Directory UMM :Data Elmu:jurnal:I:International Journal of Entrepreneurial Behaviour & Research:Vol5.Issue2.1999:
Managing service quality
for competitive advantage in
small engineering firms
Pauline Maclaran
Competitive
advantage in
engineering firms
35
T he Queen’s University of Belfast, Belfast, UK, and
Pauric McGowan
University of Belfast, Belfast, UK
Keywords Competitive advantage, Decision making, Marketing, Service quality, Small business
Abstract Examines how small firms can maximise service quality to determine a competitive
marketing advantage for their enterprise. Demonstrates how there is little in the conventional
service quality literature to guide the small firm and that current models of service quality are
most relevant to larger organisations. From the results of a two-stage empirical study which
focused on small engineering firms, a model of service quality is put forward which more truly
ref lects the circumstances of the smaller enterprise. Finally, the paper outlines the main
considerations for the enterprise owner in developing a competitive advantage through service
quality management.
Introduction
It is acknowledged that small firms cannot compete with larger organisations in
terms of economies of scale, investment in R& D, o r majo r promotional
expenditure. Small firms are, therefore, particularly vulnerable to larger
competitors unless they are able to exploit their inherent strengths such as
flexibility and speed of response to customer requirements. Various authors,
such as Kuhn (1982) and Sandberg (1986), have shown that differentiation
strategies are the key to success for the small firm. One way of achieving
differentiation, which is also consistent with a small firm’s major strengths, is
through a quality service.
Service quality is generally considered in the literature in terms of its
relevance for larger organisations with more bureaucratic structures which
often lead to poor customer communication and a lack of response to customer
needs (Zeithaml et al., 1988; Smith, 1990). Formal customer care policies are
introduced to redress this imbalance and ensure a quality of service which will
maintain good customer relationships. Small firms, however, tend to be
regarded as implicitly in close contact with their customers and therefore issues
surrounding customer care and service quality in the context of the small firm
are overlooked.
This paper seeks to develop a model of service quality which will guide the
developing enterprise in achieving success in an increasingly competitive
marketplace. Initially dimensions of service quality in the context of a small
firm’s marketing practice are defined and examined together with the results of
International Journal of
Entrepreneurial Behaviour &
Research, Vol. 5 No. 2, 1999,
pp. 35-47. © MCB University Press,
1355-2554
IJEBR
5,2
an empirical study, which investigated how enterprise owners perceive and use
service quality. A rising from these findings a model of service quality is then
proposed which the authors believe is more appropriately tailored to the needs
of the small firm. Finally, the practical implications for managing service
quality in the developing enterprise are discussed.
36
Dimensions of service quality
Since the 1980s service quality has been identified with increased profitability
and it is seen as giving an important competitive edge by generating repeat
sales, positive word-of-mouth feedback, customer loyalty and competitive
product differentiation (Zeithaml et al., 1988; Devlin and Dong, 1994; Wong and
T josvold, 1995). Serv ice quality has been most emphasised fo r serv ice
companies, particularly in sectors such as financial services (Meister, 1990;
Jones, 1991) and health (Mangold and Babakus, 1991), as a way of controlling
performance and overcoming the intangible aspects of service. Consequently it
has tended to focus on the unique characteristics of services and especially on
the role of an organisation’s employees in the production and delivery of its
services (Berry et al., 1991; Teal, 1991; Wasmer and Bruner, 1991).
It is now generally acknowledged, however, that service quality is also of
prime concern in the manufacturing sector (Keiser and Smith, 1994) and that for
companies to be successful, whether in service or manufacturing industries,
they must keep in touch with their customers and provide a high-quality service
or risk losing them to the competition (Gronroos, 1990). T his emphasis has
meant that a g rowing importance has been placed on customer care, and its
related elements, to overall marketing perfo rmance (Christopher 1986;
Clutterbuck, 1988; Carson and Gilmore, 1989/1990).
A t this point it is worth noting that, although often used as synonymous
with the term customer care, service quality is in fact a distinguishable aspect
of this more encompassing term. Christopher (1986) defines service quality as
referring to the company/customer interface and relationships and focussing on
the customer’s experience during the process of the transaction. Lewis (1993)
emphasises that it is not only the focus on meeting customers’ needs and
requirements but how well the service matches customers’ expectations.
Satisfaction results from comparisons by consumers of expectations of service
with their perceptions of actual serv ice perfo rmance (Berry et al., 1988;
Parasuraman et al., 1985). Service quality is therefore an important focus for
marketing strategy. It is determined by the interaction of all those factors that
affect the process of making products and services available to the buyer. If
there is a shortfall then a service gap exists, which needs rectifying in order to
ensure customer loyalty and develop an enterprise successfully.
Much of the literature on service quality is devoted to establishing ways to
measure service quality and identify the shortfalls. Zeithaml et al. (1988)
developed SERVQUA L, a concise multiple-item scale that can be used to better
understand service expectations and consumer perceptions. This instrument is
based on five principal dimensions that customers use to judge a company’s
service:
(1) tangibles;
Competitive
advantage in
engineering firms
(2) reliability;
(3) responsiveness;
(4) assurance; and
(5) empathy.
A lthough the SERVQUA L model has received criticism (Teas, 1994; Lewis and
Mitchell, 1990; Lew is, 1993), it continues to be the most w idely used
measurement of service quality and is adopted for many different industry
sectors. For example, Headley and Miller (1993) and Mangold and Babakus
(1991) apply it to medical care serv ices; Young et al. (1994) use it to test
perceived quality of passenger airlines.
T he main problem with the SERVQUA L model, as regards the developing
enterprise, is that it is invariably set in the context of large organisations.
Goodyear Tyre and Rubber, Dupont, Disney World, Federal Express and the
National Westminster Bank are but a few of the examples used by Zeithaml
et al. (1990). These illustrations contain little with which the smaller enterprise
can empathise. Neither does the SERVQUA L instrument itself, w ith its
implications in time and resources for its administration and analysis, and its
emphasis on the streamlining of management systems, provide a realistic
assessment of service quality for the small business owner.
