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JMIJMR NOVEMBER, 2010
JM ACADEMY OF IT&MANAGEMENT
ISSN 2229-4562
JM International Journal
of
Management Research
(JMIJMR)
VOLUME -1 ISSUE - 1 NOVEMBER, 2010
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JMINTERNATIONAL JOURNAL OF MANAGEMENT RESEARCH (JMIJMR)
JM International Journal of Management

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K.C. JOHN SASI KUMAR, Chief Editor
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JMIJMR NOVEMBER, 2010
Preface
Traditional management concepts, methods and structures are failing to
accommodate in this high tech society, which is characterized by fast change,
hyper competition and exponential explosion of information technology. It is
obvious that the 21st Century demands a fundamental rethink, and
JM ACADEMY OF IT&MANAGEMENT
development of the management paradigm that can withstand the pressure of

rapid changes in this seamlessly wired world. The first issue of JM
International Journal of Management Research November 2010 contains 10
papers selected from 34 submitted papers. All the papers were peer reviewed
by the members of editorial board of JMIJMR and the respective expert
reviewers.
I am delighted at the exceptional response from various contributors, to the
journal all over the world. I am of the opinion that sharing of knowledge and
research findings will enlighten the interested community with various
changes and developments in the field of management which in turn will
develop the managerial skill set and efficiency. I believe this journal will be of
interest to a wide range of researchers, faculty, and students in all areas of
management. The journal covers a broad range of topics in the field of
management, like Eentrepreneurial characteristics, International Business,
Investment in E-Technology, Investment Decision and Quality Management. I
thank the authors for submitting their work and the members of JMIJMR,
Editorial board and reviewers for managing the review process on time.
John Sasi Kumar
Chef Editor
iii
JMINTERNATIONAL JOURNAL OF MANAGEMENT RESEARCH (JMIJMR)
Editorial Board
Chief Editor
K.C. John Sasi Kumar
Editorial Board
Dr. A.K.M Ahasanul Haque
Dr. Sathish Kumar Ananthula
Professor, Department of Business Administration,
Professor SCPGC, India
International Islamic University, Malaysia.
Dr.Umesh M Bhushi Dr.Fawad Hussain
Principal, AITRC, VITA Maharashtra State, India University Utara Malaysia, Malaysia
Dr.S.Mukherjee Dr. Ratna Vadra
Professor, Department of Electrical Engineering, Faculty IMT, Ghaziabad
Indian Institute of Technology M. Amirthalingam,
Dr.Arne Olav Oyhus,
Retired Chief Engineer of Govt. of Tamilnadu, India.
University Of Agder, Norway.
Dr.R.Dayanandan
Dr.Muhammad Abi Sofian Abdul Halim Professor, Mekelle University.
Faculty of Business Management, Universiti
Teknologi Mara, Terengganu, Malaysia Maxwell Chanakira
Harare Institute of Technology, Technopreneurship
Dr.José Guadalupe Vargas Hernández Centre,Harare, Zimbabwe.
Doctor En Administración Pública Por Columbia
States University Y Doctor En Economía Por Keele Dr.L.Manivannan
Professor, Erode Arts College, Erode
Dr. Ashok Kumar
Panigrahi is an Associate Professor, RITEE Business Dr. M. Jayasree
School, Raipur Professor, GITAM Hyderabad Business School,
GITAM University.
Dr.Woldegebrial Zeweld,
Mekelle University, Ethiopia Alireza Fazlzadeh
Professor, University Of Tabriz, Iran
Dr. S. Sandhya Menon,
Principal. CMS Institute of Management Studies Dr.A.Venkata Seetha Maha Lakshmi
HOD, Dept Commerce, Monteseri Mahila
Dr. Shaktidev Mukherjee Kalasala,Degree College,Vijawada,
Professor, Department of Electrical Engineering
Dr.G.Ravindran
Indian Institute of Technology, Roorkee
Professor, School of Management, Karunya University
Dr. Himanshu Agarwal,
Dr.H.N.Ramesh
Reader, Dept. of Commerce, D. N. (PG) College,
Meerut Director Kuvempu University, Karnataka
Dr. Rajinder Kumar Uppal Dr M.A.Lahori.

Professor, Head, Dept of Economics, D.A.V. Professor,
College, Malout, India. Srinivas School of Management,Mangalore
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Frequency of Publication: Six Issues per Annum.
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JM ACADEMY OF IT & MANAGEMENT
S.No Page
CONTENTS No
1 THE MISSING LINK IN “TECHNOLOGY AND PRODUCTIVITY OF WHY WE GET ONE
WITHOUT THE OTHER”
5
Umesh Bhushi , Channappa Javalagi , Prof.M.M.Bhagwat, Teli.S.N
2 ENTREPRENEURIAL CHARACTERISTICS AND COMMITMENT IN TERENGGANU

HERITAGE INDUSTRY
17
Muhammad Abi Sofian Abdul Halim, Wan Asri Wan Ab Aziz Zainuddin Zakaria
3 WOMEN EMPOWERMENT AND ENVIRONMENT REHABILITATION

THOUGH COOPERATIVES IN HIGH LANDS OF ETHIOPIA 28
Woldegebrial Zeweld,. R. Dayanandan, Arne Olav Øyhus,
4 MARKETING OF BANK PRODUCTS: EMERGING CHALLENGES & NEW STRATEGIES
39
Dr. R.K. Uppal
5 STATE FINANCES IN INDIA: PROBLEM AND PROSPECTS

47
Dr. Ratna Vadra
6 MARKETING PROBLEMS OF SMALL AND MEDIUM ENTERPRISES

58
Raavi Radhika,Dr.A.Venkata Seetha Maha Lakshmi
7 INSIGHT ON CRITICAL FACTORS OF QUALITY MANAGEMENT PRACTICES IN

65
INDIAN INDUSTRIES
Sedani C.M , Lakhe R.R

8 A MODEL TO MEASURE THE QUALITY SERVICE IN A LOCAL COMPANY OF PIZZA
IN LOS MOCHIS, SINALOA
74
José Guadalupe Vargas Hernández,Mario Guadalupe Zazueta Félix , Ernesto Guerra García
9 FACTORS INFLUENCING CONSUMERS’ PERCEPTION IN THE CHOICE OF

88
CONSUMERS’ PRODUCTS: A SEM APPROACH ON MALAYSIAN CONSUMERS’.
Ahasanul Haque, Sabbir Rahman, Noorhazilah Abd. Manaf
10 ACHIEVEMENT AND EXPERIENCE TOWARDS THE USE OF SELF SERVICE
TECHNOLOGY (SST) IN THE NEW AGE BANKS FOR THE CITY OF ALLAHABAD –
100
INDIA
Dr.Devendra K. Dwivedi
4
THE MISSING LINK IN “TECHNOLOGY AND PRODUCTIVITY OF

WHY WE GET ONE WITHOUT THE OTHER”
Umesh Bhushi 1, Channappa Javalagi 2, Prof.M.M.Bhagwat3, Teli.S.N4
Abstract. Technology has been the hallmark of human activity. It has

become an integral part of our nature as a basic need for survival.
Technology is driving the change at an ever-increasing rate, and has been
©JM ACADEMY ISSN 2229-4562

accepted as a panacea for a better future. Thus technology has been given
sovereignty over humanity. Human beings have become creatures of
technology. When we evaluate the effects of technology, the results do not
match to what was expected of it in this era of depleting resources. The
productivity, effectiveness, efficiency too have not been as expected. The
utility of technology is yet another area of concern, considering its impact
November, 2010
on biosphere. Technology thus still remains not only a poorly understood
concept, but also incompletely tapped. Hence, the need of the hour is
conversion from creatures of technology to that of technology creatures.
JMIJMR
Also it is important to rediscover the nature and economy of technology.
The paper discusses the technology and productivity as seen in the present
perspective and proposes the systemic view of looking at the same, which
results in understanding and the successful use of technology.
Keywords: Technology, Productivity,
Introduction
Technology has enabled people to fly without wings, and defied nature itself by prolonging their
mortal existence. This has not been achieved through the natural process of genetic mutation of
biological evolution, but through technology [1]. Technology has always been, and will continue to
be, the hallmark of human activity. Technology drives change at an ever-increasing rate, and holds the
panacea for a better future. The accelerating rate of change is making the presence of technology
evermore noticeable pervading every aspect of modern society.
The issue of associating technology with productivity is as old as hundred years. In industrialized
nations, it is taken for granted that productivity is a direct function of technology. In reality, it is not
so direct. For solving different problems and fulfilling needs, we use some kind of technology or
other. Economics of technology produces things and creates wealth, showing the material and social
causality. Need is to produce in larger volume within a shorter time with good quality and lower cost.
Most of the human activities can be linked to economic considerations. Technologies are ultimately
evaluated on economic effectiveness. Developing the technology, converting to innovation, diffusion
for application is quite a long process and needs intense research efforts. Therefore, it is not
everybody’s cup of tea. There has also been failure on adaptation of the procured technology to the
local conditions. As a result, the productivity growth has not been commensurate with the growth of
technology. Here, we discuss the systemic view of relating technology to productivity so that apt
supporting system could be devised to use technology effectively. Brown emphasized that when
technology is easy to learn, consistent in output and demonstrates cost or opportunity of saving,
people will use it [2]. There is connection between technological advance, wealth creation and the
quality of life.
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2.0 Technology
Technology is in the forefront of trends that are making history. Before we discuss the impact of
technology, it is utmost importance to clarify what technology is and wipe away some of the
misconceptions so that its importance may not be negated. So
what is technology and what drives the technology?
In Greek the word, techne, means every art, making perfect
what seems imperfect in nature. On this line, technology Technology has
May not mean a new kind of machine, it may be a new
way of doing things enabled people to
May be combination of already existing one fly without wings,
Is not always an invention but it may mostly be Technology has
innovated, improved and refined.
Drucker argues that technologists define technology in always been, and
too narrow terms. Not only do they define technology narrowly will continue to be,
in terms of tools, but also they define tools too narrowly.
Technology is thus not about things: tools, processes, and the hallmark of
products; it is about work: the specific human activity by human activity.
means of which man pushes back the limitations of the iron-
law of biology [1] .
To technologists, technology has to mean tools and the
creation of tools and it is where their strength lies. For the tools to be of use, they must first have to be
contextualised. It calls for the conception of a purpose.
Need of society drives technology, but that may not be always economical need. The need may arise
out of problems encountered, low effectiveness, missing features etc. It can be visualized from the
Fig. 1.
What could not Problems encountered

be done
Low efficiency, Varieties in the needs

effectiveness PURPOSE
# Present # Future
# Unfamiliar # Familiar
# Old TECHNOLOGY # New
Figure1. Technology as a connector.
So, technology is a means to connect the present and the future, conversion from unfamiliar to
familiar, from the old to the new. And all this being done with prime motive or drive coming from the
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purpose. The perceptions of looking at the technology are varied. The following sections give two
different contradictory views on the technology.
2.1 Perceptions of technology by the society

Plato emphasized that technology is both boon and bane, and technology is rooted in human nature.
Technology is a paradox where our survival depends on technology but many of our problems derive
from it. The study of technology, however, invariably treats it as something extrinsic to humans [3].
Based on the above, technology has resulted in two extreme groups: the skeptics and the believers.
The distinction is shown in Table I.
Table 1: Perceptions of Skeptics and Believers
Skeptics Believers
Technology is a Curse is depriving people Technology acts as a separator between man and
of their jobs, privacy and dignity as human beast. It has allowed humankind to overcome their
beings (Mesthene, 1970)[4]. own natural (animal) limitations an essential
It has made our whole way of life natural ingredient in economic growth (Schon, 1967)[7].has
It is outraging essential human values and changed the way the society lives.
leaving society prey to the compulsion of It is a motor of all progress, while holding the
modern technology (Muller, 1970) [5]. solution to many of the present and future problems
It has stripped individuals of their human society faces or creates (Mesthene, 1970) [4]has
dignity and become a ubiquitous liberated society from the drudgery of everyday life
It has become a means of discipline and (Stein, 1998)[8].Making everyone wealthy, healthy
control (Burnes et al., 1988) [6]. and with abundant leisure time to benefit from the
It has given rise to a new false god at joys of technology (Douglas, 1971) [9].
whose altar society pays homage. It is magic ingredients that can make anything
It is driving second industrial revolution happen.
and creating a form of hell on earth
It is a fundamental evil, which is
undermining the stability of every society
poisons the environment and degrades our
quality of life.
Technology is moving fast and can make a difference. It is important to take decisions that are both
fast and right. Also, to choose an approach, that is sustainable and fits to the organization. The choices
made at the entry point of new technology are the foundation stones of a secure future. But all
technologies are not equally effective. Impact/after effects of technology are very important and need
a careful assessment. Gain at one point of time may be nullified by losses at same or different points
of time and space. Under the negative impacts, technology is portrayed as an unwanted guest.
Therefore technology needs management. Management refers to the assessment of the need,
developing/adopting technology and adaptation the same to the local environment. Just the use of the
recent technology is not a magic formula to successful business performance. For productivity or
performance solid leadership, integrity in business relationship and many more things like strategic
plan, goal and objectives are necessary. Added to it, technology transfer has to be apt to the situation.
For example Information technology (IT) can help in leading and improving business by streamlining
information collection and analysis. But there are barriers in using it, in the form of people’s
resistance, changing work culture, training the employees, implementing and managing. If IT were to
really make an impact as expected, than all the barriers are to be removed and the necessary
preliminary groundwork be thoroughly done. But in many cases, it is partial so too are the results.
2.2 Technology Science and Innovation
Commonly, technology and science are used as synonymous to each other. Many technological
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advances arising within a given set of design principles flow from experience gained in using and
producing specific artifacts. This dependence of technological advance on practical experience
gained, in the diffusion and integration of artifacts into the economy, is a quite distinctive factor of
technological change which science does not share. Even the applied science does not completely
encapsulate the scope of technology. Technologists have designed and operated artifacts well in
advance of any scientific understanding. And their labours have directly stimulated the search for an
understanding of the natural laws, which underpin the operation of the artifacts. Technology involves
much more than science, but innovation involves much more than technology. Technology by itself
has no significance unless it is translated into innovations, which are subsequently diffused into
implementation in economy. Innovation and diffusion are primarily economic and social processes,
which involve many other factors and their behaviours besides those directly involved in the creation
of technology itself. Hence, a clear distinction between technology and science is utmost essential. It
would enable us to know how science and technology can develop synergistically. Metcalfe stated
that science and technology are distinctive but inter-dependent branches of knowledge, jointly
required as inputs into wealth creation [10].
Technology has been accorded with the productivity mostly in the positive sense. Productivity is a
measure of economic activities where technology is an important input. But how are the two related?
What is the context of visualization? These points have been dealt in the succeeding section.
3.0 Technology and Productivity
Productivity is the ratio of input to output of any production process. It is usually expressed in terms
such as tons per employee, checks per hour, pages per secretary or revenue per salesperson [11].
Technology and productivity are closely related to each other:
• Within a given technology, productivity tends to be fixed.
• Primary way to increase productivity is to change technology
The impact of technology on society is mostly through production of goods and services. Blackburn's
term "Fordism” has been employed to describe social and political circumstances in Western Europe
during the 1950s and 1960s. The most important feature of Fordism is mass production. The direct
consequence of Fordism was that as the volume of production increased, per unit manufacturing costs
fell, and the fall in cost was passed on to consumers in reduced prices. The underlying idea was that in
the long run something like an "Income Effect", namely the maintenance and stimulation of
purchasing power, is an essential pre-condition for profitable production. In post-industrial
revolution, technology almost became synonymous for flexibility, quality and efficiency. The
nineteenth and twentieth century though experienced accumulation of material wealth within rich
countries but total productivity growth over the century is not that substantial.
In most cases, business performance and productivity ought to increase with the introduction of
technology, but there were significant dis-appointments. This is particularly true for the case of soft
technologies viz. Total Quality Management, Business process re-engineering, ERP etc. We find
literature flooded with the debacle stories for almost a decade. And these soft technologies have been
tagged as “fad”. There were a few success stories, around 15-20% of the cases. On analysis it has
been found that the technologies were not at fault but the methodology and means adopted for
implementation was at fault.
In many a case, it was the short-sighted vision in the implementation process. We only look at
technology as everything but fail to recognize that for it to succeed the human component is much
more important. Either people have not been properly trained, or awareness programme has been
inadequate. Productivity was attributed to the items that were directly visible viz. Raw material
productivity, Machine productivity, and Labour productivity. But there were many intangible factors
or parameters which do really contribute to the productivity but they could not be quantified or
typically do not yield absolute quantities viz. knowledge worker productivity.
8
Traditional Productivity
measures
Raw Material Input Production Output Raw Material
Time process
Land & Building Productivity
Human resource Labor Productivity
Information
Technology Machine productivity
Intangible
Productivity
Parameters
Knowledge
Information
Environmental Basic Modern
Impact Productivity measures
Figure 2. Productivity and its measure

In the similar lines, though computing power has increased exponentially in the last three decades, yet
productivity in firms, especially in the service sector, has stagnated. Loveman has shown that
information technology investment provides negligible benefits. Since organizations are spending
increased amounts of capital on information technology, it is very important to understand the
relationship between information technology investment and firm productivity [12].
Roach in a study of information workers from 1970 to 1986 found that computers had limited effect
on the productivity of workers [13]. Brynjolfsson and Hitt modified the traditional measures of
productivity of information systems and proposed that productivity should be determined using
organizational "value of information technology (or IT value)". They defined IT value to include the
tangible as well as intangible assets created by information technology investment. So a different
approach to productivity needs to be adopted that overcomes the traditional measures. The Fig. 2
shows some facets of the same.
From the above discussion of technology and its relation with productivity, it is evident that
technology still remains a poorly understood concept. Now technology does not come as an isolated
item, it encompasses many factors and thus complex in nature.
4.0 Technological System

Technology is changing at a faster rate than social changes. Economic order is changing the pattern of
national boundaries and markets. Technology once developed it takes the dimension of technological
system with the designers, institutional agents and society. In the early part of the development, we
have a control over them or one can have a choice but once institutionalized we become slave of it. A
technological system can be both a cause and an effect; it can shape or be shaped by society. We
should not fall victim to the seduction of technological promise and novelty. Humanism and
effectiveness must be linked together in the design of work and work system. Organization is now
viewed as socio-technical systems [14].
Technology and research, technology & innovation are important. Science, technology and innovation
have to be used in tandem. All have to be integrated to design the appropriate technology. Research
effort is necessary in basic science, in technology development and subsequent innovations. In
addition, a handsome return is possible from better exploitation of the existing stock of knowledge.
There is importance of institutional coupling between firms and universities in the generation of
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scientific and technological knowledge. Along with the new technology, a new market, in which
competition and commercial incentives are a part, has to be created to exploit the innovation. The
experience from the use of existing technology and stimuli from economic and social sphere gives the
dynamics of the system.
There is no "right" technology - the nature of the technology that is appropriate at any particular time
depends on a number of key factors:
The nature of the organization;
The product(s);
The supply chain; and
Current technology etc
So a major exercise will be to strategically plan and bring the scientists, engineers, industry and
Government together.
Technological systems ought to be viewed from the perspective of both the content thinking (outward
looking) and process thinking (looking inwards) [5]. Lack of this systemic thinking has led to the
failure of countless technological change programmes [15], [16].
4.1 CASE-1: Changing perspectives of Quality – A review
Aristotle considered achieving a good and happy life was
Ethics. Management ethics are concerned with creating good
organizations, which achieve excellent quality in the
production of goods and services. Thus, Ethics and Quality are
integral part of management. Peter Drucker (1977a) also
Technology is
emphasized “ethics and quality” as the core area in the changing at a faster
enterprise of management and the quality of life becomes the rate than social
business of business. He believed that ethical and socially
responsible management provides continuity for the changes. Economic
organization. One important dimension of socially responsible order is changing
management is responsibility or accountability for the social
consequences of products and processes. “One is responsible the pattern of
for one’s impacts, whether they are intended or not” (Drucker, national boundaries
1977a). This involves taking action to address problems, even and markets.
before society might force business to regulate or change
behavior, in contrast to the more limited view (Friedman,
1970) that business only has a responsibility to comply with
legal requirements and basic norms, i.e. a more community-
based and long-term perspective needs to be accounted. Ethics (doing right things) and quality (doing
things right) represent complementary dimensions - the soft and hard sides - of management. Further,
both are a philosophy as well as a process, each seeking to optimize organizational behaviour by
clarifying the purpose and nature of work. The scope of business has been extending dramatically
from a mere “an organization for profit” to “serving the society and its implications in the longer run”.
Thus an organization has a multi-dimensional focus such as, coping with market dynamics,
stakeholder focus, customer focus, government regulations and social/ethical issues. Hence, the
holistic approach to the organization is the need of the hour. In the process of catering to the changes
of the society, organization too needs to change the strategies. The organization caters to these
varying requirements of customer demand, along with society orientation, whose stakes are quite
large enough to encompass the various dimensions. Hence the perspective to what constitutes quality
has been changing and is represented in figure A. (Bhushi,2003). Where before the Industrial
revolution in the producers market era, emphasis was mostly on Production and Productivity, as there
were large scale buyers and very few producers. Also, in this era, quality was what was defined by
manufacturer. As the time passed and, in the Consumers Market, buyer started asking a product with
quality, reliability, lower cost and with less gestation period of delivery and also should encompass
the multiple utility of the product and over above it has to be made bio-degradable. Especially now,
before we design the product, we should plan how the product has to be retired.
10
If one takes into account the changing perspectives of quality and quality per se holistically, during
the period of Producers market definition: Quality is what producer offered.Customer market
definition: Quality is what customer demanded.
Everybody thought that was an end. But now a day even if both the producers and customers are
happy about the product it does not qualify for quality product, because if that product is harming the
society in the longer run, than product ceases to qualify for quality. So, new definition of quality is
where it delights both the Customer and all the Stakeholders. It is aptly represented in figure 3.
New definition of quality is not just customer delight, but it should also encapsulate the stakeholders
delight.(Bhushi,2003)
So, is the case with the technology, when it is being perceived as a need, reliability, we need to think
beyond it, “Does it entail every stakeholder satisfaction?” If yes, the holistic perspective is being
accounted for.
Figure 3. Broader vision of quality
4.2 Status of TQM in Industries

ISO9000 certification became the symbol of quality-oriented company; however, a mere certification
does not guarantee quality. Adopting Total Quality Management was embraced to ensure a company
to achieve the desired quality and sustain it. So, many companies went beyond ISO9000 towards
TQM, hence there was a wide spread acceptance of TQM in several countries. There were successes
in few companies, however, that percentage of success was abysmally low to the extent of a
maximum of 20%. A review of the failure of TQM implementation is presented below
4.3 Statistics of failures of TQM implementation
KPMG (1989) productivity survey conducted among electronics manufacturers in USA indicates that
over 90 per cent of the respondents claim TQM as a competitive tool, but only 15-20 per cent say that
they have implemented TQM. Wright (1993) reported that TQM success rate in USA is 25% and that
in UK, is only 20%. Eskildson (1994) found that the American Electronic Association’s quality
programmes dropped from 86% in 1988 to 73% in 1991. Of these, around 63% failed to reduce
internal defects even by programs being in use for 2-3 years. He also found that in Britain, only 20%
believed that their quality programmes had a significant impact on their organization.
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PAST Productio Productivit

Producers
n Market y
Quality Cost
Consumer’s
S Reliabilit Market
H y Product Life
Cycle
I
F
Energy
T Conservation
Customer
Focus Society Resource
Oriented Conservation
Stakeholder
Focus Ethics
PRESENT Eco-friendly Concern

to Society
Intense Quality
Competition Of
Figure 4: Shift in focus of an Organization.
Fisher (1994) and Brown (1993) also reported about 80% failures in TQM implementation. Paton
(1994) stated that a study of 30 quality programs by McKinsey & Company found that two-thirds of
the quality programs failed to yield real improvements. Also emphasized is about the Rath et al. study,
which found that only 20% of Fortune 500 companies were satisfied with the results of their
TQM activities.
Gatchalian (1997) generalized, from his surveys that the proportion of successes in TQM
implementation was only within the range of 20 to 35 per cent of those who have initiated the
practice. Singh (1991), in his survey, revealed that only 39 companies out of 1000 surveyed are
practicing TQM to some extent in India. Moreover, he concluded that these 39 organizations were
also not able to distinguish between TQM and quality control.
If one could see completely across the global corporate horizon, there are possibly many TQM
implementation disaster stories than that of TQM successes. As we see from the above statistics, the
literature of failure of TQM has been reported not for a year or so, but has been reported for the
decade. Failing to capture the full potential of TQM and improper implementation has led some
managers to dub TQM as a fad.
Several authors have emphasized the reasons for failure in the implementation of TQM.
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4.4 Summary of the Literature Survey on the Reasons for failure of TQM
Some of the reasons as attributed by the various quality professionals are:
Culture Change: Develin and Partners (1989), Dale, et al. (1997), have stated that the key factor to
obtain a successful implementation of TQM is change of organizational culture and emphasized that a
structured approach is required. However, they feel that the approach to change organizational culture
remains largely unclear in most cases, and therefore full potential of TQM is not achieved.
Quality policy communication: Crosby (1979) emphasized quality policy as a standard practice,
which sets priorities by influencing the entire organization on what to do and what not to do and
provides the launching platform for the implementation of
TQM. Failure to communicate this quality policy actually
defeats the purpose of having the policy in the first place
followed by a failure of TQM. Technology is for
Top Management Commitment: Bertram (1991), Juran our survival, and it
(1993), and Easton (1993) have all attributed the lack of
“Top Management commitment” for the failure of TQM or
will remain an
quality initiatives. integral part of our
Leadership: Zairi (1994) emphasized that the lack of nature, it should be
enough know-how and capability of the leadership to seen from systemic
properly implement the quality programmes, inhibits the view to capitalize
momentum of TQM implementation.
the benefits and
Delegation and Involvement: Corrigan (1995) emphasized desired
that the debacle of TQM quite often comes forth because of
too much delegation of TQM responsibility without personal productivity.
involvement of the Top Management in TQM efforts.
Poor Strategic Vision: Gatchalin (1997) indicated the
following for failure of TQM: The absence of strategic
communication and teamwork, for quality improvement from the top management. High emphasis on
short-term strategic goals those are financial in nature, i.e., expectation of immediate monetary
benefits.
To summarize, the Company’s existing culture, lack of top management commitment, non-
communication of quality policy, diluted responsibilities, absence of strategic communication, team
work, and higher emphasis on short term monetary goals, lack of knowledge and leadership capability
are the reasons found by several authors for failure of TQM implementation.
Therefore, looking at the failure rate of implementation should not necessarily be tied to the fault of
technology be it hard or soft technology. But our unplanned process of initiating the change,
preparedness, and our inability to measure appropriate success parameters at the different stages of
process makes them fail.
It is very important to assess the mode of impact of these factors. Figure B shows the sequence in
which each of the factors takeoff. Only when each of the impact is completed next one takes off from
there. Some amount of gestation period does exist at each of these levels, after which only others take
off soundly. But due to short-sighted vision, and expectancy of immediate results, each of the impacts
at employee and process level is relinquished. Many of the impacts during the early part (Employee
level and Process level) are intangible and don’t yield significant monetary benefits, which are not
being felt or assessed by the management. They expect the impact to occur at the marketing and
organizational level soon, which is not observed and the faith on the soft technology is lost. There is
13
some amount of gestation period for these impact points to deliver the tangible gain. The gestation
period changes from organization to organization based on the knowledge base, experience and the
top management commitment. So every organization needs to assess itself and has to find out the
gestation period for the new system to stabilize. There are many intangible benefits at the end of a
year or so, in the form of healthy working environment, good relationships amongst all the
employees, openness in the employees, reduced customer complaints, enhanced customer asset base,
enhanced reputation, etc. Also that the costs of poor service, inefficiency and low morale become
immeasurable, so the management need to have patience till the early intangible gains deliver the
required financial gains in the times to follow. Therefore where are the apt productivity measures for
these, which are not reflected in any of the balance sheet of the company. And looking at the balance
sheet will drub the use of soft technology as a fad.
Employee Process Marketin Organizationa TQM

level level g level l environmen
impact impact impact level t
impact
Figure 5: Sequential impacts of soft technology

Similar effects of failures are seen with other soft technologies like BPR, Six Sigma etc. But
everybody drubbed them as fad and fobia of NIH (Not Invented Here) has crept in the organization.
But they fail to realize all the soft technologies have evolved sequentially one after another, that too
after capitalizing on all the previous technologies. It is illustrated in the figure C. For instance a
company has started to prepare for ISO certification, half way through they find there contemporary
company is applying Six Sigma and yielding good results, they feel they should also venture in the
same, little realizing that to capitalize on six sigma the concepts of TQM, BPR need to be internalized
and understood. So they directly join the band wagon of Six Sigma implementation, obviously they
are bound to fail in its implementation. So the victim is the technology, but the culprit is our short
sighted vision in not nurturing the basics and the preliminary preparedness of the organization. Some
of the important one’s being: Awareness emphasizing the purpose; everyone’s involvement through
proper dialogue, systematized education and training; understanding the culture and tailor making it to
the organizational purpose; transparency and appropriate empowerment; Sustained Top Management
support. Importantly, realize the gestation period for bearing of tangible results and capitalize on the
early intangible benefits and constantly encourage and motivate the people involved like the one’s
emphasized in figure 6.
ISO TQM BPR SIX

9000 SIGMA
Figure 6: Overlapping of Soft Technologies concepts
5.0 Conclusion
We need technology for our survival, and it will remain an integral part of our nature. Ever-increasing
social expectations can only be met through change. But how much/extent of the technology is to use
or adopt? Too little may not serve the purpose and too much may have significant side effects. How
appropriate or inappropriate a new technology hinges on shifting the balance between the forces of
change and status quo. The longer the period of stability this resistance brings about, the harder it
14
becomes to accept change. The success or failure of a technology depends on gestation period for
absorption, which goes unrecognized.
Technology needs to be seen from a systemic view to capitalize the benefits and desired productivity.
The systemic view accounts just not from the cradle to the grave of the technological life But, right
from the inception of an idea for satisfying the need till the after effects of technology i.e. much
beyond the technological life needs to be assessed.
The past century has observed that widening of the distribution of income and wealth as feared by
Marx has not taken place within industrial economies. Nor John Stuart Mill's optimism in the
"convergence" of nations toward approximately equal levels of productivity has begun.
Mankind has travelled a long way of development through technology, but it is not obvious to us that
the economic problem has been solved. The moral and psychological transformation is yet to be seen
too. At this juncture of perplexity, we again have to seek the assistance of new technology. This new
technology will be in line of “GREEN TECHNOLOGY”, which drives the society/mankind towards
nature. Systemic thinking will enable us to probe much deeper into the technological perspective than
the myopic view of gain in productivity.
6. References
[1] Drucker, P.F. 1977a, People and Performance: The Best of Peter Drucker, Harpers College Press, New
York, NY.
[2] Friedman, M., 1970, The social responsibility of business is to increase profits, The New York Times
Magazine, September 13.
[3] Bhushi U.M.,2003, Total Quality Management in Engineering Education in India, A doctoral Dissertation
Thesis, Indian Institute of Technology, Kharagpur (India)
[4] KPMG Peat Marwick, 1989, Productivity Survey: American Electronics Association, Mountain View, CA.
[5] Wright, C., 1993, Introducing TQM - the cultural context, Quality Australia, Vol.10, No.5, pp. 42-6.
[6] Eskildson, L., 1994, Improving the odds of TQM’s success, Quality Progress, Vol.27, No.4, pp.61-3.
[7] Fisher, E.,1994, Total quality: hit or myth?, Accountancy, April.
[8] Brown, M.A., 1993, Why does TQ fail in two out of three tries?, Journal for Quality and Participation,
Vol.16, No.2.
[9] Paton, S.M., 1993, TQM thrives at Babson College, Quality Digest, September, pp. 32-43
[10] Gatchalian, M.M.,1997, People empowerment: the key to TQM success, The TQM Magazine, No. 9
[11] Singh,A., 1991, TQM: Concept and Practice in India, Productivity Vol.32, No.3, pp 393-399.
[12] Develin and Partners, 1989, Effectiveness of Quality Management Systems, Develin and Partners.
[13] Dale,B.G., C.L.Cooper and A.Wilkinson, 1997, Managing Quality and Human Resources – A Guide to
Continuous Improvement, Blackwell Publishers Ltd, UK
[14] Crosby, P.,1979, Quality Is Free: The Art of Making Quality Certain, Penguin Books, New York, NY.
[15] Bertram, D.,1991, Getting started in total quality management, Total Quality Management, Vol. 2, No.3,
pp.279-82.
[16] Juran, J.M.,1993, Why quality initiatives fail, Journal of Business Strategy, Vol.14, No.4, 35-9.
[17] Easton, G.S.,1993, The 1993 state of US total quality management: a Baldrige examiner’s perspective,
California Management Review, Vol.35, No.3, pp.32-54.
[18] Zairi, M., 1994, Leadership in TQM Implementation Some Case Examples, The TQM Magazine, Vol.06,
No.6.Corrigan, J.P.,1995,The art of TQM, Quality Progress, Vol.28., No7, pp. 61-4
15
Dr.Umesh M Bhushi is presently Principal, Adarsh Institute of Technology

and research centre, He has a teaching experience of 23 years in Technical
and Management Education. He is a Doctorate and Master of Technology
from Indian Institute of Technology, Kharagpur in 2003 and 1994
respectively. He has 49 publications. He has delivered numerous invited
lectures at IIT’s, Technical and MBA institutes mainly in the areas of ISO,
TQM, Six Sigma, Learning Organization, Knowledge Management, System
Dynamics etc. He has conducted workshop for Principals of Engineering
colleges on Implementation of TQM in Engineering Colleges. He was also a
Member of District Task force committee for “TQM implementation in
Schools and Colleges in Karnataka., and Member of core committee of
Strategic Planning of BVVS institution spanning 115 institutions.
(umesh.bhushi@gmail.com)
S.N.Teli has completed B.E. (Mechanical) in 1997 & M.Tech.

