International Conference of Inclusive Innovation and Innovative Management (ICIIIM 2014)
Strategy Innovation for Taza Mia Coffee, Philippines: Service Quality Approach
Prof. Ramon George Atento, MBA,
Faculty of College of Business and Accountancy
Lyceum of the Philippines University-Laguna, Philippines;
Christelle Mae Angulo
Student of College of Business and Accountancy
Lyceum of the Philippines University-Laguna, Philippines;
Diane Carandang
Student of College of Business and Accountancy
Lyceum of the Philippines University-Laguna, Philippines;
Paulinne Jane Porras
Student of College of Business and Accountancy
Lyceum of the Philippines University-Laguna, Philippines;
International Conference of Inclusive Innovation and Innovative Management (ICIIIM 2014
Abstract: The study was conducted to propose an enhancement of service quality in Taza Mia Coffee, Sto. Tomas, Batangas, Philippines, a small-scale family-owned company. The findings of the study showed that the expectation, perception, and satisfaction of the customers of Taza Mia Coffee (TMC) to the products and service quality, are significantly related to the quality of the factors, which TMC achieved. Though there are some factors that need to improve, the researchers proposed some recommendations for the enhancement of service quality in TMC. Competitive Profile Matrix was prepared using an online survey of customers of TMC as well as its main competitors in the area. SWOT and confrontation matrix was prepared to ascertain strategic options for the company.
Keywords: Service Quality, Competitive Profile Matrix, SWOT confrontation, Business Strategy
I. INTRODUCTION
The enhancement of service quality is essential, especially in this age of service. Competition among food outlets has become fiercer. Companies need to compete because this is an age of competition, especially on the service side. Consumers not only value products, but also relationship with companies (Atento, 2012). Walker (2013) puts it as buying loyalty with service.
Customer satisfaction is a measure of how products and services supplied by a company meet or surpass customer expectation and defined as the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services (ratings) exceeds specified satisfaction goals.
This study focuses on the enhancement of service quality in Taza Mia Coffee, Sto. Tomas, Batangas. Since Taza Mia Coffee was newly opened last year, the researchers chose to focus on the enhancement of their service quality. The success of the service provider depends on a high-quality relationship with customers (Panda, 2003) which determines customer satisfaction and loyalty (Jones, 2002 as cited by Lymperopoulos et al., 2006). Also, the research has shown that service quality influences organizational outcome such as performance superiority (Poretla & Thanassoulis, 2005), increasing sales profit (Levesque & Mc. Dougal, 1996; Kish, 2000; Duncan & Elliot, 2002) and market share (Fisher, 2001), improving customer relations, enhanced corporate image and promote customer loyalty (Newman, 2001; Szymigin & Carrigan, 2001; Caruana, 2002; Ehigie, 2006. That is the reason for choosing enhancement of service quality rather than the other areas of the business.
Review of Related Literature and Studies
“The coffee-shop industry has been undergoing substantial change during the latter part of the twentieth and early part of the twenty-first century, reflected by continuous changes in consumer behaviour”, as written by Burge (2013). This realization is important for Taza Mia Coffee (TMC), especially since it is operating within the context of this industry that was made popular by Starbucks. Even in the Philippines, the “Starbucks Experience” (Michelli, 2007) is regarded with awe and admiration.
Wolf (2006) notes that almost 100% of tourists dine out while traveling, and Shenoy (2005) supported that food and beverage consistently rank first in visitor spending. These findings suggest one explanation for the major growth of coffee shops (Bishop, 2012).
Services are intangible as they are unable to see, touch or feel, as is clear in Parasuraman et al. (1985). It is said to be perishable because it is unable to store; and inseparable because service are attached to the service provider. Further, it isunsubstantial due to heterogeneousness ;(Hoffman and Bateson, 2002). In Proomprow (2003), it was made clear that the word SERVICE may be understood in the context of ServQual, in that S is Satisfaction; E is Expectation; then, Readiness, Value, interest, Courtesy, and Efficiency. These areas are indeed important to understanding ServQual.
Service quality, developed over time, relates to customer expectations, whereas satisfaction is transaction-specific, as appears in Hernon, Nitecki, and Altman (1999)
Wherefore, satisfaction may be considered short-term measure, and hence, focuses on personal, and emotional reaction to service.
