfaction index?
Does the company benchmark other company‘s performances?
Is the company using key performance indicators to measure the satisfaction levels and customer
referrals in terms of revenue growth?
Fast-growth companies.
1.
2.
3.
4.
5.
The author wants to find out the company specific experience of fast-growth CRM functions?
What are the effects of the fast growth on company‘s CRM functions?
Does CRM support have any indications in the growth of the company?
How‘re the possible problems addressed and solved e.g. internally, with the help from literature,
consultants etc?
What are the main potential development issues in CRM in the future?
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An Assessment Of Fixed Assets Maintenance And
Replacement Decisions In A Government Owned
Transport Company
Dr. Paul Aondona Angahar
B.Sc, M.Sc, Ph.D Cna.
Senior Lecturer/Deputy Dean
Department Of Accounting
Faculty Of Management Sciences
Benue State University, Makurdi
[email protected]
Tel: 234-706-801-0515
Abstract
This paper has assessed the fixed assets maintenance and replacement decisions in a government owned
Transport Company, with respect to the usage of the assets using Benue Links Limited, a transport company
owned by the Benue state Government in Nigeria as a case study. The hypothesis formulated and tested was:
Assets maintenance and replacement decisions of a government owned Transport Company do not significantly
result in efficient utilization of assets. Data collection was through personal interviews which were conducted
with some managerial staff of Benue Links Nig Ltd, the study also relied on secondary data collected from the
company in terms of the maintenance schedules of their vehicles. The Chi-square Test was employed to test the
hypothesis at 5% level of significance. The study found out that the existing assets management and replacement
decisions of the government owned transport company -Benue Links Nig Ltd do not significantly result in
efficient utilization of assets. In order to improve the assets maintenance and replacement decisions of the
company the following recommendations were made: Developing a policy to require a complete inventory and
periodic measurement of the physical condition of all existing assets in the establishment; Establishing
conditional/functional performance standards to be maintained for each type of government-owned assets;
Evaluating existing assets to determine if they still provide the most appropriate method to deliver services;
Various measures should be put in place by the company to monitor and evaluate the performances of asset
managers with respect to asset management; Educating assets custodians on the need to ensure proper
maintenance and replacement of the assets in their custody.
Key Words: Assets Maintenance, Asset Replacement, Asset Maintenance and Replacement Decisions, Assets
Management Policy
1. Introduction
Fixed assets like motor vehicles, tractors, plants, and machineries are usually purchased with scarce funds and
are employed in government and private organizations for the day-to-day running of their businesses. Ironically,
one is confronted with a catalogue of abandoned, yet fairly new assets left to rot on the flimsy excuse of lack of
funds for maintenance or obsolescence in the premises of many government organizations in Nigeria.
Shodehinde (2001) noted that, billions of naira has apparently gone down the drain in the Nigerian economy due
to lack of proper maintenance practices probably sustained by a weak culture of maintenance of assets,
lamenting that the Lagos State Government had lost to decay motor vehicles worth N600m which have
apparently been abandoned and parked at Lagos state secretariat, Ikeja alone. This same scenario may somehow
abound in most government owned organizations in Nigeria.
The survival and subsequent growth of any organization is largely dependent on its assets management policy.
One can therefore safely assert that it is either organizations manage their assets efficiently or effectively to stay
in business or they go out of business. The importance of fixed asset management is determined by the size of
an organization‘s investments in fixed assets and in the cost of their operation. Even if an organization has a
limited investment in fixed assets, fixed assets management is still very crucial. If the value of the assets is low,
while the operating cost remains high, the fixed assets management policy of the organization may need to be
reviewed.
Evidently, assets are acquired and used in output delivery. Organizations- either private or public should
therefore review the composition and utility of their asset holdings on a regular basis. This is essential so that
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decisions can be taken on whether maintaining an old asset or replacing it with a new one would be more
meaningful and cost effective.
Like human beings, assets have life cycles, according to Kotler (1980), a typical life cycle of an asset represents
the time it was purchased to the time the asset breaks down beyond repairs, or up to the time when repairs are no
longer economical. During the time of usage of the asset, efforts should be made to effect repairs or make
replacements as and when necessary
In the light of the importance of fixed assets management to organizations, this research paper has studied the
maintenance and replacement of fixed assets employed in the day-to-day businesses of a government owned
Transport Company.
The main objective of the paper is to assess the efficiency of assets maintenance and replacement decisions of
a government owned Transport Company with respect to the usage of the assets using Benue Links Limited, a
transport company owned by the Benue state Government in Nigeria as a case study.
2. Conceptual Framework
Asset management includes making decisions about whether it is more economical and efficient to maintain an
old asset or to replace it with a new one. A good asset management policy should ensure that different parts of
an organization follow same procedure when evaluating capital proposal or when purchasing assets. Standards
often need to be set where assets must be compatible across the organization. The asset manager is responsible
for major maintenance, repair and replacement decision, as well as the long-term strategic plans for a corporate
asset portfolio (Vannier, 2001).
Maintenance of assets generally includes carrying out inspections periodically in order to monitor and record
how organizations are performing in terms of asset management. Preventive maintenance is carried out to
ensure that assets are performing, as they are required to function through their service life. Repairs are required
when defects occur and finally, rehabilitation, which replaces an asset when it is reaching the end of its service
life (Vanier, 2000).
Replacements of assets often occur when an asset has reached the end of its useful life. Alternatively, it may be
because of technical, economic, obsolescence, modernization, or compatibility issues. When an asset is
regularly maintained, unplanned hiccups and expensive breakdowns will probably be prevented. It may also be
cheaper to replace an older asset rather than continuous servicing and repair when the cost of maintenance is
rising. Styles (2000) opined that in some instances, infrastructural asset could be renewed or rehabilitated
throughout their lifecycle so that their lives may be almost infinite. Expensive maintenance requirements may
not be ruled out because of certain characteristics possessed by the asset. Asset maintenance and replacement
are contingent upon the value and cost of the asset within a period. With a newly purchased asset, neither
maintenance nor rehabilitation cost will be required. This is the period tagged as ―Do Nothing‖. After some
period of time, the value of the asset will be going down due to usage; hence, maintenance cost will set in. This
is necessary to keep the asset in an efficient state. This period is tagged ―Maintain‖. However, some vital parts
of the assets may have to be changed with new ones in order for the asset to continue in a usable state. This time
frame is tagged ―Rehabilitate‖. Finally, a time is reached when neither maintenance nor rehabilitation is
economical. The cost of maintenance and rehabilitation will be so high that the beneficial option will be
replaced with a new one. The stage where replacement takes place is tagged ―Replace‖.
Bond and Mitchell (2002) added that maintenance is changing from a concept focused on how well a process or
an individual machine works to a more complex concern with safety, quality, commercial availability, and unit
cost of efficiency.
It is quite pathetic that most organizations have assets from which they do not derive full benefit. It is important
that an organization recognize assets that are performing, and those that are not. A simple test on every asset is
recommended, segmentation provides immediate information for developing strategy and plans for maintenance
of assets and asset rationalization (Hope, 2003).
It is therefore essential to know in terms of service delivery whether an asset is essential, just to have for
prestige, or surplus to requirements.
Williams (2003) stated that asset identification requires the clear specification of the economic benefits
embodied in asset which encompasses the service capacity, service quality, and useful life and it also requires
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that expenditure on the replacement of an asset including a component of the asset be to be capitalized.
Abdullahi (2003) also advocated that good management practices entail keeping comprehensive records of all
valuable assets and their current condition.
Hope (2003) identified that the easiest target in any budget session is the sum of money budgeted for
maintenance and renewal of the existing asset stock, most organizations, especially government owned are
always quick to prune maintenance cost from the budget. It should be noted, that asset life is dependent on
appropriate maintenance being carried out regularly on such an asset. Asset failure is oftentimes caused by lack
of maintenance, and replacing an asset is far more costly than maintaining it.
Similarly, Bond and Mitchell (2002) observed that most managers view plant and machinery reliability as the
capability to operate in its prescribed manner. However, capability is the product of design, manufacture,
operation and maintenance. Asset maintenance is therefore a critical activity which must be appropriately
funded.
Hope (2003a) advocated that scarce maintenance money should not be wasted ―on assets that are nice to have,
or surplus to requirements when essential assets need more maintenance. Bond and Mitchell (2002a) explained
further that ―the only way to permanently reduce maintenance costs is to reduce the need for maintenance‖. This
implies that to reduce the need of maintenance, diligent efforts must be made to improve materials designs,
maintainability, and operations. Therefore, organizations must have a clear knowledge of the condition of their
asset and how they are performing.
2.1 Asset Replacement Decisions
Lucy (2001) has classified asset replacement decisions into two namely identical and non-identical replacement
decisions. The former has to do with the replacement of an existing asset with an identical one. Besides, the cash
flows produced by the new asset are the same as those produced by the existing one. The usual problem
associated with this type of classification is the determination of when and how frequently such an asset shall be
replaced. The latter involves replacement of the existing asset with a different one which may be a technically
superior asset. The two types of assets are different since they produce different cash flows. The problem
associated with this type of classification is the determination of when to replace the existing asset.
Lucey (2001a) reiterated that most items of equipment, for example, components, vehicles, machinery, parts and
so on need replacement at one time or another. The various cost consequences involved are studied so that the
optimum replacement decision can be taken. The commonest replacement problems relate to parts or
components that work adequately well up to a point and then fail, these items are often relatively inexpensive.