(Prod.Mgmt.) in 2001 from V.T.U.,Karnataka with First class with
Distinction. He has 13 years of teaching experience. Presently he is
working as Head & Asst. Professor at saraswati college of Engg.,
NaviMumbai. He has presented & published 15 papers at National &
International level conference. He has taught 10 subjetcs for UG & PG.
He has written a book on “ Automatic control & Fluid systems” .
16
ENTREPRENEURIAL CHARACTERISTICS AND COMMITMENT IN

TERENGGANU HERITAGE INDUSTRY
Muhammad Abi Sofian Abdul Halim1, Wan Asri Wan Ab Aziz2, Zainuddin Zakaria 3
Abstract. As the creative industry grows from the producing sector into more
complexes in industrialization, entrepreneurship will draw more attention to
the need for emphasizing on creative industry. Based on previous research, we
postulate that the commitment of creative entrepreneurs is affected by the
changes in their entrepreneurial characteristics. Furthermore, we suggest that
government initiative moderates the effect between the entrepreneurs’
characteristics and their commitment. Several factors in entrepreneurial

characteristics have been discovered to contribute significantly to the
performance of small and medium business, such as; need for achievement,
locus of control, creativity, innovative and also strategy to grab market
opportunities. The purpose of this paper is to measure the relationship between
entrepreneurial characteristics toward business commitment among creative
entrepreneurs who are registered with Kraftangan Malaysia, Terengganu. Raw
data was gathered from 105 creative entrepreneurs registered with the
November, 2010
Perbadanan Kemajuan Kraftangan Malaysia, Terengganu (Malaysian Craft
Development Authority of Terengganu) from a sample of 175 entrepreneurs.
JMIJMR
Findings in this paper revealed that entrepreneurs’ characteristics have a
moderate to low association with their business commitment except for the
construct locus of Control. In addition, we discover that the introduction of
government initiatives does not provide any significant impact on the relation
between the entrepreneurs’ characteristics and their business commitment.
Keywords: Heritage Industry, Creative Entrepreneurs, Commitment,

Entrepreneurial Characteristics.
Introduction
Heritage industry is a new approach for Malaysian Government to establish in several sectors which
are related to the needs of idea development in art composition through creativity, like craft, batek,
songket, wood curving, furniture, music, and film. Most of creative entrepreneurs in a Malaysian
heritage industry are categories under small and medium scale industry. As the heritage industry
grows from the producing sector into more complexes in industrialization, entrepreneurship will draw
more attention to the need for emphasizing on creative industry. Therefore, entrepreneurship becomes
as a main factor to develop personality traits among creative entrepreneurs in their business
commitment, in term of self-development based commitment and profit based commitment.
Personality traits also become both fashionable and popular as an explanation of entrepreneurial
characteristics and motivation toward the business commitment in heritage industry.
Previously, heritage industry becomes a main sector in United kingdom which is contributed to the
gross domestic product in an economy, where the growing rate is faster than any other economic
sector in a year of 1997 to 2003 (Einarsson, 2002). In fact, it had expanded by an average of 6 percent
per annum compared over the period of time that only 2 percent per annum (Carey, Naudin, 2006).
Nowadays, Malaysia also gives a positive feedback toward the development of heritage industry as
well as in UK (Hatta Azad Khan, 2006). Therefore, entrepreneurial characteristics play an important
role to develop the commitment among creative entrepreneurs. The purpose of this study is to identify
the relationship of entrepreneurial characteristic significantly affected to the commitment among
creative entrepreneurs in Terengganu.
17
Malaysian Heritage Industry

The successful entry of the heritage entrepreneurs into global markets for consumer goods such as
music, textile, furniture and craft in early 2000s clearly evidenced that Terengganu heritage
entrepreneurs could no longer depend on local market as the primary source of economic growth. The
sector becomes potential for growth and its ability to enable innovation and improved productivity
across other sectors within the economy. Currently, the heritage industry highly contributes to gross
domestic products (GDP), and also growing at a faster rate in economy as a whole. In fact, heritage
industry is identified as one of the keys to transform the
Malaysian economy.
Therefore, creative entrepreneurs in heritage industry in
Terengganu or even in Malaysia is considered as industry in
Heritage industry
transition to move from social activity into profit oriented, becomes a focal sector
also highlighted an essential of entrepreneurship skill in all over the world.
heritage industry. Although numerous descriptive studies
and some valuable empirical research have been undertaken Malaysian
in this regard, but there is a guarantee that is less in Government bestows
guidelines derived from the research which contribute to the
development of heritage industry in Malaysia. a positive
One of the most exciting new developments towards the
commitment toward
promotion and development of entrepreneurial-oriented the development of
competencies in heritage industry is the publication of a heritage industry. It
several policies which are dealing with the Ministry of
Culture, Arts and Heritage, and Ministry of Entrepreneurial currently contributes
Development and Cooperation. A key issue emphasis by to faster economic
Ministries is the proper development of skills, as required
by the market place, with specific reference to growth and high gross
entrepreneurial skills and business skills. domestic products of
Perbadanan Kemajuan Kraftangan Malaysia the nations.
Perbadanan Kemajuan Kraftangan Malaysia (Malaysian
Crafts Development Agency) also known as “Kraftangan
Malaysia” is an agency under Kementerian Perpaduan,
Kebudayaan, Kesenian dan Warisan (Ministry of Unity, Culture and Heritage) has a mission to make
Malaysia a leader in the heritage industry (Kraftangan Malaysia, 2008). It plays a vital and important
role in the promotion of traditional skill and craftsmanship; development of the handicraft industry;
assisting craftsmen towards the use of modern methods of production; and promotes the marketing
and export of handicraft products. A variety of program has been introduced by Kraftangan Malaysia
to develop and promote the local creative product into international market.
Kraftangan Malaysia has nine divisions to manage all the activities in the Malaysian heritage industry.
However, only three divisions at Kraftangan Malaysia are responsible for the development of
entrepreneurs in the heritage industry, which includes; the handicraft industry development division,
the market and promotional development division and the research and development division. The
handicraft industry development division is responsible in providing the facilities, technology, and
training program to develop the technical expertise of the local creative entrepreneurs. The market and
promotional development division is given the task to manage various marketing and promotion
programs to encourage more creative entrepreneurs to participate in domestic or international
promotional activities, such as in-store promotion, theme promotion or trade exhibition. The purpose
of this planning is to introduce local craft producing into foreign market, to increase the level of craft
producing in term of creative and innovative, and also get to know the consumer behaviours which are
contribute to the market demand.
18
Furthermore, the research and development department at Kraftangan Malaysia is very concern on the
product development in the context of product design, packaging, craft inventory and interior design;
technological study in productivity and quality; identifying the substitute material in craft production
and to produce high quality craft products.
Creative Entrepreneurs in the Terengganu Heritage Industry
Terengganu is well known for its strength and riches in traditional culture heritage in Malaysia.
Therefore, Terengganu state government has set their own policy planning regarding culture heritage
toward the tourism industry based on their strengths and advantages in an industry. This policy will
make the state government to anticipate global market and also to improve their performance in
meeting the need of global standard. However, in Terengganu’s heritage industry, the number of
creative entrepreneurs who understood and committed to their business and government policies
remains unknown.
Furthermore, in order to help these entrepreneurs, the Terengganu State Government took the
responsibility to ensure that the positive development of heritage industry in Terengganu becomes a
reality to support the local tourism industry (Penggalakan Pelancongan Negeri Terengganu, 2004).
Hatta Azad Khan (2006) suggested three main components to highlight and develop creative
entrepreneur in heritage industry in Malaysia. They are: the knowledge of entrepreneurship, creativity
and innovativeness in art and technology awareness. These three components are crucial in
developing the character of entrepreneurship especially for those who are involved in the heritage and
creative industry in Terengganu.
Literature Review
The most comprehensive studies in a concept of entrepreneurship describe the significance of
individual entrepreneurs toward the face of risk and uncertainty for the purpose of achieving profit
and growth by identifying opportunities with its surrounding by a business challenging (Zimmerer et
al, 2005). In studying the concept of entrepreneurship, it also possible to discriminate factors that
influence entrepreneurial characteristics. These are all influenced by individual factor, social factor,
and environmental factors (Gurol & Atsan, 2006). Koh (1996) also agree with Gurol & Atsan (2006)
where they highlighted that individual factors are widely known as the trait model focus on
personality characteristics of entrepreneurs.
Nowadays, many factors have been proposed to study the characteristic frequently exhibited the
concept of entrepreneurship. According to Gurol & Atsan (2006), six personality characteristics are
used to conceptualize the entrepreneurship. There are; need for achievement, locus of control, risk
taking propensity, tolerance for ambiguity, innovativeness, and self confidence, as well as highlighted
in independent variables in this study. Meanwhile, Shane, Locke and Collins (2003) identified several
factors of human motivations that influence the entrepreneurial process; there are need for
achievement, risk taking, tolerance for ambiguity, and locus of control, self efficacy, and goal setting.
McKenna (2005) suggested that most small entrepreneurs in Singapore are involved in the
management of their own business. According to him, the development and growth of small
businesses is linked to the way entrepreneurs managed their business and their understanding of the
degree of commitment such entrepreneurs felt towards their organization. Previous study has looked
into the theory of commitment from different angles of business management, such as; an application
of commitment in a relationship marketing (Young et al, 1995); a rigorous analysis of the facets of
work commitment (Carmeli et al, 2006); the nature of managerial commitment to strategic change
(Lamsa et al, 2000); an employee commitment in organizational policies (Foote, 2005); and
organizational commitment in a small enterprise (McKenna, 2005). Hence, entrepreneurial
characteristics become important to develop commitment in a business.
Government also becomes an important factor to construct the entrepreneurial characteristics among
creative entrepreneurs toward their commitment in a business. In fact, government initiative is
constantly seen as an effective way of providing entrepreneurs in small and medium enterprises with
the supportive of entrepreneurial development program and financial aid in order to develop and
19
grow. According to Ab. Aziz Yusof (2009), government initiative plays an important role in assisting
entrepreneurs who plan to start a business or those who already involved in a business. This initiative
includes assistant in areas such as; policies, education, training, research, financial, infrastructure, and
consultation. The researchers argue that government initiatives to develop entrepreneurial personality
will highly contribute to entrepreneurs’ business commitment in the context of networking, ready to
compete, an effective financial management, management skill, and entrepreneurial potential
(Zimmerer et al, 2005).
Hypothesis and Theoretical Framework
The first objective of this study is to determine which of the five entrepreneurial characteristic will
significantly affect their commitment. Based on the discussion of the literature, the first research
hypothesis is framed as follows;
H1: There is a significance and positive relationship between entrepreneurial characteristics and
commitment.
This paper also investigates the role of government initiative as a supportive action to the
entrepreneurial characteristics in creative industry toward their business commitment. Therefore, the
second hypothesis is framed as follows;
H2: There is significance change between entrepreneurial characteristics and commitment when
there is a significance increase in government initiative.
Need for Achievement
Entrepreneurial Locus of Control

Characteristics H1
Creativity Commitment
Innovative H2
Utilising Market
Government
Opportunities
Initiative
Figure 1: Theoretical Framework on Entrepreneurial Characteristics towards

Business Commitment
Methodology
As this paper focus on the investigation of social phenomenon or behaviour among creative
entrepreneurs in heritage industry, a descriptive research becomes an approach to provide details
about situation and social relationship. Through a descriptive research, a survey investigation
attempts to describe the perception of respondents toward their entrepreneurial characteristics which
have associated with the business commitment.
This paper focuses on the creative entrepreneurs at Perbadanan Kemajuan Kraftangan Malaysia,
Terengganu. According to the statistic produce by Kraftangan Malaysia (2008), 309 entrepreneurs
from the whole of Terengganu are registered under this agency. Most of them are operated as a
producer, distributor, agent, and retailer. Generally, the product that produced by Terengganu creative
entrepreneurs are batik-based products, ceramics, wood carving, forest based fibre, “Songket” cloth,
and silver. A total of 175 entrepreneurs are chosen for this paper, however only 105 entrepreneurs
20
returned the questionnaires to the researcher.
In order to provide equal chance to the populations of sample at Kraftangan Malaysia, the researchers
have chosen to use random sampling for this paper. The sample of entrepreneurs is divided into six
groups based on the type of handicraft produced as defined by Kraftangan Malaysia. These types of
handicraft are divided into batik, ceramics, wood curving, forest based, Songket (cloth woven with
gold thread) and metal products. In using a random sampling in dividing the creative entrepreneurs
into product based, researcher has used percentage to an equal chance to all the creative entrepreneurs.
Table 2 shows the percentage of population and the sample based on product classification.
Table 2: The Total Number of Population and Sample Size

Type of Products
Population Sample
Number
%
Batik 57 18.0 31
Ceramic 2 0.5 1
Wood curving 23 8.0 14
Forest based 141 45.0 79
“Songket” 78 25.5 45
Metal 8 3.0 5
Total 309 100.0 175
Data Analysis and Finding

In order to determine the association between the five “Entrepreneurial Characteristics” and the
entrepreneur’s business commitment as postulated in the first hypothesis, H1 the Bivariate Correlation
is used. The Partial Correlation is used to determine the influence of “Government Incentives” on the
relationship stated in H1, and consequently testing the second hypothesis, H2.
A descriptive analysis is first conducted before the inferential analysis is executed in order to
determine the significance of respondent’s entrepreneurial profile and their business background with
the factors in both entrepreneurial personality and business performance.
Reliability Analysis
Based on the reliability, analysis indicates that most of the variables that have been investigated in this
study are found to be highly reliable as mention in a table 3. It means that the structure of
questionnaire in this study is well and consistent.
21
Table 3: Reliability Analysis of Variables
Section Number of Item Reliability

(Variables) Coefficients
(Cronbach Alpha)
Need for Achievement 3 0.650
Locus of Control 2 0.730
Creativity 4 0.756
Innovativeness 3 0.707
Utilising Market Opportunities 4 0.732
Commitment 5 0.724
Government Initiative 5 0.877
Descriptive Analysis
A frequency of respondents in each part of demographic profile is depicted in table 5. Most of
creative entrepreneurs registered under Kraftangan Malaysia Terengganu are between the age of 40
and 60 (62%) years old followed by those in the 20 – 39 (25%)age bracket and the rest are below
20%. In term of gender, the majority of creative entrepreneurs are male (61%) and female (39%).
Meanwhile, data collected showed that 78.1% of respondents are married, 12% are widowed and only
10.5% are bachelor. The majority of entrepreneurs operating in the creative business had their
education business (58.1%), followed by those in arts (35.2%), and social science (4.8%). A few had
their education in Science and Technology (1.9%).
In term of business profile, the result clearly shows that the majority of creative entrepreneurs who are
registered with Kraftangan Malaysia Terengganu are those marketing their product in a district level
(17%) and follow state (44%), national (36%) and International level (3%). The majority of the
entrepreneurs are producing Batek based product (31.4%), followed silver product (13.3%). Those
producing wood carving, forest based fibre, Pewter and Songket products form the 3rd largest group at
12.4% respectively. The rest form less than 3%. As expected, the majority of the businesses are sole
proprietorship (60%) followed by private enterprises (Sdn.Bhd) with 24.8% and only 15.2% is
partnerships. In terms of financial sources, the majority of entrepreneurs use their own resources
(42.9%) followed by government loan (40%) and government aid (14.3%). Only 2.9% receive
financial assistant from private financial institutions.
In this paper, entrepreneurial characteristic is considered to be/as major independent variable which
comprises of five elements that is postulated to have a significance relationship with the
entrepreneur’s business commitment. The five elements include; need for achievement, locus of
control, creativity, innovative and utilising market opportunities. This is stated in the first hypothesis
as follows:
H1: There is Positive and Significant Relationship between Entrepreneurial Characteristics and
Commitment
A Bivariate correlation analysis is used to test the direction and strength of the relationship between
the independent variables; entrepreneurial characteristics and business commitment.
22
Table 4: Correlation Analysis between Entrepreneurs Characteristics and Business

Commitment
Achievement
Need for
Control
Locus of
Creativeness
Innovativeness
Opportunities
Using Market
Commitment
Need for Achievement 1 0.035 0.225* 0.361** 0.236* 0.313**
Locus of Control 0.035 1 0.072 -0.225* 0.024 0.058

Creativeness 0.225* 0.072 1 0.229* 0.457** 0.375**
Innovativeness 0.361** -0.225* 0.229* 1 0.281* 0.457*
Using Market
0.236* 0.024 0.457** 0.281* 1 0.551**
Opportunities
Commitment 0.313** 0.058 0.375** 0.407** 0.551* 1
*Correlation is significant at 0.05 level (2 tailed)

**Correlation is significant at 0.01 level (2 tailed)
Results of the Bivariate correlation analysis revealed that all the handicraft entrepreneurs’
characteristics have a positive and significant association with their business commitment except for
the construct “Locust of Control”. Entrepreneurs’ ability to use market opportunity showed the
strongest association with the entrepreneurs’ business commitment while need for achievement had
the lowest relationship with their business commitment. High need for achievement is associated the
other entrepreneurs’ characteristics except Locust of Control. Interestingly, positive level of Locus of
Control is associated with the negative level of Innovativeness among the entrepreneurs. Creativity of
the entrepreneurs may be linked to all other characters except Locust of Control with the strongest
relationship in using and taking market opportunities. Innovativeness shown by the entrepreneurs is
also associated with all other entrepreneur’s characteristics. Using market opportunity and the level of
commitment among the entrepreneurs are positively associated with other characteristics except for
Locust of Control. All results are shown in table 4.
An application of government initiative as a moderating variable is suggested as an effective way in
providing the small and medium creative entrepreneurs with the necessary support in terms of
government policies, business aid, and also legal assistant. These types of supports are considered to
be critical in the business expansion of the creative entrepreneurs and their business commitment. The
impact of the government initiatives on the relationship between the creative entrepreneurs’
entrepreneurial characteristics and their business commitment is stated in the second hypothesis as
stated as follows:
H2: Government Initiative has a Moderating Effect on the Relationship Variable
The researcher conducted a partial Correlation analysis to determine the moderating effect of the
variable “Government Initiatives” on the relationship between the entrepreneurs’ characteristics and
their business commitment. Result of the partial correlation analysis indicates that none of the
entrepreneurs’ entrepreneurial characteristics had any association with the entrepreneurs’ business
commitment.
23
These results indicate that the government initiative is not a significant influence in moderating the
association between the entrepreneurs’ entrepreneurial characteristics and their business commitment.
One interpretation of this phenomenon is that regardless of the level assistant and incentives provided
by the government, the handicraft entrepreneur’s business commitment is not affected by the
government’s decision to assist and supports the entrepreneurs’ business activities. In addition the low
correlation value revealed that there is lack of business commitment from the entrepreneurs and they
remain committed only to their artistic purpose and objectives. Results of the Partial Correlation can
be observed in table 4.
Table 4: Correlation Analysis between Entrepreneurs Characteristics and Business
Commitment Controlling for Government Initiatives
Need
Locus of Control
Creativeness
Innovativeness
Opportunities
Utilising Market
Commitment
for Achievement
Control for
Government Initiatives
Need
1 -0.14 0.116 0.277* 0.038 0.146
for Achievement
Locus of Control -0.14 1 -0.019 -0.281* -0.080 -0.051
Creativeness 0.116 -0.019 1 0.151 0.351* 0.279
Innovativeness 0.277* -0.281* 0.151 1 0.093 0.318
Utilising
Market 0.038 -0.080 0.351* 0.093 1 0.350
Opportunities
Commitment 0.146 -0.051 0.279* 0.318 0.350 1
*Significant Correlation
Discussion and Recommendation

Scholars have suggested that government initiative in the heritage industry has provided the platform
for craft artists to develop their entrepreneurial personality which significantly influences their
business commitment (Einnarson, 2002). Based on the result of the first hypothesis testing, the
entrepreneurial characteristics of the craft entrepreneurs at Kraftangan Malaysia, Terengganu has a
low to moderate level of association with their business commitment. The result highlighted the fact
that private or public authorities need to create more innovative and creative ways to enhance
entrepreneurial programs in terms of the five entrepreneurial characteristics discussed in this paper.
Consequently, we would like to offer two changes in conducting programs to upgrade the level of
personality among creative entrepreneur in Kraftangan Malaysia, Terengganu, there are;
24
i. Paradigm Shift
Based on the Pearson Correlation’s result in testing the first hypothesis, entrepreneurial characteristics
have been proven to have a positive and significant relation to the business commitment of the
handicraft entrepreneurs. However, the association ranges from low to moderate. This result indicates
that the handicraft (creative) entrepreneurs in Terengganu should enhance and improve their
“entrepreneurial characteristics” as this would motivate them to increase their business commitment
and subsequently help to develop their business into a viable and profitable venture.
These entrepreneurs should also take the initiative to develop their own personal character in terms of
taking challenging task, solving problem, developing high self-confidence, ability to influence events,
ability to study market environment and also creating new business strategy. This will help them
create a business enterprise that is able to create a sustainable competitive advantage. Specifically,
they have to change their attitude and business paradigm from being artistically committed into
business-minded committed entrepreneurs as shown in table 5.
Table 5: Comparison between Artistic and Business Commitment
Artistic Commitment Business Commitment
1. Dependent 1. Independent
2. Arts motivated 2. Business and art motivated
3. Self-appreciation 3. Consumer-appreciation
4. Creative 4. Creative & Innovative
5. Social oriented 5. Profit oriented
6. Product value depend on producer 6. Product value depend on customer
ii. “Entrepreneurial Development Model” for Creative Entrepreneurs

As a government agency, Kraftangan Malaysia of Terengganu needs to aggressively enhance and
strengthen the traditional skill, craftsmanship and entrepreneurial characters of the creative
entrepreneurs (usahawan kraf) who are registered under this agency. In fact, Kraftangan Malaysia
Terengganu are also assisting craftsman in utilising modern methods of production, and promoting
their handicraft products. However, the government initiatives to aid and develop the creative
entrepreneurs in Terengganu have not shown the desired results. Hence, government should revaluate
their previous activities and programs, and rebuild new strategies to identify weaknesses in programs
that were implemented to increase the entrepreneurs’ entrepreneurial characteristics. Therefore,
Kraftangan Malaysia, Terengganu should develop an entrepreneurial development model (training
and motivation workshop, business incubator etc), as a guide to creative entrepreneurs to identify
better personality traits which are necessary to develop their business commitment. The main content
of this model is to assist the creative entrepreneurs in developing strong entrepreneurial characteristics
such as the skill and ability to search better business improvement, locus of control, creative,
innovative and also strategic to grab market opportunities in a competitive market.
25
Conclusion
Entrepreneurship research in the heritage industry is a
new and under explored research in Malaysia. This is
especially true in entrepreneurship research among the Research in the
small and medium enterprise. We proposed that the heritage industry is a
development of entrepreneurial characteristics in the
heritage industry is the right approach to build up the new and under
creative entrepreneurs’ business commitment in their explored in Malaysia.
respective field. A good infrastructure becomes useless if
the creative entrepreneurs lack the business management Creative
skill and desire to improve their business as discussed entrepreneurs and
earlier. The findings of this study are applicable to a wide
range of heritage industry in Terengaanu and provide the excellent business
necessary knowledge to increase the level of activities in management
the artistic and heritage industry into a new dimension. strategies are essential
Moreover, the Malaysian government may utilize this
finding as the foundation to develop new strategic plans, for the success of this
policies and programs to help the creative entrepreneurs industry.
create sustainable competitive advantage in the Malaysian
and foreign heritage market.
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PWTC, Kuala Lumpur.
8. Koh, H.C (1996), Testing hypothesis of Entrepreneurial Characteristics, Journal of Managerial Psychology,
Vol. 11 No. 3. 9Kraftangan Malaysia (2008), available at www.kraftanganmalaysia.gov.my
9. Lamsa, A.M and Savolainen, T (2000), The Nature of Managerial Commitment to Strategic Change, Journal
of Leadership & Organization Development, Vol 21 No. 6.
10. McKenna, S (2005), Organizational Commitment in the Small Entrepreneurial Business in Singapore,
Journal of Cross Culture Management, Vol. 12 No. 2.
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2008, LPPNT, Kuala Terengganu.
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Review, Vol. 13. No. 5.
13 .Young, L and Denize, S (1995), A Concept of Commitment: Alternative Views of Relational Continuity in
Business Service Relationships, Journal of Business & Industrial Marketing, Vol. 10 No.5.
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Management (4th and International Edition), Prentice Hall, New Jersey.
26
Wan Asri Wan Ab Aziz pursued Master of Science (MSc) in Quality and
Productivity improvement at National University of Malaysia (UKM) Senior
Lecturer (now doing PhD in Technology Management) Faculty of Business
Management, MARA University of Technology (UiTM), Terengganu, Malaysia
Specialized area is Operations Management
Muhammad Abi Sofian Abdul Halim has completed his Master of Business
Administration (MBA) in National University of Malaysia (UKM) He is at
present Senior Lecturer ( now doing PhD in Entrepreneurship) Faculty of
Business Management, MARA University of Technology (UiTM), Terengganu,
Malaysia.
Zainuddin Zakaria is a PhD candidate and a lecturer at Faculty of Business

Management, Universiti Teknologi MARA, Terengganu, Malaysia. He holds
an MBA and BBA in Marketing and Finance from Western Michigan
University, Kalamazoo, Michigan, USA and a Diploma in Accountancy from
Universiti Teknologi MARA, Malaysia. His research interests are education in
management, marketing, service quality as well as general management. He has
published three books on motivation and communication with PTS
Professional Publishing, Malaysia. In addition, his research works has already
appeared in IJCRB, GBMR as well as IJSRE journals.
27
WOMEN EMPOWERMENT AND ENVIRONMENT

REHABILITATION
THOUGH COOPERATIVES IN HIGH LANDS OF ETHIOPIA
Woldegebrial Zeweld1, R. Dayanandan2 Arne Olav Oyhus3
Abstract. Ethiopia (Horn of Africa) is predominantly agrarian economy and

Tigray Region as well. Unemployment and environmental degradation due to
land degradation, deforestation and low investment are severe problems of
Tigray region. This study explores the roles that agricultural cooperatives

could play in rehabilitating the degraded environment, empowering poor
women and generating employment using household survey, informant
interview, case study and descriptive analysis. The results of the study show
that agricultural cooperatives have generated significant level of employment
opportunities to both skilled and unskilled people. They have also empowered
poor women through adopting affirmative initiatives and creating working
November, 2010
environment, which enables them fully utilize their potentials. The cooperatives
have played remarkable roles in reducing environmental degradation through
physical and biological conservation activities. To contribute more in the
JMIJMR
development effort in terms of women empowerment and environment
rehabilitation, the agricultural cooperative institutions should therefore be
highly encouraged through financial, technical and material support by
government and other agencies.
Keywords: Cooperative Institution, Employment Generation, Women Empowerment

and Environmental Rehabilitation
Introduction and Justification

Ethiopia (Horn of Africa) is predominantly agrarian economy and Tigray Region as well. Tigray
Region is located in the northern part of Ethiopia in the altitude of highland. Agriculture contributes
more than 53 percent of the regional GDP, 83 percent of employment and about 48 percent of the
regional government revenue. It also serves as an engine for the expansion of non-agriculture sectors
through inputs provision and niche market creation. The sector has however remained in its
traditional stage due to high reliance on erratic rainfall, natural factors, family labor, small-fragmented
farmland, and adoption of traditional technologies. For example, rain fed agriculture contributes about
98 percent of agricultural production in the region and 95 percent of the rural people do not have an
access to modern agricultural technologies. The productivity of the sector for these reasons is very
low (Fitsum & Holden 2002 and Hanna 2007). Food insecurity and poverty thus frequently occur in
the region. In order to solve the problem, the regional government has given priority for the
establishment and expansion of agricultural cooperatives - defined as voluntary association among the
rural people, jointly solving their common agricultural problems (UN Report 1984). In this case, the
government assumes that it is easy and inexpensive to provide modern agricultural technologies
through cooperatives. With technical and financial support, agricultural cooperatives become strong
and powerful which enables them to actively participate in the development process and significantly
contribute their parts in employment generation, women empowerment and environmental
rehabilitation activities.
28
Many researches have been conducted on wide issues relating to the importance of cooperative
societies in employment generation, women empowerment and environment rehabilitation. Zeuli
studied on the role of agricultural cooperatives in employment creation using the Social Accounting
Matrix in the rural areas of Wisconsin state through cross section data. His result shows that 798
cooperatives have generated 17413 fulltime and 60211 part-
time jobs in the state as cashier, accountant and store-keeper.
He concluded that the cooperatives are basis for the reduction
of unemployment in the country (Zeuli et’al 2002).
Unemployment and
Using 1996 and 2001 year panel data, input-output model and
major parameters (e.g., revenue, number of employees and
environmental
expenses), Coon and Leistritz (2001) carried out a study in degradation due to
Minessesota covering 337 cooperatives, of which about 58 land degradation,
percent were agricultural cooperatives. The result shows that
they have provided 9078 direct jobs and 42290 secondary deforestation and low
(induced) jobs. As a result, the livelihood of the individuals investment are severe
employed in the cooperatives has grown by about 1.2 percent
per annum. They concluded that cooperatives have solved problems of Tigray
income shortage and unemployment problem in the country. region
Merrett and Walzer (2001) also conducted a study in the same
state with 475 cooperatives and concluded that agricultural
cooperatives are the foundation of better life in rural
community of Minessesota through imperative contribution to employment opportunity, livelihood
progress and food security through expansion of local business and meeting the challenges of market
failures. Thus, cooperatives are basis for unemployment reduction by providing employment
opportunities within the cooperatives and supporting financial resources which enable the
unemployed individuals to be employed.
Most women in developing countries do not have access to education, productive resources and other
services. Such discrimination hampers them not to earn incomes and not to actively participate in
socioeconomic and political conditions (Kebeer 1999). In order to solve the problem, women
empowerment becomes a global agenda. Scholars define empowerment differently. Reza (2002)
explained it as customary gender values, rules and rights from the moral order of society that restricts
the access of women to social, political and legal institutions ultimately create and perpetuate a
vicious exclusionary cycle that maintains gender inequalities.
Baviah (2006) defined it as enhancement of assets and capabilities of diverse individuals to engage
influences and holds accountable that affects them. Mayoux (2005) views women empowerment as
process of women being able to organize themselves to increase their own self-reliance and to acquire
independent right to make choices and to control resources. United Nations Division for the
Advancement of Women (2001) defined it as the process by which people, organisations or groups
who are powerless become aware of the power dynamics at work in their life context; develop the
skills and capacity for gaining some reasonable control over their lives; exercise this control without
infringing upon the rights of others; and support the empowerment of others in the community.
Experience from Bangladesh shows that women were highly discriminated and were not participated
in productive activities. The government motivated the local communities to organize themselves
under cooperatives and solve their problems through those institutions. Reza (2002) argued that rural
women organize cooperative institutions in such a way that they serve to address gender inequalities
by mobilizing savings from members and others to develop members’ businesses. Schuler et al (2002)
argued that shift in women’s ability to visit a health center without getting permission from a male
household member is a sign of empowerment in rural Bangladesh, which results from the cooperative
institutions.
According to Sobrado (2000), Cooperatives are essential to escape many of the limitations of
isolation, small scale, financial shortage and inexperience by capturing of economies of scale and
economies of scope. Rural women could easily borrow from the cooperative institutions to participate
in productive activities (Cited in Haile 2004). Rural women of India are highly marginalised in such a
29
way that they do have low levels of literacy, low purchasing power, poor health status, low
participation rates in the formal economy and low levels of empowerment in the family as well as in
the society. To solve the problem, women are organized themselves under cooperative institutions,
which make them homogenous and for development interventions easy to operationalise
(Bandyopadhyay et al. 2002).
In addition to employment and women empowerment, cooperatives do have significant role in
environment rehabilitation and natural resources conservation. Cooperative institutions provide
nursery and tree planting services in rural Canada (Hallett 2001). Boyle (1997) explained that
agricultural cooperatives have taken important steps in environmental protection via promoting
integrated pest management, supporting soil and water conservation, best management practices, and
promoting low disturbance conservation tillage systems. Cooperatives in Western Europe initiate
farmers to integrate environmental values into their production systems (Glasbergen 2000).
Cooperatives also address that environmental repercussion of an industrialized agriculture, including
the waste management problems of concentrated animal feeding operations (Walter 2002 and Zeuli
2003). In general, cooperative institutions are basis for empowerment viability and ecologically sound
development.
For this practical fact, the Tigray regional government has organized rural people in cooperatives
forms; provided them technical, financial, material and moral support; and arranged linkage between
the cooperatives and other essential sectors like universities, research and development institutions,
and market promotion agencies so as to make the cooperatives playing a leading role in attaining
sustainable development in the region. Consequently, many and various agricultural cooperatives
have been establishing in the region.
However, there are no or little empirical evidences about the importance of cooperatives in this region
regarding said issues. The only available studies (Fitsum 2003, Veerakumaran 2003, Tadesse 2002
and Hana 2007) are dealt with the historical development of cooperative societies in the region. Thus,
this study explores the roles that agricultural cooperatives could play in generating employment
opportunity, empowering poor women and rehabilitating the degraded local environment in the region
using household survey, group discussion, case study and descriptive analysis.
Methodology Followed
This study was conducted in northern region (Tigray) of Ethiopia aiming at exploring the role that
agricultural cooperatives could play in creating employment opportunities, empowering poor women
and rehabilitating the degraded local environment. The study area has six administrative zones, 81
woredas (districts), 1089 tabias (villages) and 3500 Kushets (sub-villages) (Wikipedia 2007 and
Bhatta 2004).
In order to collect information, one woreda from each zone, one target tabia from each selected
woreda, one kushet from each selected tabia and 400 sample households (200 members and 200 non-
members cooperatives) from the selected 6 kushets were chosen using simple random over stratified
sampling method. Though various types of agricultural cooperatives established in the region, the
study covering sample of irrigation, beekeeping and multipurpose cooperatives only.
The study employed both primary and secondary data; the primary information was collected using
household questionnaire, group discussion and informant interview. The study also employed case
study and comprehensive group discussion with 45 key informants (30 representatives from
cooperatives and 15 from cooperative-related government and non-government offices). In addition,
the study reviewed secondary information from books, cooperative records, journals and proceedings.
After giving due consideration for data processing and clearing, descriptive analysis such as
percentage analysis, and explanation to come up with valid result and make correct prediction about
future development of agricultural cooperative institutions.
30
Results and Discussion