The small firm context
Storey (1994) has emphasised that too often large-firm models, such as those
described above, are taken as given and the small firm is assumed to be a
“scaled-down” version of a large firm. In the context of studying the small firm,
however, it is important to realise that small firms are not just “little big
businesses” and that each small firm is unique and very much reflects the
personal characteristics of the enterprise owner.
Correspondingly, marketing practice in small firms is different and, as
Carson (1985) indicates, it is not appropriate to apply the marketing concepts
and practices developed in large firm scenarios to the small firm situation. This
difference arises because of the limited expertise among owner managers of
marketing techniques and methods and because of their inherent limitations in
terms of resources. Frequently their marketing activ ities emphasise the
enterprise’s tang ible product and place an over-reliance on low pricing
structures (Carson, 1985). Intangible product issues, such as those that deal
with service and add value, are largely ignored. It is, of course, much more
difficult for the enterprise owner to see immediate returns in these more
intangible aspects which have much longer-term implications for contributing
to a firm’s position in the marketplace. A greater understanding is therefore
required of how service can be integrated into the marketing which is actually
37
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38
practised by small firms and in what ways they can utilise their strengths in
this area w hich has often been pinpointed as critical to g row th and
development (Watson, 1992; Teal, 1991; Carson, 1990; Jackson, 1985).
It has already been established that marketing goes through evolutionary
stages and that in the initial stages of an enterprise development it is reactive
and instinctive rather than proactive or planned (Carson, 1985). Service, in
particular where we are dealing with manufacturing companies producing
tangible goods, is part of the augmented product and, as such, is an important
part of marketing, with implications for all elements of the marketing mix. For
example, as part of the augmented product it can be a strong contributor to
price/value perceptions with efficient distribution and good communications
playing crucial roles in the overall servicing of the customer. T herefore, given
what we know about marketing in small firms, with the emphasis on price and
the tangible aspects of the product, we might presume that service quality is
under-utilised or minimalised by enterprise owners.
From a research point of view, a review of the current literature reveals few
articles which deal directly with how service quality relates to the small firm.
One exception, by Reeves and Hoy (1993), draws attention to the fact that the
importance from a marketing perspective is to examine how a small firm can
gain a quality advantage in order to pursue a policy of differentiation in the
marketplace. This advantage can only realistically be achieved by maximising
existing strengths in relation to service quality. T his paper aims to develop a
framework to enable service quality to be assessed in the small firm context.
Empirical research programme
T he research approach adopted was qualitative, reflecting current thinking
(Muzyha and Hills, 1993; Stewart, 1991; Davis et al., 1985; Bygrave and Hofer,
1992) that the holistic and dynamic nature of entrepreneurial activities favours
the collection of data that is rich in descriptive characteristics. This meant that
an inductive research programme was developed. We wanted to establish all the
issues surrounding service quality from the perspective of the enterprise
owners themselves rather than prejudging these in the light of conventional
models of service quality. Research methods consistent with this approach,
such as g roup discussions and in-depth interviews were used (Gummesson,
1991).
The research was conducted in two stages. Initially the participants on four
small business development programmes were engaged in discussion groups to
determine the level of marketing in which they eng aged, to assess their
marketing strengths vis-à-vis competitors and to pinpoint the areas where they
faced challenges in developing their marketing activities. In this way the issues
of service quality and its potential for defining a competitive advantage were
allowed to emerge naturally from the discussions.
T he research beg an with initial discussions around general marketing
activities and then focussed on the topic of “being a customer” and participants
were asked to adopt this role. With the insights they had gained from this
exercise they were then asked to extend their thinking and consider how their
Competitive
customers were likely to view the service provided by their company. A sked to
advantage in
consider their marketing strengths in relation to service, participants identified
engineering firms
areas such as “personal touch”, specialist offerings, employee loyalty, speedier
delivery, g reater flexibility, quicker decision making, direct access to that
decision maker, local image, commanding local customer loyalty, and greater
39
innovativeness. Characteristic of most small firms there w as a general
ag reement that the key marketing challenges to be confronted were: their
limited appreciation of marketing competencies, their general lack of resources,
particularly with respect to acquiring and processing information on their
customers, actual and potential, and their very small size which limited their
company’s impact on their respective markets .
In order to balance these disadvantages participants quickly realised that
their marketing strengths could offer considerable potential for defining a
competitive advantage and supporting continuous enterprise development
throug h an emphasis on serv ice quality. In particular there w as also a
realisation that this was an area ideally suited to the small firm, an area which
had limited resource implications and which maximised existing strengths.
T he research programme, however, needed a tighter focus on some of the
areas pinpointed by the initial collection of data, in particular to see how those
areas identified as service strengths were utilised in the day-to-day working
environments of the small firm. It was decided to concentrate on one sector to
enable mo re relevant comparisons to be made between companies. T he
eng ineering sector was chosen, as one whose g rowth is considered very
important to the macro economy; a sector which is made up of a few large
players and a majority of small companies which have emerged as providers of
specialist goods on a subcontracting basis to the larger enterprises. The criteria
for involving companies in the research were that they should have been in
business for at least five years, be employing at least five people and be turning
over a minimum of £ 250,000 per annum. In adhering to these critieria we were
clearly dealing with company owners who had experienced some measure of
success in developing their enterprises.
The aim of the research was to investigate in more detail those issues which
had been distilled inductively through discussions with company owners on the
development programmes. T hese were considered the most advantageous for
the small firm in relation to the provision of quality services as a part of their
augmented product. T he issues were “personal touch”, specialist offerings
g reater innovativeness, employee loyalty, quicker decision making, g reater
flexibility, and speedier delivery.
A series of ten in-depth interviews were conducted using a loosely structured
topic list which allowed interviewers to adapt the topics and conversation to
suit each particular respondent. T he topics reflected the issues regarding the
provision of quality services as listed above. T ime was also taken at each
respondent’s business to make observations prior to the actual interview. This
not only yielded richer data by way of more meaningful insights, but meant
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40
that more detailed comparisons could be made between respondents. The main
findings from these interviews and observations led to descriptive accounts of
service quality as practiced by small engineering firms and the most salient
points from these accounts in relation to the key issues will now be outlined.