Nevertheless, the cost consequence for their failure and/or the installation costs in replacing them can be
considerable. Estimation of the various costs involved and choosing of the least cost position is therefore
necessary. The second category are usually relatively expensive items which with increasing amount of
maintenance, could be kept functioning, examples include vehicles, machines, tools, and so on.
A vehicle could be performing satisfactorily for up to say twenty years. For this to be possible, increasing
amounts of maintenance would be incurred. Hence, careful cost analysis is needed to choose the most
economical replacement time. The annual capital loss each year, that is, the difference between the market value
at the beginning and end of the year, as well as the maintenance charges, are the two major cost consequences
involved. The two costs would be accumulated and average over the number of years of the economic life of the
assets, to find the least cost position. Simple replacement analysis assumes that there are no changes in
performance or technology. In practice, however, there is often potential improvement in performance from a
new item. Asset management program should be instituted so that existing assets that have to be replaced are
identified and listed.
Ayodele, (1998) is of the view that management often employs several criteria and methods in arriving at an
asset replacement decision.
Bond and Mitchell (2002) observed that financial considerations like profitability drive most aspects of modern
process and manufacturing operations. The first consideration is the operating and maintenance cost. The cost of
repairs and maintenance are likely to rise with the age of an asset. Likewise, delayed replacement decisions will
often increase the maintenance cost.
Inadequate maintenance of assets may result from reduced budgets, diversion of maintenance funds for
emergency responses, and competition for resources, from other program needs. The deterioration of assets,
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especially motor vehicles, as well as other movable assets can adversely impact on public health and safety,
reduce employees‘ morale and productivity, and increase the need for costly major repairs or early replacement.
However, lack of adequate maintenance may require that assets be replaced or subjected to major reconstruction
before the expected useful life ends.
Assets often involve a substantial outlay of capital. The longer the replacement period, the higher the cost of the
asset, the older the asset also, the lesser the realizable value would be. Good asset management entails the
disposal of under-performing assets and replacement with higher yielding, and more appropriate ones. Finally, a
delayed decision to replace asset may cause inflation to catch up with the new value of the asset.
2.2
The Relationship Between Asset Maintenance And Asset Replacement
From the views expressed by Vannier (2001), Styles (2000), Bond and Mitchell (2002), Hope (2003) and Lucy
(2001) above it can be deduced asset replacement commences where asset maintenance terminates. This is the
theoretical relationship or link between the two concepts; assets maintenance and replacement. Asset managers
require information on both value and cost to make informed decisions about maintenance and renewal of
assets. The managers are equally faced with the constant technical challenge to weigh the costs of maintenance,
repair, or replacement versus the technical and functional benefits of implementing a solution.
3 Statement of hypothesis.
In order to achieve the objective of the study which is to assess the efficiency of assets maintenance and
replacement decisions of a government owned Transport Company with respect to the usage of the assets using
Benue Links Limited, a transport company owned by the Benue state Government in Nigeria as a case study,
the following null hypothesis was formulated:
Ho1:
Assets maintenance and replacement decisions of a government owned Transport Company do
not significantly result in efficient utilization of assets.
4. Methodology
In order to collect data for the study, personal interviews were conducted with some managerial staff of Benue
Links Nig Ltd in a bid to finding out the mode of assets maintenance and replacement in the organization.
Specifically, the head of maintenance units, the head of accounts and finance sections, the head of traffic and
commercial services units and the head of purchases and supply units of the Benue Links Nig Ltd were
interviewed. The study also relied on secondary data collected from the company in terms of the maintenance
schedules of their vehicles which were availed the researcher. The Chi-square Test was employed to test the
hypothesis at 5% level of significance.
5 Data Presentation and Analysis
The data obtained in the course of this research work are presented and analyzed below:
Table 1: Number of movable assets (Motor Vehicles)
Type
No Available
Percentage
Company Vehicles
81
31.64%
Contract Vehicles
175
68.36%
TOTAL
256
100.00%
Source: Field research, October 2011.
From the table above, it can be seen that the organization (Benue Links Nig Ltd) as at the time of this research
had a total of 256 vehicles in its fleet. Of this number, 81 vehicles or 31.64% were company vehicles financed
by the Benue state government while 175 of the vehicles or 68.36% of the organization are contract vehicles on
a lease scheme from private and corporate bodies.
Table 2: The working condition of the company’s movable assets
Type
Good
Percentage of Unserviceable
Percentage
of
Vehicles
good vehicles
Vehicles
unserviceable
Vehicles
Company
35
18.72%
46
66.67%
Vehicles
Contract
152
81.28%
23
33.33%
Vehicles
Total
187
100%
69
100%
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From table 2 above, it can be deduced that Benue Links Nig Ltd had a total of 35 company vehicles
representing 18.72% of the company‘s total vehicles that were in a good condition as at October, 2011 and 152
contract vehicles representing 81.28% of the good or serviceable vehicles of the organization. The company
also had a total of 69 unserviceable vehicles in its fleet, of this number, 46 vehicles representing 66.67% are
company vehicles while 23 vehicles or 33.33% of the company‘s unserviceable vehicles are contract vehicles.
Table 3: Frequency of vehicles maintenance
Period of maintenance
Company Vehicle
Percentage
Maintained within last one month
4
11.43%
Maintained within last two months
6
17.14%
Maintained within last three month
9
25.71%
Un-serviced vehicles within last three
16
45.72%
months
TOTAL
35
100.00%
The data in the above table shows that only 4 or 11.43% of the company‘s motor vehicles which are in use as at
the time of the research were serviced within the last one month. Six (6) vehicles representing 17.14% of the
company‘s vehicles were serviced in the last two months while 9 or 25.71% of the company‘s motor vehicles
were serviced only once within the last three months leaving 16 or 45.72% of the company‘s vehicles not
serviced within the last 3 months as at the time of this research.
Table 4: Regularity of Vehicles refurbishment
Period covered
No of vehicles
Percentage
1988 - 1999
12
19.67%
2000 - 2011
49
80.33%
TOTAL
61
100.00%
Table 4 above indicates that within the first half of the company‘s existence spanning over eleven (11) years
ranging from year 1988 to year 1999, Benue Links Nig Ltd refurbished 12 vehicles in its fleet representing
19.67% of the total refurbished vehicles of the organization. However, between the years 2000 to 2011 which
represents the second half of the company‘s existence, the organization refurbished 49 of its vehicles
representing 80.33 % of the total refurbished vehicles of the organization.
Table 5: Frequency of motor vehicles disposal
Period covered
No of vehicles
Percentage
1988 - 1999
8
36.36%
2000 - 2010
14
63.64%
TOTAL
22
100.00%
From table 5 above, it can be seen that Benue Links Nig Ltd within its first half of existence as at the time of
this research across eleven (11) years from year 1988 to year 1999 discarded a total of 8 vehicles which signify
36.36% of the total vehicles of the organization disposed since inception to date. Conversely, between the years
2000 to 2011 which is the second half of the company‘s existence, the organization disposed a total of 14 of its
vehicles representing 63.64 % of the total disposed vehicles of the company.
5.1 Test Of The Research Hypothesis
Based on the data gathered in the course of this study and presented above, in order to achieve the objective of
the study, the researcher proceeded in the research analysis to test the validity of the hypotheses hitherto stated
in section 3 above
Type
Company
Contract
TOTAL
Source: From Table 1
fo
81
175
256
Table 6: Test of research hypothesis HO1
fe
fo – f e
(fo – fe) 2
128
-47
2209
128
47
2209
256
0
4418
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(fo – fe) 2/ fe
17.258
17.258
8.629
Page | 79
X2c =
Vol. 1 Issue. 3
∑ (fo – fe) 2
___________________
Fe
where; fo = observed frequencies and
fe = expected or mean frequencies
Also, fe =
∑r x ∑k
___________________
n
where; ∑r = row total
∑k = column total
n = grand total
X2c = 4418 = 4418 = 8.629
256x2 = 512
Degree of freedom (df) is given as (r-1)(k-1) where; r = number of rows and k= number of columns. Thus from
table 7 above, degree of freedom is;
df = (2-1)(5-1) = 4
Given that α = 0.05 and df = 4, tabulated X2 is therefore;
X2t = 9.488
Decision rule; since X2c is less than X2t (i.e. 8.629< 9.488), we accept the null hypothesis that assets
maintenance and replacement decisions of a government owned Transport Company do not significantly result
in efficient utilization of assets.
5.2 Data evaluation and findings of the study
After undertaking a detailed study on the assessment of Assets maintenance and replacement decisions of
government organizations with particular reference to Benue Links Nigeria Ltd, it has been discovered that
government organizations‘ decisions of maintaining and replacing assets do not give rise to effective utilization
of the assets. This position is supported by the fact that employing the results obtained in tables 1 through to 4
on the adequacy of movable assets, their working conditions and their frequency of maintenance, we were able
to substantiate through the computed chi-square values as tabulated in tables 6 that though the existing assets
management procedures present a suitable method to delivering services in Benue links Nig Ltd, their decisions
of maintaining and replacing assets do not give rise to effective utilization of the assets hence the need to
prioritize the maintenance and replacement plans for assets in accordance with overall goals and objectives to
sustain expected service levels
6. CONCLUSION
Maintenance is an antidote to disaster. A culture of maintenance is therefore desirable. However, when the cost
of maintenance rises against the sharp drop of the residual value of the asset, then replacement becomes the
beneficial option left for management. The analysis revealed that the existing assets management decisions of
the government organization as it applies to the case study -Benue Links Nig Ltd do not significantly result in
efficient utilization of assets.