The descriptive result of the primary data shows that sample male-headed households account about
65 percent and average age of the households is 44 years. 79 percent of the samples do have special
skills (e.g., carpenter, mason, tailor, craftwork, pot making, weaving, hairdressing, traditional healer
and basket making) while the remaining 21 percent do not have any skill. 83 percent of the sample is
literate through religious institution, literacy campaign, and formal education while the remaining 17
percent households are illiterate
Table 1. Demographic and Socio-economic Attributes of Respondents
Household Characteristics Obs. Household Response Description
Household head age 400 Min (20), Max (76) and Mean (43.89)
Household head sex 400 Male-headed (65 %) and Female-headed (35 %)
Household head special skill 400 Yes do have (78.5%) and No don’t have (21.5% )
Household head education 400 Literate (82.5 %) and Illiterate (17.5 %)
Family sizes 400 Min (1), Max (16) and Mean (6.71)
Adult equivalence 400 Min (0.6), Max (13) and Mean (5.26)
Dependency ratio 400 Min (0), Max (6) and Mean (2.01)
Consumer-worker ratio 400 Min (0), Max (9) and Mean (2.64)
Farmland/head/tsimad 400 Min (0), Max (7) and Mean (2.67)
Livestock-equivalence/head 400 Min (0), Max (38) and Mean (7.53)
Source: Primary Data
Further it indicates that the average family size of the sampled households is 6.71. The average
dependency ratio, which is children below 18 years and elders above 60 years per adult (between 18-
60 years) households, is 2.01. The consumer-worker ratio, (i.e) the total family sizes (consumers
group) per the adult workers in the family cell, is on average 2.64. Livestock and farmland resources
are the basic livelihood opportunities and choice indicators of rural people.
The average livestock ownership in the study area is 7.53 Tropical Livestock Unit (TLU). One TLU is
equivalent to 1 camel; 0.7 ox/cow; 10 sheep/goats; 0.5 donkey/bull; 0.45 heifer/calf; 0.7 mules; 0.8
horses; or 100 chickens (Bharat 2004). The study also indicates that the farmland holding size per
household head is 3 tsimad (Customary four tsimad is considered as one hectare).
Agricultural Cooperatives and Employment Creation
Unemployment, which is defined as a condition in which people are willing and able to work at the
prevailing wage, and actively looking for job but practically unable to get job, is formidable challenge
in Tigray province. In 2006, for instance, the unemployment rate was above 20 percent and
sometimes reaches 30 percent. This problem is very serious for women. Women unemployment rate
sometimes reach 50 percent because the existing culture and religious norms do not allow them to
work outside home and in productive activities (Abebe 2007 and Wikipedia 2007).
This unemployment problem has serious economic and social implications. It keeps the economy
from moving all the way to its production possibilities curve. It creates a number of emotional
problems for the worker and their family (reduction of social contact with fellow employees, lack of
self-esteem and mental stress), which can, in turn, lead to morale plummeting, family disintegration
and high crime (ibid). Because of its multi-impact and complex nature, the economic actors of the
region have undertaken various development interventions for unemployment reduction.
Agricultural cooperatives, for example, exerted utmost their effort to reduce the unemployment
problem in the region through generating employment opportunities, providing financial support for
those unemployed that enable them to engage in micro and small business activities, and promoting
awareness on self-employment and job innovation tactics. As explained in the group discussion,
agricultural cooperatives have generated different types of employment such as daily laborer, seller,
31
guard, accountant, cashier, manager, storekeeper and so forth for many members and nonmembers
within the cooperatives across the selected woreda.
The result of the primary study expresses that 65 percent of the members have found permanent or
occasional job opportunities within the cooperatives while the remaining 35 percent have not found
job, because, some are new entrants so that they have to wait for more years. Others do also have
blacklist or passive participation so that the bylaw does not allow enrolling them. Limited capacity of
the cooperative to provide employment is also another reason. Those individuals who are employed in
the cooperatives have received different annual income from it ranging from Birr (national currency)
1000 (equivalent to USD 118) to Birr 5460 (USD 642). The incomes of the households on average
increased to Birr 2400 per year. This income variation comes from the difference in educational level
and administration position
Table 2. Employment Opportunity Generated by the Sampled Agricultural Cooperatives
Activity Questions Obs. Respondents Responses
Member households that have obtained employment Yes (65 %)
opportunity in the agricultural cooperatives 200 Members No (35 %)
The annual average incomes the employed households Min (1000),
received from the agricultural cooperative (in Birr) 130 Members Max (5460)
Mean
(2440.57)
Positive change in their family’s livelihood status due 200 Yes (70%)
to employment in cooperatives Members No (30 %)
Employment opportunities generated for member 30 Yes (100 %)
households by cooperatives Informants No (0%)
Employment opportunities generated for non-member Yes (80 %)
households by cooperatives 30 Informants No (20 %)
Source: Field Data
The higher the member’s education, the higher the incomes receive; the higher the administrative
position in the cooperative has, the higher is the payment; and the more experience, the higher
incomes receive. The result also confirms that because of being employed in the cooperatives, more
than 70 percent of the member households have brought significant and positive changes in their
livelihood. It includes enable them to send their children to school, cover their families’ medical
expenses, having nourished food, and well furnished their houses, even some with correlated iron.
The output of the primary study also illustrates that all the sampled cooperatives have generated
employment for members while 80 percent of them have generated employment for nonmember
households within the cooperatives.
Some household members opinioned that the cooperatives have brought significant and positive
influence their annual income but not bring changes on their livelihood due to the high inflation in the
country. In addition to generating direct jobs within the cooperatives, they create employment
opportunities through (a) providing financial support for unemployed households which enable them
to open micro and small enterprises. As a result, they become self-sufficiency and create employment
for other unemployed individuals (b) developing positive thinking and bringing attitudinal change in
the communities about work habit via training and intensive discussion.
The result of the desktop analysis shows that the total 120 agricultural cooperatives in the region
created permanent employment opportunities for 860 skilled and 27430 unskilled individuals during
the year 2006 whereas number increased by 240 for skilled and 2756 for unskilled manpower in 2008
year.
32
To illustrate the importance of cooperative institution for employment generation, Damayno

beekeeping cooperative institution was randomly chosen for case study. It was established with 17
farmers and Birr 20000 capital in woreda Atsbiwenberta. Within 10 years, the cooperative has now
230 members and Birr 1.6 million annual budgets. It has permanently employed 3 skilled and 10
unskilled nonmembers. It has also generated occasional employment opportunities to nonmember
households. For instance, during 2007, it had only 20 daily workers which increased to 46 in 2008.
Thus, the cooperative institutions have been reducing unemployment problem in the selected woreda
by generating direct employment opportunities and providing loan-or-grant-based financial support to
open small businesses and become independent.
Women Empowerment through Agricultural
Cooperatives Women in Tigray
Lawless et’al (1996) argued that women produce between 60 region face more
and 80 percents of the food in developing countries and are
responsible for half of the world’s food production. In spite
difficulties than men
of this truth, women have been discriminated from the in gaining access to
productive economic activities and access to productive land and credit. This
resources. Martin defined empowerment as giving power and
special privilege to underprivileged sections of the society, leads to high
which enables them to increase their capacities and optimally consumer-worker-
utilize their potentials (2000).
ratio and food
In Tigray region, women represent half of the population so
that they can play leading roles in the mainstream of
insecurity at family
development process. They face more difficulties than men level
in gaining access to land and credit. This leads to high
consumer-worker-ratio and food insecurity at family level.
Recently, governments, civic societies and NGOs have
considered the importance of women and given great
attention for women empowerment in the development endeavor. Agricultural cooperatives are the
effective tools to empower women by minimizing female discrimination (traditional beliefs) against
them and providing them external (access to training, finance, health or education) and internal
(awareness and confidence) qualities.
The result of the primary data proves that majority of rural people (including women) in the study
areas are members of different cooperative institutions. The cooperatives do have great acceptance in
the village so that they do have power to incorporate women affairs in their by-laws and develop
positive outlook in the local communities by minimizing the cultural and religious challenges against
women. The cooperatives have provided financial support to empower them economically, which
make them to actively participate in socioeconomic activities and contribute their parts in the
attainment of sustainable development in the region.
Cooperatives have arranged intensive discussion and public meetings about the importance of women
development endeavor. Every member of cooperative has become aware of that women are an engine
of development and can play a leading role to reduce food insecurity. 80 percent of the selected
cooperatives in the study area have provided special financial support for women from their capital
budget to enable them realize their full potential and solve their interrelated problems. About 70
percent of the sampled cooperatives have given special training for women aiming at empowering
them and then actively participate in changing the community perception because the people have
considered them as weak and inferior
33
Table 3 Initiatives Undertaken by Agricultural Cooperatives

Activities Obs. Respondents Responses
Adaption of women empowerment initiatives 30 Informants Yes (100%) and
by cooperatives No (0%)
Credit access or financial support for poor 30 Informants Yes (80%) and
women No (20%)
Short term Training provided for women 30 Informants Yes (70%) and
members No (30%)
Inclusion of women affairs in their bylaw 30 Informants Yes (87%) and
No (13%)
Awareness Creation regarding girl children’s 30 Informants Yes (70%) and
education No (30%)
The number of women in the management 30 Informants Low (12%) and
committee of the cooperative society High (44%)
Participation of cooperatives in supporting 30 Informants Yes (37%) and
orphan and poor females No (63%)
Status of women employment in the 27990 Total
agricultural cooperative societies in 2007 employed & 40%
(desktop review) female employed
Status of women membership in cooperative 388312 Total
societies during 2007 (desktop review) members & 23.18%
female members
The result obtained from the group discussion shows that 87 percent of the cooperatives have
integrated women affairs in their bylaws in order to encourage women to participate in the
management committee, avoid discrimination against women, and allow them to get special credit and
training privilege, in turn, allow women to easily discover their inherent capabilities and rapidly
engage in productive activities to benefit their family. As a result, many women have actively
participated in the management committee though the participation rate ranges from 12 percent of the
total committee members in some cooperatives to 44 percent in other cooperatives. From the selected
30 cooperative institutions about 37 percent are, supporting orphan and poor female students while the
remaining cooperatives are also willing to adopt poor females supporting initiatives.
Increasing the number of female members in the cooperatives is also another method that the
cooperatives have used for women empowerment. The desktop review shows that in 2003, the
proportion of females in the total agricultural cooperatives was 7 percent but it is now 23 percent.
Finally, agricultural cooperatives have adopted women empowering strategy through generating
various types of employment opportunities. For example, out of the total employees in the agricultural
cooperatives in the region, 40 percent are women by now but it was 9 percent in 2003 (Hana 2007).
Thus, due to high and intensive effort of agricultural cooperatives in women empowerment initiations,
the participation of women in different economic, management and political activities of the region
has been considerably increased and improved.
Hiwane Cooperative Institution is a multipurpose cooperative established in 1998 in Southern part of
the region with 25 members and 15000 Birr capital budget. It has now 107 members and 900000 Birr.
It supports poor and disadvantaged women through financial assistance, loan provision at low interest
rate with collateral, and arranging practical training which enable them self-employed and
empowered.
Hagosa Tesfay, a 41 years lady having three children before 2000, she was poor with no livestock and
farmland as well as suffered from food insecurity. In 2000, she joined the cooperative and agreed to
pay Birr 320 registration fee. In March 2001, the cooperative gave her Birr 900 free support, which
enabled her to buy house furniture and opened small restaurant. In October 2002, the cooperative
provided her Birr 3500 loan at low interest rate without collateral and she bought 13 sheeps, a modern
34
cow, and improved the quality of the restaurant. In 2003, the cooperative along with Global Food
Preparation Training Centre and Wukro St. Marry Agricultural College arranged two practical
trainings about food preparation and environmental sanitation, and horticulture and animal science for
its members.
Hagos was one of the trainees and gained an excellent experience, which encouraged her to become
strong and competitive in the business area. Currently, she has 40 x 30 meters house in Hiwane cost
Birr 15700 and 10 permanent workers in her restaurant. Her family’s total annual incomes in 2006
was birr 35000 but it was less than Birr 200 in 2000. In 2007, she received a Madelia and Birr 1500
award from Tigray President Office for her tireless commitment to relieve from poverty. She is, at all,
highly satisfied being member of the cooperative because she would have been engaged in immoral
activities if had not been joined in the cooperative, she said.
Environment Rehabilitation and Agricultural Cooperatives
Environmental degradation (e.g., land degradation and deforestation) in Tigray region has been
caused frequent drought occurrence and resulted in persistent food insecurity problem. Stakeholders
in the region have pulled their resources and effort together in order to solve severity of the problem.
Agricultural cooperatives have exerted utmost effort to minimize environmental degradation in the
region through producing environment sensitive citizens and practicing biological and physical
conservation activities. Table 4 explains that all the sample households and the informants have
realized that their local environment has ever changed. Some decades ago, their local areas were
fertile and covered with dense forest. They were harvested more crops yield from small size of land.
They had not faced food insecurity problem.
Table 4. Environmental Concerns of Agricultural Cooperatives
Environment related activities Obs Respondents Responses
Awareness among the people regarding the Members & non- Yes (100%) and
changes in the local environment in the 400 members No (0%)
society
Realization of the consequences of the Members & and Yes (100%) and
environmental degradation in the region by 400 non members No (0%)
the local people
Cooperatives organized training to make Yes (73%) and
their members and other nonmembers aware 30 Informants No (27%)
of negative effect of environmental
degradation
Whether the cooperative societies have Yes (60%) and
incorporated environmental issues in their 30 Informants No (40%)
bylaws
Participation in environmental protection and 30 Informants Yes (80%) and
rehabilitation activities by the cooperatives No (20%)
At present, however, the areas are left without forests and fertile soil, which causes for low
productivity of agricultural sector and recurrent food insecurity problem. According to the
respondents, the reasons for the ever-changing environment are rapid urbanization, population
pressure, industrial expansion, natural disasters and political instability in the region. They also
explained the impacts of environmental degradation as adverse effect on agricultural production,
imbalance problem between the available resources and the population, disappearance of wildlife and
intensification of global warming, which have adverse economic and social implications. Without
environmental concern, the aim to attain food security remains meaningless.
73 percent of the sampled agricultural cooperatives have intensively involved in making their
members conscious about causes and effects of environmental degradation through intensive
discussion and trainings. About 60 percent of selected agricultural cooperatives have also
incorporated environmental issues in their bylaw, which totally prohibits members to react against the
35
environment and puts some financial punishment for those members who violate the rule. The law
allows the local communities to use the forests and its products when they agree to replace the forests
and strictly follow up the survival of the forests they planted. Hence, the local peoples have
minimized their cutting of forests for firewood, charcoal and other purposes due to enhanced
awareness as well as introduction of forest-replacing industrial commodities.
Involvement of agricultural cooperatives in environmental protection is another means of reducing
environmental degradation. Table 4 indicates that 80 percent of the selected cooperatives in the study
areas have practiced environmental rehabilitation initiatives like discussion with members and non
members about environment issues, causes and
consequences of environmental degradation, and
undertaking physical and biological conservation activities.
The following two case studies publicize how agricultural Intensive war and
cooperatives reduce the environmental degradation in the population pressure,
study area.
deforestation and
Humera Multipurpose Cooperative was established in
western zone of the region in 1993 with 95 farmers and total land degradation are
budget of Birr 35000. It has now 323 members and Birr 2.53 the major defy of the
million total budget. Its main activities are distribution of Tigray region.
agricultural inputs (fertilizer), agricultural products and
consumer goods to the local communities at reasonable Agricultural
price. It has also engaged in exporting of sesame products to cooperatives have
international market since 2003. Besides, it has been
actively participating in environmental conservation made vital roles in
practices by increasing its members’ awareness on protecting the
environmental degradation. In its annual meeting in 2004,
the members have agreed to plant two trees every year in a
environment and
selected degraded area of the zone. It has again established reducing
environment committee to produce environment sensitive unemployment
citizens.
The committee has the responsibility of identifying
degraded areas and suggesting members to plant trees as
well as preparing environmental rehabilitation project proposals and forwarding to government and
non-government organizations for financial support. The committee has selected Menjaer hillside,
among the highly degraded areas in the region due to overgrazing and high flood erosion, and
members have planted trees since summer 2004. More than 60000 indigenous and exotic seedlings
have planted still and their survival rate is above 73 percent (Amare Techane, Natural Resources
Expert). Recently, the area is referred as model of rapidly rehabilitated area in the region. In 2007,
the cooperative has received medial award from the regional government of Tigray for all efforts
made to rehabilitate the area. Thus, cooperative societies could play priceless roles in rehabilitating
the degraded local environment if they are financially and managerially strong and powerful.
Rawuyan irrigation cooperative is the largest agricultural cooperative in North Western zone of the
region. Its objective is to improve agricultural productivity through irrigation scheme and introduction
of modern technology. It has also actively participated in rehabilitating the local degraded
environment through planting indigenous trees, and undertaking soil and water conservation, gully
treatment and reforestation activities. According to the cooperative chairperson, it has constructed 578
km lengthy soil and water conservation, treated three big gullies and distributed 20000 indigenous
trees to plant for the communities. In monetary value, the cooperative has spent about Birr 2.3
million, of which 80 percent is free labor contribution of members and the remaining from members
and Deutsche Gessillschaft fur Technische Zusammenarbiet (GTZ) money contribution. Thus, the
cooperative institutions in the study areas have exerted great effort and commitment to avert
environmental degradation in the region through soil and water conservation, reforestation, and gully
reclamation.
36
Conclusion
The main aim of the study was to explore the roles that agricultural cooperatives can play in the study
areas in terms of employment generation, environmental rehabilitation and poor women
empowerment using questionnaire, group discussion, desktop review, case study and descriptive
analysis. Agricultural cooperatives have played significant roles in reducing unemployment problem
in the study area by generating permanent and temporary employment to both skilled and unskilled
individuals, providing credit- and/or grant-based financial support to unemployed people, which
enable them to engage in micro and small activities, and building the confidence and awareness of the
local people about self-employment via intensive discussion and training. The secondary review
shows that the cooperative institutions have generated permanent employment opportunities for 860
professionals and 27430 unskilled workers in the region.
The cooperatives have also considerable contribution in empowering poor women. First, they have
actively participated in minimizing traditional beliefs against women. Second, they have enshrined
principle of gender equality in their bylaws to develop positive outlook on the local people. Third,
they have adopted affirmative initiatives (special privilege in credit access, training and financial
support) in favor of women. Fourth, they have empowered them via providing employment and
increasing the number of female members in the cooperatives. Finally, cooperatives have provided
financial support for poor females and orphan children. The technical, material and financial support
have enabled females to effectively utilize their inherent potentials and then actively participate in
economic, political and social conditions.
Due to intensive war and population pressure, deforestation and land degradation are the major defy
of the study areas. Agricultural cooperatives have, in this case, made vital roles in protecting the
environment from degradation through making their members conscious on the impact/effect of
environmental degradation and undertaking various environmental rehabilitation initiatives including
reforestation, gully reclamation, soil and water conservation, and biological and physical
conservation. The result shows that about 80 percent of the agricultural cooperatives in the study areas
have actively participated in the environmental rehabilitation activities. Thus, efforts should be
exerted to strengthen cooperative institutions technically, materially and financially to contribute
more in the achievement process of poor women empowerment, employment generation and
environmental rehabilitation.
References
1. Abebe, M. 2007. Assessment of Unemployment Condition in Ethiopia: Significance and Problems, Selam
Printing Press, Addis Ababa, Ethiopia.
2. Baviah, M. 2006. “Microfinance for Women Empowerment and Gender Equality: Experience of some
Asian Countries and Lessons for Ethiopia”. Biannual Conference of the Association of Ethiopian
Microfinance Institutions (AEMFI).
3. Bhatta, P. B. 2004. “Socioeconomic Transformations and Road Accessibility: Evidence from Northern
Ethiopia”. Department of Economics and Resource Management, Norwegian University of Life Sciences,
Norway.
4. Boyle, Jennifer. 1997. “Cooperating with Nature”. Rural Cooperatives. 64(2)
5. Coon, R. C. and Leistritz, F. L. 2001. “Economic Contribution North Dakota Cooperatives Make to the
State Economy”. AE20011 Department of Agricultural Economics, North Dakota State University.
6. Fitsum, H. and Stein Holden. 2002. “Incentives for Conservation in Tigray, Ethiopia: Findings from a
Household Survey”. Department of Economics and Social Sciences, NLH. Ås., Norway, Mimeo.
7. Gertler Michael. 1999. “Sustainable Communities and Sustainable Agriculture on the Canadian Prairies”. in
Communities, Development And Sustainability Across Canada, (Eds) By John, T. Pierce and Ann Dale.
UBC Press. Vancouver.
8. Glasbergen Peter. 2000. “The environmental cooperative: self-governance in sustainable rural
development”, Journal of Environment and Development. 9(3)
9. Haile, A. 2004. “Impact of Micro finance: The Case of DECSI in Ganta-Aftshum Woreda of Eastern
Tigray” A Paper presented in International Conference on Micro-Finance Development in Awassa.
10. Hallett, Paula. 2001. “The Car Sharing Cooperative of Edmonton: Paving the way to a greener future”,
Synergy 10(1)
37
11. Hana, W. 2007. “Comparative Study of Cooperative Practices in Uganda and Ethiopia”, A Paper Submitted
to the Annual Conference of Ethiopian Economics Association, Addis Ababa, Ethiopia.
12. Kabeer, N. 1999. “Resources, Agency, Achievements: Reflections on the Measurement of Women’s
Empowerment”. Development and Change. Vol.30, Institute of Social Studies, Oxford, UK.
13. Lawless, G. Cropp. R and Harris, P. 1996. “Cooperative Ownership Compared to Other Business
Arrangements for Multi-Family Dairy Operations”, UCC Occasional Paper No 11, Published on
International Cooperatives Information Centre Website www.Wisc.Edu.Au/Uwcc/Icic/
14. Martin, J. 2000. “Role of the Australian Competition and Consumer Commission’s With Farmers and
Small Business”, Published in ACCC Website, www.Accc.Gov.Au
15. Mayoux, L. 2005. “Women’s Empowerment through Sustainable Micro-finance: Rethinking - Best
Practice”. Accessed from Gender and micro-finance website: http://www.genfinance.net on 01/03/2008
16. Merrett, C. Holmes, M. Walzer, N. and Roger Brown. 2002, “New Generation Cooperatives: Alternative
Measures of Success”, Illinois Institute for Rural Affairs WI, Value-Added Conference.
17. Sobrado Miquel. 2000. From Navies to Entrepreneurs: The OW in Costa Rica. In a future for the excluded.
(Eds) Raff Carmen and Miquel Sobrado. Zed Books. London,
18. United Nations Report (1984). “Promoting Organized Self-Help Through Cooperative Modes of
Participation”, UN Center For Human Settlement (Habitat)
19. UN Division for the Advancement of Women (UNDAW). 2001. “Empowerment of Women Throughout
the Life Cycle as a Transformative Strategy for Poverty Eradication”. Department of Economic and Social
Affairs. Report of the Expert Group Meeting, 26-29 November. New Delhi, India
20. Walter, G.R. 2003. The process discursive approach to community economic development. Community
Development Journal. 38(2)
21. Wikipedia, 2007. Tigray Region: The Free Encyclopedia. Http://En.Wikipedia.Org/Wiki/Tigray_Region,
Accessed on May 12, 2007.
22. Zeuli, K. 2002. “The role of cooperatives in community development”, Bulletin No. 3 Modison, Center for
Cooperatives, University of Wisconsin.
23. Zeuli, K. Lawless, G. Deller, S. Cropp, R. and Hughes, W. 2002. “Assessing State and Community Impacts
of Agricultural and Rural Cooperatives”, Final Report to USDA Rural Business Cooperative Service to
Fulfill the Requirements of Contract Rbs-99-23.
Dr.R.Dayanandan is having the academic background of M.A (Econ),

M.A (R.D), M.B.A, M.Phil (MLP) and Ph.D with extensive teaching
and research experience. He is a member of doctoral committees for
different universities and higher Institutions. A prolific writer, he has
written several books and many papers in international and national
publications. He is a perspective researcher and secured funds from
different international funding agencies. He is a life member of several
professional and academic bodies. Currently he is an Associate
Professor of Mekelle University
38
MARKETING OF BANK PRODUCTS – EMERGING CHALLENGES &

NEW STRATEGIES
Dr. R.K. Uppal
Director, UGC Sponsored Major Research Project
D.A.V. College, Malout (Punjab)
Abstract. The present paper acknowledges with same limitation that Indian

private sector banks and foreign bank’s marketing strategies are quite better
than our public sector banks. On the basis of performance parameters like
deposits, advances, interest income, other income and operating profits, the
growth in performance is much better in foreign banks and private sector
banks. The paper also suggests some strategies for the enhancement of bank
marketing. Only those banks will survive in the future which will adopt
November, 2010
effective and realistic strategy to win the trust of the customer.
Keywords: Bank Marketing, Customer, Challenges and Strategies
JMIJMR
Introduction
Human being is a social being. Throughout the life, all we do is try our best to fulfill our needs. The
place where things are exchanged or say mutual needs are satisfied, is called the market and the
efforts to make people aware of your offerings encouraging them to deal with you and let them
believe that in doing so, they are satisfying their needs at its best is called marketing. After the
banking sector reforms, marketing has developed as a more integrated function within financial
service organizations like banks largely as a result of rapid changes in the operating environment.
Banks Marketing is defined as a aggregate of function directed at providing service to satisfy
customer’s financial needs and wants, more effectively than the competition keeping in view the
organizational objective of the bank. The bank marketing has become a very complex yet interesting
subject as it requires the knowledge of economics, sociology, psychology, banking and also core
marketing concept (Sasanee, M.K. p. 5). In marketing, it is the customer who has the upper hand. The
mantra of effective marketing bank products lies in the systematic and professional approach towards
satisfying customers needs (Ojha, V.K. p. 19). Thus, banks have to set up “Research and Market
Intelligence” wings so as to remain innovative to ensure customer satisfaction and to keep abreast of
market development (Ananthakrishnan, G. p. 9).
Product and Service
A product is defined as “Anything that has the capacity to provide the satisfaction use or perhaps, the
profit desired by the customer”. Product and service are the words used interchangeably in banking
parlance. The bank products are deposit, borrowing or other product like credit card or foreign
exchange transaction which are tangible and measurable whereas service can be such products plus
the way/manner in which they are offered that can be expressed but cannot be measured i.e.
intangibles.Better service is more important than just a good product in the marketing of banking
service, so the focus should be on the want and need of satisfying that product or service.
39
Different Products and Services

• Deposits – Banks accept the deposits of the public. In order to attract the savings of the
people, the bank provides every sort of facility and inspiration to them and collects the
scattered savings of the society. The bank opens an account of those people who deposit their
savings with the bank. These deposit accounts can mainly be of three types and people can
open any of these three types of accounts according to their wish. These accounts are current
account, saving bank account, fixed deposit account.
• Loans – The bank just don’t keep with themselves
the deposited amount of the people, rather they
advance them in the form of loans to the
businessman and entrepreneurs, just to earn profits
for their partners. The loanee keeps some gold,
Bank Marketing is
silver, fixed and variable assets in the form of the aggregate
security with the bank. The bank can advance loan function directed at
to their customers in three ways: overdrafts,
money at call, discounting bills of exchange. providing service to
Marketing Approach to Banking Services satisfy customer’s
• Identifying the customer’s financial needs and
financial needs and
wants. wants, more
• Develop appropriate banking products and effectively than the
services to meet customer’s needs. competition keeping
• Determine the prices for the products/services
developed. in view the
• Advertise and promote the product to existing organizational
and potential customer of financial services. objective.
• Set up suitable distribution channels and bank
branches.
• Forecasting and research of future market needs.
From the above discussion of bank marketing, it can be understood that the existence of the bank has
little value without the existence of the customer. The key task of the bank is not only to create and
win more and more customers but also to retain them through effective customer service. Customers
are attracted through promises and are retained through satisfaction of expectations, needs and wants.
Marketing as related to banking is to define an appropriate promise to a customer through a range of
services (products) and also to ensure effective delivery through satisfaction. The actual satisfaction
delivered to a customer depends upon how the customer is interacted with. It goes on to emphasise
that every employee from the topmost executive to the junior most employee of the bank is market.
Due to the introduction of LPG policy and IT Act of 2000 the scope of the market has enhanced.
Customer’s expectations are high from the service industry like a banking industry. Only those banks
will survive who will provide efficient and customer desired services.
Scheme of the paper
The paper has been divided into six sections. After the brief introduction, second section reviews
some studies related to the present theme. Third section highlights objectives and research
methodology. Fourth section discusses results. Section five reflects strategies and last section
concludes the paper.
II. Review of related study
Dwivedi, R. (2007) explained that finance functions are important but not as important as the
marketing functions. Friction between the marketing and finance functions would be detrimental to
40
the smooth development and functioning of any business organization. Finance objectives like value
maximization to shareholders are integral parts of any new strategy adopted by the organization. But
this objective seems to have been lost amidst the flurry of marketing activities focusing on market
share. Conscious efforts must be taken to avoid the missing core objective and for sales growth.
Dixit, V.C. (2004) concludes that for successful marketing and to make it more effective, identify the
customer needs by way of designing new products to suit the customers. The staff should be well-
equipped with adequate knowledge to fulfill the customer’s needs. We should adopt long-term
strategies to convert the entire organization into a customer-oriented one.
Gupta, O. (1997) described the emergence of services sector and banks experience in service
marketing. He emphasized customer satisfaction as the key to success and suggested a few measures
to meet the needs and expectations of the customers.
Gurumurthy, N. (2004) asserts that technology today is claimed to be a ‘leveler’ and not a
‘differentiator’. After the ‘wow’ feelings die down, technology would become a must for most clients.
Banking products can be easily copied and replicated by competitors unlike manufactured products. It
is also not a viable model for marketers to compete on price. The solution, therefore, would lie in
effective application of marketing strategies.
Jain, A. (2007) described that marketer has to know that each and every country is having various
marketing environment. Comparatively, it has to be very clear that the international marketer is bound
to hold on the reorganization that every marketing environment differs from place to place as well as
nation to nation than that of the same country state. It is also evident from the study that the global
business transactions have to be sound planned and objectives oriented in nature.
Malik (1996) explained the importance of human capital for successful banking. He described the
various aspects of human resources development in banks. He observed that skill level of a significant
segment of the workforce in Indian banks was not up to standard and they opined that banks seeking
major performance improvements had no option but to overcome these obstacles speedily.
Patnaik, U.C. and Chhatoi, B. (2006) assess the marketing efforts of the Staten Bank of India, which
enjoy the status of premier bank in India. He also concludes that banks have a wide network of
branches for delivery of products. It has taken up some measures to improve the quality of its
employees and customer service at branches. But, its pricing are wilting under competition without
any regard to costs and it is yet to give due emphasis to its promotional measures.
Sreedhar (1991) have dealt with marketing in commercial banks. They have emphasized motivation
research, marketing research and promotional aspects in marketing of services and suggested to
improve the marketing strategies to cope with the changing environment.
Objectives, Research Methodology, Database
Objectives
• To study and analyze the marketing developments regarding products and services in various
bank groups.
• To suggest some strategies for the enhancement of bank marketing.
Research Methodology
Research Design
Marketing has suddenly become a buzzword in the banking sector. Customer has suddenly moved to
the centre-stage and he has now a choice. How do banks then attract a customer to use their product
and services? One has to reckon the fact that the old loyalty can no longer be taken for granted. Banks
have to make efforts to retain the existing customers and also use strategies to attract new customers
to their fold.
Sample Design
The universe of the study is Indian banking industry. The Indian banking industry has been divided
into three major bank groups.
41
• Public Sector Bank Group – G-I (28)