Small firm perceptions of service quality issues
From initial observations made at all the interviewees’ premises it would have
been easy to dismiss the issue of service quality as having bypassed the small
firms in this sector. By their nature, engineering firms tend to have very basic
and utilitarian surroundings. Small firms, particularly in this sector, cannot
necessarily afford the investment of their larger competitors in new plant and
equipment and give the immediate impression that they are somehow second
rate. With premises often in large converted sheds, oil, grease and fumes were
frequently pervasive during the interviews. Many of the companies had old
pieces of machinery and other miscellaneous and rusting materials lying
around their yards, giving a careless and haphazard impression. A s one
respondent, however, explained:
we can’t afford to throw anything out – you never know when it may come in useful. I’ve
known things lie here for three years and suddenly we’re able to see a use for them.
Neither was there much reassurance from initial questioning on service quality
policies with only two companies indicating any type of more formalised
quality structures and these were on account of BS5750. Indeed the word
“policy” in itself tended to elicit such dismissive comments as “no time for any
of that” and “only relevant for larger companies”.
In the mo re detailed discussions following these initial observations,
however, service quality did indeed become evident as we talked around the
issues pinpointed earlier. Some of these categories have now been subsumed
into others as we discuss the broad findings from these discussions.
T he personal touch
A ll the respondents cited their ability to provide a personalised service as a
major competitive advantage and emphasised the importance of being available
to their customer. T hey acknowledged that their customers preferred to deal
with “the boss” and all these owner/managers maximised this whenever
possible. A lot of time was therefore devoted to developing and maintaining
long-term relationships with customers. A s one respondent pointed out, this
meant a constant aw areness of “w hat’s happening w ith them”. Others
mentioned that it was important to have a relationship that was on first name
terms, where they could build up a rapport and “know about their lives”.
In this sector relationships tend to be longer than in many others because
often the cost involved for both parties in setting up an initial contract, i.e. the
development of special jigs, etc., mitigates against a short-term outlook from
either party. One company had known all its customers for between eight to ten
years. Rather than formal customer information systems they relied on this
constant contact to monitor their customers with most of the information being
in the head of the enterprise owner.
Specialist offerings
The fact that most knew all their customers personally ensured that they were
continually in touch with changing requirements. T his meant that new ideas
were automatically grounded in customer needs and a majority of respondents
demonstrated a willingness to adapt and innovate in keeping with customer
requirements. T here was one exception, a company that had changed from
customisation to mass production because one-offs had proved to be
unprofitable. T his however had been an innovative approach in the particular
niche in which this company found itself and so still reflected the needs of the
customers.
Employee loyalty
Most respondents realised their own ability to inspire employee loyalty,
acknowledging that this loyalty in turn produced a more competent and
productive wo rk fo rce. Way s to obtain this loyalty were various but the
common denominator was the owner/manager’s ability to place an importance
on the motivation of his wo rk fo rce. Often this was throug h a hands-on
approach and some enterprise owners frequently worked alongside their
employees to inspire a team spirit. A lmost always they ensured that they were
accessible to employees and could be communicated with easily. Training was
an important part of this motivation and, in particular, training which kept the
work force flexible in terms of the tasks they could perform. Even the company
w hich had mass production w as try ing to create an atmosphere w here
employees would not be carrying out the same tasks all the time because “if
they get bored they get careless”. It was well recognised that service also
depended on the work force and that highly motivated employees would instill
confidence in the customers.
Quicker decision making
Apart from contributing to overall flexibility the major advantage of quicker
decision making was seen as enhancing problem-solving abilities, both as
regards product development and also in the response to actual problems which
could occur in day-to-day business transactions.
In the majority of cases it was the owner who would respond to problems and
this response tended to be immediate. Talking of a large customer 100 miles
away, one respondent commented:
If there is a problem, you just have to be available or have some of your men available to go
down and sort the problem out.
T he emphasis was very much on the speed of response that these companies
could offer when required, together with the personalised attention of that
response. One respondent even cited going out on Christmas Eve to a
Competitive
advantage in
engineering firms
41
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42
breakdown and pointed out that he was always accessible to his customers
because his home was beside “the shed” and so somebody was always around
to respond to a customer’s request for a part or to solve a problem. (In itself this
example is a good illustration of how different the circumstances of a small firm
environment are to that of larger organisations and of how service takes on
different aspects.) A ll these companies made sure they were never too busy to
fix a problem fast, a crucial factor in an industry where a part or machine
malfunction may lead to plant closure.
Speedier delivery
The delivery system holds several opportunities for service quality and Berry
et al. (1990) believe that the firm should be accessible from the point of view of
the customer in both the placing of orders and prog ress updates. It was
generally acknowledged that delivery needs to be prompt and reliable. This was
facilitated by the owner/managers keeping their fingers on the pulse, making
quicker decisions and responding quickly to problems. It was seen as essential
to have some sort of order system in place although facilities for checking an
order once it was being processed varied considerably. In one company someone
had to physically go to the workshop to check where a product was at any time
in the production process, w hereas another firm had a very sy stematic
approach where all production units regularly submitted prog ress reports
centrally to give enquirers immediate feedback.
It depended on the nature of the work undertaken but the crucial factor was
to be able to give a reasonably instantaneous response to schedule queries. Even
the company that had to go to the workshop for confirmation boasted that they
could respond within five minutes. A ll respondents placed emphasis on giving
realistic time frames in advance and establishing which products customers
were prepared to wait longer for. However, they were all prepared to use their
inherent flexibility to offer an immediate and quality service to their customers
whenever urgent items were required.
Local image
W here a potential o r ex isting customer was in the same locality, all the
enterprise owners indicated that they maximised the importance of their local
origins and knowledge in developing their relationships with these customers.
However, where the customer was from outside the locality owners tended to
use their local image to reinforce the positive aspects of the firm’s “smallness”
in terms of staff quality and supplier reliability.