Service quality is comprised of product service, service environment, and delivery of services, or it consists of interaction in physical environment quality and outcome quality. (Karatepe, 2013)
Service quality and Customer satisfaction are one of the basic opportunities which help to run and improve business as well as its profit, and especially gain the loyalty of customers. Good service quality is an outcome of well-organized corporate culture, which in general can be considered as a kind of social culture. (Asya Archakova, 2013)
Service quality must be determined by assuring the external and internal factors of an organization. If there is awareness with the specific content of factors, the more obscure they are considered in the progress of the Service Quality, the greater the probability that it will be effective. (Ronzina, 2010)
Service quality is defined in terms of reducing the gap between the customer expectations and the service provided and expectations is one of the focus dimensions on service quality research (Hernon & Nitecki, 1999). If companies want to increase the service quality, the gap needs to be narrowed.
Service quality is a concept that has aroused considerable interest and debate in the research literature because of the difficulties in both defining it and measuring it with no overall consensus emerging on either (Wisniewski, 2001).
The potential payoff is considerable from an improved quality of service. The goal of every organization is to provide excellent service, which leads to greater efficiency and effectiveness and a loyal customer base (Zeithaml, Parasuraman, & Berry, Delivering Quality Service - Balancing Customer Perceptions and Expectations, 1990).
Hanson (2000) suggested that service quality shows the ability of an organization to meet customer’s needs and desires. So to meet the customer's demand, the business must improve their service. It is found that the perception of customers in the service quality is very significant for managers or owner of a business in competing in the market (Hoffman and Bateson, 2002).
The most widely discussed measure of performance today is the customer satisfaction measurement. The theory is that more satisfied customers will return and patronize the business again in the future. The apparent qualities of customer satisfaction measures are well recognized by companies, and these companies cite customer satisfaction in the mission statement as their primary objective (Lambert, 1999). Service quality is considered very important indicator towards customer satisfaction (Spreng and Machoy, 1996).
In the study of Rapp (1999) about the customer satisfaction through service quality, he found out that customer satisfaction was achieved by the overall performance of the company. The dimension of performance could be distinct as product quality, service quality, reputation, reputation quality, relationship quality and price elements. The main aspect of the marketing relationship approach is customer satisfaction leads to customer loyalty. Therefore, customers demand and satisfaction had been the key to survival and development of organizations.
The study of Opperud, Khalid, Helandera, Xi Yang, Qianli Xua, and Jiao (2008) demonstrated that the Kano model can effectively incorporate customer preferences in product design, while leading to an optimal tradeoff between customer's satisfaction and producer's capacity.
From the book of “Strategic Management” wrote by David, Competitive Profile Matrix (CPM) determines a firm’s major competitors and its distinct strengths and weaknesses in relation to a sample firm’s strategic position. A CPM not just constructs a powerful visual catch point, but it also conveys information about competitive advantage. This tool is the basis for the company’s strategies and is useful to communicate those attributes and show how the competition is addressing them (Borajee & Yakchali, 2011). “The matrix identifies a firm’s key competitors and compares them using industry’s critical success factors”. According to Bullen and Rockart, Critical success factors (CSF) are, "the limited number of areas in which satisfactory results will ensure successful competitive performance for the individual, department or organization. CSFs are the few key areas where “things must go right” for a business to flourish and for the manager's goals to be attained. (Bullen & Rockart, 1981).
Satisfaction means a feeling of pleasure because one has something to achieve, and it is an action of fulfilling the needs, desire, demand or expectation of customers. Every customer compares the cost (price) and benefit (utility) of any product or services. Customers compare their expectations about what they have experienced with the product/services and its actual benefits. This comparison results into three types of customers: (1) dissatisfied customers whom expectations are more than actual performance of the service; (2) satisfied customers whom actual benefits realized from services are equal to or more than expectations; and (3) indifferent customers where actual performance and expectation are exactly equal. According to Bowbrick (2002), achieving higher customer satisfaction does not come without cost. Economic theories argue that a customer is a function of product or service attributes. Increasing customer satisfaction requires higher levels of these attributes and additional cost, particularly at higher satisfaction levels.
Westbrook (1981) reported that the outcome of the evaluation of customers with the experienced linked with a specific service provider is an overall satisfaction. It is observed that the concentration on customer expectations of an organization results into greater satisfaction. (Peters and Waterman, 1982).