• Private Sector Bank Group – G-II (28)
• Foreign Bank Group – G-III (29)
Parameters of Study
• Nature of competition in the banking industry pre and post 1993
• Performance parameters of public, private sector and foreign bank group
i. Deposits
ii. Advances
iii. Interest Income
iv. Other Income
v. Operating Profit
All the parameters have been analyzed for the period 1993 and 2007
Growth rate is measured with the help of following formula
Growth rate = Yt-Yt-1

--------------
Yt-1
Yt= Current Year, yt-1=Base Year
Database
• Report on Trend and Progress of Banking in India 1993 and 2007 RBI, Mumbai
Results and discussion
Nature of competition in the banking industry pre and post 1993
A glance at the table 1 reveals that there is a lot of difference in the nature of competition in the
banking industry before and after banking reforms. Many new products have been introduced. Now
all the work is done by technological tools. Many e-delivery channels like ATM, credit card, M-
banking, Tele-banking, I-banking have come into existence. Now banks take profit into consideration
rather than price. Customer was slave to the bank before 1993 but now he has become the king of the
bank. Customer can get feedback as per his own wish.
Table 1: Nature of Competition in the Banking Industry Pre and Post 1993
Indicator Pre-1993 Post-1993
Customer Service Mandated by committee reports and law Consciously practiced as a way of banking
Customer feedback Done based on regulator’s guideline Willingly attempted

complaint/suggestion boxes symbolized
this
Product innovation Minor variations of vanilla products New products with value additions
Tools Manual Technology driven

Delivery channel Branch More alternate delivery channels like ATMs,
phone banking, internet banking, mobile
banking, DSAs
Pricing Price=cost plus profit Profit=price-minus cost
Orientation Inward looking Outward looking
Status of the Slave to the bank King because more bankers chasing him
consumer
Branch ambience Resembled erstwhile government offices Aims to simulate supermarket buying
experience
42
Performance parameters of public, private sector and foreign bank group

Table 2 reflects the marketing of services by the Indian banks during reform period and after reform
period. It is clear from table that all the parameters have shown the remarkable performance after the
banking reforms. But public sector banks lags behind the private sector and foreign banks. The gains
of private sector banks are more in terms of deposits, advances and operating profit. Private sector
banks and foreign banks are growing fast than the public sector banks. Thus the table implies that
private sector and foreign banks are more efficient in the marketing of their products and services.
Table 2: Performance Parameters of Public, Private Sector and Foreign Bank Group
Rs. in Crore
G-I G-II G-III
Parameters 1993 2007 Growth 1993 2007 Growth 1993 2007 Growth
% % %
Deposits 263254 19,94,199.57 676 15445 551,97.07 3474 20875 1,50,793.58 622
Advances 153880 14,40,122.88 836 8012 4,14,754.81 5077 10433 1,26,338.57 1111
Interest Income 31885 1,68,107.66 427 1677 51144.55 2949 3628 18,018.92 396
Other Income 3958 20,871.65 428 209 11120.66 5220 310 6,937.14 2137
Operating Profit 3134 42,268.16 1248 233 14048.58 5930 580 9,599.81 1555
Source: Report on Trend and Progress of Banking in India 1993 and 2007 RBI, Mumbai
Challenges of bank marketing

• Technology
Marketing by private sector banks and foreign banks is more effective than public sector banks
because these banks are IT oriented. Private sector banks and foreign banks are attracting more
customers by providing e-services. Thus, technology has become a challenge before the public sector
banks.
• Untrained Staff
Often it happens that when a prospective customer approaches the branch, the employees seem to
have very little knowledge about the scheme. This reflects an ugly picture of our bank’s image. Banks
are not losing one prospective customer but 10 more customers who would be touch of this man.
Attitude of the employees towards customers is also not very well. Thus, it is a need of time to
reorient the staff.
• Rural Marketing
This is a big challenge before the Indian banks to enhance rural marketing to increase their customers.
Banks should open their branches not only in the urban and semi-urban areas but also in the rural
areas.
• Trust of Customers
Marketing can be enhanced only by increasing the customers. Customers can be increased or attracted
only by winning the trust of the customers.
• Customer Awareness
Customer awareness is also a challenge before the banks. Bank can market their products and services
by giving the proper knowledge about the product to customer or by awarding the customer about the
products. Bank should literate the customers.
43
Strategies for the enhancement of bank marketing

In the fierce competitive market, needs of customer keep changing. Hence, our marketing strategy
must be dynamic and flexible to meet the changing scenario. Here are steps that form successful and
effective marketing strategy for bank products.
• Emphasis on Deposits
Emphasis, though in a discrete manner, should be given to mobilize more of term deposits as they are
more profitable for the bank in comparison to demand. Introduction of products comparable to “Kisan
Vikas Patra” of post office and product with the facility of tax
rebate under section 88 of Income Tax Act will of much help
in this regard.
• Form a Saleable Product Scheme Efforts should be
Bank should form a scheme that meets the needs of customers. made to widen and
A bunch of such schemes can also form a product. A bank deepen the process
product may include deposit scheme, an account offering more
flexibilities, technically sound banking, tele/mobile/net of information flow
banking, an innovative scheme targeted to special group of for the benefit and
customers like children, females, old aged persons,
businessman etc. In short, a bank product may consist of education of Indian
anything that you offer to customers. customers. There is
• Effective Branding a need to educate
Man is a bundle of sentiments and emotions. This can the customers on
effectively be helpful in branding our products. Considering bank products.
the features of products and target group of customers, the
product can be effectively branded so as to sound it catchy and
appealing. Some proven examples are Apna Ghar, Dhan
Laxmi, Kuber, Flexi Deposit, Smart Kid, Sapney, Vidya etc.
The branding should be done in such a way that the brand name must attract the attention of
customers. It should be easy to remember. The target group and the silent feature of the product
should resemble brand name. This will help a lot in making the brand successful. All employees and
all our campaigns should refer the product by its brand name only so that to strike the same in the
customer’s mind.
• Products for Women
The national perspective plan for women states that 94 pc of women workers are engaged in the
unorganized sector and 83 pc of these in agriculture and allied activities like dairy, animal husbandry,
sericulture, handloom, handcrafts and forestry. Banks should do something to improve their access to
credit which they require.
• Customer Awareness
There is a need to educate the customers on bank products. Efforts should be made to widen and
deepen the process of information flow for the benefit and education of Indian customers. Today, the
customers do not have any idea as to how much time is required for any type of banking service. The
rural customers are not aware for what purpose the loans are available and how they can be availed.
Customers do not know the complete rules, regulations and procedures of the bank and bankers
preserve them for themselves and do not take interest in educating the customers. It is a need to
educate the customers from the grassroots of banking. It is time that each bank branch takes steps to
educate the customers on all banking function, which will facilitate growth of banking on healthy
lines both qualitatively and quantitatively.
44
• Advertisement
Advertisement is an eminent part of marketing of bank products. Advertisement should be such that
appeals to people. It should not follow the orthodox pattern of narrating a product. For effective
advertisement, bank should understand people’s tastes and choices.
• Selling Products in Rural Areas
For enhancing the marketing of their product, bank should sell their products in rural areas. For it,
there is a need to open branches in the rural areas.
• Informing Customers About Products
The bank should embark upon aggressive marketing of its products, particularly at the time of
launching a new product, which will inform the perspective customers regarding product and at the
same time relieve staff at branch level from explaining the product to all customers.
• Customer Convenience
In a service industry like banking where product differential is hard to maintain and quality of service
depends upon the service provider, from whom it cannot be separated. So the bank employees have to
render services to the satisfaction of the customer, not as per their own conveniences or whims.
• Re-orient Staff
Sincerity of efforts in implementation of the measures is lacking among the bank staff. It is a fact that
its employees are not able to rise up to the expectations of its customers. They lack in their behaviour,
attitude and efficiency. The phenomenon is glaring at urban centers. Therefore, it calls for an
immediate attention which is missing link in the entire process of marketing, and the bank should
undertake all such steps to motivate and reorient its staff.
• Sale of Products and Services through E-delivery Channels
After the Information Technology Act, many new e-delivery products have been introduced. These e-
delivery channels are very helpful in enhancing the marketing of various products and services. Thus
Indian banks should sale the products and services through e-delivery channels.
• Sale of Products and Services through Web-sites
Internet is a network of network which connects the world. Thus, banks should sale their products
through web-site. This will enhance the marketing of the products not only at the national but also at
the international level.
Implication
Thus the study implies that for a successful and effective banking marketing of bank products is a
necessary condition. This condition can only be fulfilling only by attracting the more and more
customers. Thus, bank should make only policies which are helpful in fulfilling the needs of
customers.
Conclusion
Banking sector reforms have changed the traditional way of doing banking business. Mainly
technology is the outcome of banking reforms. Customer is now the king and customer focus or
satisfaction of customer is the main aim of the banks. With the introduction of new products and
services competition has grown up among the banks. Only those banks will survive who face the
competition with the effective ways of marketing.
45
References
1. Ananthakrishnan, G. (2004), “Marketing of Bank Products”, IBA Bulletin, (April),s p.9
2. Dwivedi, R. (2007), “Managing Marketing-Finance Interface”, Journal of Commerce and Trade, Vol.
2, No. 2 (Oct.), p. 32
3. Dixit, V.C. (2004), “Marketing Bank Products”, IBA Bulletin, (April), p.15
4. Gupta, O., “Emerging Issues in Service Marketing-Banks Experience”, SBI Monthly Review, (Dec.),
p. 627
5. Gurumurthy, N. (2004), “Marketing Bank Products”, IBA Bulletin, (April), p.23
6. Jain, A. (2007), “Managerial Role in International Marketing Strategies”, Journal of Commerce and
Trade, Vol. 2, No. 2 (Oct.), p. 29
7. Malik, S.C. (1996), “Building Human Capital for Banking”, Vichaar, Vol. 16, Issue 4, (Oct.)
8. Ojha, V.K. (2004), “Mantra of Effectively Marketing Bank Products”, IBA Bulletin, (April), p.19
9. Patnaik, U. and Chhatoi, B. (2006), “Bank Marketing” edited book by Sonali Publications, New Delhi.
10. Sreedhar, G., “Marketing-Style of Indian Banks”, The Banker, New Delhi, (Feb.)
11. Sasanee, M.K. (2004), “Marketing Bank Products”, IBA Bulletin, (April), p. 5
Dr. RK Uppal did his M.A. in Economics from Punjabi University, Patiala
in 1986. Thereafter, he obtained M. Phil. degree from MDU, Rohtak in
1987, Ph. D. degree from Punjabi University, Patiala and D.Litt degree from
International University of Contemporary Studies, USA in 2009,
specializing in banking and finance, Dr. Uppal has 37 books in his credit and
has published 132 research papers on the subject in reputed national and
international journals. He also presented 42 research papers in national and
international conferences. Presently, he is head of the Dept. of Economics,
DAV College, Malout (Punjab) and Principal Investigator of a UGC-
Financed Major Research Project on Indian Banking. He has successfully
completed four major research projects of UGC, ICSSR and HRD Ministry,
New Delhi.
46
STATE FINANCES IN INDIA: PROBLEM AND PROSPECTS

Dr. Ratna Vadra
Faculty , IMT, Ghaziabad
Abstract. Public finances in India are at a turning point. Analysis of the past

data, however, shows no improvement in any of the major fiscal indicators.
Restructure of debt, reforms in power sector and implementation of other
issues under MTFRP hold promise for future. Lower revenue transfers to
states have exacerbated their revenue deficits and capacity to spend on social
infrastructure. The proposed study attempts to bring out the deteriorating
trend in state finances of India in recent years and examine as to what extent
November, 2010
the recent reform measures taken by stares are helpful in reducing the
deficits. The paper details the areas of reform the States should focus on to
impart efficiency and improve revenue productivity of revenues and
JMIJMR
prioritization and compression of unproductive expenditures. These, however,
require a strong political will and administrative competence and involvement
of the public in the reform process.
Keywords: State Finances, Fiscal Crisis, India, Fiscal Reforms, Deficits
Introduction
The structural imbalance in India’s public finance system has existed right from the beginning. While
the deterioration in fiscal turning points in the last decade can be related to some proximate causes
like pay revision of employees or sluggish revenue growth because of a slowdown in the economy,
the imbalances in the state budgets have their origin in factors that are structural in character [Anand,
Bagchi and Sen 2001].
Despite several years of fiscal consolidation effort, large and persistent fiscal deficits remain. India’s
overall government spending, currently around 33% of GDP (Centre and states together) will need to
be brought down substantially as a proportion of national product in order for India to achieve its
reform goals of macroeconomic stability and long-term rapid growth. The states’ increasingly large
deficits mean their fiscal policy is an important factor not only in their own performance but in India’s
overall fiscal sustainability. Deteriorating finances have caused state spending on critical sectors such
as health, education, irrigation, and infrastructure to decline below the levels required to make further
headway against poverty. There has been a steep deterioration in State finances during the last decade
as evidenced by sharp increases in revenue, fiscal and primary deficits, increases in their indebtedness
and contingent liabilities, and decline in capital and maintenance expenditures. Low buoyancy of
central transfers and spillover of central pay revisions have had the most adverse impact on State
finances. However, the States’ own fiscal performance has also seen sharp deterioration.
Concurrently, there has been an increase in spending on loss-making state enterprises and massive
subsidies for power, water, irrigation, and transport. The remainder of the Study is organized as
follows.
Section I provide the overview of the study of public finances of states in India and also present the
need for Sub national Fiscal Reforms .Section II deals with the objective, scope of study and review
of literature. Section III enumerates the major causes of fiscal crisis. Section III gives analysis and
assessment of the major deficit indicator of the State Governments .Section IV is with the conclusion
and suggestions
47
1. Need for Sub national Fiscal Reforms:

Launching Indian economy to the higher growth trajectory during the tenth Plan crucially depends on
State level fiscal reforms. The Constitution assigns a pre-eminent role to States in agricultural
development, poverty alleviation and human development and co-equal position in the provision of
physical infrastructure. The predominant role in allocation and cooperative role in distribution makes
States’ fiscal operations critical for macroeconomic stabilization as well. Although the Constitution
places limitations on the States’ borrowing powers, in actual practice they are able to run large deficits
and that makes fiscal reforms at the State level critical for achieving overall fiscal consolidation in the
country. Thus, fiscal reform at the State level is important from the viewpoint of both macroeconomic
stability and microeconomic allocative efficiency. Much of the discussion on fiscal restructuring in
Indian context has remained at the Central level in spite of the fact that the States incur almost 55 per
cent of total expenditures and raise 37 per cent of total revenues. Ironically, even at the Central level,
even after a decade of fiscal restructuring, fiscal consolidation has remained elusive. Analysis shows
that, on a comparable basis, there has hardly been any reduction in Centre’s fiscal deficit. On the
contrary, there has been a steady increase in the revenue deficits and sharp reduction in the share of
capital expenditures indicating significant deterioration in the quality of fiscal imbalance (Rao and
Amar Nath, 2000). International comparison too shows that of the 74 countries with more than 10
million population, only 7 countries including India recorded a government deficit higher than 7 per
cent and India stood in the third position after Turkey and Zimbabwe (Acharya, 2001). The
unsatisfactory nature of finances constrains the ability of the Central government to transfer adequate
resources to the States.
Fiscal management of state governments in India is certainly a cause of worry. Fiscal position of state
government in India is certainly a cause of worry. More worrisome is the fact by and large state
finances are deteriorating further with the obvious consequence of the central government finances.
Finances of states are in worst shape. Revenue deficit has been rising alarmarigly resulting in growing
indebtness of the government. Interest amount on its debt is presently more that what the state
government spends on all economic services like agriculture, irrigation, power rural development etc.
2. Objective of study:
In view of the above theoretical background, the objective of the present study is to examine the
background and to identify the major problem areas at state level. The Objective of the paper is to see
whether fiscal reforms taken by the states for resources mobilization led to reduction in deficits .The
present study level of fiscal Reforms in India is to test the hypothesis that: “Fiscal Reforms have
helped the states in improving their fiscal health”. The study aims to test the hypothesis on macro
level.
2.1 Research methodology:
Our study on the topic “Fiscal crisis in India” is based exclusively on secondary data taken from
various issues on “State finances” by Reserve Bank of India (R.B.I.), Public Finance Statistics,
Government of India, Economic Survey, and Centre for Monitoring Indian Economy (CMIE).The
trends in deficits of the all-states are analyzed
2.2 Review of Literature
There are many studies on State level fiscal reforms in India and related topics. This section deals
with the review if such studies. Reddy, K.N. (1972) has analyzed a secular and time pattern of the
growth of public expenditure in India. He has taken time period from 1872 to 1968. In an effort to
establish a theoretical link between the growth of public expenditure and National Income of the
country Reddy has examined the applicability of Wagner’s hypothesis in India. Reddy concludes that
the study conducted by Peacock and Wiseman for great Britain also holds good in case of India. The
study provides important guidelines to whose main concern is expenditure policy formulation. While
examining the shorter period (i.e. periods after the two world wars and independence of the country)
he sees the relevance and validity in the concept of displacement effect propounded by Wiseman and
Peacock. His study of the growth of public expenditure in India over roughly a century, is a modest
48
attempt on the lines of the pioneering study “Growth of

public expenditure in the U.K.” done by Wise man and
Peacock.
Even after the launch
Rao, M. Govinda (1981) makes a modest attempt to study
and to identify the determinant of tax revenue and non- of the reform process
plan revenue expenditure of the states towards making in India significant
their medium term projections. The researcher has chosen
the states of Karnataka, Kerela, Orissa and West-Bengal attention is not given
for the purpose in studying the time series determinant. In to the fiscal reforms at
this study, both the political and economic determinants
have been considered. The effects of various economic
state level. Despite
and political factors on the fiscal decisions of the four several years of fiscal
states are also quantified. While discussing the consolidation effort,
determinants of non-plan revenue expenditure the study
summaries that in all the four states except Orissa, the large and persistent
growth expenditure on various services is of providing fiscal deficits remain.
them. Only in Orissa the growth in non-plan revenue
expenditure is due to increased quantity of public
services. The results of the study confirm ‘Down’s
Hypothesis’ that fiscal decisions are essentially guided by the desire to maximize the length of their
tenure by the parties in power and are not influenced by their ideological doctrines. Howes, Stephen,
Ashok, K. Lahiri and Nicholas (2000) in their article discusses about the states level reforms in India.
They also enumerate the causes that lead to the spread of state level reforms in India. According to
them India cannot succeed with reformed and revived state governments. Chelliah, Raja. J. (1991) in
his essays says that with the era of liberalization and privatization the relative position of states has
enhanced. Hence state level reforms are as important as the reforms at the Centre. Each state must set
its own house in order. The reforms should include area of taxation with introduction of VAT; cut of
subsidies cut of staff of general administration, privatization of SEBs etc. The tax reform, which was
carried out in South East Asian countries, can provide the lessons for the future.
Rao, Govinda (1992) in his paper seeks to examine the present state of public finance at the state level
with a view of tracing the emerging trends in the medium as well as long term. The major objective of
the paper is to identify the major problem areas and indicate policy changes to tackle them. The
precarious fiscal position in states calls for bold and decisive policy measures which include reduction
in employment, levy of appropriate user charge on services, phase of non merit subsidies,
privatization of state electricity boards, rationalization of tax system by introduction of VAT and
determine the shares of states in aggregate Central taxes rather than percentage share of two taxes.
Kurian, N.J. (1999) in his paper attempts to bring out the deteriorating trend in state finances in recent
years. “Failure to contain wasteful expenditure and reluctance to raise additional resources” on the
part of the states are the main problems afflicting most of the state finances. Tax wars among the
states government to attract private investment in the wake of economic reforms as well as
competitive populism and the pay revision of employees led to starvation of funds of states. Unless
drastic measures are resorted to without delay finances of states will collapse.
Chelliah, J. Raja, Rao, Kavita R. (Jan 2002) in their paper discusses about the rational ways of
increasing the tax revenue of Central and state governments in India. According to them no serious
effort has been made to modernize tax administration. The administration of all the states is manual
based. A reform and modernization of the administration of the major taxes through computerization
and strong deterrent action against tax evaders and corrupt taxmen are two important steps to be taken
to increase revenues. Kurian, N.J. (2003) in his work pointed to some expend success has been
achieved at the Centre but there has been steep deterioration in the finances of the states. Any decline
in the Union government and the associated fall in devolution to the states will have further deletions
effect on regional imbalances of the country. Anand, Mukesh, Bagchi. Amaresh, Sen, K. Tapas (Jan.
2002) in their article has discussed about the causes of fiscal indiscipline at the state level.
49
Weaknesses of the system of inter-governmental fiscal relations have been cited as prime caused
leading to fiscal indiscipline among states, which call for corrective measures.
In a similar line Bagchi, Amaresh (2002) have observed even after a decade of correction the
consolidated fiscal deficit (FD) of the government (Centre plus states) stood at about the same level at
the close of decade as it is in the beginning10% of GDP. The crises in state finances have their origin
in some deep-seated weakness of the fiscal system that call for structural reform. The weakness is in
revenue system, budgeting system and system of inter government financial relations. If fiscal deficit
is to bring down the weakness of the fiscal system noted above need to address frontally. The study
conducted by Bhargava, P.K. (2002) discussed about the state level fiscal reforms. The state should
play complementary and supplementary role and performance to the efforts of the Centre to play and
improve the fiscal situation. It is high time that agriculture income tax should be included in the
constitution to raise the revenue of the states. Chelliah, J. Raja, Rao, Kavita R. (Jan 2002) in their
paper discusses about the rational ways of increasing the tax revenue of Central and state governments
in India. According to them no serious effort has been made to modernize tax administration. The
administration of all the states is manual based. A reform and modernization of the administration of
the major taxes through computerization and strong deterrent action against tax evaders and corrupt
taxmen are two important steps to be taken to increase revenues.
Kurian, N.J. (2003) in his work pointed to some expend success has been achieved at the Centre but
there has been steep deterioration in the finances of the states. Any decline in the Union government
and the associated fall in devolution to the states will have further deletions effect on regional
imbalances of the country.
3. Main causes of fiscal crisis
The principal cause for such imbalance is the fact that in spite of limited resources base, states have to
cope with the significant growth in their committed expenditure like wages, salaries pension, interest
payments which constitute a major portion of non plan expenditure. Causes of this imbalance are also
well known. The chief amongst them are the propensity of political leadership to counterproductive
populism and avoidance of tough measures to stem the root. Political instability contributed to the
above trend. It is not likely that there would be any drive towards financial prudency and corrective
measures would be taken to stop the drain through pensions to state electricity board, irrigation, state
road transport corporation etc Therefore the question which assumes significance is that how long the
state would sustain it.
3.1 Pensions
Salaries are such large part of government spending that they must be at the core of any expenditure
restructuring effort. Salaries make up 30 percent of state governments spending. India’s public private
wage differentials are in fact among the highest in the world. In India about 40% of the state
government employees are teachers. “Pensions are increasing at a faster rate due to the longevity of
life”. However, no major reform has been taken so far by state governments towards increased
expenditure of salaries and pensions. As suggested by World Bank, for maintaining a policy of wage
restraint will be avoidance of another pay commission leading to significant increase in real wages.
New hiring is needed in the civil service in priority areas; overall hiring restraint is justified because
there are large areas of overstaffing as well as understaffing. Targeted retrenchment programmes
would be the best way to free up space for new hiring but have not been success in India. A second set
option through which much can be achieved is attrition based restructuring.
Pensions also forms a mounting liability and as a source of fiscal vulnerability. Pension’s payments at
the state government’s level have also risen sharply during the last 10 years. Pensions expenditure of
states are proposition of revenue receipts rose from 5.4 percent in 1990-91 to more than 10 percent in
2000-01.
In the budget 2002-03, Government announced the introduction of new restructured defined
contribution pension system applicable in the first stage to new entrants to government service, except
armed forces. Accordingly, the new pension system (NPS) was introduced from Jan 1, 2004 for
Central Government employees recruited on or after that date. The NPS will be available on the
50
voluntary basis to all persons including self-employment, professional and other in the organized
sector. However mandatory programmes under the employee’s provident fund Organization and other
special provident funds contrive to operate as per the existing system. The Union cabinet recently
approved a proposal to introduce legislative framework for NPS. An ordinance was promulgated on
December 29, 2004 for the establishment of Pension Fund Statutory Regulatory and Development
Authority (PFRDA) to undertake promotional, developmental and regulatory functions in the respect
of pension sector. However no abroad measure has been taken place in case of reforming the pensions
sector of state governments.
However, two types of reforms are underway-structural reforms to enable shifting to a cheaper and
less fiscally risky defined contribution (DC) scheme and parametric reforms to contain the cost of the
current pay, as you go system. GOI has announced DC scheme for new civil servants a scheme that
will also be open to interested state governments and the unorganized sector on a voluntary basis.
Several state governments have indicated their willingness to shift to a DC scheme and some have
already announced that new employees will no longer be eligible for the old defined benefit scheme
(Maharashtra, Tamil Nadu and H. P.)
3.2 Public Sector Undertakings: State Electricity Board and State Road Transport Corporation
A major source of revenue imbalances reflected in dissaving of the public sector is rooted in the poor
profitability of the PSUs. The returns on capital invested by the Government in case of SEBs, and
SRTC have been low. The rationale regime that governs the supply of power to agriculture is an
enormous source of fiscal pressures and in discipline. The agricultural supply to farmers is unlettered
and often free. Even if payments are required for electricity, they are lump sum and so the marginal
cost to the consumer are additional unit of consumption is zero. The biggest problem facing the power
sector is the lack of commercial discipline in three areas that is, in the utility customer relationship,
non-paying customers are frequently not disconnected and bills are often not paid. Second is
government utility relationship. Governments typically fail to compensate utilities for the losses
incurred by them due to supply of power at non-remunerative rates, Third, on the utility supplier
relationship utility lacking cash in part as a resent of the payments defaults.
4. Deficit Indicators of State Government
The consolidated fiscal position of the State Governments showed noticeable improvement in the
recent years owing to fiscal and institutional reforms, particularly the enactment of FRLs, higher
devolution and transfers from the Centre as recommended by the TFC and improvement in tax
buoyancy at the State level. The State Governments achieved a revenue surplus (0.6 per cent of GDP)
in 2006-07 (Accounts) after a gap of nearly two decades and a historically low level of GFD (1.9 per
cent of GDP). All the major deficit indicators, as ratios to GDP, were substantially lower as compared
to the high level of deficits in the recent past (Table 1).
4.1 Finances of the States:
The state governments collectively account for about half of the aggregate fiscal deficit in India.
Table 1 and 2 shows the deficit of State Governments of India during the period 1990-1991 to 2009-
2010. Table 1 shows the deficits of states in Rs crore and Table 2 shows the deficits as percentage of
GDP. The key indicators of deficits of state governments are gross fiscal deficit, primary deficit and
revenue deficits. The gross fiscal deficit of state government was Rs 18900 crores(3.3% of GDP ) in
1991-92 Which increased to Rs 30,870 in 1995-96 and then to Rs 87,922 crores in 2000-01. It further
increased to Rs 10,7774 crores in 2004-05 and then to Rs 199,510 in 2009-10. When we see GFD as
percentage of GDP it was 3.3% in 1991-92 which increased to high level of 4.7% in 1999-00 and then
declined to 1.8% in 20006-07 but then further increased to 3.2% in 2009-10.
51
Table 1 : Measures of Deficit of State Governments of India (1990-1991 to 2009-2010)