Key issues emerging from the research
If we refer back to our initial definitions of service quality, as a focus on the
customer’s ex perience during the process of transaction, then the small
engineering firms in our sample were conforming to such requirements. To
achieve this focus, their primary concern was on the development of long-term
relationships between the enterprise and its customers. Most commonly the
owner was the focal point for these relationships. A ttention was also paid to the
Competitive
nature of employee/customer interface with time spent on the motivation and
advantage in
training of employees. In addition these companies demonstrated a strong engineering firms
customer orientation as supported by previous research (McGowan and Rocks,
1995); all new ideas for products were grounded in customer needs and wants;
customers who experienced problems with the company’s products were
43
responded to sensitively and knowledgeably; and overall every attempt was
made to ensure that customers perceived that they were obtaining value for
money.
A lthough few formal customer records were kept, frequent contact with
customers ensured good informal feedback systems enabling problems to be
rapidly identified and solved. Ultimately a company’s reputation for a quality
service depended on the enterprise owner simply being as good as his/her word.
T he pivotal position was occupied by the building of long-term relationships
and all other aspects of their service revolved around these relationships, as
illustrated in Figure 1.
In the light of these findings, the principal dimensions of service quality as
identified by Zeithaml et al. (1988):
Personal
Touch
Greater
Innovativeness
Specialist
Offerings
Quicker
Decision Making
Longterm
Relationships
Speedier
Delivery
Employee
Loyalty
Local
Image
Greater
Flexibility
Figure 1.
The role of long-term
relationships in small
firms’ service quality
44
•
tangibles,
•
reliability,
•
responsiveness,
•
assurance, and
•
empathy
can now be related to the small firm context.
A model has been developed which shows how a small firm’s advantages in
respect of service quality (as identified at stage 1 of the research) interact with
these principal dimensions to produce key indicators of service quality for the
small firm (as identified by stag e 2 of the research) which are shown in
Figure 2.
Reliability is demonstrated by efficient but flexible delivery systems and
maintained through a fast response to problems, facilitated by the quicker
decision-making possible in the small firm environment; responsiveness is
indicated by the small firm’s willingness to adapt its product and service to
meet customer requirements, particularly in terms of the development of a
customised product; assurance is given through frequent and personalised
communication, both by the owner and by the enterprise’s employees; and
empathy is shown through overall knowledge of the customer and their needs
and the owner’s ability to generate new ideas for products or services in
response to those needs. Long -term relationships contribute to all four
dimensions by ensuring that bonds are established which accommodate the
interaction between each of these dimensions. T he emphasis of this model is
therefore on the intangible aspects of service because there were no tangible
advantages for the small firm in respect of service quality to emerge from this
research. Indeed in the environment characteristic of the small engineering firm
the tangible image is unlikely to be anything other than one of confusion and
A Small Firm’s Advantages
In Respect of Service Quality
Speedier Decision Making
Quicker Decision Making
Greater Flexibility
Specialist Offerings
Personal Touch
Employee Loyalty
Figure 2.
Key indicators of small
firm service quality
Greater Innovativeness
Local Image
Principle Dimensions
Key Indicators of
Small Firm Service Quality
RELIABILITY
Efficient delivery systems
Responsive delivery systems
RESPONSIVENESS
Wiilingness to adapt to customer needs
Customised product
ASSURANCE
Customer communication
Employee motivation
EMPATHY
New Idea generation
Knowledge of cusotmers
Long Term Customer Relationships
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even chaos. It must therefore compensate for the signals that this type of
Competitive
environment gives to the customer through a stronger emphasis on the principle
advantage in
dimensions, as outlined in Figure 2. This model offers a conceptual framework
engineering firms
arising from the empirical research which is intended to guide an enterprise
owner from the engineering sector when assessing service quality in his/her
business. More generally, it also demonstrates that it is in the augmented
45
product area that any enterprise will have the best opportunity to differentiate
its product offering from that of its competitors, as demonstrated in Figure 3.
Basically any product has two levels: the “core” product which focuses on
core benefits and services and addresses issues such as brand name, product
features and quality, design, styling and packaging; and the “augmented”
product which focuses on customer service, warranties, delivery, installation
and post-purchase service. Figure 3 seeks to reflect the relationship between the
small firm as characterised in the literature and the emphasis or potential for
such an enterprise to get the most from developments in the area of the
augmented product.
Conclusion
T his paper has demonstrated how small firm considerations are largely
overlooked in the service quality literature and, in particular, it has questioned
the relevance of the SERVQUA L model for the small firm environment. From an
empirical study it has then suggested an alternative model for understanding
how service quality is managed by the small firm in order to maintain a
competitive advantage. The key emergent issue emphasised the importance of
managing long-term relationships between an enterprise and its customers.
T here is a g rowing body of literature on relationship marketing which was
outside the scope of this present study but this is clearly an area for future
research into small firms’ service quality together with an examination of this
model in relation to other industry sectors.
Emphasis on
core product
Emphasis on the
augmented product
low
high
Service Quality
Figure 3.
Emphasis for service
quality in the small firm
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Smith, A . (1990), “Quality aspects of services marketing”, Marketing Intelligence and Planning ,
Vol. 8 No. 6, pp. 25-32.
Stewart, A . (1991), “A prospectus on the anthology of entrepreneurship”, Entrepreneurship:
T heory and Practice, Vol. 16 No. 2, pp. 71-91.
Story, D.J. (1994), Understanding the Small Business Sector, Routledge, London.
Teal, T. (1991), “Service comes first: an interview with USA A’s Robert F. McDermott”, Harvard
Business Review, Vol. 69 No. 5, pp. 116-27.
Teas, R.K. (1994), “Expectations as a comparison standard in measuring service quality: an
assessment of a reassessment”, Journal of Marketing, Vol. 58 No. 1, pp. 132-9.
Wasmer, D.J. and Bruner II, G.C. (1991), “Using org anisational culture to design internal
marketing strategies”, Journal of Services Marketing, Vol. 5 No. 1, pp. 35-46.