7. RECOMMENDATIONS
Based on the findings of this research work, it is recommended that the Benue links limited should establish a
system for assessing its assets and then appropriately plan and budget for any capital assets maintenance and
replacement needs, this can done through the following:
 Developing a policy to require a complete inventory and periodic measurement of the physical condition of all
existing assets in the establishment. The inventory should contain essential information, including: engineering
description, location, physical dimensions and condition, ―as-built‖ documents, warranties, maintenance history,
replacement costs, operating cost information, usage statistics, book value, original useful life and remaining
useful life.
 Establishing condition/functional performance standards to be maintained for each type of government-owned
assets. The condition measures and related standards should be understandable and reliable. Such standards may
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be dictated by mandated safety requirements, all levels of funding requirements, or applicable engineering and
other professional standards, including available software models. Using these standards and a current condition
assessment as a basis for multi-year capital planning and annual budget funding allocations for government asset
maintenance and replacement.
 Evaluating existing assets to determine if they still provide the most appropriate method to deliver services.
Maintenance and replacement plans for assets should then be prioritized in accordance with overall goals and
objectives to maintain expected service levels.
 Various measures should be put in place by the company to monitor and evaluate the performances of asset
managers with respect to asset management. Sanctions should be meted out to those who fail to perform, while
reward in form of incentives should be given to those with excellent asset management strategies and who
carried this out efficiently and effectively.
 Educating assets custodians on the need to ensure proper maintenance and replacement of the assets in their
custody. The need to educate all workers especially those at the managerial level on the importance of proper
assets management cannot be over emphasized. Continues education through workshops, seminars, conferences
on the benefits of asset replacement and the need for good culture of maintenance should be organized regularly
for all staff.
References
 Abdullahi, D.S.B (2003) ―Towards Development of Maintenance Culture‖ Reader‘s Forum retrieved from
http//www.google.com
 Ayodele J.A. (1998) ―Socio-Economic Objectives of Parastatals.‖ Paper delivered at a workshop on
Managing Parastatals. University of Ibadan.
 Bond, T and Mitchel, J. (2002) ―Beyond Reliability.‖ Machinery Information Management Open Systems
Alliance MIMOSA. Retrieved from http//www.hsb.com/pem/m.mimosa.html.
 Hope, D. (2003) ―Asset Management for Local Governments-Current Solutions to the Dilemma.‖ Public
Sector Centre of Excellence (PScoE). Retrieved from (http://www.google.com).
 Kotler, P. (1980) Marketing Management, Analysis Planning and Control. Prentice Hall Inc. New York
 Lucey, T (2001) Quantitative Techniques London: Ashford Colour Press. 5th Edition.
 New South Wales Treasury (2003) ―Guidelines for the evaluation of Physical Non-Current Assets at fair
value (TPP 03-02).‖ Retrieved from (http://treasury.nsw.gov.au/.)
 Styles, M.D.G (2000) ―Best Value Advanced Asset Management- AN Australian Perspective.‖ Innovations
in Urban Infrastructure Seminar of APWA International Public Works Congress, Louisville, USA pp. 65-74
Retrieved from http://www.nre.ea/irc/urapwa.
 Shodehinde, A.S. (2001) ―Waste in Public Enterprises.‖ A paper delivered at a Workshop on Public
Enterprises in Nigeria. University of Lagos.
 Vanier, D.J (2000) , ―Asset Management 101: A primer.‖ Innovations in Urban Infrastructure Seminar of
the
APWA
International
Public
Works
Congress,
Louisville,
U.S.A.
pp.
1-12.
(http://www.nre.ea/ire/ur/apwa).
 Vanier, D.J (2000) ―Advanced Asset Management: Tools and Techniques.‖ Innovations in Urban
Infrastructure Seminar of the APWA International Public Works Congress, Louisville, U.S.A. pp. 39-56.
(http://www.nre.ea/ire/ur/apwa/apwaoo).
 Vanier, D.J (2000) ―Why Industry Needs Asset Management Tools.‖ Journal of Computing in Civil
Engineering. Vol. 15, No. 1, January. Pp. 35-43.
 Vanier, D.J (2000) ―Asset Management: ―A‖ to ―Z.‖ Innovations in Urban Infrastructure Seminar of the
APWA International Public Works Congress, Louisville, U.S.A. pp. 1-14. (http://www.nre.ea/ire/ur/apwa)
 Williams,
R.
(2003)
―Treasury
Policy
Paper.‖
New
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Treasury.
(http://www.treasury.nsw.gov.au/).
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Vol. 1 Issue. 3
Econometric Modeling Of Queueing System Originated At
A Customer Care Center: A Case Study At Nokia
Customer Care Center Gulshan Branch, Dhaka.
Mina Mahbub Hossain
Lecturer, Department of Agricultural Statistics
Faculty of Agribusiness Management
Sher-e-Bangla Agricultural University, Sher-e-Bangla
Nagor, Dhaka-1207, Bangladesh
Email: [email protected]
Sayedul Anam [Corresponding Author]
Lecturer, Department of Business Administration
Faculty of Business and Economics
Daffodil International University, Dhanmondi, Dhaka1207, Bangladesh
Abstract
Customers at a bank counter or at a reservation counter, calls arriving at a telephone exchange, machines for
repairing before a repairman etc. are some of the examples of queueing situations in which customers arrive
singly. A queueing process is largely determined by the arrival pattern of the customers, the process of service
and the way customers are chosen for service. This study was concerned with some aspects of single server
queues where customers arrive singly to receive some kind of service from a server. We have derived performance
indicators like mean length of queue, mean waiting time, mean sojourn time, mean busy period and so on. To get
an idea regarding the queueing situation, we have collected data from Nokia Care Center. From our analysis it is
evident that, the customers were served by a single server. For a service time of 5 days they need to spend 7
days in the queue. If they used more servers then waiting time for one to get service will reduce. But before
doing that, the management needs to consider the cost of operation. If it is economically viable then the
authority can receive the decision of setting another server.
Key Words: Call Center, Customer Relationship Management, and Queue System.
1. Introduction
Waiting in a queue is a common experience in our everyday life. More specifically a queue certainly
results from congestion and is formed only when there are more people demanding service than the server
can possibly handle. Queueing theory is the mathematical study of waiting lines, or queues. The theory enables
mathematical analysis of several related processes, including arriving at the (back of the) queue, waiting in the
queue (essentially a storage process), and being served at the front of the queue. The theory permits the
derivation and calculation of several performance measures including the average waiting time in the queue or
the system, the expected number waiting or receiving service, and the probability of encountering the system in
certain states, such as empty, full, having an available server or having to wait a certain time to be served.
Queueing theory has applications in diverse fields, including telecommunications, traffic engineering,
computing and the design of factories, shops, offices and hospitals. Queueing theory is generally considered a
branch of operations research because the results are often used when making business decisions about the
resources needed to provide service. It is applicable in a wide variety of situations that may be encountered in
business, commerce, industry, healthcare, public service and engineering. Applications are frequently
encountered in customer service situations as well as transport and telecommunication. Queueing theory is
directly applicable to intelligent transportation systems, call centers, PABXs, networks, telecommunications,
server queueing, mainframe computer of telecommunications terminals, advanced telecommunications systems,
and traffic flow. Mayhew et.al (2006), Feller (1968), Newel (1971), Champernowne (1956) and Prabhu(1965)
discussed applications of queue models in details.
Danish mathematician named A. K. Erlang is treated as the pioneer of queueing theory. A.K. Erlang
(Brockmeyer, et.al (1948) and Erlang (1917)) was the first person to study the problem of telephone networks.
By studying a village telephone exchange he worked out a formula, now known as Erlang's formula, to calculate
the fraction of callers attempting to call someone outside the village that must wait because all of the lines are in
use. Although Erlang's model is a simple one, the mathematics underlying today's complex telephone networks
is still based on his work. Erlang at once started to work on applying the theory of probabilities to problems of
telephone traffic and in 1909 published his first work on it "The Theory of Probabilities and Telephone
Conversations" proving that telephone calls distributed at random follow Poisson's law of distribution. At the
beginning he had no laboratory staff to help him, so he had to carry out all the measurements of stray currents.
He was often to be seen in the streets of Copenhagen, accompanied by a workman carrying a ladder, which was
used to climb down into manholes. Further publications followed, the most important work was published in
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1917 "Solution of some Problems in the Theory of Probabilities of Significance in Automatic Telephone
Exchanges". This paper contained formulae for loss and waiting time, which are now well known in the theory
of telephone traffic. A comprehensive survey of his works is given in "The life and works of A.K. Erlang".
David G. Kendall (1951) in this paper the he introduced the concept of imbedded Markov chain, a widely
used technique for analyzing queues. Notation for describing the characteristics of a queueing model was first
suggested by David G. Kendall in 1953. Kendall's notation introduced an A/B/C queueing notation that can be
found in all standard modern works on queueing theory, for example, Tijms (2003) and Bhat (1984). Haight
(1957) studied this problem for a single queue in equilibrium with Poisson input and exponential holding time
for various balking distributions. Burke (1964) studied the problem of random selection for service for a
single channel with Poisson input and constant holding time. Worthington (1987 and 1991) and with various coauthors, wrote several relevant papers in the 1990s, regarding healthcare applications of queueing theory. Novak
(2005) made a successful attempt to find the distribution of the number served in a subinterval of a busy
period in a single server queue where the arrival follows a Poisson process and the service time
distribution is deterministic. Three types of problems can be identified in this process: Behavioral
Problems, Statistical Problems, and Operational Problems.