Year Gross Fiscal Deficit Gross Primary Deficit Revenue Deficit
1991-92 18,900 7,956 5,651
1992-93 20,892 7,681 5,114
1993-94 20,364 4,564 3,872
1994-95 27,308 7,895 6,706
1995-96 30,870 9,031 8,620
1996-97 36,561 11,175 16,878
1997-98 43,474 13,675 17,492
1998-99 73,295 37,854 44,462
1999-00 90,098 45,458 54,549
2000-01 87,922 36,937 55,316
2001-02 94,261 32,665 60,398
2002-03 99,727 30,699 57,179
2003-04 120,631 40,235 63,407
2004-05 107,774 21,353 39,158
2005-06 90,084 6,060 7,013
2006-07 77,509 -15,672 -24,857
2007-08 75,455 -24,376 -42,943
2008-09 146,349 40,128 -10,701
2009-10 199,510 83,083 32,295
Note. Data for 2008-09 is Revised Estimates and Data for 2009-10 is Budget Estimates.
Source: Budget documents of the State Governments.
The states’ fiscal deficit has risen from 3.2% of GDP to 4.7% between 1990-91 and 1999-2000. This
increase in the fiscal deficit consists of a rise in revenue deficit of 2.8% in 1999-2000. Thus, the tight
resource position and crowding out of capital expenditure by increasing pressure of interest payments
and salaries on the revenue account are transparent. The sharp rise in expenditure on social services in
FY 1998 and 1999 is entirely due to a rise in the wage bill because of salary revisions and does not
reflect any real increase in the provision of social services.
52
Table 2: Key Deficit Indicators of the State Government (As Percentage to GDP at
Current Market Prices)
Year Gross fiscal defict Gross primary deficit Revenue deficit
1990-91 3.3 1.8 0.9
1991-92 2.9 1.2 0.9
1992-93 2.8 1 0.7
1993-94 2.4 0.6 0.4
1994-95 2.7 0.8 0.6
1995-96 2.6 0.8 0.7
1996-97 2.7 0.9 1.2
1997-98 2.9 0.9 1.1
1998-99 4.3 2.2 2.5
1999-00 4.7 2.4 2.8
2000-01 4.1 0.2 2.7
2001-02 4.2 1.5 2.6
2002-03 4.1 1.3 2.2
2003-04 4.4 1.5 2.3
2004-05 3.3 0.7 1.2
2005-06 2.4 0.2 0.2
2006-07 1.8 -0.8 -0.8
2007-08 1.5 -0.5 -0.9
2008-09 2.0 0.1 -0.5
2009-10(B E) 3.2 1.3 0.5
Note: Data for 2008-09 is Revised Estimates and Data for 2009-10 is Budget Estimates.
Source : Budget documents of the State Governments.
The Gross Fiscal Deficit (GFD) of the States is primarily an outcome of bilateral negotiations between
the States and the Centre on permissible net borrowing, i.e., the GFD is an exogenously determined
instrument variable. Total expenditure, and especially capital expenditure, are the variables which
adjust to accommodate limits set by committed revenue expenditures, revenues, and the negotiated
ceiling on the GFD
53
The finances of State Governments traditionally follow a pattern similar to that of the Centre, with a
lag. As a proportion of GDP, revenue deficit of the States shot up from Rs 5651 crores in 1991-92 to
Rs 55316 crores in 2000-01. The proportion declined to 2.2 per cent in each of the two years 2002-03
and of GDP in 2005-06. As a proportion of GDP, revenue deficit which was 0.9% of GDP in 1991-92
then increased to 2.5 per cent in1998-99 to 2.7 per cent in
2000-01, declined to 0.5 per cent in 2009-10 (BE). It may be
noted that Primary Deficit of states was Rs 7956 crores in
1991-92 which increased to RS 13,675 crores in 1997-98
and then soared up to Rs 45,458 crores in 1999-00 and then Several states have
declined to -Rs 24376 crores in 2007-08. After 2008-09 it shown interest in
again started increasing. As percentage of GDP the primary
deficit was 1.8% in 1991-92 which increased to 2.4% in
undertaking a
1999-00 and then declined to -0.5% percent in 2007-08. The comprehensive
recent estimate of primary deficit was 1.3% in 2009- review of functioning
10.(Table 2)The combined finances of the states, which had
exhibited a somewhat intractable negative trait earlier, of states public sector
showed a dramatic turnaround in 2005-06 with the level of undertakings (SPSUs)
fiscal deficit ruling well below the target of 3.0 per cent of
GDP mandated to be achieved three years later. Three including the closing
important factors attributable to this included the award of down of non-viable
the Twelfth Finance Commission in terms of grants and the
incentive scheme of debt consolidation and waiver linked to
units after providing
fiscal consolidation under fiscal rules, revenue buoyancy of suitable safety nets to
the Centre and the introduction of state-level VAT, which employees including
proved to be a very buoyant source for states. As a
proportion of GDP, combined gross fiscal deficit of the (VRS) scheme.
states fell to a level of 2.5 per cent in 2005-06-the first year
of the award of the Twelfth Finance Commission and
revenue deficit was limited
5. Reforms measures by states
States have also undertaken sectoral measures to improve their finances. Several states have shown
interest in undertaking a comprehensive review of functioning of states public sector undertakings
(SPSUs) including the closing down of non-viable units after providing suitable safety nets to
employees including voluntary retirement scheme (VRS). States such as Tamil Nadu, Kerela,
Haryana, Karanataka, Himachal Pradesh, Goa and Orissa have encouraged private sector participation
in the transport and power generation sectors. Karnataka has come out with the policy paper on
restructuring of state public sector undertakings (SPSUs) while Maharashtra has introduced a bill for
restructuring of the (SPSUs). In order to strengthen the administrative machinery, many states have
initiated measures to computerize their records as well as their day-to-day functioning.
Efforts to phase out inefficient PSUs were also made at state level. The leader states include Andhra
Pradesh and Orissa. According to the available information from the ministry of disinvestments, 19
states have identified 290 state level public enterprises for disinvestments out of which AP,
Karnataka, Kerala and West Bengal account for nearly half of the PEs. Restructuring or closure has
been initiated in 221 of these enterprises. So for 69 units have been closed down, 33 units have been
privatized.
States have also initiated measures to reform the power sector, which is crucial for the fiscal reforms.
The main objective of these reforms was to mobilize private sector to resources for augmenting power
generating capacity. The power sector reforms have assumed critical importance in recent years. The
measures taken by the states in this regard relate to the constitution of State Electricity Regulatory
Commission (SERCs) for determining tariff structure, unbundling of electricity boards and to separate
entities for power generations State electricity Regulatory commission has been constituted in 21
states out of these SERCs of 15 states have issued tariff orders. The states of A.P., Delhi, Gujarat
Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan and
54
Uttar Pradesh have enacted their state electricity acts. Twenty-one states have signed Memorandum of
Understanding (MOUs) with the Ministry of Power, Government of India to undertake reforms in
time bound manner. The Debt Swap Scheme (DSS) operated during 2002-05 and Debt Consolidation
and Relief Facility (DCRF) recommended by the Twelfth Finance Commission have created fiscal
space at the State level in India by reducing the expenditure on interest payments. The rule-based
framework adopted under FRLs brought in fiscal discipline to the States.
International financial institutions like World Bank and Asian Development Bank have focused on
state level reforms and extended loans to state undertaking economic restructuring programmes. The
World Bank is assisting Andhra Pradesh, Uttar Pradesh and Karnataka. The Asian Development Bank
has similar programmes with Gujarat and Madhya Pradesh. The World Bank has suggested tax on
agricultural income and land reduction, indiscretionary subsidies, introduction of VAT and improving
cost recovery particularly in power and irrigation sectors, increased social sector and infrastructure
spending, empowerment of poor through participation, consolidation of welfare programmes,
downsizing and upgrading the civil service should form a part of state level fiscal reforms. There are
two major challenges in pursuing the fiscal restructuring plan detailed by the Thirteenth Finance
Commission. First, a substantial proportion of the budgeted fiscal correction in 2010/11 was realised
from the savings on account of lower-than-expected pay and pension arrears, loan waiver and higher
telecom revenues and disinvestment proceeds. These items together enabled the adjustment of fiscal
deficit by 1.2 percentage points. Such relatively easy options will not be available in coming years
and serious policy measures to contain unproductive expenditures will have to be initiated.
Second, the Thirteenth Finance Commission has put in several conditions to make the Fiscal
Responsibility and Budget Management (FRBM) process transparent and comprehensive, capable of
reacting to exogenous shocks and to ensure improved monitoring and compliance. The measures
recommended include (i) preparation of a more detailed Medium Term Fiscal Plan (MTFP) to put
forward detailed estimates of revenues and expenditures, to make it a statement of “commitment”
rather than merely one of “intent”; (ii) presenting the economic and functional classification of
expenditures as a part of MTFP; (iii) preparing a detailed statement on Central transfers to States; (iv)
reporting compliance costs on the major tax proposals; (v) presenting the revenue consequences of
capital expenditures and fiscal fallout of Public Private Partnerships (PPPs); and (vi) preparation of an
inventory of vacant land and buildings valued at market prices by all departments and enterprises.
Achieving fiscal consolidation recommended by the Thirteenth Finance Commission will depend
upon both improving the revenue productivity of the tax system and phasing out unproductive
expenditures. The government will have to initiate measures to rationalise food and fertilizer
subsidies, also as indicated in the Economic Survey (2009/10). On the revenue side, two important
initiatives relate to the passing of the Direct Taxe Code and replacement of domestic indirect taxes at
the Central and State levels with the Goods and Services Tax (GST). The Government has put out a
revised paper to elicit the opinion of the public before placing it in the monsoon session of the
Parliament and it should be possible to implement the reform from April 2011. As regards GST,
considerable work requires to be done before the reform is implemented. These include completing
the “grand bargain” to determine the structure of the tax, carrying out the constitutional changes
required, the mechanisms needed to deal with inter-state transactions, agreements to share revenue
from services whose scope spans across States and administrative changes needed to effectively
implement the new tax regime 134. GST is a major tax reform agenda in the country replacing the
plethora of domestic indirect taxes prevailing at present. The reform is necessary to secure seamless
trade across the country and to ensure a common market within the federation. However, a lot of work
needs to be done before the tax becomes operational. Both the first discussion paper put out by the
Empowered Committee of State Finance Ministers and the paper by the Task Force of the Thirteenth
Finance Commission are agreed on the levy of dual GST.
5.1 .Recent reform measures by States
In the backdrop of moderation in economic activity as fallout of the global financial crisis, State
governments have announced a number of policy initiatives in their budgets for 2009-10. Emphasis
has been accorded to the generation of employment, restructuring of Public Distribution System
55
(PDS) and tax exemptions/ reductions besides giving priority to creating more
opportunities/assistance to entrepreneurs in terms of improvement in industrial infrastructure. Most of
the States have taken proactive measures to streamline revenue generation at the State level and also
simplified the procedures in general. The simplified procedures include rules, inspections,
registrations and the introduction of the single window clearance system for industries and businesses
to carry on their operations (Andhra Pradesh and Maharashtra) recognizing the fact that the industrial
sector must remain vibrant and growing, special focus has been given to identifying a large pool of
land having access to National Highways, building Special Economic Zones (SEZs) and industrial
estates and making these available for development of industry through the PPP mode in many States.
Almost all the States have announced policy measures to upgrade their overall infrastructure and West
Bengal and Punjab have accorded priority to the development of infrastructure for clusters of
industries in the small scale sector so that new small scale units can develop alongside traditional
industries. Some States have proposed a ‘New Industrial Policy’ (Rajasthan) while others are in the
process (Meghalaya), Industrial Model Towns (Haryana) and ‘Economic Hubs’ in select places. In
order to augment their power generation capacities some States, viz., Maharashtra, Tamil Nadu and
Mizoram are focusing attention on the generation of power (through the PPP mode). The State
governments have adopted institutional measures oriented towards fiscal discipline. Thus, States have
gradually put in place legislations with respect to various fiscal parameters such as Fiscal
Responsibility Legislations (FRLs), Value Added Tax (VAT), New Pension Schemes (NPS’),
Consolidated Sinking Fund (CSF) and Guarantee Redemption Fund (GRF). The progress so far has
been quite encouraging as far as the implementation of VAT is concerned as all the States have
implemented VAT while Twenty Six States have enacted FRLs. Thus keeping in view the uncertainty
surrounding macroeconomic developments and the need for minimizing its impact, State budgets for
2009-10 have focused on enhanced public expenditure.
6. Conclusion
The ambitious project announced by private participants in area of health, power housing would
neutralize or not. The moot question is the private investment driven growth will contribute towards
the reduction in state financial imbalance. Experience suggests that large public debts normally crowd
out private investment. Does the above mention development defy this logic of it is simply a reason of
one of the political party (currently in power) with the private corporate sector?
The argument is that the volume of investment depends more on private sector participation rather
than the plan expenditure of the state. Thus, there is a good case for attracting private sector
investment in Uttar Pradesh, but for private sector participation, a good governance is a prerequisite to
sustain it in long run and private sector and government both stand to gain out of it. Montek Singh
Ahulwalia in 2000, emphasised the importance of private sector participation. According to him, any
effort to increase the total level of investment does not much depend on the plan expenditure but on
importance of private sector investment. The poor performing state like Uttar Pradesh suffers from
handicaps in attracting private investment. So efforts must be made to attract private investment for
robust growth. Causes of this imbalance are also well known. The chief amongst them is the
propensity of political leadership to counterproductive populism and avoidance of tough measures to
stem the root. Political instability contributed to the above trend. It is not likely that there would be
any drive towards financial prudency and corrective measures would be taken to stop the drain
through pensions state electricity board, irrigation, state road transport corporation etc. Therefore, the
question which assumes significance is that how long the state would sustain it.
References
[1]Ahluwalia, S. Montek., “Economic Performance of states in post-Reforms Period”, Economic and Political
Weekly, 2002, May 6, pp. 1637
[2]Ahluwalia, Montek. , “Understanding India’s Reform Trajectory: Past Trends and Future Challenges”, India
Review, 2002, Vol.3, no.4
[3]Ahluwalia, S. Montek., “India's Experience with Globalisation”. David Finch Memorial Lecture at
Melbourne University, Australia, 2005.
56
[4] Anand Mukesh, Amaresh Bagchi and Tapas. K. Sen., “Fiscal Discipline at the state level: Perverse
Incentives and paths to Reform”, 2002, National Institute of Public Finance and Policy, New Delhi.
[5] Bertucci Guido, Adriana Alberti., “Globalization and the Role of the State: Challenges and Perspectives”
[6] Bank, World.,State Fiscal Reforms in India, progress and prospects,2005, A World Bank Report.
[7] Krueger, O and Sajjid,Chinoy. , “Economic Policy Reforms and the Indian Economy”, 2002, Chicago:
Chicago University Press.
[8] Mukherji, Rahul. , “The Indian State and Globalization”, Background Paper for the Ford Foundation’s
Project Administered by the National Foundation of India,2005.
[9] Rao, M. Govinda, “Proposals for state-level budgetary reforms”, 1992, Economic and Political Weekly.
Feb1.
[10]Rao,M. Govinda and Tapas K.Sen., “Government expenditure in India”, 1991, National Institute of Public
of Finance and Policy, New Delhi.
[11] Rao, M. Govinda J. V.M Sharma., “Value Added Taxation in the states”, Economic and Political Weekly,
1997.
[12]Rao, M. Govinda, “Reforms in Tax System”, 1998, Economic and Political Weekly, PP .1971-1976.
[13]Rao, M. Govinda, “Linking Central Grants to revenue deficit Reduction by states”, 2002, Economic and
political weekly, PP. 1983-84.
[10]Report on Currency and finance, various issues, Mumbai, R.B.I.
[11]Reserve Bank of India, A study of budgets, Bulletin, Various issues.
[12] Sandy ,Gordon., m “Globalisation and economic reform in India”, 1997,Australian Journal of International
Affairs, Volume 51, Issue 1 April , pages 73 - 89
Dr. Ratna Vadra is Ph.D in Economics with specialization in Public

Finance, from Aligarh Muslim University, Aligarh. She has also
Qualified UGC (NET) in Economics. She has also done M.A
(Economics) and B.A (Hons) from the same university. She has 5 years
of teaching and research experience. She has been earlier associated with
Amity Business School, Noida in area of macro and micro economics.
Currently she is working as Senior Lecturer at IMT, Ghaziabad. She has
published number of research papers in national and international
journals. She has also attended number of conferences within India and
also outside India. Her areas of interest are macro economics, micro
economics, public finance and international trade.
57
MARKETING PROBLEMS OF SMALL AND MEDIUM ENTERPRISES
Raavi Radhika1, Dr.A.Venkata Seetha Maha Lakshmi2
Abstract. Small and medium enterprises (SMEs ) are the essential part
of healthy economy. The SME sector represents over 90 percent of
enterprises in most of the developing countries and contribute 40-60

percent of the total output or value added to the national economy. SME
sector in India is the key driver of the nation's economic growth with
a contribution of over 40 percent of the country's industrial output and
about 35percent of direct exports and another 15 percent of indirect
exports. In terms of employment it is a very crucial sector being the
second largest sector after agriculture. In recent years the SME sector
has consistently registered higher growth rate compared to industrial
November, 2010
sector. In the current economic slowdown SME sector has been hit very
hard due to raising interest rates and financial crunch. The small size
JMIJMR
and capacity of the firms and their lack of awareness have bred many
hindrances to their growth. In this backdrop this paper tries to throw light
on the problems related to marketing faced by SMEs in the changing
economic environment and tries to give some suggestions to solve the
problems.
Introduction
Small and Medium Enterprises (SMEs), are the essential part of a healthy economy. The SME sector
represents over 90 per cent of enterprises in most of the developing countries and contributes 40-60
per cent of the total output or value added to the national economy. In recent years, the MSE sector
has consistently registered higher growth rate compared to the overall industrial sector. The major
advantage of SME sector is its employment potential at low cost. Worldwide the Micro, Small and
Medium enterprises have been accepted as the engine to economic growth and for promoting
equitable development. MSEs contribute over 90% of the total enterprises in most of the economies
and are credited with generating highest rate of employment growth and account for a major share of
industrial production and exports.
The Indian Scenario
In India, the MSEs play a major role in the overall industrial development of the country. It is
estimated that in terms of value the small and medium enterprises account for 39% of the
manufacturing output and around 33% of the total export of the country. As per the available
statistics, this sector employs an estimated 31 million people spread over12.8 million enterprises and
the labor intensity in the sector is almost four times higher than the large enterprises.
The president under notification dated 9th may, 2007 has amended the Government of India
(Allocation of Business) Rules, 1961 Pursuant to this amendment Ministry of Agro and Rural
Industries and Ministry of Small Scale Industries have been merged into a single Ministry, Namely,
“Ministry of Micro, Small and Medium Enterprises”. As per the Micro, Small and Medium
enterprises Development Act, 2006, in the manufacturing sector, an enterprise with an investment in
plant and machinery up to Rs. 5 crore is termed as a small enterprise, and an enterprise with an
investment up to Rs.10 crore is defined as a medium enterprise. In the services sector, enterprises
with an investment in equipment up to Rs, 2 crores are classified as small enterprises and those with
an investment up to Rs.5 crore are classified as medium enterprise.
58
Figure: 1 Trends in the growth of Micro and Small Enterprises (MSEs) and the Employment
Generated (in lakh)
Figure-1 Contribution of MSE (%) at 1999-2000 prices in total industrial production and GDP
59
Small and Medium Enterprises are a major contributor of the GDP of a country and an even larger
contributor to the segments of exports and employment. The SME growth has been propelled by
fresh investments in heavy and basic industries: the contribution to exports and employment has been
significant in the wake of increased manufacturing activity and the increasing prominence of service
sector companies in this space. The major thrust is on industries like garments, spices and metals,
which are net revenue earners for the country which is rich in its mineral reserves. The government of
India has given small enterprises an important place in the economic planning for ideological as well
as economic measures. As a result of these efforts, the small sector has achieved an impressive growth
in the number of units. It infers, inter alia, more chances for enterprising persons to assume the
entrepreneurial careers.
Thus, SMEs serve as a seed-bed for the emergence of entrepreneurship of the country. The
development of small scale industries contributes to the increase in the per capita income and
contributes to the economic growth of the economy. It provides for more equitable distribution of the
income of the nation. Further they make effective mobilization of the untapped capital and human
skills and lead to dispersal of manufacturing activities all over the country.
Table 2 Micro small and medium enterprises department budget estimate
Though the government of India is attaching increasing importance to the development of small scale
enterprises by way of various support measures adopted from time to time, they are facing several
problems in practice. According to the third census of SSIs (2001-02), out of the 105 lakh registered
and un-registered SSIs, over 95% of them are tiny units with a low capital and managerial base. With
intensifying competition, many SMEs especially in the consumer goods sector would find it difficult
to survive. Items reserved for SSIs will now face competition from similar products produced by
large scale global manufacturers, imported freely at low tariffs. When the domestic market is fully
open to global competition, the low labor cost advantage that our SMEs claim to enjoy may not work
beyond a point. Low end products will also face competition from export oriented developing
countries.
60
In the current economic slowdown, SME sector has been hit very hard due to raising interest
rates and financial crunch. The small size and capacity of the firms and their task of
awareness have bred many hindrances to their growth
such as Under-utilization of capacity, Inadequate and
untimely credit flows, Inability in technology up gradation,
Insufficient raw-material procurement, Inability to market
finished goods and Ineffective monitoring and feedback Government of
mechanism. The problem which continues to be a big hurdle for India is attaching
the development of the sector is the lack of access to prompt
and adequate credit. The Abid Hussain Committee on
increasing
SSIs(1997) examined the problems of SSIs and recommended a importance to the
package of policies to restructure the industries in the context of development of
the current global economic challenges. It endorsed the Nayak
committee’s recommendations of financial support through small scale
State Financial Corporations and tapping of other resources enterprises by
funding for the SMEs, addressing credit rating services to small
units. The Nayak committee recommended a desirable norm of way of various
20% of the value of production to be made available by way of support measures
working capital through term lending institutions, and
commercial banks as against the existing 13% of the value of
adopted from
production (AIMA figures). Another major problem that is time to time.
hindering the growth of SMEs is the Marketing including
export marketing.
Marketing Problems:
The Indian SMEs are facing a lot of problems related to marketing in the national and international
arenas. This is mainly due to the fact that these organizations belong to rural or semi urban areas
where the resources are easily available to them and cheap labor is associated with them. But, when it
comes to selling of these products, the SMEs have to face a difficulty in creating an impression and
awareness in the minds of urban and other potential buyers about the quality and related aspects of
their products and services.
The main marketing problems of the SMEs in marketing their products and services are briefly
discussed as follows:
Most of the SMES established in the developing nations provide products and services with
moderate quality largely applying outdated technologies. Thus, they are faced with tough
competition with the high quality products of the MNCs at lesser price. With the increasing
globalization, the situation is further worsened.
Reduced protection has already lowered the SMEs competitive strength. The sector may face
dumping by foreign competitors like China. The cost of anti dumping investigations may be
prohibitive for SMEs.
The sector is mostly consisting of family run businesses which generally employ family
members at various positions of hierarchy in the business. Sometimes these people lack
professional knowledge and wisdom needed to market their products and services. They are
continuing with the age old ‘hunch decision ‘making and use of no modern tools. As well,
taking the help of professional organizations of marketing is too costly to them when
compared to the value of the products they are manufacturing.
Most of the times the SME sector ends up with wrong marketing strategies and irrelevant
strategies applicable to the segment or the total market. Majority of the SMEs are not aware
of the modern techniques like supply chain management, just in time inventory.
These organizations also have a problem of customer awareness as they do not adopt any
publicity and advertisement strategies. Most of their products are sold through word of mouth
publicity and direct selling. Sometimes the government in association with the local
authorities organizes exhibitions to promote the products of these units. Still the small
61
enterprises are unable to utilize this opportunity because of the low levels of literacy and
shortage of working capital needs.
It was often complained that despite providing the SMEs with full actual samples of the
product at free of cost; the host country distributors fail to give result as required. They have
a tendency to export what they manufactured without even having resemblance of the quality,
timing, or presentation of the product. They learn only when the importer chokes them up in
terms of the non-payment due to inferior stuff or other related things.
Many companies fail to get buyers or even enquiries because they had never developed the
unique selling point (USP) of their products. Many enterprises are not sure about how their
products are different from those of the market. Since they are unaware of their vital aspects,
they are unable to understand the needs of their target customers, and that a vicious circle.
Most of the SMEs don’t market themselves enough because they think that they can’t afford
it. They give up easily if a particular marketing activity does not immediately set to each
registers ringing. To expect a marketing activity, be it a premium membership with B2B
portal or a constitutional advertisement to a newspaper to give business from day one is
unrealistic.
The SMEs particularly in the field of exports lack in awareness about the institutional support
in terms of provision of foreign currency payments and other related activities of imports and
exports. This is resulting in less percentage of utilization of the available opportunities in the
overall exports and related activities by these institutions.
The companies in this sector have a difficulty in explaining clearly the product features and
their utilities which they are selling and are inconsistent in their communications. Most of the
SMEs jump from one marketing strategy to another for no valid reasons. This confuses the
prospective buyers and also creates a low opinion of the company and its product line.
Several enterprises have the notion that one has to be a big company to enter the online arena
to market their products. Most of the SMEs are yet to realize that online marketing can only
be the cost effective, measurable and targeted advertising channel.
Individual SSI units are scattered throughout the country and their resources are limited. They
find it difficult to participate in Government stores purchase programmes even if certain items
are reserved to them to supply.
SMEs also encounter a problem in expanding markets due to lack of marketing arrangements
with other bodies. An important factor contributing to this problem is the interdependence of
different strata of the industries ( large, medium and small) has not been fully realized.
The cost of production of these units is relatively high because these units tend to purchase
the raw materials in small lots and through middlemen, resulting in exorbitant price of the
goods. By contrast, large organizations are offered raw materials at lower cost under
economies of scale and bulk manufacturing.
The emerging challenges to the small scale sector are to come from the impact of the
agreements under WTO. The agreements under TRIPS call for tighter patent laws through
regulation of intellectual property a right which is becoming a costly affair to the SMEs.
Majority of the SMEs are unable to participate in the Industrial exhibitions and Expos
organized nationally and internationally. This is due to the high cost associated with
transportation of the produce and traveling costs of the entrepreneurs themselves. Further,
these units are not aware of the formalities to be completed for registering their firms for
these fairs. So, the SMEs are finding it difficult to participate in overseas market.
In most parts of the developing world, the problems being faced by the SMEs are more or less
similar in their nature, and are due to shortcomings in policy and legal frame work, finance
entrepreneurship, management, socio-cultural values and of course, technology. Most of
these units are heavily dependent on the imported technologies and skills for the maintenance
of the plant and operations. Adaptation to the local needs has always been the least priority
and national budget allocation for technology transfers is quite low. In fact, it is vital for the
developing nations to examine and understand the nature of technology transfer process and
give effort to execute them successfully in the development of SMEs.
62
Suggestions for improvement

At times, when major markets are shrinking down consistently, each and every SME should have a
marketing strategy not only to show-case their products, but also to easily get inquiries from other
markets. Some suggestions have been proposed in this regard to find solutions to the marketing
difficulties faced by the SME sector.
There must be some programmes on making these organizations aware of the modern
business tools. SMEs can be greatly benefitted if they recognize the power of internet for
exploring and managing the market online.
They should develop their websites in English
language for spreading their reach beyond India.
Bodies such as CII, Trade India can take up
awareness programmes for them in systematic
The SMEs should think
way and monitor the changes. beyond conventional
SMEs cannot do conventional marketing because marketing practices of
of the limitation of resources. They need to think
beyond conventional marketing practices of large large companies and
companies and search for alternative marketing search for alternative
approaches such as personal contact networks,
social networks, B2B portals, E-Commerce tools, marketing approaches
Business Networks and Industry and Marketing such as personal
networks.
SMEs should realize that on the Internet, a big
contact networks, social
company will have the same chances as an SME networks, B2B portals,
to make an impact on the buyer. With the correct E-Commerce tools,
techniques, any SME can make it to the top
leaving behind even the biggest of the companies. Business Networks and
Indian SMEs have to take note of technical Industry and
barriers to trade (TBT) in view of technical
standards set by developed countries. Marketing networks.
Good planned strategic approach, if adopted by
SMEs can help them to overcome many of the
barriers and obstacles that they face now.
Institutional support
India has already recognized the importance of its SME sector is providing a wide array of assistance
programmes to this sector to reduce the barriers to the development of this sector. Policy and
implementation bodies along with IDBI, SFCs and Commercial Banks are working at national and
state levels and sometimes at the local government also. Many forms of assistance are given from the
institutions including,
Supply of raw materials at affordable rates,
Provision of fiancé for investment and working capital at subsidized costs
Provision of technical and other assistance and other advisory services
Assistance in expansion of markets including Government purchases, reservation of certain
items for government stores, price preferences and support in joint tendering for government
purchase contracts.
A Market development scheme is specially operated by the Ministry of Small and Medium
Enterprises (MSME) to encourage exports from this sector and to increase the access and
development of overseas markets to these units. The scheme offers funding for participation
in international fairs, study tours abroad, trade delegations, publicity etc. Direct assistance is
given to individual sales cum study tours, participation in fairs, exhibitions and publicity.
SIDBI operates a scheme for direct assistance for financing activities related to marketing of
the products of MSME sector. The financing referred to so far is available for a wide range of
63
activities and purposes. Additional financing is available to the purchase of machinery and
investment needs.
As a part of the comprehensive policy package for promotion and development of MSMEs
announced on 30th August, 2000, it was decided that the Small Industries Development
Organization (SIDO) should have a Market Development Assistance scheme similar to the
one obtaining in the Ministry of Commerce. This scheme will operate in addition to the SIDO
scheme for participation in the international fairs will cover all activities for which direct
assistance is given under the existing scheme MDA Scheme of the Ministry of Commerce.
Assistance to Individual exporters would be made available by way of reimbursement of to
and fro air fare within the permissible limits. Special assistance programmes are also in
operation by IDBI, SFCs and Commercial Banks to encourage location of industries in the
backward areas. These organizations are providing marketing assistance to the enterprises
located in the backward areas.
Conclusion
To conclude, Indian SMEs are presently incapable of developing the right perspective as they are
technologically, financially and organizationally weak compared to global SMES. It is essential to
reposition Indian SMEs in some strategic sectors with some proven comparative advantage. Clusters
should be the future strategy for SME development. There must be emphasis on brand building of
products to improve their marketability in the national and international markets. During the present
crisis of the global markets, the Indian SMEs are considered to be the alternatives for large and high
capacity manufacturing sectors due to their capabilities of providing employment and support to the
domestic markets.
References:
1.Dr.Jain PC, “Government and Business policy” Galgotial Publishing House, 2001.
2.Mohanty SK “Fundamentals of Entrepreneurship” Prentice Hall of India, 2006.
3.Nicholas Siropolis, “Entrepreneurship and small Business Management”, Himalaya publishing House, 2006.
4.Vasant Desai, Dynamics of Entrepreneurial Development and Management”. Himalaya Publishing House,
2006.
5.Dr.Prarameshwaran KP “Institutional support for small scale rural processing enterprises
The case of India”, Corporate Document Repository.
6.Satyajit Majumdarm “Modelling Growth strategy in small entrepreneurial business organizations’ Journal of
Entrepreneurship, Vol.17,No2,Jul-Dec, 2008.
7.Dr.Satyanarayanachary T.Syam sundar, “ Institutional Finance and SMEs in India”, Business Vision, Oct
Dec,2008.
8.Vidyanatan A, “Reviving the Economy, Problems and Prospects” EPW, Feb. 7/13/2009.
9.Dr. Yeram Rahy B. “Small and Medium enterprises (SMEs), Issues in the changing global economic
environment” banketindia,31-1-2009.
10.Notification of the Ministry of Small Scale Industries, Government of India, Dt 9-5-2007.
Ms. Raavi Radhika has 19 years of experience in teaching Advanced

Management Accounting, Costing Accounting, International Financial
Management Her doctoral thesis on “Lending by Co-Operative Banks to
Priority Sector in Ranga Reddy Dist” has been submitted to Osmania
University. She has presented and published several research papers in
national and international publications. She has also presented several papers
in National and International Seminars and conferences in the areas of
Financial Management and H.R.
A.V.Seeta Mahalakshmi HOD, Dept Commerce, Monteseri Mahila

Kalasala, Degree College, Vijawada, A.P
64
INSIGHT ON CRITICAL FACTORS OF QUALITY MANAGEMENT