Watson, D. (1992), “T he meaning of service in business”, Business Horizons, January/February,
pp. 55-60.
Wong, C.L. and T josvold, D. (1995), “Goal interdependence and quality in marketing services”,
Psychology and Marketing, Vol. 12 No. 3, pp. 189-205.
Young, C., Cunningham, L. and Moonkyu, L. (1994), “A ssessing service quality as an effective
management tool: the case of the airline industry”, Journal of Marketing T heory and Practice,
Vol. 2 No. 2, pp. 76-96.
Zeithaml, V.A ., Berry, L.L. and Parasuraman, A . (1988), “Communication and control processes in
the delivery of service quality”, Journal of Marketing, Vol. 52, April, pp. 35-48.
Zeithaml, V.A ., Parasuraman, A . and Berry, L.L. (1990), Delivering Quality Service , T he Free
Press, New York, NY.
Competitive
advantage in
engineering firms
47
for competitive advantage in
small engineering firms
Pauline Maclaran
Competitive
advantage in
engineering firms
35
T he Queen’s University of Belfast, Belfast, UK, and
Pauric McGowan
University of Belfast, Belfast, UK
Keywords Competitive advantage, Decision making, Marketing, Service quality, Small business
Abstract Examines how small firms can maximise service quality to determine a competitive
marketing advantage for their enterprise. Demonstrates how there is little in the conventional
service quality literature to guide the small firm and that current models of service quality are
most relevant to larger organisations. From the results of a two-stage empirical study which
focused on small engineering firms, a model of service quality is put forward which more truly
ref lects the circumstances of the smaller enterprise. Finally, the paper outlines the main
considerations for the enterprise owner in developing a competitive advantage through service
quality management.
Introduction
It is acknowledged that small firms cannot compete with larger organisations in
terms of economies of scale, investment in R& D, o r majo r promotional
expenditure. Small firms are, therefore, particularly vulnerable to larger
competitors unless they are able to exploit their inherent strengths such as
flexibility and speed of response to customer requirements. Various authors,
such as Kuhn (1982) and Sandberg (1986), have shown that differentiation
strategies are the key to success for the small firm. One way of achieving
differentiation, which is also consistent with a small firm’s major strengths, is
through a quality service.
Service quality is generally considered in the literature in terms of its
relevance for larger organisations with more bureaucratic structures which
often lead to poor customer communication and a lack of response to customer
needs (Zeithaml et al., 1988; Smith, 1990). Formal customer care policies are
introduced to redress this imbalance and ensure a quality of service which will
maintain good customer relationships. Small firms, however, tend to be
regarded as implicitly in close contact with their customers and therefore issues
surrounding customer care and service quality in the context of the small firm
are overlooked.
This paper seeks to develop a model of service quality which will guide the
developing enterprise in achieving success in an increasingly competitive
marketplace. Initially dimensions of service quality in the context of a small
firm’s marketing practice are defined and examined together with the results of
International Journal of
Entrepreneurial Behaviour &
Research, Vol. 5 No. 2, 1999,
pp. 35-47. © MCB University Press,
1355-2554
IJEBR
5,2
an empirical study, which investigated how enterprise owners perceive and use
service quality. A rising from these findings a model of service quality is then
proposed which the authors believe is more appropriately tailored to the needs
of the small firm. Finally, the practical implications for managing service
quality in the developing enterprise are discussed.
36
Dimensions of service quality
Since the 1980s service quality has been identified with increased profitability
and it is seen as giving an important competitive edge by generating repeat
sales, positive word-of-mouth feedback, customer loyalty and competitive
product differentiation (Zeithaml et al., 1988; Devlin and Dong, 1994; Wong and
T josvold, 1995). Serv ice quality has been most emphasised fo r serv ice
companies, particularly in sectors such as financial services (Meister, 1990;
Jones, 1991) and health (Mangold and Babakus, 1991), as a way of controlling
performance and overcoming the intangible aspects of service. Consequently it
has tended to focus on the unique characteristics of services and especially on
the role of an organisation’s employees in the production and delivery of its
services (Berry et al., 1991; Teal, 1991; Wasmer and Bruner, 1991).
It is now generally acknowledged, however, that service quality is also of
prime concern in the manufacturing sector (Keiser and Smith, 1994) and that for
companies to be successful, whether in service or manufacturing industries,
they must keep in touch with their customers and provide a high-quality service
or risk losing them to the competition (Gronroos, 1990). T his emphasis has
meant that a g rowing importance has been placed on customer care, and its
related elements, to overall marketing perfo rmance (Christopher 1986;
Clutterbuck, 1988; Carson and Gilmore, 1989/1990).
A t this point it is worth noting that, although often used as synonymous
with the term customer care, service quality is in fact a distinguishable aspect
of this more encompassing term. Christopher (1986) defines service quality as
referring to the company/customer interface and relationships and focussing on
the customer’s experience during the process of the transaction. Lewis (1993)
emphasises that it is not only the focus on meeting customers’ needs and
requirements but how well the service matches customers’ expectations.
Satisfaction results from comparisons by consumers of expectations of service
with their perceptions of actual serv ice perfo rmance (Berry et al., 1988;
Parasuraman et al., 1985). Service quality is therefore an important focus for
marketing strategy. It is determined by the interaction of all those factors that
affect the process of making products and services available to the buyer. If
there is a shortfall then a service gap exists, which needs rectifying in order to
ensure customer loyalty and develop an enterprise successfully.
Much of the literature on service quality is devoted to establishing ways to
measure service quality and identify the shortfalls. Zeithaml et al. (1988)
developed SERVQUA L, a concise multiple-item scale that can be used to better
understand service expectations and consumer perceptions. This instrument is
based on five principal dimensions that customers use to judge a company’s
service:
(1) tangibles;
Competitive
advantage in
engineering firms
(2) reliability;
(3) responsiveness;
(4) assurance; and
(5) empathy.