The most popular measure of service quality is SERVQUAL, an instrument developed by Parasuraman et al. (1985; 1988). Not only the research on this instrument has been widely cited in the marketing literature, but also it has been quite widespread in the industry (Brown et al., 1993).
According to Berry et al. (1985) and Zeithaml and Bitner (1996) the five specific dimensions of service quality are as follows:
1.Tangibles - the appearance of physical facilities, equipment, staffs, and other written materials.
2.Reliability - the ability to perform the required and promised services dependably and accurately.
3.Responsiveness - the willingness to approach and help customers and to provide prompt service.
4.Assurance - the knowledge and courtesy of staffs and their capability to inspire trust and confidence.
5.Empathy - the caring and individual attention for the customers provide by the business.
A comprehensive service quality measurement scale (SERVQUAL) is empirically evaluated for its potential usefulness in a service environment. Active participation by management helped to address practical and user-related aspects of the assessment. The completed expectations and perceptions scales met various criteria for reliability and validity.
Since its launch in 1985, SERVQUAL has become a widely adopted technology for measuring and managing service quality. Recently, a number of theoretical and operational concerns have been raised concerning SERVQUAL (Francis Buttle, 1996).
“A competitive profile matrix is the basis for company’s strategy and it conveys information about one's competitive advantage and not only creates a powerful visual catch-point. (Bygrave and Zacharakis, 2011). According to Nilsson and Rapp (2005) It is essential; in the development of the firm to understand the processes that lead to the creation of a competitive advantage.
The SWOT Matrix is widely used among both practitioners and academicians of strategic management (David, 2009). This analytical tool utilizes the underlying internal and external factors to generate strategies that would be feasible to consider for a more competitive position of the company.
Service quality and customer satisfaction are important to researchers studying customer's evaluation about the product and services that create competitive advantages and customers loyalty.
In the research “How determinant attributes of service quality influence customer‐perceived value: An empirical investigation of the Australian coffee outlet industry” of Po‐Tsang Chen from Department of Hospitality Management, Ming Chuan University, Gui‐Shan, Taiwan and Hsin‐Hui Hu of Department of Hospitality Management, Ming Chuan University, Gui‐Shan, Taiwan, they investigated empirically how the determinant attributes of coffee quality, service quality, food and beverage, and extra benefits influenced customer‐perceived value in the coffee outlet industry. The study found that factors of determinant attributes of service quality significantly influenced functional and symbolic dimensions of perceived value with the former being related with coffee quality, service quality, and food and beverage, whereas the latter is positively related with coffee quality, food and beverage, and extra benefits.
In a similar research by Atento (2012), they evaluated the current operations of the two branches of The Park – the Calamba and Tanauan branches. The goal of the study was to determine the current and future needs and to present strategic and specific recommendations to improve the operations of the park and improve the customer perception of The Park’s product and service. The study proved how important the areas are in assessing service quality perceptions and expectations in order to gain successful operations of the business. One of the strategies that they use is the SWOT Analysis and the Confrontation Matrix of SWOT resulting in the effectiveness of this environmental analysis in enhancing business operations, products and services.
It is most important to have some understanding about consumer expectations, how such expectations develop, and their significance related to service quality. “Knowing what customers expect is the first, and possibly most critical step in delivering service quality” (1994). However, expectations have been variously defined as wants, desires, ideal standards, normative expectations, what is the offered service, and a pair of accurate standards composes what the consumer expected to receive and acceptable service.
The thesis written by Josephine R. Ignacio – Cosino (2006) in “Service Quality of a University Foodservice Expectations and experiences of Students” used SERVQUAL as an effective quality tool concerning service quality. The study concerns about maintaining the ability to provide high-quality service of the Leslie Hardinge Library by determining the quality of its service from the quality of the service from the perspective of users. Also, they determined if the instrument that was used in the study that is SERVQUAL, is a reliable and valid tool in evaluating service quality in the context of a library based in the Philippines. The study found out that SERVQUAL is a reliable tool in assessing service quality in the LHL as shown by the high internal consistency of its construct/dimensions. However, these construct/dimensions did not hold fast as indicated by the three-factor solutions produced from principal axis factoring.