PRACTICES IN INDIAN INDUSTRIES
Sedani C.M1, Lakhe R.R2
Abstract. Designing new products, services and even entire business models
to cater needs can yield innovations that can serve as cutting-edge sources of
competitive advantage. Quality Management System (QMS) deals with the
entire organization and it has many challenges to the managers to fulfill
quality requirements starting from product design to customer satisfaction,
with an ultimate objective to obtain positive performance outcomes. In the
atmosphere of cut throat business competition, the industries in India are
compelled to adopt quality culture in their organization. The role of a quality
manager is one that is constantly evolving. With increased demands on

manufacturing operations quality managers are finding themselves subject to
strict guidelines from both their customers and regulatory bodies.
Historically individual programs were developed at the plant level to address
quality needs; however, quality managers are now taking an approach that
includes a complete enterprise wide view of the business based on adoption
of successful quality practices. The objective of present paper is to identify
the critical factors of quality management practices used in Indian industries
November, 2010
such as ISO 9000 and Total quality management through a literature review.
Depending on identified factors of quality, the study seeks to develop the
JMIJMR
frame work for quality management research. The paper also examines the
literature for most popular quality practices of recent trend to achieve
business excellence awards such as Golden Peacock National Quality
Awards, Rajeev Gandhi National Quality awards, CII EXIM Awards etc.
followed by Indian industries.
Keywords: Quality Management System (QMS), Literature review on Quality Practices &
Critical, factors in Industries, Business Excellence Models
Introduction
If U.S. manufacturers are going to be competitive in the foreseeable future, they'll need to access the
growing market in India. With a middle class population estimated at between 215 million and 300
million and expected to reach 583 million by 2025 (according to the McKinsey Global Institute),
opportunities for global-minded manufacturers are abundant, not only in servicing the needs of this
market but in creating products adhering to new business models that ultimately will ensure future
global markets. Never in the past has the role of the quality managers in India been as crucial and
exciting as now. The on- going economic reforms programs has created for them infinite
opportunities for improving quality at international level so that every company can dent into the
international market and make its own place in terms of increased market share.
The past ten years of industrial growth, are the inflection point on the graph of India’s progress from a
developing to developed economy. It is the decade of fastest rate of economic growth and the biggest
jump in per capita income. It took us 60 years to reach the $ 1 trillion plus economy. At India Today
Conclave, 2004 it was quoted by Mr. Mukesh Ambani (CMD, RIL) that “India can create a
replicable model for 3 billion men and women of the developing world. In that process, India will
become a G-5 economy”
65
By focusing from year 2000 -2009, it is indeed a privilege to mention that these were best ten years
for tax revenues, government spending, savings and investments. But that doesn’t mean there will be
no constraints. Our trillion dollar economy still has many challenges to face like water crisis;
electricity and road connectivity to villages. Manufacturing units of India are facing these primary
problems along with number of factors lining up to ensure that the economy does grow by average
rate of at least 8 percent a year. However in recent economy report of 2000-09 featuring India’s best
decade-economy (Business Today, December 2009) it was specially mentioned about productivity
growth which has been raised to 60% since 1980 and greeted as total factor productivity of Indian
manufacturing. The latest report is encouraging and provides the evidence that India is following the
quality practices in industries and on the mark of becoming G-5 by 2020.
Quality Management System:
Quality Management System (QMS) is a management function in totality which deals with ensuring
quality level of out-coming product to achieve customer satisfaction. Quality Management System
(QMS) includes entire organization and it has many challenges to the managers to fulfill quality
requirements with an ultimate objective to achieve positive performance outcomes. The aims of the
businesses may differ, but the importance of customers is a matter of common interest and the ability
of organizations to adapt to new customer requirements on a global market is of vital importance for
long-term success. Quality management has been recognised as a major edge for competitiveness and
long-term profitability. A typical QMS focuses on Strategic quality planning, customer satisfaction,
analysis of information, team work and training and finally effective leadership. In nutshell, QMS
system should meet all the requirements of achieving total quality. Organizations all over the world
are using different techniques for quality improvement. ISO 9000 is both a management tool, and a
source of competitive advantage, with the potential to stimulate the company in moving towards Total
Quality Management (TQM). After more than two decades since quality became part of managers’
everyday lexicon, total quality management (TQM) and ISO 9000 have taken the centre stage.
However, there has been much debate about how they might be related to each other as might be
expected; both TQM and ISO 9000 lead to improvement in performance.
ISO 9000 and TQM:
ISO 9000 consists of a set of international standards for running a business in an effective manner.
ISO 9000 standards of Quality Management were introduced in 1987 by International organization
for standardization (ISO), a worldwide federation of national standards bodies in 1947 to promote the
development of standardization and facilitate the International exchange of goods & services.
Thereafter, ISO 9000 family underwent three revisions, first one in 1994, second in 2000 and the
latest one in 2008. New ISO 9001:2008 families of standards were published in November 2008.
They focus on how the provisions of these standards can be applied for continual improvement of
quality and how they help in international accreditation of an organization and its programmers.
The essence of ISO 9000 is for a company to "document what it does and do what it
documents." When properly facilitated and used, the documentation developed in the facilitation
process and the ISO 9000 registration and audit process itself becomes a management tool to promote
excellence throughout the business. An essential feature of ISO 9000 is that it does not prescribe
quality standards. The registered companies are free to define the quality standards or "best practices"
that are sufficient to meet the needs of their customers and market within which they operate. All that
ISO 9000 requires is that the applicable standards are documented in a certain way. This innovation
friendly aspect of ISO 9000 assures that companies are not locked in to stagnant, expensive and
bureaucratic systems and procedures that may or may not meet the needs of their customers.
Figure 1 shows the generic model of ISO 9000 QMS
Total Quality Management (TQM) is a philosophical approach adopted for designing a structured
system to manage the quality of products, processes, and resources of an organization in order to
satisfy its internal and external customers, as well as its suppliers. Its main objective is to provide
customer satisfaction through continuous improvement. TQM has been defined in variety of ways via
several models starting from Deming’s PDCA cycle to the most popular Business excellence models
66
of recent quality practices. In recent publication, Pendse and Baghel (2008) have mentioned about
more than 900 different approaches being peddled as TQM by several consultants at worldwide. Isn’t
sound interesting? There are several definitions of TQM, According to Total quality forum (Rampey
and Roberts, 1998):
“A people- focused management system that aims at continual improvement in customer satisfaction
and continually lower real cost. Total Quality is a total system approach and integral part of high level
strategy. It works horizontally across functions and departments, involving all employees top to
bottom, and extends backwards and forwards to include the supply chain and the customer chain.”
Figure 2 shows the evolution of QM practices approach re 1: ISO 9000 QMS Model.
Figure 2. Evolution of Organizational Paradigm and Origins of QM approaches
Literature Review on Quality practices & Critical factors of ISO 9000 and TQM:
At first glance, one would think that TQM and ISO 9000 do not have much in common, other than the
fact that they both deal with the topic of quality. One is a philosophy of what makes up a quality
organization, and the other is a set of rules that a quality organization might undertake. However, they
both do share a common defining characteristic that is critical to understanding both of these notions.
That is, neither one will prescribe how quality is to be deployed in an organization, nor how to
explicitly design a business process that is profitable while simultaneously satisfying the customer (
Lakhe & Mohanty,1994) , Saraph J V et al (1989) has developed the initial instrument for measuring
the critical factors of quality management after declaration of ISO 9000 QMS in 1987. Flynn B et al
(1993) suggested very useful frame work for quality management research. Dean J W (1994)
highlighted the management theory and Total Quality through theory development. Askey J.M (1994)
defined the path from ISO 9000 registration to TQM and advocated that only ISO 9000 is not enough
for complete growth of the firm. Whilford B (1994) mentioned in his study of Australian firms that
ISO 9000 is beginning of TQM process. Bettes David (1995) through his work mentioned that ISO
9000 is short term goal to survive while Deming based TQM is long term goal to sustain and survive.
67
Brown A and Weile T V(1996),Carl Gustav(1996), concluded that ISO 9000 – is only managerial
approach while TQM is organizational approach includes all level of employees form Top level to
bottom level and identified several critical factors to implement TQM. Ahire S.L et al (1996) provided
an important Indian contribution for development and validation of TQM implementation construct
by focusing demerits of ISO 9000 system. Frehr (1997) made distinct argument that TQM is far more
than a Quality Management system in the sense that ISO 9000 merely focuses on the production
processes, while TQM focuses on organization as a whole. Zhing G. (1999) discussed the issues
beyond ISO 9000 in Chinese SMEs and concluded ISO 9000 as a gate to enter for Deming based
TQM and Baldrige based TQM models. Malcom Macpherson (1999) has focused initial introduction
of ISO 9000 and TQM and mentioned five strategic issues for the improvement of ISO 9000 QMS.
Seddon John (2000) analyzed the strength and weakness of ISO 9000 through his article “Is ISO
9000:2000 stronger?” and mentioned several drawbacks while comparing to world class performers.
Hongyi Sun (2000) provided the other side of the coin and find through study that ISO 9000 is
enablers to TQM and recommended ISO9000 should be incorporated with TQM. Chaudhary Nimit
(2001) mentioned the outcomes of ISO 9000 to quality as ISO 9000 brings least changes in
organizational involvement, which is unlike to TQM which changes the entire philosophy of
organizational involvement. Kotreshwar G et al (2004) examined the Quality management practices in
Indian ISO 9000 certified companies and disappointed with outcomes as most of the companies are
still unable to satisfy the customers. Costa M M et al (2007) carried triple analysis of ISO 9000
industries and mentioned effect on performance with few positive outcomes comparative to TQM
outcomes.
68
ISO 9000 and TQM:
TQM, through its 14 Points (Deming, 1986), provides guidance that an organization can refer when
designing their processes and operations, while ISO 9000 does not provide process design guidance,
but instead allows a firm to declare its operational practices and has a mechanism to confirm that the
organization follows those declared processes. The other point like to bring up a comparison to TQM
is that ISO 9000 could be considered a subset of TQM. In this instance, ISO 9000 would be covered
by Deming's first point, "Create constancy of purpose ...” Deploying a process where business
processes are documented and audited would be one way that constancy could be implemented
Table 1 provides the comparison between ISO 9000 and TQM

Points ISO 9000 TQM
1 Standardization of activities Continuous improvement
2 Audits to ensure compliances Self assessment to find opportunities to improvement
3 Statistical tools as techniques Statistical tools to understand variation in process
4 Bureaucratic approach Cultural orientation
5 Responsibility mostly on Involvement of Top management and all employees
Managers to maintain Quality
6 Conformity to specification Customer satisfaction and customer enlightenment
7 ISO 9000 certification gives A never ending TQM journey
concrete goal
8 Internal orientation on processes Orientation on organization & relation with outside
organization
9 Focusing on quality goals based Focusing on goals based on external benchmarks
on internal capabilities
Critical factors of ISO 9000 QMS and most TQM Models:

Based on Literature review, ISO 9000 QMS applies eight critical factors while TQM has more than
fifty critical factors and every successful organization adds the new ingredient to its recipe. Table 3
provides the comprehensive list of critical factors for ISO 9000 and TQM
Business Excellence Model
International quality accreditation is always a selling argument, and this is no different in India. The
quality award is a natural development from quality certification programs. Since quality certification
is an important need felt by suppliers and buyers alike in globalizing markets, it is natural that the
logic is especially recognized in India. Worldwide acceptability of local certification is necessary by
various counts and at present there are about two-dozen independent certification bodies in India,
private and governmental. There are also institutions that assist in the formation of potentially more
bodies, and the knowledge base necessary to staff future certification agencies. Sector-specific
certification bodies introduce even more diversity, since they are geared towards particular needs,
with certification dimensions that match downstream buyer requirements.
The variety of sectoral and downstream supply chain needs and the development of a quality
management training market spurred the users' need for better governance. Firms that seek to
distinguish themselves are seeking the next motivational level for quality excellence. Among the most
prestigious national quality awards are the Rajeev Gandhi National Quality Awards (RGNQA), IMC
Ramakrishna NQA, CII Business Excellence Award, Golden Peacock NQA, Deming Prize, Eicina
Award etc. All these awards have derived their guideline from the MNNQA-Malcolm Baldrige
National Quality Award and the EFQM - European Foundation Quality Model.
69
ISO 9000 factors TQM factors

• Customer focus • Top Management support/Leadership
• Leadership • Policy and Strategy
• Involvement of people • Strategic Planning
• Process approach • Customer focus/satisfaction
• System approach to • Quality Information Availability
Management • Quality Information Usage
• Continual improvement • Benchmarking
• Factual approach to • Information Analysis
decision making • Workforce/
• Supplier relationship • People Management
• Process Management
• Supplier Management
• Supplier Quality
• Employee Involvement
• Employee Training
• Process /Product Design
• Role of Quality Department
• Corporate Culture
• Strategic Management
• Customer Orientation
• Quality Improvement System
• SPC usage
• Internal Quality Results
• External Quality Results
• Employee Empowerment
• Product Quality
• Supplier Performance
• Operational Planning
• Supervision
• External Interface Management
• Quality Citizenship
• Quality Policy
• Technology Utilization
• Continuous Improvement
• Balance Score Cards
Literature Review on Business Excellence Models

Deming prize was instituted in 1951. The Malcolm Baldrige National Quality Award (MBNQA) was
established in 1987 and the European Quality Award (EQA) was introduced in 1991. Panton S M
(1991) has highlighted the debate of Quality practices by including Business excellence del into
quality race. Finlay JS (1992) was the real enabler, who made the initial comparison among ISO
9000, Deming based TQM and Malcolm Baldrige Model. Scheffelers (1993) in his article urged to
consider Business excellence model as a primary strategy to reach at the destination of world-class
mature quality. M. Xie, K.C. Tan et. al (1998,2002) have taken initiatives to carry out study and
comparison of 9 national Quality awards and also provided the glimpses of organizational culture of
India and declared RGNQA as an excellent approach for managing total Quality. Heras Imaki (2006)
has carried Delphi study to examine the motivational aspects of ISO 9000 and EFQM for more than
50 Swedish firms. Ganapathy (2007) has provided several critical factors used in quality practices in
70
past researches with a focus on ISO 9000, TQM and Quality award linkages. His work can be
considered as latest work up till now. In similar type of studies Gyani G J (2008) has justified the
importance of QMS certification process through various certification bodies and Accreditation
bodies and Oakland J S et al (2008) through his empirical work provided the performance outcomes
of business by using Kanji and Sa’s leadership excellence model.
Table 3 shows the composition of RGNQA (awarded by BIS India) for Quality Excellence:
SN Criteria Distribution (Marks) Remark
01 Leadership Policies 120 Enablers
02 Objectives & Strategies 80 Enablers
03 Human Resource Management 100 Enablers
04 Resources 80 Enablers
05 Process Management 120 Enablers
06 Customer Satisfaction 100 Result
07 Employee Satisfaction 150 Result
08 Impact on Society & Environment 100 Result
09 Business Results 150 Result
Total 1000
Table 4 shows the comparison of various Business Excellence Models
Critical MBNQA CII– RGNQA IMC GPNQA AFQM EFQM ISO*

Factors EXIM RBNQA 9000
QMS
No. of 07 09 09/06 07 09 07 09 04
constructs
Leadership Y Y Y Y Y Y Y Y*
Information Y Y Y Y Y Y*
and Analysis
Strategic Y Y Y Y Y Y Y Y*
Planning
People Y Y Y Y Y Y Y Y*
Management
Process Y Y Y Y Y Y Y Y*
Management
Customer Y Y Y Y Y Y Y Y*
Focus and
Satisfaction
Business Y Y Y Y Y Y Y Y*
Results
Resources Y Y** Y
Employee Y Y** Y Y
Satisfaction
Impact on Y Y** Y
Society
*Partially used under several sections of ISO 9001:2000 / ISO 9001:2008 ** used for evaluation of
Large -scale Industries under RGNQA
71
Abbreviations
MBNQA: Malcolm Baldridge National Quality Award
CII EXIM: Confederation of Indian Industries Business Excellence Model
RGNQA: Rajiv Gandhi National Quality Award
IMC RBNQA: IMC Ramkrishna Bajaj National Quality Award
GPNQA: Golden Peacock National Quality Award
AFQM: Australian Foundation for Quality Management Award
EFQM: European Foundation for Quality Management Award
ISO: International Organization for Standardization
BIS: Bureau of Indian Standards
Conclusion:
Unlike the experience in the broader quality management (QM) area, for ISO 9000, the relationships
between management practices associated with the standard and performance are relatively under-
researched. This has contributed to a general lack of clarity on how the standard works and how
effective it is in generating the espoused benefits in current Indian perspectives. TQM includes both
an empirical component associated with statistics, and an explanatory component that is associated
with management, of both people and processes. The terms "hard" and "soft" are commonly used to
represent these two components. TQM brought recognition to the fact that tasks can be categorized as
value adding or not. The obvious corollary is that non-value adding tasks would be eliminated and the
value adding ones improved. Many process design and operation tools have been highlighted in TQM,
such as statistical process control, Kanban and flexible organization, just to name the tip of the
iceberg. While analyzing the critical factors of TQM, it is strange though important to conclude that
those points left by the quality practitioner seem to be more philosophy than a framework or
methodology in which one can design a quality business process. Each one of those points can give
rise to a framework and practice in themselves, and there is no fixed manner in which those
frameworks can be expressed. Thus, TQM is left open to the reader's interpretation.
References:
1. Ahire S.L et al, Development and Validation of TQM implementation constructs, Decision Sciences, Vol.27,
No.1, 1996, pp 23-53
2. Askey J.M et al, From ISO 9000 series registration to TQM an examination, Quality Management Journal,
Vol.1 No.4,1994, pp 67-76
3. Bettes David, Moving from ISO 9000 towards Total Quality, Quality World, Sept. 1995, pp 610-613
4. Brown A and Weile T V et al, A typology of Approaches to ISO Certification and TQM, Australians Journal
of Management, Vol. 21, No.1, 1996, pp 57-72
5. Choudhary Nimit, Look! What ISO is doing to your service quality, Udyog Pragati, Vol.25, No.1, 2001, pp
17-25
6. Costa MM et al, A triple analysis of ISO 9000 effects on Performance, International Journal of productivity
and performance management, Vol.56, No.5, 2007, pp 484-499
7. Dean J.W et al, Management Theory and Total Quality: Improving research & Practice through theory
development, Academy of Management Review, Vol.19, 1994, pp 392-418
8. Deming W E, Out of Crisis, MIT centre of Advanced Engineering, Cambridge publication, 1986
9. Flynn B et al, A frame work for Quality Management research & associated measurement Instrument, Journal
of Operation Management Vol.11, 1994 pp 339-366
10. Finlay J S,ISO 9000,Malcolm Baldrige award guidelines & Deming/SPC based TQM:A comparison, Quality
System Update,Aug.1992,pp 1-9
11. Gyani G J, Effectiveness of QMS Certification Process, Total Quality Management & Business Excellence
Vol.19, Issue 3, 2008, pp 263-279
12. Heras Imaki, Delphi Study on Motivation on ISO 9000 & EFQM, International Journal of Quality &
Reliability Management, Vol.23, Issue 7, 2006, pp 807-827
13. Hongyi Sun, Total Quality Improvement, ISO 9000 Certification and Performance Improvement,
International Journal of Quality & Reliability Management, Vol.17, Issue 2, 2000, pp 168-179
14. ISO, International standard ISO 9001 :2008, Quality Management Systems-requirements, International
organization for standardization, Fourth edition, 2008
72
15. Kanapathi Kanagi, Critical factors of Quality Management used in research questionnaire : A review of
Literature, Sunway academic Journal,No.5,2006,pp 19-31
16. Kotreshwar G et al, Quality Management Practices in Indian ISO 9000 certified companies: An Empirical
Evaluation, Total Quality Management & Business Excellence, Vol.15, Issue 3, 2004, pp 295-305
17. Lakhe R R and Mohanty R P, Understanding TQM, Journal of Production planning and control, Vol 5, 1994,
pp 426-441
18. Maclom Macpherson, An Introduction to ISO 9000&TQM, Exhibit Baldrigeplus.com,1999, pp 1-10
19. Mehra Puja, 60 years to $1 trillion 10 years to $ 3 trillion: A report on 2000-09, India’s best decade-economy,
Business Today, December 27, 2009 (pp12-14)
20. M.Xie, et al, Indian Society, Total Quality & Rajiv Gandhi National Quality Award, Management
Development, Vol.21, Issue 6, pp 417-426
21. Oakland J S et al, The Relationship between Business Excellence and Performance-an Empirical study using
Kanjis Leadership Excellence Model,Total Quality Management & Business Excellence Vol.19, Issue 7 & 8,
2008, pp 733-749
22. Panton S M,The Baldrige,the Deming,ISO 9000& You,Quality Digest, August 1991,pp 18-26
23. Pendse NG and Baghel, Technological change and productivity growth in the manufacturing sector of India,
Sarup and sons publishers, 2008
24. Rampey J and Roberts H, Perspectives on Total Quality, Proceedings of Total Quality forum
IV,Cincinnati,Ohio,1992
25. Saraph J.V et al , An instrument for measuring the critical factors for Quality Management, Decision
Sciences, Vol.20 Issue 4, 1989, pp 810-823
26. Schlefflers S,What is world-class mature quality? Continuous Journey,Aug-Sept.1993
27. Seddon John, The case against the ISO 9000, Exhibit Baldrigeplus.com, 1999, pp 1-4
28. Whilford B et al, The pursuit of Quality: How companies in Australia are attaining excellence through quality
certification and TQM Systems, Prentice Hall, 1994
29. Yusof S M & Aspinwall E, Case studies on the implementation of TQM in the UK automotive SMEs,
International Journal of Quality and reliability Management ,Vol. 18 No.7,2000,pp 722-744
30. Zhing G., Beyond ISO 9000 Certification-A China Experience, Managerial Auditing Journal, Vol. 14, Issue 1,
1999, pp 75-78
C.M.Sedani (BE, M.Tech, MBA) is presently working as Assistant Professor in

Mechanical Engineering Department at Jawaharlal Darda Institute of Engineering
and Technology Yavatmal (MS) India. He is pursuing his research (PhD) in
Mechanical Engineering from Sant Gadge Baba Amravati University (MS) India.
He is having 16 years of teaching and Administrative experience and presented
more than sixteen papers at various National & International conferences and
published Seven papers in International Journals of repute.
Dr.R.R. Lakhe (BE, M.Tech, PhD) is well known & eminent personality in
academics as well as Industries. He is certified lead auditor and six-sigma black belt
champion and renowned quality consultant of central India. He has published more
than 25 papers in international Journals of repute and presented more than 100
papers at various National and International conferences. He is active member of
Quality Movement across the globe and organized more than 15 workshops,
seminars and symposiums to up bring the quality awareness among the people.
Presently he is working as Director of Shreyas Quality Management System,
Nagpur and provides his expertise in both quality and productivity related issues.
In past, He has worked as Head of the Department (Industrial Engineering) at
RKNEC, Nagpur and associated for more than 25 years in academics. He has
guided more than 50 projects at Post Graduate level (ME/M.Tech) and supervised
more than 15 students for Doctoral Research (PhD) in Mechanical, Production and
Industrial Engineering.
73
A MODEL TO MEASURE THE QUALITY SERVICE IN A LOCAL

COMPANY OF PIZZA IN LOS MOCHIS, SINALOA
José Guadalupe Vargas Hernández1,Mario Guadalupe Zazueta Félix2

Ernesto Guerra García3
Abstract. The SERVQUAL model was redesigned in relation to the context of

the local company MetroPizza, in Los Mochis, Sinaloa; the main change was

the orientation of the visual that corresponds to the intensive use of the image
of the transnational franchises, to the taste, that represents a competitive
advantage in local firms that know the flavor in the culture of regional. The
differences between the expected, and perceived quality service was analyzed
through the dimensions proposed by Zeithaml and Bitner (2002). The results
show in the tangible, that customers expect more flavor than the image.
November, 2010
Keywords: SERVQUAL model, quality service, local pizza company
JMIJMR
Introduction
The importance of offering quality goods and services becomes each time more essential in the
marketplace. Consumers are more pressing and have a great notion of quality implications, the main
reason why quality service has become the most powerful competitive tool possessed by services’
enterprises (Berry, 2004). Service is understood as the set of benefits that a client expects, besides the
basic product or service, in a tangible or intangible ways, as consequence of price, image and
reputation and more related attributes (Lara, 2002). The giving of high levels of quality service
constitutes an essential strategy for the firm’s success and surviving in the current competitive
environment (Barquero et al, 2007). But quality is difficult to define because in different
circumstances means different things; Thus can be seen from different perspectives.
Most definitions of quality service is centered in achieving the client’s expectative (Bell, 1982).The
research interest resumed in this report was to analyze the differences between the expected service
and the perceived service to measure the quality of the firm Metro Pizza, located at Los Mochis, Sinaloa. The
methodology followed consisted in dividing and separating the main features of the phenomena proceeding to review
orderly each one separately (Hernández et al, 2006). The utilized techniques were questionnaires which
were applied during the period from July to September 2008 according to a stratified random sample
design regarding the type of client followed by a statistical data analysis. The questionnaire was
developed centered around the construction of our own model based on the general Zeithaml and
Bitner (2002) which is described in detail through this paper.
2. The firm Metro pizza
In the State of Sinaloa, the first business of pizza was established in the city of Culiacán in the year
1970, known as the Fábula Pizza. Later, it opened its doors in Los Mochis, Sinaloa in 1980. Since that
date began the natural market growth of pizza in the locality. According to the registry of the National
Chamber of restaurants and hot food (Cámara Nacional de la Industria de Restaurantes Alimentos
Condimentados CANIRAC, 2008), consulted in the general roster of affiliated during the period
2007-2008, the brands which offered services and products in Los Mochis, Sinaloa, were Pizzeta
Pizza, Rin Rin Pizza, Magos Personal Pizzas, Pizza Time, Pizza Xtreme Factory, Metro Pizza,
Paparazzo´S, Super pizza y Domino's Pizza. Out of these businesses, the franchise Domino's Pizza is
the leader of the market due to intensive use of image and advertisement.
74
As regarding Metro Pizza, it is an enterprise which was founded in Los Mochis in the year 2004 and it
is considered as the retailer in the food service to take out and to deliver at home’s address. In this
enterprise, 56% of clients ordered the products from their homes; 20% was junior high school, high
school, commercial and technical career and university level´s students. 15% were entrepreneurs or
clients which required servicing of products since the employment places and the rest ordered over the
counter. The distribution of registered clients in the data base from January to June 2008 through the
system of the firm Metro Pizza is asymmetric. The great majority had a small purchasing frequency
and very few were assiduous clients (Figure 1).
Histograma
10000
9000
8000
Frecuencia
7000
6000
5000
4000
3000
2000
1000
.
11
13
15
17
19
21
23
25
27
29
31
33
35
37
39
1
r..
o
ay
E D C A
m
B
y
Compras
Figure 1. Client´s distribution according to its purchasing frequency
Source: Construction of authors

Source: Own creation.
In the above figure it is also shown that the enterprise used a client classification according to its
purchasing frequency. In one extreme, it classified the clients type “A” as minor frequency which has
only bought once at the firm. At the other extreme, it classified clients type “E” as major frequency.
This classification was useful mainly to conduct the technique of stratified random sample design to
choose the clients to be questioned.
3. Quality service
The quality concept is multidimensional in a sense that consumer needs are multiple and diverse, also
because it includes aspects such as tastes and the ability for the use, design, safety, reliability and
respect to environment, among others (Atencio y González, 2007). Although there had been a lot and
varied concepts related to what is quality and what is not, the different authors coincide on the
fundamental goal of quality is found on the client’s satisfaction. By the term, satisfaction is
understood as the response of client’s fullness satiety; it is such as a judgment over the product or
service’s features, or a product and service in itself, which gives a pleasant level of reward related to
consume.
In this way, consumer satisfaction has been defined as a) in function of associated expectancies to
consume or service, b) in function of discrepancies evaluation between expectancy and perceived
performance, c) as a judgment or global evaluation determined by affective or cognitive responses
related to the use of services and consumption of products, d) in function of comparative purchasing
costs and benefits, or use of services and consumption of goods related to anticipating consequences,
and e) as a multidimensional, dynamic and complex process which includes cognitive, affective,
physiological and behavioral activities (Peralta, 2006: 97).
75
For the actual research it was selected the point b) which corresponds with the model drawn by
Zeithaml and Bitner (2002). These authors explain that in order to achieve the satisfaction level of
clients it is fundamental to begin the design of service. This design will define the real firm´s
commitment to grant it, as well as to stablish the limitations in such a way they satisfy their clients
(McDaniel et al, 1999). Zeithaml and Bitner (1992) defend that what is treated about it is to build a
global consumer’s judgment as the result of the comparison between the expectancies over the
service. The quality of the service is received according to the consumer’s perceptions in relation to
the entreprise´s acctions (Figure 2).
Hate (1997), in his work on services and benefits recounts the heritage of Zenithal and Bitner (2002),
but with its own lecture. He proposes a model in which the client’s satisfaction is composed by two
features: Structural and emotional ones. The structural element of customer´s satisfaction is referred
to the importance of counting on good tangible benefits.
The second element, the emotional one, is related to the enterprise’s personality, warm human contact
and the way in which clients feel about the firm. To manage satisfaction through the first feature, the
enterprise must segment its clients and define the concept of service for each segment. The second
component is more emotional and it is related with the interplay between perceptions and
expectations.
On the other side, the content of perception is the result of value’s judgment achieved from the
singularity of the client. Such a perception always appears charged with a strong emotional content.
The expression proposed by Huete (1997) is parallel to the definition given by Zeithaml and Bitner
(2002). According to this author (Huete, 1997), customer satisfaction comes determined by the
following expression: Satisfied customer = Perceptions – Expectations > 0
From this perspective, the product of one enterprise of services is the same service creation processes.
What a customer sees, hears, smells, touch and tastes, the five senses are sources of perception. Each
sense can build or destroy the customers’ satisfaction. Once that the needs are known, the supplier of
services must prove that he is able to meet the needs (Costa, cited by Nuno, 2003). Customers’
satisfaction will be a function of expectations which are being defined through the established
requirements and the perception which can be measured through the following equation: Customers
satisfaction = [Perception –defined expectations in the requirements]
It is important to well define the requirements in order not to create false expectations. If the
expectations are excessively high, above the possibilities, the global satisfaction will be poor. If there
are well defined the requirements, which are the translation of customers’ expectations, satisfaction is
reinforced. The image plays a determinant role in customer’s perception and the service quality. Thus,
it is important either for services enterprises as for each type of organizations.
However, this product tends to be over evaluated for many enterprises which allocate extraordinary
resources. According to Zeithaml and Bitner (1992), people in charge to execute the services
marketing know a intuitive level of the customer´s expectations, but it is necessary to conduct a more
profound search of these expectations aimed to understand, measure and manage them better.
76
Figure 2. Schema of perceived quality
Source: (Grönroos cited by Nuno, 2003)
The first type of expectation is denominated expected service; it could be defined as the service that
the client expects to obtain; in other words, is a fussion of what can be and what must be. Wanted
service expectations reflect the hopes and wishes of customers. If they are not fulfilled, customers will
be unsatisfied with the service and securely they will not
purchase the service later. Service is understood here as the
work, activity and benefit (Duke, 2005: 64). Services are
heterogeneous, this is to say, can be differences in its All the customers
application, which can have differences among suppliers, the have different
same employees in such a way that customers are conscious and
accept these differences between each other. tolerance zone. It
This variation is denominated tolerance zone. In other words, is narrower for
when the received service is classified below the suitable and some customers
adequate service, customers can feel the discomfort and it is
affected its level of satisfaction with the enterprise. On the other than for others
hand, when the received service surpasses the customer´s
expectations, these can be satisfied or also astonished. The
tolerance zone can be considered as the interval within customers passes on unnoticed the level of
service performance. Only when the service surpasses the expectations or not fulfills them is when
call the customers’ attention, this is to say, each client has a tolerance for the distinctive types of
services which utilize (Zeithaml and Bitner, 1992).
All the customers have different tolerance zone. It is narrower for some customers than for others. It is
here when the service that is going to provide the firm has to be more rigorous and equally some
customers have wider tolerance zone. In this types of customers, the service granted have to be less
strict that in the diminished tolerance zone. There are some services, depending of firm´s type of
business, which require more contact between the employees and customers than others, and that a
bad experience in any of them can give as a result a negative evaluation towards the service quality.
This is the case fast food firms and more specifically that of pizza, which depend on the relationship
between the employee and the customer since the order taking, either through the phone or over the
counter, until the service on the table or at home.
According to Berry (2004), the first contacts are the ones critical, but without resting importance to
the rest when it is related to determine satisfaction and loyalty of the customer. When for the first time
the customer interacts with the firm, he creates a first impression of the organization, because he does
not count with any other base to judge the enterprise. On the other hand, although the customers have
77
had many interactions with employees, each individual encounter forms part of a joint image of the
firm in the customer’s mind. In order to create a positive image firm must have high quality
interactions (Berry, 2004).
When there are present combinations of positive interactions together with negative interactions, it is
generated in the customer feelings of insecurity over the quality service granted by the firm which in
turn make it vulnerable before the competence’s attractiveness. There are some key interactions which
weigth more than the others, the dificulty is to identify which are those that have weight over the
customers (Zeithaml and Bitner, 2002).
4. Methods and materials: The Servqual model
On the literature over the quality models, the one that enjoys a larger diffusion is denominated model
of differences or Servqual (Zeithaml and Bitner, 2002), which defines service quality as a function of
discrepancies between consumer’s expectations over the service which are going to receive and their
perceptions over the service effectively given by the firm. The authors suggest that reducing or
eliminating such a difference depends at once of an efficient management on the part of the firm’s
services of other deficiencies and discrepancies.
Servqual is a scale of multiple items to measure perceptions that the customer has over the service
quality, its instrument is a questionnaire which is composed of two parts. The first part has 22
questions that measure the customers´ expectations and other 22 items with similar words to measure
customers’ perceptions and experiences, which in the survey case use a Likert scale from 1 to 7 to
gauge as a totally unconformity in one extreme to total conformity in the other extreme (Zeithaml and
Bitner, 1992). To evaluate the service quality it is necessary to calculate the difference between
punctuations that clients assign to the affirmative pairs of espectations and perceptions. Each one of
the dimentions is represented on a Servqual scale whose finality is to be an instrument of diagnostic to
know and to identify the areas of strengths and weacknesses in the provision of services.
As can be appreciated in figure 3, the Servqual model introduces and analyzes a serie of gaps which
can be perceived by customers (gap 5) or to produce it internally in the supplier’s organizations of
services (gaps from 1 to 4). These gaps are described in the following way:
Gap 1: Indicates the discrepancy between the customer’s expectations over a concrete service
and the perceptions and beliefs developed by directives over what the consumer expects of
that service
Gap 2: Measures the difference between directive’s perceptions and the specifications or
quality norms.
Gap 3: Calculates the differences between specifications and quality service’s norms and the
provision of itself.
Gap 4: Measures the discrepancy between the provision of service and external
communication.
Gap 5: All mentioned deficiencies make that service provided by the organization does not
fulfill the expectations that the customers had on it.
Just exactly this is the point that this research has evaluated in the firm Metro Pizza. This is to say it is
the quality in the service which results in gap 5 that measures the difference between the expected
service and the perceived service, in function of the measures of gaps 1 to 4. Gap5 = f (Gap 1, Gap 2,
Gap 3, Gap 4).
78
Communication
mouth - ear Personal needs Past experience
Mouth.
Expected service
perceived service
Service delivery (Include pre and post Paste