A lthough the SERVQUA L model has received criticism (Teas, 1994; Lewis and
Mitchell, 1990; Lew is, 1993), it continues to be the most w idely used
measurement of service quality and is adopted for many different industry
sectors. For example, Headley and Miller (1993) and Mangold and Babakus
(1991) apply it to medical care serv ices; Young et al. (1994) use it to test
perceived quality of passenger airlines.
T he main problem with the SERVQUA L model, as regards the developing
enterprise, is that it is invariably set in the context of large organisations.
Goodyear Tyre and Rubber, Dupont, Disney World, Federal Express and the
National Westminster Bank are but a few of the examples used by Zeithaml
et al. (1990). These illustrations contain little with which the smaller enterprise
can empathise. Neither does the SERVQUA L instrument itself, w ith its
implications in time and resources for its administration and analysis, and its
emphasis on the streamlining of management systems, provide a realistic
assessment of service quality for the small business owner.
The small firm context
Storey (1994) has emphasised that too often large-firm models, such as those
described above, are taken as given and the small firm is assumed to be a
“scaled-down” version of a large firm. In the context of studying the small firm,
however, it is important to realise that small firms are not just “little big
businesses” and that each small firm is unique and very much reflects the
personal characteristics of the enterprise owner.
Correspondingly, marketing practice in small firms is different and, as
Carson (1985) indicates, it is not appropriate to apply the marketing concepts
and practices developed in large firm scenarios to the small firm situation. This
difference arises because of the limited expertise among owner managers of
marketing techniques and methods and because of their inherent limitations in
terms of resources. Frequently their marketing activ ities emphasise the
enterprise’s tang ible product and place an over-reliance on low pricing
structures (Carson, 1985). Intangible product issues, such as those that deal
with service and add value, are largely ignored. It is, of course, much more
difficult for the enterprise owner to see immediate returns in these more
intangible aspects which have much longer-term implications for contributing
to a firm’s position in the marketplace. A greater understanding is therefore
required of how service can be integrated into the marketing which is actually
37
IJEBR
5,2
38
practised by small firms and in what ways they can utilise their strengths in
this area w hich has often been pinpointed as critical to g row th and
development (Watson, 1992; Teal, 1991; Carson, 1990; Jackson, 1985).
It has already been established that marketing goes through evolutionary
stages and that in the initial stages of an enterprise development it is reactive
and instinctive rather than proactive or planned (Carson, 1985). Service, in
particular where we are dealing with manufacturing companies producing
tangible goods, is part of the augmented product and, as such, is an important
part of marketing, with implications for all elements of the marketing mix. For
example, as part of the augmented product it can be a strong contributor to
price/value perceptions with efficient distribution and good communications
playing crucial roles in the overall servicing of the customer. T herefore, given
what we know about marketing in small firms, with the emphasis on price and
the tangible aspects of the product, we might presume that service quality is
under-utilised or minimalised by enterprise owners.
From a research point of view, a review of the current literature reveals few
articles which deal directly with how service quality relates to the small firm.
One exception, by Reeves and Hoy (1993), draws attention to the fact that the
importance from a marketing perspective is to examine how a small firm can
gain a quality advantage in order to pursue a policy of differentiation in the
marketplace. This advantage can only realistically be achieved by maximising
existing strengths in relation to service quality. T his paper aims to develop a
framework to enable service quality to be assessed in the small firm context.
Empirical research programme
T he research approach adopted was qualitative, reflecting current thinking
(Muzyha and Hills, 1993; Stewart, 1991; Davis et al., 1985; Bygrave and Hofer,
1992) that the holistic and dynamic nature of entrepreneurial activities favours
the collection of data that is rich in descriptive characteristics. This meant that
an inductive research programme was developed. We wanted to establish all the
issues surrounding service quality from the perspective of the enterprise
owners themselves rather than prejudging these in the light of conventional
models of service quality. Research methods consistent with this approach,
such as g roup discussions and in-depth interviews were used (Gummesson,
1991).
The research was conducted in two stages. Initially the participants on four
small business development programmes were engaged in discussion groups to
determine the level of marketing in which they eng aged, to assess their
marketing strengths vis-à-vis competitors and to pinpoint the areas where they
faced challenges in developing their marketing activities. In this way the issues
of service quality and its potential for defining a competitive advantage were
allowed to emerge naturally from the discussions.
T he research beg an with initial discussions around general marketing
activities and then focussed on the topic of “being a customer” and participants
were asked to adopt this role. With the insights they had gained from this
exercise they were then asked to extend their thinking and consider how their
Competitive
customers were likely to view the service provided by their company. A sked to
advantage in
consider their marketing strengths in relation to service, participants identified
engineering firms
areas such as “personal touch”, specialist offerings, employee loyalty, speedier
delivery, g reater flexibility, quicker decision making, direct access to that
decision maker, local image, commanding local customer loyalty, and greater
39
innovativeness. Characteristic of most small firms there w as a general
ag reement that the key marketing challenges to be confronted were: their
limited appreciation of marketing competencies, their general lack of resources,
particularly with respect to acquiring and processing information on their
customers, actual and potential, and their very small size which limited their
company’s impact on their respective markets .
In order to balance these disadvantages participants quickly realised that
their marketing strengths could offer considerable potential for defining a
competitive advantage and supporting continuous enterprise development
throug h an emphasis on serv ice quality. In particular there w as also a
realisation that this was an area ideally suited to the small firm, an area which
had limited resource implications and which maximised existing strengths.
T he research programme, however, needed a tighter focus on some of the
areas pinpointed by the initial collection of data, in particular to see how those
areas identified as service strengths were utilised in the day-to-day working
environments of the small firm. It was decided to concentrate on one sector to
enable mo re relevant comparisons to be made between companies. T he
eng ineering sector was chosen, as one whose g rowth is considered very
important to the macro economy; a sector which is made up of a few large
players and a majority of small companies which have emerged as providers of
specialist goods on a subcontracting basis to the larger enterprises. The criteria
for involving companies in the research were that they should have been in
business for at least five years, be employing at least five people and be turning
over a minimum of £ 250,000 per annum. In adhering to these critieria we were
clearly dealing with company owners who had experienced some measure of
success in developing their enterprises.