The Queuing Model will calculate the optimum number of customer service points (staff) to minimize costs for
your business. It considers the average arrival rate of customers, the average customer service rate, the cost to
the business of customer waiting time (customer dissatisfaction), and the cost to operate customer service points.
Queuing models are used extensively in call centers, toll booth operations and situations where a there is a
queue for service including, counter staff, service staff, call response staff or maintenance staff. They can be
applied in any business providing a customer service function. The model will calculate the optimum number of
service points and allow you to test alternatives by manually inputting service point numbers. Additional results
include the average number of customers waiting in the queue, their average waiting time, and service point
(staff) utilization. The Total Cost Chart plots total cost verses number of service points to display the impact of
changes in service point numbers. Most major businesses use call centres to interact with their customers.
Examples include utility companies, mail order catalogue firms, and customer support for computer hardware
and software. Some businesses even service internal functions through call centres. Examples of this include
help desks and sales support. A call centre can be viewed, from an operational point of view, as a queueing
network. The simplest call centre, consisting of a single type of customers and statistically-identical servers, can
be viewed as a single-queue. Queueing theory is a branch of mathematics in which models of such queueing
systems have been developed. Call centre operations have been supported by mathematical models beyond
queueing, with operations research, which considers a wide range of optimisation problems, being very relevant.
For example, for forecasting of calls, for determining shift-structures, and even for analysing customers'
impatience while waiting to be served by an agent. Jouini et. al. (2008) investigated the applications of queueing
models in a call center, where all agents are pooled and customers are treated indifferently by any agent, toward
a call center where customers are grouped into clusters with dedicated teams of agents.
The ultimate objective of the analysis of queueing systems is to understand the behavior of their
underlying processes so that informed and intelligent decisions can be made in their management. This
study is concerned with the single server queueing models. It will be useful and interesting to review the
existing literature in depth about different aspects of single server queueing models. Later we have collected
computer generated print out to get an idea about the queueing situation in front of customer care of NOKIA,
where customers arrive with different problems of their personal phone set to get repaired. The goal is to
provide sufficient information to analysts who are interested in using queuing theory to model a customer care
center (e.g. Nokia) and want to locate the details of relevant models.
The rest of the study is organized as follows. The data and methodology are explained in Section 2. Result
Analysis is discussed in Section 3. Concluding remarks are discussed in the last section.
2. Data and Methodology
The data used in this study are the customers making a queue to get service at Nokia Care Centre. It is a
computer generated data sheet which provides information about arrival of customers, problem of a handset
with model number, and service time for each handset on the month of November 2011. In this study, we
have collected computer generated print out data from Nokia Care Center, Gulshan Branch, to get an
idea about the queuing pattern formed there and found that the arrival pattern of customers followed
Poisson distribution, interarrival time followed exponential distribution and the service time distribution
was also exponential. Some important characteristics of queue such as traffic intensity, expected value of
queue length, waiting time, sojourn time, busy period etc. were also computed. A detailed methodology
can be found in Tijms (2003), Feller (1968) and Bhat (1984).
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3. Analysis and Discussion
To model a single server queue, we were interested on the queue that occurs at Gulshan branch of Nokia Care
Center. For this purpose, a computer generated Excel data sheet was provided by Nokia on the month of
November 2011. Nokia Care Center is open for six days in a week except government holidays to serve their
customers and they count their service hour from 9.00 a.m. to 5.00 p.m. which consists eight hours per day. For
further analysis we used Microsoft Excel which is convenient to handle and analyze the data.
The following table gives important characteristics of the queueing data as obtained in
Characteristics
Values
Total number of customers observed
1440
Mean inter arrival time (in minutes)
4.38
SD of interarrival time (in minutes)
5.11
Rate of arrival per hour (  )
12.7
Mean service time (in hours)
42
SD of service time (in hours)
27
Rate of service per hour (  )
14
Traffic intensity
0.91
The relations used for the calculation of arrival and service rates are
Arrival rate
1
Mean inter - arrival time
=
Where, Mean inter-arrival time
=
And Service rate
=
Where, Mean service time
=
 Inter - arrival times
Number patients
1
Mean service time
 service times
Number of patients
Arrival Di stribut ion
In this section we desire to test out arrival pattern. Our hypotheses are
HO: Arrival pattern follows Poisson distribution
H 1 : Arrival pattern does not follow Poisson distribution
k
The test statistic is
2  
i
where N 
(Oi  Ei ) 2
=
Ei
k
k
i 1
i 1
k
2
Oi
 N ~  k21 under HO

i  Ei
 Oi   Ei
It is known that if customers arrive randomly at rate  , then arrival pattern follows Poisson distribution with
probability function
P(r ) 
e t (t ) r
; r = 0,1,2,………..; Where t is the duration.
r!
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Now we should fit a Poisson distribution to see whether the present data agrees with the theoretical
consideration.
Table 4.2 Fitting Poisson distribution to the arrival pattern
Number of Arrival during
Number of 10 minutes
Probability
Expected frequency
10 minutes interval
intervals observed with r
P(r)
E = N. P(r)
(r)
(O)
0
130
0.15234375
117
1
256
0.356770833
274
2
141
0.194010417
149
3
101
0.12109375
93
4
53
0.061197917
47
5
39
0.045572917
35
6
22
0.036458333
28
7
12
0.014322917
11
8
7
0.005208333
4
9
5
0.009114583
7
10
2
0.00390625
3
Total
768
1
768
O2/E
144.4444
239.1825
133.4295
109.6882
59.76596
43.45714
17.28571
13.09091
12.25
3.571429
1.333333
777.4991
Therefore the calculated value of test statistic is
2
2
= 777.4991 – 768 = 9.5 and the tabulated value of 10
, 5%  18.31.
As a result, since calculated value of the test statistic is less than the tabulated value for 5% level of significance, we
cannot reject our null hypothesis and conclude that the arrival pattern follows Poisson distribution.
The following figure shows the graphical representation of interarrival time distribution in the queueing situation
measured in Nokia Care Center.
300
250
200
Observed
150
Expected
100
50
0
0
2
4
6
8
10
12
Figure 4.2: Poisson arrival pattern
Distribution of Inter-arrival Time
In this section we will check whether the interarrival times of successive customers obey exponential distribution. That is,
we want to test the hypothesis
HO: Interarrival time follows exponential distribution
H 1 : Interarrival time does not follow exponential distribution
Under null hypothesis, the probability distribution of interarrival times of successive customers follows exponential law
with pdf
P(t )  et ; t > 0 ; Where  is the rate of arrival.
Let t1 and t2 be two consecutive arrival times. Then probability of interarrival time t is given by
t2
P(t1  t  t2 )   e  t dt
t1
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To see whether the data follows exponential distribution we construct the following table:
Table 4.3: Fitting exponential distribution to interarrival time
Number of
Probability
Expected
lnterarrivals
P(t)
Frequency
E =N .P(t)
(O)
627
0.445139
641
Duration of
Interarrival
Time
(in minutes)
0-5
So we get
O2/E
613.3058
5-10
423
0.300694
433
413.2309
10-15
234
0.166667
240
228.15
15-20
105
0.060417
87
126.7241
20+
51
0.027083
39
66.69231
Total
1440
1
1440
1448.103
 2 = 1448.103-1440 = 8.103; and the tabulated value of  52,5%  11.07 .
cannot reject our null hypothesis and conclude that the interarrival pattern follows exponential distribution.
The following figure shows the graphical representation of interarrival time distribution in the queueing situation
measured in Nokia Care Center.
700
600
Frequency
500
400
Observed
300
Expected
200
100
0
0
1
2
3
4
5
6
Dur ation
F i g ur e 4. 3 : E xp on e n ti al I n te r - ar r i val T i me
Distribution of Service Time
In this section we want to test whether the distribution of service time follows exponential distribution. For this
purpose we set the hypothesis as
HO: Service time follows exponential distribution
H 1 : Service time does not follow exponential distribution
Under null hypothesis the probability distribution of service times of successive customers follow exponential law
with pdf
P(t )  e t ; t > 0 ; where  is the rate of service.
Let t1 and t2 be two consecutive service times. Then probability of service time t is given by
t2
P(t1  t  t2 )   e  t dt
t1
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To test the hypothesis we need to construct the following table:
Table 4.4: Fitting exponential distribution to service time
Duration of
Number of
Probability
Expected
Service Time
Served
P(t)
Frequency
(in hours)
Customers
E=N P(t)
Vol. 1 Issue. 3
O2/E
(O)
0-8
652
0.463194
667
637.3373
8-16
463
0.301389
434
493.9378
16-24
131
0.098611
142
120.8521
24-32
30
0.014583
21
42.85714
20+
164
0.122222
176
152.8182
Total
1440
1
1440
1447.803
So we get,  = 1447.803-1440 = 7.803 and the tabulated value of
2
 52,5%  11.07 .
cannot reject our null hypothesis and conclude that the service pattern follows exponential distribution. The following
figure shows the graphical representation of service time distribution in the service situation measured in Nokia Care
Center.
800
700
Frequency
600
500
Observed
400
Expected
300
200
100
0
0
1
2
3
4
5
6
Dur ation
Figure 4.4: Exponential Service Time
Since both interarrival and service times follow exponential distribution so can treat the model as M/M/1.Using
arrival and service rate we can compute the following important characteristics of the queue:
(i) Distribution of queue size, Pn 
 n (1   )
n
= (0.91) (0.09) ; n = 0, 1, 2, ….