COMPANY contacts ) experience
Conversion perceptions of service quality

specifications
Perception of the company about consumer expectations
Source: Zeithaml and Bitner (1992)
Figure 3 Conceptualization of services’ quality
The differences or gaps between perceptions and expectations for each pair of affirmations or points
can produce three situations: One, that perceptions surpass expectations, which means high levels of
quality. Second, that perceptions are inferior that expectations, which means low quality level. Third,
perceptions being equal to expectations denote modest quality levels. On the same way, dimensions
are evaluated to determine its weight according to the level of importance for the consumer.
The individual items of Servqual generally are seen as a basic skeleton which must be implemented
by others of specific content when it was necessary. Precisely, the applied model to Metro pizza
modified the visual orientation of Servqual for the one of taste, which is more adequate for the fast
food businesses. To value the service quality using Servqual implies to include the order of difference
between the assigned classification by the customers to the pair of expectations and perceptions
enunciations, as it is shown in figure 4.
5. Service dimensions
Service, according to Zeithaml and Bitner (1992), has diverse dimensions: Tangible, safety, empathy,
capacity of response and reliability. This was adequate to the firm’s conditions according to what it is
shown in table 1. These authors define the dimensions in the following way:
Tangible refers to the service tangibility such as the necessary equipment and personnel to
provide the service.
Service safety refers to the ability of a service provider to comply with the promise to provide
adequately the service.
Response capability refers to the good will of service provider to be useful and fast to provide
the service. It is the quality which disposes somebody for the good exercise of something.
Reliability refers to the knowledge and courtesy of service providers also as their ability to
inspire on the customers trust and responsibility. It is the probability of good functioning.
Empathy refers to the customer waiting for individual and humanitarian, affective, attention
on the part of the service provider. It is the mental and affective identification of one subject
in mood of each other.
79
Customer satisfaction
Expectations
Perceptions
Scenarios for the analysis of quality service

Expectations = Perceptions Optimum quality
Expectations > Perceptions Quality deficit
Expectations < Perceptions Quality excess or waste
Service quality from the five dimensions of service
Responsability Reliability Empathy
Tangibility Security
Fuente: Zeithaml and Bitner, (2002)
Conceptualization of customer satisfaction
Table 1. Variables and Dimensions of Quality Service
Dependent variable Dimensions Independent variables

Tangible Image, hygiene, price, taste,
temperature, precision,
easiness, comfort
Reliability Compliance, functionality,
credibility, health and
tolerance
Capacity of response Flexibility, fast, schedule,
Service quality disposition and assertiveness in
time
Safety Guarantee, knowledge,
truthfulness, trust in the
enterprise
Empathy Attention, interest, expression,
compression, communication,
behavior and courtesy
Source: Created by authors based on Servqual model
The questionnaire was divided in two parts for the case of this research: 46 items to measure the
customer expectations, and other 46 items with similar concepts to measure customer perceptions.
Later on it was deepening over the results that each attribute obtained in the sample utilized related to
expectations or the expected service that had the customers of pizza shops in general.
80
EXPECTATIVAS VSvs.
EXPECTATIONS PERCEPCIONES
PERCEPTIONS
6.40
6.20
6.00
5.80
Escala
EXPECTED
Scale
ESPERADO
5.60 PERCEIVED
PERCIBIDO
5.40
5.20
5.00
4.80
TANGIBLE CAPACITY SAFETY EMPATHY RELIABILITY
TANGIBLES CAPACIDAD DE
OF RESPONSE SEGURIDAD EMPATÍA FIABILIDAD
RESPUESTA
Dimensions
Dimensiones
Source: Developed by the authors.
Figure 4 – Expectations Vs. Perception by Dimension
For the customers, the dimension that more importance had, in accordance with the collected data for
both the expected service as well as the perceived service, it was the dimension of the tangible and the
one of least importance was reliability (Figure 4).In the following paragraphs it will be analyzed the
results of each dimension
5. Results
The tangible dimension
In the tangible elements were considered the appearance of physical infrastructure including
furnishing, signals, cleanings, motor-vehicles appearance, price, disposition of sausage and dressing,
temperature of foods and beverages, among others. For this motive, questions of this dimension
resulted as it is detailed below.
• The firm Metro Pizza communicates me a youthful image.
• In the firm Metro Pizza cares that their vehicles always look clean.
• In the firm Metro Pizza delivers hot pizzas
• I believe that the Price I pay at the firm Metro Pizza is fair according to the type of product.
• The firm Metro Pizza has a telephone number easy to remember
• I feel secure to purchase at the firm Metro Pizza, because its products are prepared with hygiene
• The environment surrounding Metro Pizza makes me feel comfortable
• At the firm Metro Pizza delivers the order in the promised time.
• Even if it increases the price of the pizza by 10 pesos, still I would continue buying in Metro
Pizza.
• The employees of the firm Metro pizza deliver very cool sodas.
• At the firm Metro Pizza the pizzas are served with sausage and dressing.
• At the firm Metro Pizza packaging where the products are delivered is very visually attractive.
• Employees of the firm Metro Pizza always are clean although they do not wear uniformed.
• At the firm Metro Pizza deliverer to me tasty pizzas
81
• At the firm Metro Pizza I can order through internet
In the analysis of attributes of this dimension (Figure 5) customers had greater expectations
according to the importance: Taste, temperature, hygiene, precision, image, easiness and comfort.
However, the attribute which was more perceived by the customers is the image. This is because the
local business tends to follow the practices of the leader, which in this case is Dominos Pizza, but as
this is a franchise, conditions are different.
Results showed clearly that the best strategy for local enterprises is through the intensive use
of its culture’s knowledge, overall preferred flavors by customers. These last ones, in the side, tend to
be less discerning with image at local firms. This is that way due to the town adds its own flavor. It is
a sensation that produces any food and differs according to the gender, class, ethnic group, age,
region, etc., which produces an affective relationship with the consumer (Bruno, 2008: 217).
Tangible
6.80
6.60
6.40
6.20
Scala
Scala
EXPECTED
6.00 EXPECTED
PERCEIVE
5.80 PERCEIVE
5.60
5.40
5.20
PRECISION
TASTE
TEMPERAT
YGIENE
IMAGE
URE
PRICE
COMFORT
Xxxxxx
TEMPERATU
PRECISION
EASINESS
TASTE
HYGIENE
IMAGE
RE
PRICE
COMFORT
Variable
Source: Created by authors

Figure 5 Expectations and perceptions over tangibility at Metro Pizza.
Thus, it is observed that the strategy of following a leader made Metro Pizza tend to be more intensive
with image, comfort and easiness, further more the customer expectations while it was forgotten that
the flavor was the main competitive advantage.
Reliability dimension
Among the elements of reliability are the tolerance, recommendation to trust in the firm, commitment,
trust on the driver of vehicles, accomplishing on time, continuous improvement, and trust on healthy
food, among others. Thus, the issues on this dimension resulted as it is detailed below:
• At the firm Metro Pizza I can tolerate that make mistakes 2 or more times.
• I recommend the firm Metro Pizza to my friends
• If somebody at the firm Metro pizza is committed to do something for me, he will fulfill At
the firm Metro Pizza care that vehicles can be driven in safe way.
• At the firm metro pizza delivers the pizza according to the offered time.
• At the firm Metro Pizza improve its service every day.
• At the firm Metro Pizza the food is healthy.
• When in Metro Pizza promise delivers the order in a determined time, it complies.
82
Reliability
7.00
6.00
5.00
Scala
4.00
EXPECTED
PERCEIVED
3.00
2.00
1.00
0.00
CREDIBILITY
TOLERANCE
FUNCTIONING
HEALTHY
FULFILLMENT
Variable
Source: Own creation.
Figure 6. Expectations and perceptions on reliability and confiability
It is observed in this dimension that the most notorious difference was the tolerance, one that the
customer expected less than he received (Figure 6). But what most expect customers is the healthy.
This complex category not only includes the nutritional values of the pizza, but also a series of images
that have over the product, patterns of behaviors, beliefs, knowledge, habits to maintain what the
persons think the term means, it can signifies from a simple “that not make me damage” to form part
of one life style according to any identity image (Arrivillaga et al, 2003: 186).
Capacity of response dimension
In the elements of capacity of response it is found the necessary and sufficient time, disposition to
help, deliveries in promised time, capacity to attend difficulties, among others. Thus, the issues of this
dimension resulted as it is detailed below:
• At the firm Metro Pizza it is dedicated the necessary and sufficient time to take the order.
• Employees of Metro Pizza always show disposition to help me.
• In Metro pizza have schedule of convenient opening and closing for you.
• Personnel of Metro Pizza always have disposition to attend me and help me.
• At the firm, Metro Pizza delivers me the orders in 30 minutes.
• At the firm metro Pizza, employees show flexibility and capacity to face difficulties and
unforeseen events.
In this dimension the more notorious differences are encountered in the disposition and flexibility that
surpass the expectations of the customer, while it is observed a deficit in assertiveness on time (figure
7).
In this last category, one of the time has been inherited from the marketing practices employed by the
firms of United States pizzas, all a series of cultural aspects which have been developed around this
characteristic fact of our era.
83
Response Capacity
6.60
6.40
Scale
6.20
EXPECTED
6.00
PERCEIVED
5.80
5.60
5.40
in the time
Schedule
Assertiveness
Rapidity
Flexibility
Disposition
Variables
Source: Created by authors
Figure 7 Expectations and perceptions over the capacity of response in Metro Pizza.
Safety dimension
On the safety elements are the trust, order specifications, guarantees, and trust on employees, among
others. Thus, the issues of this dimension results as it is detailed below:
• I trust on the deliverer of Metro Pizza

• The enterprise Metro Pizza delivers the order with the special indications given by the
customer
• The belief that the employees of Metro Pizza have the sufficient knowledge to make and
deliver pizzas.
• The firm Metro Pizza offers guarantees in purchasing its products.
• I feel tranquil and safe that my small children receive products purchased at Metro pizza.
• At the firm Metro Pizza always exists disposition to change products in the case of
complaining
Regarding safety, it is observed that the customers trust on the employees surpasses the
expectations (Figure 8).
84
Security
7.00
6.00
5.00
Scale
4.00
EXPECTED
PERCEIVED
3.00
2.00
1.00
0.00
Certainty
company
Knowledge
Guarantee
Trust in the
Trust en the
employee
Variables
Source: Own elaboration
Figure 8 Expectations and perceptions over safety in Metro Pizza
However, the firm is observed weak regarding the knowledge to make and deliver pizzas.
This category presents also a series of complex features. The customer expects to know that
production processes and the delivery of pizza are found in expert and trained hands and demand that
the firm makes him to know.
Empathy dimension
On the features of empathy were considered the good treatment, personal attention, customer’s data,
customer’s interest, behavior, communication among others. The issues of this dimension resulted as
it is detailed below:
• The employees of the firm Metro Pizza give good treatment to their customers.
• At the firm Metro Pizza gives very personal attention.
• To deliver the order, the deliverers of the firm Metro Pizza smile to the customer.
• In one firm such as Metro Pizza insists in data such as name and address of the customer to
meet again when he comes back.
• In the firm Metro Pizza has given to the employees an individual attention.
• The employees of Metro Pizza understand the needs that customers have
• The employees of Metro Pizza show interest in order that customers come back again.
• The customers think that metro Pizza offers a service that understands personal needs.
• Metro Pizza is worried for the best interest of customers
• Employees of Metro Pizza always show good behavior.
• All the employees of Metro Pizza have good level of communication with customers.
In this dimension, the interest, understanding, behavior and expression have a higher value
regarding the expected (Figure, 9), but not the courtesy, an attribute that the customers appreciate
together with the kindness of employees, their manifested responsibility, the level of intelligence and
the discretion among others, which are found intimately inter related (Salvador, 2005: 8).
85
Empathy
6.30
6.20
6.10
6.00
Scale
5.90
5.80 EXPECTED
5.70
5.60 PERCEIVED
5.50
5.40
5.30
5.20
Behavior
Courtesy
Communication
Attention
Interest
Understanding
Expression
Variable
s
Source: Own creation
Figure 9. Expectations and perceptions over the empathy dimension in Metro Pizza
Conclusion
The Servqual model presents an excellent structure for the analysis of different categories which can
integrate the service quality in different contexts. For the case of Metro Pizza, a micro enterprise
located in Los Mochis, Sinaloa in the Northeast of Mexico. Its adequacy allows breaking down each
one of the elements that are part of the owner’s daily preoccupations. But at the same time it is
allowed to attend the problems around the service quality that have the micro enterprises of the
pizza´s sector to compete with transnational firms.
The situation described above strengthens survey’s results, on which the customers wait in the
tangible dimension a mayor focus on flavor and temperature than the image. The enterprises of this
sector uneasily can define how much is necessary to invest in resources related to the image. This is
due to the leader enterprises are intensive in this dimension, but for the firms of local character, to
compete based on image extremely difficult and even dangerous, its main strength is based on flavors,
smells and cultural characteristics appropriated to the localities that people seek even with a minimum
investment in image.
It is observed the tangible in this type of firms, the capacity of response and safety are the dimensions
that more expect the customers. As the underlying values spring out besides different dimensions:
what it is healthy, assertiveness in time and courtesy, qualities that have been inherited from the
leader’ firms. As it was mentioned, the healthy has a strong cultural component, in such a way that
even could be a part of the firm’s image and the advertising bombarding, people seek and demand,
independently of the truth nutritional values that the product has.
The assertiveness in time is an outcome of our era, with people living in time constrains or the youth
which play with fast delivery of the fast food’s firms, the services now include or must include a
strong temporal content. Rapidity is culturally well valued in pizza’s business.
Finally the courtesy which contrasts with cold and impersonal treatment, is to allow systematization
and technical processes, but at the same time, to demand over all the human, warmth, friendly,
intelligent and kindness. From the above, analyses are detached the strategies that Metro Pizza must
had to follow to improve competitiveness both at local and global levels.
86
References
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protección en jóvenes universitarios”, Colombia médica, Colombia, 34, 4, pp. 186-195.
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David Le Breton”, Argumentos, 21, 57, UAM-Xochimilco, México:, pp. 213-218.
7. Cámara Nacional de la Industria de Restaurantes y Alimentos Condimentados CANIRAC,
(2008). Padrón general de afiliados, Los Mochis, Sinaloa.
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de medición”, Innovar, Revista de Ciencias Sociales y Administrativas, 025, Universidad
Nacional de Colombia, Colombia, pp. 64 -80.
9. Hernández Sampieri, Roberto et al, (2006). Metodología de la investigación. Mc Graw-Hill,
México.
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– Disponible en http://www.economiaelche.com/file_download/39.
11. Lara López, J. Refugio, (2002). “La gestión de la calidad en los servicios”, Conciencia
Tecnológica, 019, Instituto Tecnológico de Aguscalientes, México, pp. 1-6.
12. McDaniel, Carl y Roger, Gates. (1999). Investigación de Mercados, Contemporánea.
Thomson Editores, México.
13. Metro Pizza, (2007). Manual de operaciones. Los Mochis, Sinaloa.
14. Nuno, Caetano Alvés, (2003). Marketing de servicios en la educación, Universidad
Complutense de Madrid, Madrid,
15. Peralta Montesillos, Jenniffer, (2006). “Rol de las expectativas en el juicio de satisfacción y
calidad percibida del servicio”, Límite,1,14, Universidad de Tarapacá, Chile, pp. 195 – 214.
16. Salvador Ferrer, Carmen María, (2005). “La percepción del cliente de los elementos
determinantes de la calidad del servicio universitario: características del servicio y habilidades
profesionales”, Papeles del Psicólogo, 26, 90, Consejo General de Colegios Oficiales de
Psicólogos, España, pp. 1-9.
17. Zeithaml, Valarie A. and Bitner, Mary Jo (2002). Marketing de Servicios, Mc Graw Hill,
México.
18. (1992). Calidad Total en la Gestión de los Servicios, Díaz Santos, España.
José Guadalupe Vargas Hernández Doctor en Administración Pública por

Columbia States University y Doctor en Economía por Keele University. Centro
Universitario de Ciencias Económico Administrativas de la Universidad de
Guadalajara. Periférico Norte 799, Edif. G-306, Los Belenes, Zapopan, Jalisco,
45100 josevargas@cucea.udg.mx.
Mario Guadalupe Zazueta Félix Maestro en Economía y Negocios por la
Universidad Autónoma Indígena de México. Presidente de la CANIRAC en Los
Mochis. caniracmochis@metropizza.com.mx.
Ernesto Guerra García has a bachelor degree in Physics with honors at the
Universidad Autonoma de Nuevo Leon (UANL), where also got a Masters degree
in Industrial Economics. He earned his Doctor degree in Higher Education with
honors from the Centro de Investigación y Docencia en Humanidades del Estado
de Morelos. He made his first post-doctoral research on "Fractal Anthropology" at
the UANL. He belongs to the National System of Researchers of Mexico. He
currently serves as Coordinator of Research at the Universidad Autónoma
Indígena de México
87
FACTORS INFLUENCING CONSUMERS’ PERCEPTION IN THE

CHOICE OF CONSUMERS’ PRODUCTS: A SEM APPROACH ON
MALAYSIAN CONSUMERS’.
Ahasanul Haque1, Sabbir Rahman2, Noorhazilah Abd. Manaf3
Abstract. The overall purpose of this study is to identify the perception of

Malaysian customers’ in the choice of products and marketing practice. A

total of 300 usable surveys were obtained from university students from
Kuala Lumpur, Malaysia. In addition, exploratory factor analysis,
confirmatory factor analysis and structural equation modeling were applied
to proof the hypotheses. The research results highlighted that the Malaysian
consumers are very much influenced by ethnocentrism and their
demographic background before they purchase any products. The results of
this Research also suggest that a significant proportion of consumers’ are
November, 2010
not interested in country-of-origin, brand image, product quality information
before making a purchase decision.
JMIJMR
Key Words: Product Quality, Brand Image, Country of Origin,
Ethnocentrisms and Demography.
Introduction:
The customer perception reflects through buying behavior and attitude, which vary person to person.
Studies had shown that consumers around the world use COO (country of origin) as an attribute in
product evaluation (Bilkey and Nes, 1982). When products from less developed countries are
associated with a reputable brand name, the brand effect often outweighs a negative COO image.
Moreover, when product quality and reliability seem noticeable, a consumer develops a soft corner to
pay for the product. Demographic variation and ethnocentrism also execute consumer perception and
attitudinal differences Eroglu and Machleit, 1989.
The purpose of this research study is to examine that factors that influences Malaysian customers’
perceptions on choice of products. In this research we have some specific objectives as well for
instance: To identify factors those influences Malaysian consumers’ in selecting the products and to
offer a better marketing strategy for Malaysian customers’. It is hypothesized that product quality,
brand image country of origin, ethnocentrism, and demographic differences are significant predictors
of perception of Malaysian consumers in the choice of consumers’ product. Review of literature
reveals that studies of the variables that influence performance within these views are basically
lacking. So, the current study aims to provide more insight into the Malaysian consumers under the
perspective of product quality, brand image country of origin, ethnocentrism, and demographic
differences. Although growing consumers’ is crucial for most of the firms, but it has received very
little attention from researchers under the perspective of product quality, brand image country of
origin, ethnocentrism, and demographic differences
88
Literature Review
Product Quality:
According to Waller and Ahire (1996), there were four dimensions are used to define the product
quality construct: performance, conformance, reliability and durability. If a customer seems satisfied
with performance, conformity, reliability and durability; then it can be thought that the product
execute quality. Customer perception and buying behavior depend on product quality. Organizations
need to take into account the dynamic needs of their customers in order to compete effectively
(Shepetuk, 1991). For customers, the main aspect for choosing a product was considered product
quality. Generally, quality product progressively satisfied customers and gradually created customer
satisfaction. Customer satisfaction was the leading criteria for determining the quality delivered to
customers through the product or service and the accompanying services (Vavra, 1997). Malcolm
Baldrige National Quality Awards Guidelines, (1993) stated that, customer satisfaction is
acknowledged as the most important construct of TQM (Total Quality Management) implementation,
and, management quality clearly constitutes a critical pillar of TQM implementation. Management
quality refers to the efficient use of resources to meet customer demands and is measured through the
broader quality approach of the organization (Ovretveit, 1991; Curry and Herbert, 1998).
Brand Image:
A momentous quality characteristic and reliability were concerned with the performance of the
product’s function over a stated period of time, whereas, quality was defined as conformity to
requirements, reliability on the other hand is defined as a failure or fault-free performance in all
products provided to the customer (Ahmed and Dastous, 1996). However, brand strength refers to
consumers’ overall assessment of the brand or call brand image, including brand awareness and brand
preference (Aaker and Keller, 1990; Smith and Park, 1992). There are numerous studies indicated that
the accumulation of brand image and use experience is key determinant of attitude towards core-brand
attitude (Martinez and Chernatony, 2004; Ghen and Liu, 2004). Within the scope of brand extensions,
a general finding is that of brand strength, a critical factor during the brand extensions process
(Broniarczyk and Alba, 1994; Reddy et al., 1994). Tauber (1981) and Reddy et al. (1994) noted that
leading brands in the market generally have greater brand publicity and market share, and are
therefore viewed as superior in the eyes of consumers. Prior research has suggested that customer
loyalty is largely influenced by attitudes toward brands and emphasized the effective management of
brand attitudes (Chaudhuri and Holbrook; 2001; Keller, 2003).
Country of Origin:
An important influence on the development of consumer attitudes toward products is the country-of-
origin of each. The role of COO (consumers’ country of origin) influences customer perception on
choice of products. The COO of a product had been defined as “the country of manufacture or
assembly” (Bilkey and Nes, 1982), identified by ‘made in’ or ‘manufactured in’ labels. In case of
judgment of product quality consumers generally used country of origin to infer product quality if
they know little else about the product class and/or product brand (Eroglu and Machleit, 1989; Han,
1990). Wall and Heslop (1991) suggested, when the price of low-involvement products increases, the
price cue eclipses the importance of COO in product evaluation and purchase intention. These cues
serve consumers as a predictor of product quality and suitability, and themselves attributes that
stimulate attitudinal reactions. These country-of-origin cues interacted with the branding, advertising
and promotional practices associated with a foreign product in the development of each consumer’s
attitude toward that product (Leclerc et.al., 1994). Thus, country-of-origin became an important factor
in determining buyer response in the marketplace and the ultimate success of a firm’s product in a
foreign market (Anderson et.al., 1994).
89
Ethnocentrism and Consumer Behavior:

Ethnocentrism is a part of attitude that a consumer possesses irrespective of every country and it was
mentioned that ethnocentric consumers preferred domestic goods because they believe that products
from their own country are the best (Klein et. al., 1998). Besides, much of human behavior was
influenced by uncontrolled, unobserved processes in memory (Bargh, 2002; Greenwald et al., 2002).
On the other hand, a concern for morality leads consumers to purchase domestic products even though
the quality is poorer than that of imports (Wall and Heslop, 1991). Consumer ethnocentrism (CE)
plays a significant role when people believe that their personal or national well-being is under threat
from imports (Sharma et.al., 1995; Shimp and Sharma, 1987). The more importance a consumer
places on whether or not a product is made in his/her home country, the higher his/her ethnocentric
tendency (Huddleston et.al., 2001). Research from the US and other developed countries generally
supports the notion that highly ethnocentric consumers overestimate domestic products, underestimate
imports, have a preference for, and feel a moral obligation to buy, domestic merchandise (Netemeyer
et.al., 1991; Sharma et.al., 1995). Research on consumer ethnocentrisms showed that consumers in
developed countries tend to perceive domestic products as being of higher quality than imported
products (Damanpour, 1993; Herche, 1992) whereas the reverse is true for consumers in developing
countries (Batra et.al., 2000; Wang et.al., 2000). Under the light of the study of developing country’s
perspective, research has consistently found that there is a preference for products manufactured in the
home country (Bilkey and Nes, 1982; Samiee, 1994). In addition, some studies suggested that
products from countries viewed as culturally similar to the home country, in comparison to products
from countries that are viewed as culturally dissimilar, are preferred (Heslop et.al., 1998). Lantz and
Loeb (1996) found that highly ethnocentric consumers have more favorable attitudes toward products
from culturally similar countries. With regard to consumer ethnocentrism, Sharma et al., (1995)
suggested that cultural similarity between countries is one factor that may influence the effect of
consumer ethnocentric tendencies on attitudes toward foreign products.
Demographic differences and ethnocentrism:
Demographic differences with regard to age and educational level for ethnocentrism have been found
previously (Shimp and Sharma, 1987); thus, there is the potential for bias in the establishment of
ethnocentrism levels. Lantz and Loeb (1996), argued that Canada was regarded as having a shared
identity with the USA “due to a considerable history of trade and social relations,” while Mexico was
deemed to be culturally dissimilar, seemingly because it lacked this historical connection. Many
previous studies have also relied on perceptions of cultural similarity and dissimilarity that are only
loosely grounded in theory (Kaynak and Cavusgil, 1983). Sharma et al., (1995) provided some insight
into this area. They suggested that ethnocentric consumers may distinguish countries based on their
similarity to the home country as either in-group or out-group. Although some studies have
questioned the importance of country of origin for much consumer decision making (Elliott and
Cameron, 1994; Mitchell and Greatorex, 1990), research had demonstrated that the country of origin
has a substantial effect on attitudes toward products and the likelihood of purchasing these products,
often demonstrating effects that are as strong or stronger than those of brand name, price, or quality
(Ahmed and Dastous, 1996; Lantz and Loeb, 1996; Okechuku, 1994).
Theoretical Framework:
Based on the literature review; this research concentrates on conceptual framework of customer
perception for choosing products and attitudinal differences. This framework emphasizes those
variables like product quality, brand image, country of origin, ethnocentrism, and demographic
differences. These independent variables are positively related to the Malaysian consumers’
perception to specific purchasing of particular services. The detailed diagram framework is given
below:
90
H H Ethnocentrism
Product Quality Malaysian
Consumers’
perception in
choice of H Demographic
Brand Image H
consumer product Differences
Country of Origin
Figure 1: Factors of Malaysian Customer Perception on Choice of Products
To test our variables

We construct the following hypothesis:
H1: Ethnocentrism and customer perception on choice of products exist a significant relationship.
H2: Product quality significant with customer perception on choice of products
H3: Country of origin is related with customer perception on choice of products.
H4: Demographic differences of consumers are significant with customer perception on choice of
products.
H5: Brand image and customer perception on choice of products have significant relationship.
Methodology:
A simple random sampling technique employed with a few criteria to be set for the selection of these
respondents. The respondents must be of age from 18-30, minimum students in University level. The
participants who will part take in this study would comprise only students mostly undergraduate. The
questionnaire consisted with a few general questions regarding the consumers’ perception toward
foreign products under the dimensions of four variables for instance; consumer morality, demographic
differences, cultural similarity, product quality and demographic information. A 5-point Linker scale
used ranging from ‘strongly agree’ to ‘strongly disagree’ will be used. This chapter presents the
findings of the survey in order to evaluate the factors of Malaysian consumers’ perception toward
purchasing products. The findings and data analyses will begin with the reliability test followed by a
description of the general demographic of respondent. The researcher used the Statistical Package for
Social Science (SPSS) to obtain a count of the number of respondents associated with different values
of the variables and to express it in a percentage term. The sampling frame for conducting the
principal component analysis would comprise 300 Malaysian consumers’ who currently study in
University level which would be taken from both male and female. Exploratory factor analysis used in
the study to identify the salient attributes that have impact on factors that are significant with
Malaysian consumers’ perception on purchasing decision. In addition, SEM (structural Educational
Modeling) has been carried out to investigate the relationship among the variables which influence the
factors Influencing Malaysian consumers’ perception on choice of products.
91
Data Analysis:
In the Reliability Statistics, from Table 1 we got the Cronbach’s Alpha .879, which means that our
measuring is consistent. Generally, if the Cronbach’s Alpha is more than 0.5, then it is considered
acceptable.
Table 1: Reliability Statistics
Cronbach’s Alpha Cronbach’s Alpha Based on Number of Items

Standardized Items
0.879 0.868 35
Factor Analysis:
The results obtained from 300 respondents have been thoroughly analyzed and the outputs of the
results have been clearly explained in this section. Applying SPSS, the principal component analysis
(PCA) was carried out to explore the underlying factors associated with 30 items. The constructs
validity tested applying Bartlett’s Test of Sphericity and The Kaiser–Mayer–Olkin Measure of
sampling adequacy analyzing the strength of association among variables. The value of KMO varies
from 0 to 1, and KMO overall should be 0.60 or higher to perform factor analysis. Result for the
Bartlett’s Test of Sphericity and the KMO reveal that both were highly significant and eventually
concluded that this variable was suitable for the factor analysis (Table 2).
Table 2: KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .792

Bartlett's Test of Sphericity Approx. Chi-Square 1314.643
df 253
Sig. .000
92
Table 3: Total Variance Explained
Comp Extraction Sums of Squared Rotation Sums of Squared

onent Initial Eigenvalues Loadings Loadings
% of
% of Cumulati Varianc Cumulat % of Cumulative
Total Variance ve % Total e ive % Total Variance %
1 6.049 26.299 26.299 6.049 26.299 26.299 3.448 14.993 14.993
2 2.040 8.870 35.168 2.040 8.870 35.168 2.695 11.719 26.713
3 1.778 7.731 42.900 1.778 7.731 42.900 2.460 10.694 37.407
4 1.462 6.356 49.256 1.462 6.356 49.256 2.428 10.554 47.962
5 1.414 6.149 55.405 1.414 6.149 55.405 1.712 7.443 55.405
6 1.128 4.904 60.309
7 .980 4.263 64.571
8 .904 3.931 68.502
9 .868 3.775 72.278
10 .731 3.178 75.456
11 .709 3.082 78.538
12 .654 2.843 81.381
13 .642 2.792 84.173
14 .564 2.453 86.625
15 .499 2.170 88.796
16 .457 1.986 90.782
17 .437 1.900 92.682
18 .391 1.701 94.383
19 .342 1.489 95.871
20 .318 1.384 97.256
21 .258 1.120 98.376
22 .215 .935 99.311
23 .158 .689 100.000
Extraction Method: Principal Component Analysis.
For this study, the general criteria were accepted items with loading of 0.40 or greater. Not a single
factor had been dropped out under this circumstance which means the factor analysis ran on an
ultimate success. The result showed in Table III explained total variance explained by the six factors
was 55.405%. The values of the following Table IV indicated the affiliation of the items to a factor.
The higher loading (factor) indicates the stronger affiliation of an item to a specific factor. The
findings of this study indicate that each of the five dimensions (ETHNO=Ethnocentrism, PQ= Product
Quality, BI= Brand Image, CO=Country of Image, DD= Demographic Differences) was
homogeneously loaded to the different factors.
93
Table 4: Factor Loading Matrices Following Rotation of Three-factor Solutions
Items Component
ETHNO PQ BI CO DD
Own Country’s product best
.673
Morality and purchase of domestic
.421
product
Importance of national production .677
Buying attitude from similar culture .770
Feeling ethical and moral .687
Value own country’s product .731
Selection product on Performance .677
Reliability of the product .829
Product should be durable .790
Product should be easy to use .695
Consistent performance of the products .518
Positive perception on brand .827
Encourage other to buy brand .816
Product loyalty influenced brands .632
Telling friend of using my favorite brand .477
Choice product on made in .767
Proud to purchase product from
.750
developed country made
Buyer response market place .669
Always consider origin of the products .482
Gender differences on product choice .751
Education level and liking of foreign
.671
product
Generation differences on product
.571
choices
Age vary in terms of selection of
.468
products
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser
Normalization.
Rotation converged in 7 iterations.
Reliability Test:
The coefficient alpha estimates for the multi-item scales used in this study are presented in Table V.
Reliability coefficients (Cronbach’s Alpha) were computed for the items that formed each factor. The
reliability coefficients for the five factors: role enactment, escape, aesthetic, exploration, and
convenience dimensions were 0.782, 0.612, 0.752, 0.713, and 0.727 respectively. As Table shows, all
alpha coefficients for the data exceed the minimum standard for reliability of 0.70 recommended by
Nunnally (1978) for basic research. Thus, the results indicate that these multiple measures are highly
reliable for measuring each construct.
94
Table 5: The Reliability Coefficients for Derived Factors.