The aim of the research was to investigate in more detail those issues which
had been distilled inductively through discussions with company owners on the
development programmes. T hese were considered the most advantageous for
the small firm in relation to the provision of quality services as a part of their
augmented product. T he issues were “personal touch”, specialist offerings
g reater innovativeness, employee loyalty, quicker decision making, g reater
flexibility, and speedier delivery.
A series of ten in-depth interviews were conducted using a loosely structured
topic list which allowed interviewers to adapt the topics and conversation to
suit each particular respondent. T he topics reflected the issues regarding the
provision of quality services as listed above. T ime was also taken at each
respondent’s business to make observations prior to the actual interview. This
not only yielded richer data by way of more meaningful insights, but meant
IJEBR
5,2
40
that more detailed comparisons could be made between respondents. The main
findings from these interviews and observations led to descriptive accounts of
service quality as practiced by small engineering firms and the most salient
points from these accounts in relation to the key issues will now be outlined.
Small firm perceptions of service quality issues
From initial observations made at all the interviewees’ premises it would have
been easy to dismiss the issue of service quality as having bypassed the small
firms in this sector. By their nature, engineering firms tend to have very basic
and utilitarian surroundings. Small firms, particularly in this sector, cannot
necessarily afford the investment of their larger competitors in new plant and
equipment and give the immediate impression that they are somehow second
rate. With premises often in large converted sheds, oil, grease and fumes were
frequently pervasive during the interviews. Many of the companies had old
pieces of machinery and other miscellaneous and rusting materials lying
around their yards, giving a careless and haphazard impression. A s one
respondent, however, explained:
we can’t afford to throw anything out – you never know when it may come in useful. I’ve
known things lie here for three years and suddenly we’re able to see a use for them.
Neither was there much reassurance from initial questioning on service quality
policies with only two companies indicating any type of more formalised
quality structures and these were on account of BS5750. Indeed the word
“policy” in itself tended to elicit such dismissive comments as “no time for any
of that” and “only relevant for larger companies”.
In the mo re detailed discussions following these initial observations,
however, service quality did indeed become evident as we talked around the
issues pinpointed earlier. Some of these categories have now been subsumed
into others as we discuss the broad findings from these discussions.
T he personal touch
A ll the respondents cited their ability to provide a personalised service as a
major competitive advantage and emphasised the importance of being available
to their customer. T hey acknowledged that their customers preferred to deal
with “the boss” and all these owner/managers maximised this whenever
possible. A lot of time was therefore devoted to developing and maintaining
long-term relationships with customers. A s one respondent pointed out, this
meant a constant aw areness of “w hat’s happening w ith them”. Others
mentioned that it was important to have a relationship that was on first name
terms, where they could build up a rapport and “know about their lives”.
In this sector relationships tend to be longer than in many others because
often the cost involved for both parties in setting up an initial contract, i.e. the
development of special jigs, etc., mitigates against a short-term outlook from
either party. One company had known all its customers for between eight to ten
years. Rather than formal customer information systems they relied on this
constant contact to monitor their customers with most of the information being
in the head of the enterprise owner.
Specialist offerings
The fact that most knew all their customers personally ensured that they were
continually in touch with changing requirements. T his meant that new ideas
were automatically grounded in customer needs and a majority of respondents
demonstrated a willingness to adapt and innovate in keeping with customer
requirements. T here was one exception, a company that had changed from
customisation to mass production because one-offs had proved to be
unprofitable. T his however had been an innovative approach in the particular
niche in which this company found itself and so still reflected the needs of the
customers.
Employee loyalty
Most respondents realised their own ability to inspire employee loyalty,
acknowledging that this loyalty in turn produced a more competent and
productive wo rk fo rce. Way s to obtain this loyalty were various but the
common denominator was the owner/manager’s ability to place an importance
on the motivation of his wo rk fo rce. Often this was throug h a hands-on
approach and some enterprise owners frequently worked alongside their
employees to inspire a team spirit. A lmost always they ensured that they were
accessible to employees and could be communicated with easily. Training was
an important part of this motivation and, in particular, training which kept the
work force flexible in terms of the tasks they could perform. Even the company
w hich had mass production w as try ing to create an atmosphere w here
employees would not be carrying out the same tasks all the time because “if
they get bored they get careless”. It was well recognised that service also
depended on the work force and that highly motivated employees would instill
confidence in the customers.
Quicker decision making
Apart from contributing to overall flexibility the major advantage of quicker
decision making was seen as enhancing problem-solving abilities, both as
regards product development and also in the response to actual problems which
could occur in day-to-day business transactions.
In the majority of cases it was the owner who would respond to problems and
this response tended to be immediate. Talking of a large customer 100 miles
away, one respondent commented:
If there is a problem, you just have to be available or have some of your men available to go
down and sort the problem out.
T he emphasis was very much on the speed of response that these companies
could offer when required, together with the personalised attention of that
response. One respondent even cited going out on Christmas Eve to a
Competitive
advantage in
engineering firms
41
IJEBR
5,2
42
breakdown and pointed out that he was always accessible to his customers
because his home was beside “the shed” and so somebody was always around
to respond to a customer’s request for a part or to solve a problem. (In itself this
example is a good illustration of how different the circumstances of a small firm
environment are to that of larger organisations and of how service takes on
different aspects.) A ll these companies made sure they were never too busy to
fix a problem fast, a crucial factor in an industry where a part or machine
malfunction may lead to plant closure.
Speedier delivery
The delivery system holds several opportunities for service quality and Berry
et al. (1990) believe that the firm should be accessible from the point of view of
the customer in both the placing of orders and prog ress updates. It was
generally acknowledged that delivery needs to be prompt and reliable. This was
facilitated by the owner/managers keeping their fingers on the pulse, making
quicker decisions and responding quickly to problems. It was seen as essential
to have some sort of order system in place although facilities for checking an
order once it was being processed varied considerably. In one company someone
had to physically go to the workshop to check where a product was at any time
in the production process, w hereas another firm had a very sy stematic
approach where all production units regularly submitted prog ress reports
centrally to give enquirers immediate feedback.