(ii) Mean length of queue, E(Q) = 10.11

= 112.35
(1   ) 2
;w  0
1  
Distribution of waiting time, f (w) = 
  (1  ) w
;w  0
 (1   )e
(iii) Variance of queue length, V (Q) =
(iv)
0.09
=
(v)
(vi)
Mean waiting time, E(W) =

;w0
 0.0001143w
;w  0
0.0001143e
= 54 Hours or 7 days
 (1   )
  (1  ) x
Distribution of sojourn time, f (x) =  (1   )e
0.0001247x
= 0.0001247e
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(vii) Mean delay in the system = 9 hours
(viii) Mean busy period =
1
= 4 hours
 (1   )
It has been seen that mean service time is approximately 42 hours. To receive this service one has to wait 22
hours minutes. So a lengthy waiting time for a small service. But the customers always aim to get quick service.
4. Conclusion
A detail description of single server model [M//M/1] model has taken place in this study. Our interest was
mainly on distribution of queue size, waiting time, sojourn time, and busy period. To get an idea regarding the
queueing situation, we have collected data from Nokia Care Center. Both Interarrival and service time followed
exponential distribution with arrival rate of customers 12.7 per hour and service rate 14 per hour. The customers
were served by a single server. For a service time of 5 days they need to spend 7 days in the queue. If they used
more servers then waiting time for one to get service will reduce. But before doing that, the management needs to
consider the cost of operation. If it is economically viable then the authority can receive the decision of setting
another server.
5. Acknowledgements
The author acknowledges the support of Quazi Md Mafizur Rahman, Ph.D. (Texas A & M), Supernumerary
Professor, University of Dhaka and M Sharif Uddin, Ph.D. (Hokkaido), Associate Professor, Jahangirnagor
University; Bangladesh in conducting the Nokia customer care study. Also the authors are greatful to Professor
Zulfikar Ahmed Reza Chairman, Dept. of Agricultural Statistics, Sher-e-Bangla Agricultural University for his
continuous support during data collection and research planning.
Bibliography
[1] Ana Novak A., Taylor P., and Veitch D. (2005). The distribution of the number served in a subinterval of a
busy period in an M/D/1 server queue. ANZIAM2005 Conference held on January 30 - February 3, Napier,
New Zealand.
[2] Bhat, U. N. (1984). Elements of Applied Stochastic Processes. 2nd ed. John Wiley and Sons.
[3] Brockmeyer E., Halstrom H.L. and Jensen A. (1948). "The life and works of A.K. Erlang", E. Brockmeyer,
H.L. Halstrom and Arns Jensen, Copenhagen: The Copenhagen Telephone Company, 1948.
[4] Burke P.J.(1964). Random service, finite-source delay distribution for one server with constant holding time.
The journal of the Operations society of America, vol-14, No. 04.
[5] Champernowne, D. G. (1956). "An Elementary Method of Solution of the Queueing Problem with a Single
Server and a Parameter." J . Roy. Statist. Soc. Ser. B. 18, 125128.
[6] Erlang A.K. (1917)."Solution of some Problems in the Theory of Probabilities of Significance in Automatic
Telephone Exchanges", Elektrotkeknikeren, vol 13, 1917.
[7] Feller, W. (1968). An Introduction to Probability Theory and Its Application. 3 rd ed. New York: Wiley.
[8] Haight, F. A. (1957). "Queueing with Balking." Biometrika, 46, 360-369.
[9] Jouini et. Al.(2008). Analysis of the Impact of Team-Based Organizations in Call Center Management.
Journal of management science, Vol. 54, No. 2, pp. 400–414.
[10] Kendall, D. G. (1951). "Some Problems in the Theory of Queues." JR. Statist. Soc. Ser. B. 13,151-185.
[11] Kendall, D. G. (1954). "Stochastic Process Occurring in the Theory of Queue and Their Analysis by the
Method of Imbedded Markov Chain." Ann. Math. Statist. 24, 334-354.
[12] Mayhew, Les; Smith, David (December 2006). Using queuing theory to analyse completion times in
accident and emergency departments in the light of the Government 4-hour target. Cass Business School.
ISBN 978-1-905752-06-5
[13] Newell, G. F. (1971). Applications of Queueing Theory. London: Chapman and Hall.
[14] Prabhu, N. (1965). Queues and Inventories: Their Basic Stochastic Processes. New York: John Wiley and
Sons Inc.
[15] Tijms, H.C, (2003) Algorithmic Analysis of Queues", A First Course in Stochastic Models, Wiley,
Chichester.
[16] Worthington, D.J. (1987) Queueing Models for Hospital Waiting Lists. The Journal of the Operation
Research Society 38, 413-422.
[17] Worthington, D. (1991) Hospital waiting list management models. The Journal of the Operational Research
Society 42, 833-843.
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Vol. 1 Issue. 3
A Study On Micro Insurance For Rural Andhra Pradesh
(Poverty Is Not Just A State Of Deprivation But Has
Latent Vulnerability)
Muneer Sultana
(Assistant Professor)
Al-Qurmoshi Institute Of Business Management, Hyderabad
Abstract
“More than 50 percent of India‟s population doesn‟t have access to any kind of financial products.” remarks
Kamesh Goyal, CEO Bajaj Allianz. India‟s savings record isn‟t flawless. With more than 80 percent of India‟s
population working in the informal sector, the number of those that can actually save something is very small.
“What is more,” Micro Insurance is the process of delivering and servicing relevant and affordable life
insurance products to the low-income socio economic strata. This paper focuses on Micro insurance program
for rural Andhra Pradesh, where traditionally the far-flung, lower and lower middle-income segments have had
limited access to micro insurance services and highlight the benefits for rural Andhra.
Key Words: Rural, insurance, micro credit, women, government, population
Introduction
In India, many people have to do their financial planning on short intervals, because they have to manage an
extremely small amount of money on a weekly basis. Financial literacy and demand for savings products is
growing.
Micro-insurance emphasis to protect the assets and lives against insurable risks of target populations such as
micro-entrepreneurs, small farmers and the landless, women and low income people through formal, semiformal
and informal institutions.
Source: LIC-Jeevan Madhur
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Vol. 1 Issue. 3
Micro insurance should, therefore, provide greater economic and psychological security to the poor as it reduces
exposure to multiple risks and cushions the impact of a disaster.
There is an overwhelming demand for social protection among the poor. Micro insurance in conjunction with
micro savings and micro credit could, therefore, go a long way in keeping this segment away from the poverty
trap and would truly be an integral component of financial inclusion.. Micro-insurance is a key element in the
financial services package for people at the bottom of the pyramid. The poor face more risks than the well-off,
but more importantly they are more vulnerable to the same risk. Usually, the poor face two types of risks –
idiosyncratic (specific to the household) and covariate (common, eg., drought, epidemic, etc.). To combat these
risks, the poor do pro-active risk management – grain storage, savings, asset accumulation (specially bullocks),
loans from friends and relatives, etc. However, the prevalent forms of risk management (in kind savings, selfinsurance, mutual insurance) which were appropriate earlier are no longer adequate.
Such products are often bundled with micro-savings and micro-credit, thereby allocating scarce resources to
micro investments with the highest marginal rates of return. Micro insurance is the most underdeveloped part of
microfinance. Yet various schemes exist that are viable, benefiting both the institutions and their clients. Such
schemes have generally served two major purposes:
(i)
They have contributed to loan security and
(ii)
They have served as instruments of resource mobilization. The greatest challenge for micro insurance
lies in the combination of viability and sustainability with outreach.
Source: TATA AIG
Although introduction of sound practices such as appropriate policy sizes and timely payment of installments of
premium or positive incentives to renew on time in order to avoid policy getting lapsed can be feasible, the
ultimate effectiveness of interventions focusing on institutional transformation and sound insurance practices
will vary considerably, depending on the appropriateness of the regulatory environment.
While life micro insurance products are becoming increasingly available, micro insurance is a new field and still
in the experimental stage. As MFIs expand beyond credit to a broader array of financial products, there is
increasing interest to offer their clients access to micro insurance products in partnership with insurance
companies. While commercial insurers provide the majority of the world‘s products, mutual, cooperative and
other community-based or community-led insurance organizations are emerging as providers of micro
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Vol. 1 Issue. 3
insurance. The greatest challenge for micro insurance schemes is providing real-value for poor households:
finding the right balance between adequate protection and affordability.
Malcom Harper, Professor Emeritus, Cranfield Institute of Management, is of the view that the greatest
challenge is to keep politicians out of the way as the movement grows, as they will just see it as a way to
distribute money and not empower people.
A study by National Bank for Agriculture and Rural Development, which covered 560 SHG member
households from 223 self-help groups, spread over 11 states showed these positive results:
1. Average value of assets increased by 72%, from Rs 6,843 to Rs 11,793.
2. Average annual savings per household registered over threefold increase from Rs 460 to Rs 1444.
3. The average borrowing per year per household increased from Rs 4,282 to Rs 8,341. Nearly 70% of
loans taken were used for income-generating activities.
4. Average net income increased per household increased by about 33%.
The larger banks also need the micro credit institutions for other reasons, besides expanding their opportunities.