Factor Number of Cases Number of Items Cronbach’s Alpha
Ethnocentrism 300 6 0.778
Product Quality 300 5 0.751
Brand Image 300 4 0.786
Country of Image 300 4 0.769
Demographic 300 4 0.758
Differences
Confirmatory Factor Analysis:
In our study a transformation method such as Varimax rotation was used to improve the interpretation
result. In contrast, the path diagram was utilized that will represents a clear hypothesis about the
factor structure. Models of this kind are called restricted or Confirmatory factor analysis (CFA)
models. CFA is actually the measurement part of structural equation modeling (SEM). Although we
have done EFA (Exploratory Factor Analysis) for verifying grouping and loading pattern of
measuring scale items, we further attempted to screen our EFA examination by conducting CFA
among all the exogenous variables (ETHNO=Ethnocentrism, PQ= Product Quality, BI= Brand Image,
CO=Country of Image, DD= Demographic Differences) with measuring items retained by EFA.
Ethnocentricism:
For Ethnocentrism variable, the modification indices for the covariance of measurement errors were:
9.661 between r5 (“Morality and purchase of domestic product”) and r6 (“Feeling ethical and moral”)
and 13.232 between r2 and r5 (“Value own country’s product” and “Morality and purchase of
domestic product”). These two sets of measurement error are logically conceivable to be correlated
(Figure2). Therefore these correlated relations were allowed in the model. Each pair was added to the
measurement model one at a time. After adding these three parameters, testing of the revised
measurement model showed: χ²/d.f. = 1.79 (χ²=12.559, d.f=7); GFI= .97, AGFI=.93, CFI=.98,
NFI=.96 and RMSEA= .05.
Brand Image:
From our EFA as shown in table 4, we have retained five measuring items for brand image
dimensions. The examination of the modification indices revealed that the measurement errors 9.318
between f4 (“Selection product on Performance”) and f5 (“Consistent performance of the products”)
were correlated. The Logical possibility for the correlation was allowed; therefore, these measurement
errors were allowed to be related. After adding this parameter, the measurement model fit indices of
price00 showed an adequate fit: χ²/d.f. = .057 (χ²=.2.3, d.f=4); GFI= .99, AGFI=.97, CFI=1.00, NFI=
0.98 and RMSEA= .000.
Country of Image:
From our EFA as shown in Table 4, we have retained four measuring items for country of image
dimensions. The fit indices from the default measurement model were: χ²/d.f. = 2.2(χ²=4.5, d.f=2);
GFI= .98, AGFI=.93, CFI=.98, NFI= 0.97 and RMSEA= .067. All indices represent an adequate fit of
the model, except the value of RMSEA therefore, there was no need to examine the modification
indices.
Demographic Differences
From our EFA as shown in Table IV, we have retained four measuring items for Demographic
Differences. The fit indices from the default measurement model were: χ²/d.f. = 2.2 (χ²=3, d.f=2);
GFI= .99, AGFI=.95, CFI=.99, NFI= 0.97 and RMSEA= .052. All indices represent an adequate fit of
the model, so there was no need to examine the modification indices. Structural equation modeling
(SEM) was performed to test the hypothesized model using AMOS 7. In Figure 2, boxes represent
manifest or measured variables, whereas circles indicate latent or unobserved variables. As shown in
95
Figure 2, the model’s exogenous variables (E=Ethnocentrism, P= Product Quality, B= Brand Image,
C=Country of Image, D= Demographic Differences) were measured by X variable. There are four
indicators used for the construct of consumers’ perception (CP); six indicators used for the construct
of consumers’ ethnocentrism; five indicators used for the product quality, four indicators for brand
image, country of origin, and demographic differences. Similarly, the model’s endogenous variables
were measured by Y (consumers’ perception) variable. Four indicators measured the construct of
consumers’ motivation (CP).
Figure 2: Factors Influencing Factor influencing Customer Perception in the Choice of Consumer
Products (For Total Sample): Default Model
Statistical Significance of parameter estimates:
The test statistic here is the critical ratio (C.R), which represents the parameter estimate divided by its
standard error, as such, it operates as a z-statistic in testing that the estimate is statistically different
from zero. Based on a probability level 0.05, then, the test statistic needs to be >±1.96 before the
hypothesis (that estimates equals 0.0) can be rejected.
Table 7: Standard Estimation of the Main Model
Standardized regression weight Estimate S.E. C.R. P value

H1 Ethnocentrism Customers 0.219 .083 2.876** 0.002
(E) Motivation(CM)
H2 Product Customers -.629 .584 -1.076 .282
Quality(P) Motivation( FP)
H3 Country Of Customers -0.082 .073 -.1.124 .261
Origin (C) Motivation( FP)
H4 Demographic Customers 0.313 .108 2.851** 0.001
(D) Motivation(CM)
H5 Brand Customers -.113 .149 -0.759 .448
Image (B) Motivation(CM)
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Hypotheses Testing:
The structural equation model was examined to test the relationship among constructs. Goodness-of-
fit indicates for this model was chi-square/df = (672.414/318) = 2.11, GFI = 0.788, AGFI = 0.734,
CFI = 0.727, NFI = 0.673, RMSEA= 0.054. Figure 2 depicts the full model. Of the five paths
hypothesized in the model, not all the paths were significant at p < 0.05. (H2) Product quality is not
significant with customer perception on the choice of purchasing products. Therefore null hypotheses
H2 is rejected at 0.5 level of significance p > 0.000. Regarding the H1: Consumers ethnocentric
behavior doses have significance Malaysian consumers’ on the choice of purchasing products. Our
results also revealed that factor ethnocentrism has positive effect on Malaysian consumers’ on the
choice of purchasing products. Therefore, this null hypothesis is accepted at p < 0.000. (H4)
Consumers’ demographic differences affected the Malaysian consumers’ on the choice of purchasing
products. Our results also revealed that factor demographic differences have positive effect on
Malaysian consumers’ on the choice of purchasing products. Therefore, this null hypothesis is
accepted at p < 0.000. On the other hand, (H5) Brand image dimension is not significant with
Malaysian consumers’ on the choice of purchasing products. Therefore, null hypothesis is not
accepted at p < 0.000. The result also showed that country of origin dimension is not significant with
Malaysian consumers’ on the choice of purchasing products. Therefore, null hypotheses H3 is not
accepted p > 0.000. Among all the significant variables, from our result, consumers’ ethnocentric and
demographic differences dimensions are the most important which influences Malaysian consumers’
on the choice of purchasing products.
Conclusion:
From our research findings, the Malaysian consumers’ are very much conscious about ethnocentrism
and their demographic background when they purchase any products. So companies of Malaysia
should be very careful in advertisement of the products they are offering in the marketplace. The
results of this Research suggest that a significant proportion of consumers will be interested in
ethnocentric behavior before making a purchase as the consumers prefer domestic goods because they
believe that products from their own country are the best. Moreover, a concern for morality leads
consumers to purchase domestic products even though the quality is poorer than that of imports. In
other words, in a developing country like Malaysia, a consumer with strong ethnocentric tendencies
may perceive domestic products as being of higher quality than imports, even though she/he rejects
foreign products on moral grounds. Consequently, the negative perception of domestic-made products
coupled with an admiration of imported products would mitigate the effect of ethnocentrism on
intention to purchase the former. The findings also suggest that the most obvious implication concerns
decision situations in which a domestic alternative to the foreign product is unavailable. In such
situations, the use of country of origin information may be strategically advantageous for foreign
importers from countries classified as culturally similar.
Research Implication and Limitation:
For marketers who are fortunate enough to be market leaders and to enjoy a significant amount of
customers so that they will not succumb to competitor’s special offers and other inducement design to
win them over. In terms of the size of the market and purchasing power, Asia is the growing market.
There is a greater need to understand perceptions, behavioral and attitudinal characteristics of Asian
consumers’ and how these consumers react to products from various sourcing countries. This
research on the proposed topic is very worthy because the extensive developments in digital
technologies had changed the whole environment and potential of communications and multimedia;
so the research on findings will enable the academicians, and researcher in this field to understand
the attitude of the consumers of a growing sector. The result will be helpful to take proactive strategy
in order to gain competitive advantage in home and abroad for their expansion. Further research
should be considered to garner more information regarding multi-ethnic attitude toward choice of
product from all over Malaysia. The limitation of this study was the difficulty in approaching the
respondents with larger amount. For further research, the researchers need to increase the number of
respondents involved in the research study, the number of respondent, and the research should
represent the whole Malaysia.
97
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Ahasanul Haque is an Associate Professor of Marketing at Department of
Business Administration, International Islamic University Malaysia. He
received his PhD at the Graduate School of Management (GSM), University
Putra Malaysia. He has more than 12 years teaching and research experience
and published a text book of Marketing, written several study modules and
over 50 papers in international refereed journal and more than 60 papers
published international and local conferences in the area of global marketing,
e-commerce, internet shopping and internet advertising. He is member of
American Marketing Association (AMA), Academy of World Business and
Marketing Management (AWB), International Academy of Business and
Economics Society (IABE) and Academy of International Business (AIB).
Muhammad Sabbir Rahman is a PhD student of Marketing at Department
of Business Administration, International Islamic University Malaysia. He
published several papers in international refereed journal and more than 10
papers published international and local conferences in the area of global
marketing, e-commerce, internet shopping and internet advertising.
Dr Noor Hazilah is an Associate Professor with the Department of Business
Administration, International Islamic University Malaysia. She obtained her
doctorate and master’s degree from the Faculty of Economics and
Administration (FEA), University Malaya and her bachelor degree from the
University of East London. Dr Hazilah conducts research on management on
both private and public organisations. She also provides training and
consultancy to various organisations, including Tenaga Nasional Berhad,
which is Malaysia’s largest utility company. Dr Noor Hazilah is currently
Deputy Dean for Postgraduate and Research, Faculty of Economics and
Management Sciences, International Islamic University Malaysia.
99
ACHIEVEMENT AND EXPERIENCE TOWARDS THE USE OF SELF

SERVICE TECHNOLOGY (SST) IN THE NEW AGE BANKS FOR THE
CITY OF ALLAHABAD – INDIA
Dr.Devendra1 K. Dwivedi2
Abstract .An increasing numbers of banks are using technology to deliver

their regular service to the consumer. IT and Globalization have benefited

the banking industry to become more customer oriented. IT in today's Banks
is more of a holistic approach towards designing and development of
modern, robust, efficient, secure and integrated systems. But technology
adopted by the banks is well adopted by the customers. It also depends on
their perception and experience with these self-services in banks. In this
study, the perception of people towards usage of self-service options
November, 2010
provided by the bank i.e. internet banking, phone banking, ATM's and other
automated services, etc. is studied. A convenience sampling method was used
and therefore 200 respondents were selected to be as the sample size
JMIJMR
specifically for the city of Allahabad. Factor analysis was run on these 14
statements in order to observe the variability among observed random
variable and reduce the set of variables in data set.
Keywords: SSTs, ATMS, Internet Technology, Perception
Introduction
Providing an excellent customer service plays a vital role in the company's success and failure. This
issue has become more pertinent in the light of kind of industry you are operating in as well as the
intensity of competition in the business. The banking is another one kind of industries that are going
through the competition dynamics. The proximity of the customer services and use of optimum
resources with the focus upon being correct, perfect and exact in a most efficient time are the current
requirement of the banking industry. Delivering better services with innovations, managing risks and
reducing the geographical disparities is some of the challenges that the banking industry has been
strategizing against. The customer dissonance and the resonance as well as long term perception have
even forced the most conventional bankers to make up with the upcoming technologies to
revolutionize the delivery mechanisms. These technologies have provided propulsive momentum to
the banks to deliver the quality with the efficiency and at the lower cost. The banking industry has
become more independent and open with emerging concepts of core banking, remote banking,
electronic banking, mobile banking, global banking, anywhere banking, virtual banking, electronic
fund transfers etc. IT and globalization have benefited the banking industry to become more customer
oriented. Technology advancement has led the banks to manage larger information flows across more
locations, deliver better services and manage risks making geographical disparities irrelevant.
Innovative and better quality services have definitely increased competition in the banking industry
which has in turn increased the customer expectations. The customers use the services that assure
quality delivery and are risk free. This has forced banks toward a complete revamp. But yet
investigations of quality issues of banks’ automated services are necessary because of their potential
influence on: attractiveness, customer retention, positive word-of-mouth, and maximizing competitive
advantages (Santos 2003).
During the last two decades, the financial sector especially banking has advanced rapidly in terms of
size, industry structure and the variety of consumer and business-to-business products and services.
Since independence, banking in India has evolved through four distinct phases. Recommendations of
the Narasimhan Committee (1991) paved the way for the reform phase in the banking. Important
100
initiatives with regard to the reform of the banking system were taken in this phase. Important among
these have been introduction of new accounting and prudential norms and making the banks more
efficient. Entry of new banks resulted in a paradigm shift in the ways of banking in India. The
growing competition, growing expectations led to increased awareness amongst banks on the role and
importance of technology in banking. The arrival of foreign and private banks with their superior
state-of-the-art technology-based services pushed Indian Banks also to follow suit by going in for the
latest technologies so as to meet the threat of competition and retain their customer base. In order to
remain competitive, banks are increasing their technology based service options. Indian banking
industry today is in the midst of an IT revolution. A combination of regulatory and competitive
reasons has led to increasing importance of total banking automation in the Indian Banking Industry.
IT in today’s Banks is more of a holistic approach towards designing and development of modern,
robust, efficient, secure and integrated systems.
One of the major innovations for the cost reduction and optimum delivery was the use of self service
technologies in the banking sector. ‘Self-service’ is defined as any technologically mediated
interaction or transaction with a company where the only humans involved in the experience are the
customers themselves (Meuter et.al, 2000). Common self-service technologies can range from the
Internet, interactive voice technologies, to public kiosks. Use of information technology and self-
service has the potential for order-of-magnitude reductions to the cost of processing and transmitting
information (Emmons & Greenbaum, 1998). Self-service
technologies are technological interfaces that enable customers
to produce a service independent of direct service employee
involvement (Meuter et. al., 2000), i.e. person-to- technology One of the major
service delivery (Dabholkar, 1994). Self-service technologies are
viable for banks and other financial intermediaries because innovations for the
information processing is essential to their services. Automation cost reduction and
of standard services is expected to reduce the need for financial
intermediaries while there will be continued demand for optimum delivery
nonstandard, differentiated transactions and services (Emmons& was the use of self
Greenbaurn, 1998).
service
More and more banks have adopted technology to deliver their technologies in
services and this has resulted in: reduced costs, the creation of
value added services for customers (Zhu et al. 2002), the the banking sector
facilitation of their employees’ jobs and ultimately, the provision
of self-service options for customers (Dabholkar & Bagozzi
2002). Adoption of self-service banking relies on effective
information exchange between the bank and its customers. The knowledge and experience already
possessed by the customers define their extent of need of information to use technology and also their
readiness to accept it. In the context of SST deployment in financial aid administration (like banks),
the most beneficial approach is the result of a “synergistic” relationship that extends the online service
encounter leading to stronger relationships and a perpetual state of relational exchanges between
producer and customer (Mittal, Pankaj & Tsiros, 1999).
SST and Customer’s Perception
The perception of customers towards the use and ease of technology leads to attitude formation and
thus leading to action and behavior in the form of accepting/not accepting the system. in reference to
the Fig. 1, the customers are influenced with the external variable of offerings provided by the bank to
influence their own decision making and permanent intention to actually utilize the system. Generally
banks overlook the context of offerings. The external variables include the offerings by the
institutions/organizations, experience and exposure of the user, his reference group and also the
availability of the infrastructural resources. (Davis & Bagozzi 1990). The set of enquiry generated by
the offerings generate the perceptual reference of usage, and the easiness of the usage. A complex
technology results in the rejection of usage but a comprehensive training and education creates a
perceptual acceptance. This results in the attitude formation towards the usage of technology in terms
of the complexity, easiness, reliability, dependence etc. The perception of usage contributes to the
101
action behavioral response. But in context the consistency of the system is largely dependent on the
consistency of the delivery of the technology as per the first time experience and cognizance. (Meuter
et. al. 2000).
Customer Perception and Technology
Perceived
usefulness
External Attitude towards Behavioral Actual

variables use intention to use System use
Perceived ease
Of use
The customer perceptions and preferences of service quality have a significant impact on a bank’s
success. Customers’ perceived automated service quality for banking services is based essentially on
five kinds of self service such as:
The Critical Factors of Customer - Perceived Banking Automated Service Quality (ASQ)
Service delivery channels Additional dimensions
ATM Perceived Price
Telephone Banking ASQ
Internet Banking Core Service
I. ATM service,
II. Internet banking service,
III. Telephone banking service,
IV. Core service, and
V. Customer perception of price.
The banks have introduced their SSTs for the efficient delivery to customers. But these automations
not only influence the perceptual behavior of the customers but also are evaluated in the context of
cost efficiency, delivery mechanisms and reliability. The automation service quality is under
perceptual scanner of the customer not only in terms of the delivery mechanism of ATM, telephone
banking and internet banking but also the additional dimensions of the customer’s perception of price
and cost efficiency and the core services provided by the bank such as integration of financial
services, branches, loaning, depository etc (Figure 2) The service quality determines the formation of
102
opinion by the customer which in turn defines the perception. The issue that remains unsolved is that
how and what are the various responsible dimensions of SSTs that help in the formation of the
perception that are pertinent for the New Age Banks. It is required to explore the dimensions/factors
involved in the interaction of the user and provider which may result in the long term relationship.
The use of SST may reduce the interaction with the customer but it is the need of hour to maximize
the efficiency. (Gummesson, E 1998).
Research Methodology
This study is comprehensive, quantitative and thoroughly performed, where main area of focus was
studying the perception of people regarding adoption of technology in banking sector. The basic focus
of the study was to identify the broad areas of the usage of the self service technology that influences
the perception of the people. Effort was made to interview users, non users and the frequent users.
Most of the research studies done with reference to SSTs focus on the possibilities of Self Service
Technologies for the consumers. However, there is no research regarding usage and confirmation of
the possibilities that the SSTs can create for banking operatives. There was a gap of literature
available in reference to the perception of people for the various aspects of SST options. Therefore,
this study focuses specifically upon identifying the various factors and key areas wherein the self
service technologies can influence the customers in relation to their relative importance. For the above
objective of the research a convenience sampling method was used and therefore 200 respondents
were selected to be as the sample size specifically for the city of Jammu. To reach more specific
respondents, the location of various public and private sector banks where the customers would come
was chosen. The customers were chosen randomly and they were given a questionnaire where they
had to respond to the various facilities and the differences they perceive with reference to traditional
banking. Overall, they had to respond to around 14 statements that were reduced out of 34 in pre-
testing of the questionnaire. The respondents had to respond in terms of the agreement and
disagreement on a scale of 5, using Likert scale. Factor analysis was run on these 14 statements in
order to observe the variability among observed random variables and reduce the set of variables in
data set. The statements were reduced to 5 dimensions on the basis of the responses that were fed into
the SPSS.
Analysis
The KMO and Bartlette’s applied to the 14 variable factors to get the reliability of the results. Since
the KMO value was reported to be 0.518 (Table 1). Therefore, the result could be established as
reliable at the degree of freedom of 91. The chi square value was 110.736 and therefore the test factor
analysis and data are valid, which could be used for obtaining analysis and results. The lesser value of
KMO can be attributed because of lesser size of sample. The data was reduced to 5 (five) factors on
the basis of variables using rotated component matrix. The statements with factor loadings of more
than .5 (point five) were accepted under the five factors that were extracted. The five factors that were
extracted are grouped as follows
I. Efficiency
II. Reliability
III. User friendliness
1V Accessibility
V. Cost efficient
Kaiser-meyer-Olkin Measure of Sampling Adequacy 0.518

Bartlett's Test of Sphericity:
Approx. Chi-Square 1150.73
6
Degree of freedom 91
Significance 0.000
103
Rotated Component Matrix
S. No. Factor I II III IV V

1. Time Saving 0.713 0.008 0.283 0.092 -.309
2 Secure to use .119 .930 .254 -.029 -.048
3. Reduce traveling .700 .221 -.193 .093 .290
4. Error free .874 -.223 .157 -.160 -.042
5. Reliable -.026 .681 .296 .157 -.450
6. Provide multiple facilities .821 -.107 .021 .208 .035
7. User Friendly -.134 .312 .86 -.170 -.213
8. Instant updating .143 -.837 .063 .354 -.037
9. Reduce waiting time .917 .215 .048 -.008 .127
10. Clear instructions are provided .347 .035 .827 -.041 .073
11 Attractive in nature .113 .710 .028 .288 -.345
12. 24 hr service is assured .076 .116 -.110 .947 -.112
13. Charge extra cost .074 -.198 -.032 .033 .915
14. Require professionalism .050 -.304 -.103 .697 .509
Group I: Efficiency
The factor of efficiency calls upon for the perception of people regarding saving of time and
convenience of various operation without much of duplications and errors at the same time. It can be
explained as per the factors below:
1. Time saving (0.713): This factor denotes that the self service options save time to a significant
level. The factor reflects the perception of users that the SSTs save time. People perceived and
acknowledged that the SSTs have reduced the traveling time to Bank as well as the time during the
operations.
2. Reduce travelling (0.700): This factor determines that the self service factors reduce travelling
being easily accessible. However, since most of the respondents were at the bank and had to go to the
ATM, the factor load is comparatively less and hence can be explained accordingly.
3. Reduce waiting time (0.917): This factor denotes that self service options reduce waiting time by
the user. The high factor load explains the reduction in the time in wait and hence contributing to the
efficiency of service per customer.
4. Provide multiple facilities (0.821): It means that self service options provide multiple facilities at
one point. The SST allowed and made easy the usage of the multiple operations at a single time and
single service station. The consumer perceive that the SST has made it simple for them to operate
with number of activities at a single time say loan payment, utility bills payment, saving account
management, credit management, etc.
5. Give error free transaction (0.874): It means that self service options provide error free transactions.
The perception of people recorded the improvement of efficiency due to the increment in error free
processing and the response time.
Group II: Reliability
Perception towards reliability of the operations of these new age banks using SST was another
dimension. In terms of the previous experience of the people with the traditional banking and failure
instances of the failure of technology ensuring reliability is another big factor.
104
1. Secure to use (0.930): high number of respondents expressed their faith in the security towards the
usage of the technology in the banks and maintained that their financial operation are more safe and
secure than the traditional methods.
2. Reliable (Always in working condition) (0.681): However the lesser loading of the reliability was
as per the dimensions of the availability in the technology as per the requirement. The SST and many
time the ATM’s in particular have been found in non working conditions therefore the response was
tilted towards the negative perception of the people towards the reliability of the SST in working
conditions.
3. Instant updating is assured (0.837): Large responses expressed their perception towards the
instantaneous updating services of the banks. Their perception towards the instant updating of the
account has ensured a kind of reliability towards the data management and funds security with the
help of SST’s
4. Attractive in nature (0.710): Another factor of attraction has a lesser loading due to the fact that
since it was confused with the attractive features. However the attraction, due to the security of usage
and other safety measures for fund management, establishes the reliability perception of the people in
the usage of SST in the new age banks.
Group III: User Friendliness
User friendliness is another dimension of the usage of SST in the new age banks. The perception of
people as of now how easy they find the SST as convenient and usage of their accounts:
1. Help assistance is provided (0.867); The higher loading towards the help assistance provided on the
online support and the technical usage has made the technologies user friendly and helpful
2. Instructions are clearly defined (0.827): Large number of the customers feel that the instructions
given in the usage of the technologies should be well descriptive and without any ambiguity. The
users have been with SST’s that have clearly defined instructions to reduce any ambiguity.
The success of any technology and acceptance is based upon its user-friendliness so that the
consumers may feel comfortable in using it. The large number of people expresses their perception
towards the clarity of the statement and the help assistance provided by them to the customers,
establishing the fact that the user-friendliness of the technology is another important dimension for the
customers to avail the services of the bank.
Group IV: Accessibility
Another dimension is the accessibility of the bank to the customers.
1. 24 hr service is assured (0.947): The high factor loading explains the fact that the availability of the
service to the usage of the SST’s has made the access to the services more convenient. The consumers
perceive that this has resulted in better accessibility of the bank and services to the consumers.
2. Require professionalism in operating them (0.697): However, comparative lower load on the
requirement of the professionalism has established the perception that there is still significant room of
improvement for the professional assistance provided by the employees even with the support of the
technologies. The accessibility is supported with professional assistance.
Group V: Cost
Charge Extra cost (0.915): The statement was reflective of the perception of the higher cost of
services that the banks may charge for the usage of the SST. The various service charges and
transaction charges have made it to be perceived as more costly. But at the same time the issue of its
being cost effectiveness still needs to be addressed.
The usage perception of the SST in the new age banks is significantly reported and established. The
companies need to focus upon the five broad areas for the improvement in the facilities.
Improvements in the efficiency in terms of time, availability in time, error free transactions are some
of the core focus areas. Also, the accessibility of the services at the time of need with proper
105
professional assistance is given due importance by the customers to create the image of the bank. This
also requires for the training assistance for the professional delivery for the employees. Any facility
becomes redundant if the cost of operation exceeds the willingness to pay. The services at the lower
cost help the banks to reflect upon the higher usage and have economies of scale. The consumers give
due importance in creating the perception towards the cost effective banks and the reliability of the
services that they are providing. At the same time, the study suggests that the self services of banks
need to be more accessible by the users.
However, the study is also not beyond any limitation. The major limitation of the study was that many
of the users are not accessing SST’s even though their bank provides these facilities with their
accounts. This need to be established under another study that the usage of the SST’s may still be
beyond the positive belief of some threat with the technological complexities. The education and
training of the consumers is also required to remove the snag amongst the consumers to use SST’s.
Another limitation of the study is that the sample size was able to produce significant results to some
extent only. The size of the sample was small to reflect upon the issue. Moreover, the perceptual
responses of the consumers may not be true to some extent. Also, the study lacked in the approach of
segregating the users of public and private sector banks. The usage and perception of the private and
public sector banks is different but we wished to have the generalized responses of the perception
towards the usage of the SSTs in new age banks in both public and private sectors.
Conclusion
From the study, it was observed that self service options have penetrated deep into the market and are
being used by users to a greater extent. The frequency of using self service options is far greater than
going for traditional banking methods. The customers have a perception that the self service options
save time, reduce traveling, update accounts instantly and are 24 hr available and attractive to use.
The customers have also reflected that there is a requirement of the self service option/technologies to
be more reliable to use, provide instructions, help/assistance to use and require professionalism in
handling them. The users agree that to go for self-service option cost them more. Like in case of
ATMs there are yearly charges while in case of internet banking facility there are Internet charges that
the user have to bear. Similarly in case of phone banking, the users are charged for their calls made to
the bank. The users agree towards the factor that self service option provide error free transaction and
provide multiple facilities at a single point.
From factor analysis, it is observed that there are five major factors that determine the users’ criterion
for using self service option of the banks and influence the perception of the customers. These five
factors are efficiency, reliability, user friendliness, accessibility and cost effectiveness. The new age
banks need to reflect and ensure the quality of services in these dimensions.
The study paves way to the future studies in the field of self service technology as per the pattern of
the usage of technologies and how to educate customers to make the operations most cost effective. It
would further be helpful in studying the aspects of designing the self service technologies in the banks
and other financial areas in general as the customers give importance to the efficiency, reliability, user
friendliness, accessibility and the cost effectiveness in terms of the usage of Self Service
Technologies.
References
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Confirmatory Factor Analysis Approach”, Marketing Bulletin, 16, Article 1.
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Effects of Consumers Traits and Situational Factors”, Journal of Academy of Marketing Science, Vol .30, No.
3, 184-201.
3. Dabholkar PA (1994), “Incorporating Choice into An Attitudinal Framework: Analysing Models of Mental
Comparison Processes”,Journal of Consumer Research, 10, pp 100—118 .
4. Davis F D, Bagozzi R P and Warshaw P R(1989) ‘User Acceptance of Computer Technology: A
Comparison of Two Theoretical Models’, Management Science, 35, pp 982—1003.
106
5. Emmons, W. R., & Greenbaum, S. I. (1998), “Twin Information Revolution and the Future of Financial
Intermediation”, Y.Amihud & G. Miller (Eds.), Bank Mergers & Acquisitions pp.37-56. Boston, Mass,
Kiuwer.
6. Gummesson, E. (1998) “Productivity, Quality and Relationship Marketing in Service Operations”,
International Journal of Contemporary Hospitality Management, Vol.10, No. 1, p 9.
7. Malhotra, Naresh K(2004), “Marketing Research”, 4e,Prentice Hall. Meuter M, Ostrom A, Roundtree Rand
Bitner M: (2000) ‘Self-Service Technologies: Understanding Customer Satisfaction with Technology Based
Service Encounters’, Journal of Marketing, 64, pp 50—64.
8. Santos J (2003) ‘E-Service Quality: A Model of Virtual Service Quality Dimensions. Managing Service
Quality’, Vol. 13, No. 3, 233-246.
9. Steiner, T.D & Toixeira, D. B. (1990) “Reshaping the World of Financial Institutions: Guidelines for IT in
Banking”, The Mckinsey Quarterly. No. 3
10. Tiwari, R. and Buse, S.(2007), “The Mobile Commerce Prospects: A Strategic Analysis of Opportunities in
the Banking Sector”, Hamburg University Press.
11. Zhu F, Jr W & Chen 1(2002), “IT-Based Services and Service Quality in Consumer Banking”,
International Journal of Service Industry Management, Vol 13, No. 1, 69-90.
12. Zikmund, William G (2003), “Business Research Methods”, 7e, Cincinnati, Ohio, Thomson/South Western
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Behavioral Intentions Over Time: A Consumption- System Approach”, Journal of Marketing, Vol.63, April,
88-101.
Dwivedi Devendra Kumar ,M.A. Economics, M.A. (Socio),

BA(Mktg.),M.Phil. (Entrp.),UGC NET (Eco.),Ph.D.in Eco.Disaster Health
Management, Health Economics, Cultural Economics, Development
Economics, Alternative Paradigms in Economics, Research Methods. Research
Officer: Gender & Development Centre for UTTHAN Sustainable & Poverty
Alleviation, National NGO, Allahabad.
Mobile: +91+9415253467,E-mail: devkr_2006@rediffmail.com
107
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JMIJMR NOVEMBER, 2010

JM International Journal of Management

@ JM ACADEMY OF IT & MANAGEMENT

K.C. JOHN SASI KUMAR, Chief Editor

The views expressed in JM International Journal of Management Research

(JMIJMR) are not necessarily those of the Editorial Board or JMACADEMY OF

IT AND MANAGEMENT or the organizations to which the contributors

or in part of the material is concerned, specifically the rights of transaction,

reprinting, re-use of illustration, recitation or in any other way, and storage in

data banks. Reproduction of any material published herein requires prior

written permission of the Editor. Duplication of this publication or parts

to prosecution under the International Copyright Law.

development of the management paradigm that can withstand the pressure of

Dr. Rajinder Kumar Uppal Dr M.A.Lahori.

General Guidance for Paper Submission

Refer the author’s guidelines for submitting papers for JMIJM&IT

Manuscripts submitted should contain:

1. Title of the paper

Frequency of Publication: Six Issues per Annum.

2 ENTREPRENEURIAL CHARACTERISTICS AND COMMITMENT IN TERENGGANU

3 WOMEN EMPOWERMENT AND ENVIRONMENT REHABILITATION

5 STATE FINANCES IN INDIA: PROBLEM AND PROSPECTS

6 MARKETING PROBLEMS OF SMALL AND MEDIUM ENTERPRISES

7 INSIGHT ON CRITICAL FACTORS OF QUALITY MANAGEMENT PRACTICES IN

Sedani C.M , Lakhe R.R

9 FACTORS INFLUENCING CONSUMERS’ PERCEPTION IN THE CHOICE OF

THE MISSING LINK IN “TECHNOLOGY AND PRODUCTIVITY OF

Abstract. Technology has been the hallmark of human activity. It has

©JM ACADEMY ISSN 2229-4562

Keywords: Technology, Productivity,

What could not Problems encountered

Low efficiency, Varieties in the needs

Figure1. Technology as a connector.

2.1 Perceptions of technology by the society

Table 1: Perceptions of Skeptics and Believers

Figure 2. Productivity and its measure

4.0 Technological System

Figure 3. Broader vision of quality

4.2 Status of TQM in Industries

PAST Productio Productivit

PRESENT Eco-friendly Concern

Figure 4: Shift in focus of an Organization.

Employee Process Marketin Organizationa TQM

Figure 5: Sequential impacts of soft technology

ISO TQM BPR SIX

Figure 6: Overlapping of Soft Technologies concepts

Dr.Umesh M Bhushi is presently Principal, Adarsh Institute of Technology

S.N.Teli has completed B.E. (Mechanical) in 1997 & M.Tech.

ENTREPRENEURIAL CHARACTERISTICS AND COMMITMENT IN

©JM ACADEMY ISSN 2229-4562

Keywords: Heritage Industry, Creative Entrepreneurs, Commitment,

Malaysian Heritage Industry

Need for Achievement

Entrepreneurial Locus of Control

Figure 1: Theoretical Framework on Entrepreneurial Characteristics towards

returned the questionnaires to the researcher.

Table 2: The Total Number of Population and Sample Size

Data Analysis and Finding

Table 3: Reliability Analysis of Variables

Section Number of Item Reliability

Table 4: Correlation Analysis between Entrepreneurs Characteristics and Business

Locus of Control 0.035 1 0.072 -0.225* 0.024 0.058

Innovativeness 0.361** -0.225* 0.229* 1 0.281* 0.457*

Commitment 0.313 0.058 0.375 0.407** 0.551* 1