It depended on the nature of the work undertaken but the crucial factor was
to be able to give a reasonably instantaneous response to schedule queries. Even
the company that had to go to the workshop for confirmation boasted that they
could respond within five minutes. A ll respondents placed emphasis on giving
realistic time frames in advance and establishing which products customers
were prepared to wait longer for. However, they were all prepared to use their
inherent flexibility to offer an immediate and quality service to their customers
whenever urgent items were required.
Local image
W here a potential o r ex isting customer was in the same locality, all the
enterprise owners indicated that they maximised the importance of their local
origins and knowledge in developing their relationships with these customers.
However, where the customer was from outside the locality owners tended to
use their local image to reinforce the positive aspects of the firm’s “smallness”
in terms of staff quality and supplier reliability.
Key issues emerging from the research
If we refer back to our initial definitions of service quality, as a focus on the
customer’s ex perience during the process of transaction, then the small
engineering firms in our sample were conforming to such requirements. To
achieve this focus, their primary concern was on the development of long-term
relationships between the enterprise and its customers. Most commonly the
owner was the focal point for these relationships. A ttention was also paid to the
Competitive
nature of employee/customer interface with time spent on the motivation and
advantage in
training of employees. In addition these companies demonstrated a strong engineering firms
customer orientation as supported by previous research (McGowan and Rocks,
1995); all new ideas for products were grounded in customer needs and wants;
customers who experienced problems with the company’s products were
43
responded to sensitively and knowledgeably; and overall every attempt was
made to ensure that customers perceived that they were obtaining value for
money.
A lthough few formal customer records were kept, frequent contact with
customers ensured good informal feedback systems enabling problems to be
rapidly identified and solved. Ultimately a company’s reputation for a quality
service depended on the enterprise owner simply being as good as his/her word.
T he pivotal position was occupied by the building of long-term relationships
and all other aspects of their service revolved around these relationships, as
illustrated in Figure 1.
In the light of these findings, the principal dimensions of service quality as
identified by Zeithaml et al. (1988):
Personal
Touch
Greater
Innovativeness
Specialist
Offerings
Quicker
Decision Making
Longterm
Relationships
Speedier
Delivery
Employee
Loyalty
Local
Image
Greater
Flexibility
Figure 1.
The role of long-term
relationships in small
firms’ service quality
44
•
tangibles,
•
reliability,
•
responsiveness,
•
assurance, and
•
empathy
can now be related to the small firm context.
A model has been developed which shows how a small firm’s advantages in
respect of service quality (as identified at stage 1 of the research) interact with
these principal dimensions to produce key indicators of service quality for the
small firm (as identified by stag e 2 of the research) which are shown in
Figure 2.
Reliability is demonstrated by efficient but flexible delivery systems and
maintained through a fast response to problems, facilitated by the quicker
decision-making possible in the small firm environment; responsiveness is
indicated by the small firm’s willingness to adapt its product and service to
meet customer requirements, particularly in terms of the development of a
customised product; assurance is given through frequent and personalised
communication, both by the owner and by the enterprise’s employees; and
empathy is shown through overall knowledge of the customer and their needs
and the owner’s ability to generate new ideas for products or services in
response to those needs. Long -term relationships contribute to all four
dimensions by ensuring that bonds are established which accommodate the
interaction between each of these dimensions. T he emphasis of this model is
therefore on the intangible aspects of service because there were no tangible
advantages for the small firm in respect of service quality to emerge from this
research. Indeed in the environment characteristic of the small engineering firm
the tangible image is unlikely to be anything other than one of confusion and
A Small Firm’s Advantages
In Respect of Service Quality
Speedier Decision Making
Quicker Decision Making
Greater Flexibility
Specialist Offerings
Personal Touch
Employee Loyalty
Figure 2.
Key indicators of small
firm service quality
Greater Innovativeness
Local Image
Principle Dimensions
Key Indicators of
Small Firm Service Quality
RELIABILITY
Efficient delivery systems
Responsive delivery systems
RESPONSIVENESS
Wiilingness to adapt to customer needs
Customised product
ASSURANCE
Customer communication
Employee motivation
EMPATHY
New Idea generation
Knowledge of cusotmers
Long Term Customer Relationships
IJEBR
5,2
even chaos. It must therefore compensate for the signals that this type of
Competitive
environment gives to the customer through a stronger emphasis on the principle
advantage in
dimensions, as outlined in Figure 2. This model offers a conceptual framework
engineering firms
arising from the empirical research which is intended to guide an enterprise
owner from the engineering sector when assessing service quality in his/her
business. More generally, it also demonstrates that it is in the augmented
45
product area that any enterprise will have the best opportunity to differentiate
its product offering from that of its competitors, as demonstrated in Figure 3.
Basically any product has two levels: the “core” product which focuses on
core benefits and services and addresses issues such as brand name, product
features and quality, design, styling and packaging; and the “augmented”
product which focuses on customer service, warranties, delivery, installation
and post-purchase service. Figure 3 seeks to reflect the relationship between the
small firm as characterised in the literature and the emphasis or potential for
such an enterprise to get the most from developments in the area of the
augmented product.
Conclusion
T his paper has demonstrated how small firm considerations are largely
overlooked in the service quality literature and, in particular, it has questioned
the relevance of the SERVQUA L model for the small firm environment. From an
empirical study it has then suggested an alternative model for understanding
how service quality is managed by the small firm in order to maintain a
competitive advantage. The key emergent issue emphasised the importance of
managing long-term relationships between an enterprise and its customers.
T here is a g rowing body of literature on relationship marketing which was
outside the scope of this present study but this is clearly an area for future
research into small firms’ service quality together with an examination of this
model in relation to other industry sectors.
Emphasis on
core product
Emphasis on the
augmented product
low
high
Service Quality
Figure 3.
Emphasis for service
quality in the small firm
IJEBR
5,2
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advantage in
engineering firms
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