The micro credit institutions have considerable experience in dealing with the cultural realities of life for the
rural poor. Every self-help group and micro financing institution in India has been through a great learning
experience in the last few years. Every day has been an experience. Women need to guard their savings even in
a bank fighting off pressures from the family. Says SEWA Bank's Vyas: "We found women begging us not to
send them any letters or bank statements. They even asked us to keep their passbooks, as they did not want their
husbands to know they had money, as then they would be pressurized to withdraw it. More often than not, it
would be spent frivolously on gambling or alcohol." Large banks are wary of this cultural minefield, and will
look to their micro credit partners for help in steering the course.
Suggestions:
1.
2.
3.
4.
5.
6.
7.
8.
Micro-insurance has not penetrated rural markets. The same may be partnered with NGO‘s and
insurance agents in rural Andhra Pradesh at a massive level.
Micro finance can be a large scale poverty alleviation tool and a new market segment for the insurance
companies.
Design of micro-insurance products must have the features of simplicity, availability, affordability,
accessibility and flexibility.
By linking life insurance to credits provided by microfinance institutions, helps prevent the families of
borrowers from being hindered in debt upon the unforeseen death of their loved one.
The potential of micro credit to tackle poverty must not blind people to the fact that lending to the poor
has to be regulated just like other lending, perhaps even more carefully considering their already weak
economic standing.
The movement must spread and grow; and apt to have a regulator in place.
The movement must not be allowed to degenerate as it expands unless a responsible regulator is in
place, very little will happen with savings.
Micro finance must be allowed to blossom without any interference that could choke off its potential.
References:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Datta, Shankar, ‗Basics of Costs in Microfinance Operations‘
Sa-Dhan, Newsletter, Vol.5, Issue 1 (Special Issue), New Delhi, March, 2004.
EDA Rural Systems, 2006. Self Help Groups in India: A study of the lights and
shades, EDA Rural Systems & Andhra Pradesh Mahila Abhivruddhi Society
(APMAS), 2006.
Pathak,N, ‗Operating Expenses in Micro Finance‘
Sa-Dhan, Newsletter, Vol.5, Issue 1 (Special Issue), New Delhi, March, 2004.
Prasad, V, ‗Taking Interests at Large‘, Sa-Dhan, and News letter, Vol.5, Issue 1
(Special Issue), New Delhi, March, 2004.
Mahajan, Vijay, ‗The Microfinance and Poverty Alleviation‘, (mimio), New Delh,
2006.
Sinha, Sanjay et al, The Outreach/viability Conundrum ‗Can India‘s Regional
Rural Banks really serve low income clients‘p.42-46 M-CRIL, Gurgaon, 2003
M-CRIL, Microfinance Review 2005 (forthcoming)
Ghate, Prabhu, ‗Microfinance in India – A state of the Sector Report, 2006‘
April|2012
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Vol. 1 Issue. 3
Customer Satisfaction and Customer Loyalty-An
Analytical Study on the Indian Domestic Air Passengers.
Prof. Richard Remedios (M.Phil, M.B.A, M.Com, E.D.P, Pursuing Ph.D)
I/c Principal
(S.V.E.T. COMMERCE, BBA & IT COLLEGE, JAMNAGAR
Gujarat-India
Resi Address: 3-Divyam Bunglows, 12-Patel Colony, Jamnagar
Mob: 919824507579
Office: 912882553218, 2552450.
Email:[email protected]
Abstract
Today increasing customer loyalty has become a popular topic for managers, consultants, and academics. Singh
and Sirdeshmukh (2000) suggested the customer loyalty as “the market place currency of the twenty-first
century”. Ndubisi (2005) and Pfeifer (2005) pointed out that the cost of serving a loyal customer is five or six
times less than a new customer. This statement shows the importance of customer loyalty. Walsh et al. (2005)
mentioned that it is better to look after the existing customer before acquiring new customers. Heskett et al
(1997) developed a model which is known as “Service Profit Chain”. In this model there is a direct and strong
relationships between profits; growth; customer loyalty; customer satisfaction; the value of goods and services
delivered to customers; and employee capability, satisfaction, loyalty, and productivity. Traditionally,
marketing activities have focused on success in the product marketplace by examining the physical aspects of
product and services such as quantity, quality, functuality, availability, accessibility, delivery, price and
customer support. Marketing managers have shifted their emphasis to creating value for their customers
(Clutterbuck, Goldsmith, 1998; Mc Alexander et al., 2002, Mascarenhas, et al. 2006). So there are very limited
researches for customer value affect customer loyalty? Is customer value affecting customer loyalty? This
research focused determine the effects of customer value, which is perceived by domestic line passengers based
on the services offered by the airline company preferred, on the level of loyalty towards airline companies. This
study was carried out based on descriptive research model. Multiple regression analysis was employed in the
study so that the extent to which the level of passenger satisfaction about each of the services offered by airline
companies influences the level of passenger loyalty to airline companies can be determined. Also, logistic
regression analysis was conducted to determine the services playing a role in meeting passenger expectations
by airline companies. Keywords: Customer loyalty, Customer value, Airlines, Indian air travellers
Key words: customer satisfaction, service profit chain, customer loyalty, passenger, employee capability
1. Introduction
Recent years have shown a growing interest in customer loyalty. The globalization of competition, saturation of
markets, and development of information technology have enhanced customer awareness and created a situation
where long-term success is no longer achieved through optimized product price and qualities. Instead,
companies build their success on a long-term customer relationship. According to lots of studies, it can cost as
much as 6 times more to win a new customer than it does to keep an existing one. (Rosenberg et al. 1984)
Depending on the particular industry, it is possible to increase profit by up to 60% after reducing potential
migration by 5%. (Reichheld 1993, Kuusik, Varblane, 2009) Customer loyalty is a buyer's overall attachment or
deep commitment to a product, service, brand, or organization (Oliver 1999). The loyalty concept is similar in
meaning to relationship commitment, which is described by the relationship marketing literature as an enduring
desire to be in a valued relationship (Morgan and Hunt 1994). Customer loyalty manifests itself in a variety of
behaviors, the more common ones being recommending a service provider to other customers and repeatedly
patronizing the provider (Fornell, 1992) Customer loyalty is a prime determinant of long-term financial
performance of firms (Jones and Sasser, 1995). This is particularly true for service firms where increased loyalty
can substantially increase profits (Reichheld, 1996). Service firms focus on achieving customer satisfaction and
loyalty by delivering superior value, an underlying source of International Journal of Business and Management
competitive advantage (Woodruff, 1997). For service firms the challenge is identifying the critical factors that
determine customer satisfaction and loyalty. (McDougall, Levesque, 2000) Value in social science is understood
in the human values such as the instrumental and terminal ones suggested by Rokeach (1973). In marketing, it is
typically defined from the customer‘s perspective. As Zeithaml suggested, this is ‗‗the customer‘s overall
assessment of the utility of a product based on perception of what is received and what is given‘‘ (1988).
Meanwhile, others have proposed various definitions with a distinct emphasis (Anderson, Jain and Chintagunta
1993). They share some commonalities: customer value is linked through or inherent in the use of some
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products or services; it is perceived by customers instead of independently determined by the one who offers the
products and services; and customer‘s perceptions typically involve a trade-off between what one receives and
what he or she correspondingly sacrifices. The distinctions of these definitions exist in the different terms used
(utility, worth, benefits, quality, etc.) and the different points of time when the perception of value is created: at
the moment of making purchase decision or after use (Woodruff 1997, Feng, Morrison, 2007) Perceived value
has proven to be a difficult concept to define and measure (Woodruff, 1997, Zeithaml, 1988). Broadly defined,
perceived value is the results or benefits customers receive in relation to total costs (which include the price paid
plus other costs associated with the purchase). In simple terms, value is the difference between perceived
benefits and costs. However, what constitutes value appears to be highly personal, idiosyncratic, and may vary
widely from one customer to another. Research evidence suggests that customers who perceive that they
received ``value for money'' are more satisfied than customers who do not perceive they received `‖value for
money'' (Zeithaml, 1988). Also perceived value may be used by customers to ``bundle'' various aspects of the
service relative to competitive offerings. (McDougall, Levesque, 2000) The nature of customer value, how it
determines customer loyalty and how this in turn leads to financial outcomes is the subject of considerable
discussion amongst academics and consultants. As with the development of any new area, there is debate about
the alternative ways concepts can be defined. Some authors focus just on the benefits of customer value. Others
adopt a cost–benefit view, which assesses value on the basis of a ―get for give‖ view. The benefits are what the
customer gets, and costs are what the customer gives up (Whittaker et al., 2007; Brodie et al. 2009)
2. Research Methodology
Objective of the Study: The aim of this study is to determine the effects of customer satisfaction, which is
perceived by domestic line passengers based on the services offered by the airline company preferred, on the
level of loyalty towards airline companies.
Limitations of the Research: The research is limited by the questionnaire answered by 397 passengers between
March 2010 & August 2011. Data was collected from domestic passengers departing from Ahmedabad airport,
Vadodara airport, Rajkot airport & Kandla Airport in India.
Research Method: Face-to-face interview is used for the research.
Research Medium: The research medium consists of 397 passengers. For sampling purposes, 397 was randomly
selected from the domestic passengers and included in the questionnaire analysis.
Collection of the Research Data: A sample has been done with 21 passengers to learn about how good the
questions in the questionnaire form serve for the objective of the research. According to answers to those
questions, some modifications have been done in the questions. 397 usable questionnaires were gained in the
research and Microsoft Office Excel and SPSS (Statistics Pack for Social Sciences) 13. 0 were used in the
analysis.
Reliability Analysis of the Research: It is possible to say that the research is reliable as a whole, according to
the coefficient of reliability Į = 0,884
3. Research Findings
Sex
Male
Female
Age
15-25
26-35
36-45
46-55
55-more
Education
Primary School
High School
University
Master
Table 1. Demographics
Frequency
236
161
Frequency
31
113
47
12
4
Frequency
22
35
118
40
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Percent
59.4%
40.5%
Percent
15.0%
54.5%
22.8%
5.9%
1.8%
Percent
0.9%
17.0%
57.0%
19.3%
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Doctorate
Monthly Income
0-10000
11000-20000
21000-30000
31000-40000
More than 40000
Total
12
Frequency
20
76
75
20
15
207
Vol. 1 Issue. 3
5.8%
Percent
9.66%
36.8%
36.23%
9.66%
7.9%
100%
As can be seen Table 1, 59.4 % of male and 40.5 % of them are female passengers. When the distribution of the
subjects according to their age range is analyzed it can be seen that 15% of them are aged between15-25, 54.5 %
of them are aged between 26-35, 22.8 % of them are aged between 36-45, 5.9% of them are aged between 46-55
and 1.8% of them are aged 56 or more than it. Consequently it is seen that passenger intensify between ―26-35‖.
When the distribution of the members related to their education background is examined, it can be seen that 57
% of the members are graduates, 19.3% of them are master‘s degree graduates and 5.8 % of them are doctor‘s
degree graduates. When the proportion of the members who are graduates and postgraduates is analyzed in
terms of the general sum a high proportion has been occurred as 82.1 %. When the monthly incomes of the
members are examined, it has been seen that 36.8 % of them have monthly income as 11000-20000, 36.2% of
them have monthly income as 21000-30000, 9.6 % of them have monthly income as 31000-40000, 7.9 % of
them have monthly income as more than Rs.40000.
Table 2 Airline Company’s Meeting of Expectations
Airline Company’s Meeting of Expectations
Frequency
Percent
Yes
317
79.8
No
80
20.2
Total
397
100.0
As can be seen Table 2, Air passengers were asked if the services provided by a carrier met their expectations in
terms of value for money for their travel cost or not, and 79.8% of the passengers stated that their expectations
were met while 20.2% of them gave negative response to this question. As can be seen in Table 1, the money
spent by passengers meet their expectations to a great extent. On the other hand, the 20.2% negative response
points out that identifying passengers‘ wants and needs accurately and meeting them has become really
important for carriers in domestic lines. Therefore, airline companies should increase communication channels
with their customers and also become involved in studies aimed at measuring customer satisfaction and value by
using techniques like questionnaires. Apparently, customers attach a great deal of importance to fulfillment of
their wants and needs. In this respect, carriers operating in domestic lines have to provide their customers with
services designed to create higher values for their customers and to increase customer loyalty to airline
companies. Thus, it seems obligatory for airline companies to provide various options in value-oriented services
such as low-pricing, increasing domestic routes, stepping up direct flights, punctuality and baggage services.
Furthermore, communication channels with customers should be increased so that customer wants and needs
can be identified more accurately and services should be provided continuously through a strategy from which
all customers in the market can benefit.
Table 3 Experiencing Negative situations
Experiencing Negative Situations
Frequency
Percent
Never experience
116
29.2
Rarely experience
170
42.8
Experience
105
26.4
Too much experience
4
1.0
Certainly experience
2
0.5
Total
397
100.0
As can be seen Table 3, passengers involved in the survey were asked if they had ever experienced any negative
situation related to the airline company they preferred. The responses received indicate that 72.0% of the
passengers have hardly had an unpleasant experience concerning the carrier chosen. This result is indicative of
the fact that airline firms operating in domestic lines provide services by creating value for their customers and
maintain a high level of customer satisfaction. On the other hand, 26.4% of the passengers stated that they had
experienced a negative situation while 1.5% stated they had experienced too many or continual negative
situations. This highlights the significance of the fact that airline companies need to continue their actions
designed to improve personnel training and to provide better service so that customer loyalty is improved.
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Table 4 Efficiency of Airline Company’s Attitude towards Negative Situations
Efficiency of Airline Company’s Attitude towards
Frequency
Percent
Negative Situations
Strongly Agree
13
4.6
Agree
143
50.9
Neither Agree Nor Disagree
71
25.3
Disagree
46
16.4
Strongly Disagree
8
2.8
Total
281
100.0
As can be seen Table 4, those passengers who had stated that they had had a negative experience concerning the
airline firm chosen (n=281) were inquired about the extent to which they found carriers‘ attitude towards
problems efficient. The responses indicate that 55.5% of the passengers regard the airline firms‘ attitude towards
the problems experienced as efficient. On the other hand, 25.3% of them provided neither positive nor negative
responses while 19.2% of them stated that they found the airline firms‘ attitude towards the problems inefficient.
This situation shows that the personnel of the carriers operating in domestic lines should receive more training
and there should be more effort about the management of customer relations. Also, airline companies should
ensure that their personnel have a feeling of satisfaction and contentment about their job. It is only natural that a
member of staff with a complete training and a feeling of contentment about his or her job will adopt a more
positive attitude towards customers. Furthermore, a well-qualified employee could help increasing customers‘
level of loyalty to airline firms by creating more customer value on behalf of firms.
Table 5 Communicating Suggestions and Complaints
Communicating Suggestions and Complaints
Frequency
Percent
Strongly Agree
24
6.0
Agree
203
51.1
Neither Agree Nor Disagree
94
23.7
Disagree
72
18.1
Strongly Disagree
4
1.0
Total
397
100.0
As can be seen Table 5, passengers participating in the survey were asked whether they thought their
suggestions and complaints were conveyed to the relevant departments of airline companies or not. According
to the results, 57.1% of the air passengers stated that they thought their suggestions and complaints were
conveyed to the concerning departments of airline companies. On the other hand, the percentages of those
providing negative responses for this question and those giving neither positive or negative responses were 19.1
% and 23.7 % respectively. This situation points out that the units of airline carriers where suggestions and
complaints are evaluated prove inefficient. Passengers may have the opinion that when their remark about a
negative situation is conveyed to the relevant unit it is ignored. In this respect, it becomes critical that
passengers‘ suggestions and complaints be evaluated by the relevant unit and immediate feedback is
communicated to customers. Resolving an issue and providing feedback about that may lead to a change of
negative opinions about airline companies even if customers have experienced a negative situation.
Table 6 Determinants of Airline Choice & Satisfaction Level
Airline Choice &
Importance
Satisfaction
Matched z Test
Satisfaction Travel
O
SS
O
SS
z
P
Convenience of Schedules
Ticket Fares,
Convenience of Flight Time
Airline Image
On Time Performance
Aircraft type
Aircraft Comfort
Of Catering services
Paid Catering service
Behavior of the Staff
Security
Baggage Services
Flight Safety
4.33
4.19
4.34
4.27
4.49
3.80
4.01
3.66
3.24
4.37
4.74
4.54
4.86
0.57
0.73
0.64
0.73
0.62
0.94
0.80
0.94
1.06
0.69
0.44
0.59
0.35
April|2012
3.81
3.81
3.68
4.13
4.04
3.89
3.96
3.75
3.44
4.03
4.51
3.93
4.62
0.76
0.84
0.90
0.62
0.74
0.71
0.67
0.85
0.89
0.77
0.63
0.88
0.59
11.76
7.75
11.28
3.61
10.43
-1.74
1.22
-1.62
-3.36
7.23
6.87
12.23
7.66
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0.00
0.00
0.00
0.00
0.00
0.08
0.23
0.11
0.00
0.00
0.00
0.00
0.00
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Availability of online Service
Cabin Cleanliness
Meeting special request in
Check in & Boarding
4.12
4.46
4.10
0.91
0.54
0.85
4.08
4.11
3.95
0.79
0.73
0.74
0.87
8.63
3.22
Vol. 1 Issue. 3
0.39
0.00
0.00
As can be seen Table 6, in terms of services and criteria, the questions in the first and second parts of the study
were aimed at the services provided before, during and after flight and factors affecting customer value such as
brand image, network connection, pricing, costs and human resources management. It is considered that each of
the services and criteria questioned is included simultaneously by one or more factors affecting customer value.
When the order of importance assigned by passengers to the services provided by the airline they prefer is
examined, it can be seen that the services of ―great importance‖ are, in a descending order,‖ flight safety
(O=4.86) and security (O=4.74) followed by baggage services (O=4.54). Other services following them are ontime departures and arrivals (O=4.49), cabin cleanliness (O=4.46) and behavior and attitude of personnel
(O=4.37). These are followed by ―ticket fare‖ (O=4.34), which indicates that low-pricing is not the only value
perceived by customers but other service factors also may play a more significant role. The importance assigned
by customers to ticket fare is followed by suitability of schedule (O=4.33), brand image of airline (O=4.27) and
suitability of flight route (O=4.19). While all other services are considered to be ―important‖ by passengers, only
paid catering services (O=3.24) are regarded by passengers as ―neither important nor unimportant‖. When the
factors satisfying customers about the services of the airline they choose are examined, it can be seen that air
passengers are satisfied most by flight safety (O=4.2) and security (O=4.51) followed by brand image of airline
(O=4.13), cabin cleanliness (O=4.11) and availability of on-line services (O=4.08). The level of passenger
satisfaction for ticket price is lower (O=3.68) than that for other service factors, which plainly reveals the fact
that airline firms should become engaged in more actions to create more customer value in their low-pricing
activities. On the other hand, passengers stated that they were satisfied with all other factors provided by airline
company, while they stated that they found only paid catering services ―neither satisfying nor dissatisfying‖
(O=3.44). This highlights the need for airlines offering service in domestic lines to improve catering services.
As Table 6 demonstrates, the satisfaction and importance levels assigned by passengers vary significantly for all
the services of the airline preferred except for aircraft type, aircraft comfort and design, variety-speed-quality of
catering services and availability of online services. The least satisfying factors based on level of importance are
ticket fare (OÖ=4.34; OT=3.68), baggage services (OÖ=4.54; OT=3.93) and convenience of schedule
(OÖ=4.33; OT=3.81). Apparently, air passengers express dissatisfaction with the airline company chosen
particularly in terms of the satisfaction levels they expect from these services. In other words, it seems that their
expectations are not met and the value created by airline company for customers cannot be perceived. The
service for which satisfaction level is more significantly higher than importance level is paid catering services
(OÖ=3.24; OT=3.44). This shows that in that service category, passengers receive service from the preferred
airline at a level above their expectations.
Table 7 Loyalty towards Airline
Loyalty towards Airline
Frequency
Percent
Strongly Agree
30
7.6
Agree
116
29.2
Neither Agree nor Disagree
117
29.5
Disagree
100
25.2
Strongly Disagree
34
8.6
Total
397
100.0
As can be seen Table 7, when air passengers were asked if they would think of not having a lifelong loyalty to
the airline company they preferred or not, 36.8% of them stated that they would be loyal to the airline they
preferred while 33.8% stated they wouldn‘t. On the other hand, the percentage of those passengers providing
neither positive nor negative response for that question was 29.5%. As Table 7 clearly shows, the percentage of
passengers thinking of being loyal to their airline (36.8%) and the percentage of passengers not thinking this
way (33.8%) are very close. This situation demonstrates that customers may feel loyal to a particular airline in
direct proportion to the service value offered to them by airline companies. As customers‘ value perceptions are
formed in line with their relative decisions, any value component to be created by an airline company can be
perceived in a different way by any customer. Customers form their preference criteria based on the
comparisons among airlines offering the services which create value for them. Customers show preference to
the airline which creates most value for them. However, this does not necessarily mean that a feeling of loyalty
to the airline company preferred is created within customers because a customer may show different preferences
among the airline companies creating most values for him or her. The percentage of those air passengers
providing neither positive nor negative responses for this question (29.5%) seems to support this suggestion.
Habits deriving from previous experiences may be a strong determinant for passengers‘ airline choice. However,
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this habit for an airline company does not again mean loyalty to that airline. The concept of loyalty to be formed
for an airline company can be shaped by improving value oriented services and presenting them to customers
continuously. Therefore, airlines operating in domestic lines should keep up with developing technology,
improve the services creating most value for customers and provide these series continuously throughout a year
except for certain intervals. According to the results from the logistic regression analysis carried out to
determine the services affecting meeting of expectations considered by passengers in creating loyalty to a
particular airline, the level at which the satisfaction level for services explains airline‘s meeting of customer
expectations seems to be 40%. The services having a positive effect on an airline company‘s meeting of
customer expectations are, in a descending order, cabin cleanliness (increases the probability of meeting
expectations by 3.45), ticket fare (increases the probability of meeting expectations by 2.83), airline‘s brand
image (increases the probability of meeting expectations by 2.39) and behavior and attitude of personnel
(increases the probability of meeting expectations by 1.73). On the other hand, the services having a negative
effect on an airline company‘s meeting of customer expectations are, in a descending order, aircraft type
(decreases the probability of meeting expectations by 0.81), availability of online services (decreases the
probability of meeting expectations by 0.66) and convenience of flight route (decreases the probability of
meeting expectations by 0.49).
Table 8 Logistic Regression Analysis on the Services Affecting Meeting of Expectations
Parameters
Beta
Convenience of schedules
0.39
Ticket fares
-0.67
Convenience of flight
1.04
Airline Image
0.87
On time performance
0.19
Aircraft type
-1.65
Aircraft comfort
0.56
Catering Service
0.04
Paid catering service
-0.38
Behavior of Staff
0.55
Security
0.20
Baggage Services
0.24
Flight Safety
0.22
Availability of online service
-1.08
Cabin Cleanliness
1.24
Meeting special request in
-0.26
check-in and boarding
(Stable)
-4.39
Model χ2=116.08, p=0.00<0.01; R2=0.40
St.Error
0.24
0.28
0.22
0.35
0.24
0.38
0.38
0.30
0.27
0.27
0.28
0.21
0.28
0.26
0.32
0.28
Wald statistic
2.53
5.76
2.65
6.35
0.60
18.55
2.17
0.01
1.94
4.23
0.48
1.42
0.61
17.02
15.42
0.88
p value
0.11
0.02
0.00
0.01
0.44
0.00
0.14
0.90
0.16
0.04
0.49
0.23
0.44
0.00
0.00
0.35
Odds ratio
1.47
0.51
2.83
2.39
1.21
0.19
1.76
1.04
0.68
1.73
1.22
1.28
1.25
0.34
3.45
0.77
1.64
7.19
0.01
0.01
As can be seen in Table 8, cabin cleanliness, ticket price, brand image of airline company, behavior and attitude
of personnel are among the services meeting expectations of passengers flying domestic lines. This situation
shows that airlines providing service in domestic lines have realized customer value oriented activities. The
height and continuity of the value perceived by a customer can positively affect the loyalty to be formed in that
customer towards a particular airline. However, a careful examination of the relevant table clearly reveals the
fact that aircraft type, availability of online services and convenience of flight route fail to precisely meet
customer expectations. Naturally, it should be kept in mind that if the inefficiencies in these services happen to
be continual, customers‘ feeling of loyalty could be affected in a negative way.
Table 9. Regression Model on the Services Affecting Loyalty
Parameters
Beta
St.Error
St. Beta
t
(Stable)
1.02
0.54
1.87
Convenienceof Schedules
0.02
0.09
0.02
0.27
Ticket Fares
0.02
0.08
0.02
0.29
Convenience of Flight line
0.08
0.08
0.07
1.05
Airline Images
0.04
0.11
0.02
0.37
On time performance
0.17
0.08
0.12
2.10
Aircraft type
0.09
0.10
0.06
0.85
Aircraft comfort
-0.11
0.13
-0.07
-0.83
Catering service
0.24
0.09
0.19
2.54
Paid Catering Service
-0.06
0.08
-0.05
-0.81
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Odds ratio
0.06
0.80
0.77
0.29
0.71
0.04
0.40
0.41
0.01
0.42
Page | 97
Behavior of the Staff
Security
Baggage Service
Flight Safety
Availability of online services
Cabin Cleanliness
Meeting special requests in
check in and boarding
0.07
0.23
0.15
0.04
-0.13
-0.12
0.28
0.10
0.10
0.07
0.10
0.08
0.10
0.09
0.05
0.13
0.12
0.02
-0.09
-0.08
0.19
0.75
2.23
2.00
0.35
-1.67
-1.21
3.05
Vol. 1 Issue. 3
0.45
0.03
0.05
0.72
0.10
0.23
0.00
R=0,39; R2=0,15; F=4,32, p=0,00<0,01.
According to the results from the logistic regression analysis carried out to determine the influence of
customers‘ satisfaction level about airline‘s services on the level of loyalty to a particular airline company, the
level of satisfaction felt for service explains 15% of the change in overall satisfaction level. The model
demonstrates that variety, speed and quality of catering services (0.19), meeting of special requests in check-in
and boarding procedures (0.19), on-time departures and arrivals (0.12) and safety services (0.13) have a positive
influence on loyalty level. Accordingly, the increase in the satisfaction level for variety, speed and quality of
catering services, meeting of special requests in check-in and boarding procedures, on-time departures and
arrivals and safety services leads to an increase in loyalty level, too.
4. Conclusions
Today‘s airline companies have started to employ various marketing methods and strategies in an intensely
competitive environment where product and service differentiation is becoming harder and harder, the number
of rival companies is increasing and a new notion of customer whose wants and expectations are increasing day
by day is emerging. In order for airline companies operating in domestic lines to determine methods and
strategies appropriate for themselves, they have to identify accurately the characteristics of the market in which
they provide service. They particularly have to ensure customer value, which is defined as providing products
and services with qualities different from rival airlines and with most benefit and lowest price. It is clear that, in
addition to ticket price, criteria such as schedule, convenience of schedule, convenience of flight route, aircraft
type, aircraft comfort and design, services and criteria related to comfort such as catering services and behavior
and attitude of personnel and other service features such as quick reservation and meeting special requests in
check-in and boarding procedures are also influential in creating value for customers and ensuring customer
loyalty. In conclusion, in marketing strategies aimed at creating value for customers, airlines operating in
domestic lines have to determine the services and criteria regarded important by customers accurately and in
line with customer expectations. Thus, satisfaction level of customers about the services and criteria offered
should continuously be measured. As well as creating a benefit for customers, the services and criteria satisfying
customers and regarded important by them also create a value and loyalty for customer.
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Franz Schubert Impromptus, Moments Musicaux, Klavierstücke for

Catalogue 2015 - Parresia Publishers

Dignitaries on the high Table

- Covenant University Repository

1. Background of ACLEDA Bank