Bahir Dar University Institute of Technology School Of Industrial and Mechanical

Seminar paper On Operation Strategy and Efficiency of Service Industries in Ethiopia

Submitted to: Ato Tenaw T. By: BirhanuDagnew November 15, 2011
MSc Program

Seminar Nov, 2011

Operation Strategy and Efficiency of Service Industries in Ethiopia

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Abstract
The principal objective of this research is to explore Ethiopian service sector operational strategies, efficiencies and customer satisfaction levels. This research paper reviewed the pertinent literature on services marketing as well customer satisfaction. Then, through structured questionnaire and in-depth personal interviews with 600 Ethiopian telecom, banking and insurance, civil aviation and tourism, and health services customers of both the sexes (300 male and 300 female) in the Addis Ababa region collected the opinions on service interaction, service delivery process, customer complaint handling procedure, overall satisfaction levels and also customers opinion on improvement on service providers ability in the last five years. This study used both quantitative as well qualitative survey research designs. The study measured customer satisfaction levels with recalled service encounters and the method of data collection was convenience type. Hypotheses were developed based on literature review and applied to empirical data of Ethiopians. The findings of the analysis showed that 36% customers of Ethiopian service sector were dissatisfied with employees interaction skills. Furthermore another 47% of the customers were also disappointed with service delivery system and 52 and 61% customers were not pleased with the service recovery process and complaint handling procedure, respectively. And 49% of the customers expressed overall dissatisfaction on the services provided by Ethiopian service sector. Besides 94% respondents robustly acknowledged Ethiopian service sector is improving immensely in providing all kinds of services in the last five years. Because of significant dissatisfaction percentage levels among customers, sectors think tank has the opportunity to seriously evaluate its existing activities, procedures, programs related to service interaction, delivery and recovery process, complaint handling and other areas which crafted unhappiness in the market. And finally Ethiopian service industry overview on operational strategy an example of service sector has verified.

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List of tables Table 1. Service interaction summary14 Table 2. Customers criteria for selecting banking service.21

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Contents

Abstract ...............................................................................................................................3 List of tables.........................................................................................................................4 Contents................................................................................................................................5 Acknowledgement................................................................................................................5 Chapter One ......................................................................................................................7 Service Industry in Ethiopia ................................................................................................7 Introduction .........................................................................................................................7 Service Operational Strategy and operational efficiencies .........................................7 Service interaction: ..............................................................................................................8 There is a relationship between service interaction and customer satisfaction. ..................8 There is a connection between service delivery process and customer satisfaction............9 There is an association between service recovery process and customer satisfaction.......10 There is a relationship between customer complaint handling process and customer satisfaction..........................................................................................................................11 Methodology......................................................................................................................12 Results and Discussion.......................................................................................................13 Chapter 2............................................................................................................................17 Financial Service in Ethiopia ............................................................................................17 Financial service overview in Ethiopia .............................................................................17 Financial Service Systems in Ethiopia...............................................................................17 ...........................................................................................................................................18 Chapter 3............................................................................................................................19 Model service industry.......................................................................................................19 National Bank of Ethiopia ................................................................................................19 Competitive Service Strategies (Overall Cost Leadership)................................................20 Competitive Service Strategies (Differentiation)...............................................................20 Customer Criteria for Selecting Banking Service Provider in Ethiopia ............................21 Operational efficiencies of banking services......................................................................21 Service Purchase Decision.................................................................................................22 Quality and Time Strategies...............................................................................................22 Time-based strategies.........................................................................................................22 Conclusion..........................................................................................................................24 References..........................................................................................................................25

Acknowledgement Since this seminar paper preparation is my first time and I would like to express my special thanks to Ato Tenaw T. for his continuous assistance in giving the direction of preparing this paper. And also i am pleasant to thank to my class mates for their interactive dealing about the seminar paper while we are together. Finally I gratefully acknowledge the Corresponding Authors of this study.

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Seminar Nov, 2011 Chapter One Service Industry in Ethiopia Introduction

Several Ethiopian firms, particularly in the tourism and service industries, operate under the names, or use the symbols, of major international brands. Service Organizations everywhere are challenged to achieve higher levels of efficiency in their operations as one means of coping with global competition and pricing pressures. Service industry is a sector of an economy made up of people of business providing personal and professional services to others, such as food serving and preparation, financial, truism, and hotel. Service organizations must produce and deliver a service package which matches the expectations of their customers. A framework for a service operations strategy, its analysis and measurement, is provided. The service operations task is defined;

The means of achieving the objectives of the task, The service production and delivery system is detailed; and The operational factors affecting the running of a system are addressed.

A case example of the applications of a service operations strategy is provided. Accounting for 42 percent of the GDP, services are an extremely important component of Ethiopia's economy. At the same time, however, with only 12 percent of the labour force engaged in services and government employment, a relatively small percentage of Ethiopians work in the service sector. The large contribution of services to the GDP stems mostly from the government and the strong financial sector. Service Operational Strategy and operational efficiencies Service Operation Strategy is about making tough choices. In the classic definition, the two concerns of strategy are the external environment and the future. An organization needs a sense of where it is going and what forces in its environment are going to help or hinder it in achieving its goal. It helps the organization to explore a limited number of possible directions and create a model of how their actions are going to affect that environment. Operational Strategy is likely to concern itself with the survival of the business as the minimum objective and the creation of value-added as a maximum objective. Operational efficiency deals with minimization of waste and maximization of resource capabilities, in order to deliver quality services to customers and though Operational efficiency is concerned with identifying wasteful processes and resources that drain the organization's profits. The organizational structure and the internal processes
affect operational efficiency.

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Seminar Nov, 2011 Service interaction:

Interactions between customers and employees are a decisive component of service quality. This is principally actual for services exemplified by high degree of person-toperson interaction and by the absence of an exchange of tangible goods. The client comes away from service interaction with feelings of contentment or annoyance. Service encounter is an interpersonal association between the firms staff and customers. Some service encounters are very succinct and consists of just a few distinct delivery steps, however, other may extend over a long time frame and involve manifold steps. As a result, the service encounter often begins with submitting applications requesting service and placing an order. Contact may take personal swap between customers and service employees or impersonal interaction with machine or computer. It is not easy to perk up service quality and efficiency without complete understanding of customers involvement in a specified service situation. This study delineates the service encounter as the intact exchange between customer and service provider from the preliminary contact through wrapping up of the exchange.

There is a relationship between service interaction and customer satisfaction.

Service delivery process: Processes are the construction of services, describing the scheme and sequence in which service operating systems work and how they link together to create the service experiences and outcomes that customers will worth. In high-contact services, customers themselves become an integral part of the operation. Badly designed processes, often result in slow, frustrating, and poor-quality service delivery and are likely to annoy customers. Similarly, poor processes make it difficult for frontline staff to do their jobs well, result in low productivity, and increase the risk of service failures (Lovelock and Wirtz, 2004). Organizations which are implicated in high-contact, peopleprocessing service sector should design highly suitable process outline for both frontline staff as well customers. This process sketch should clearly prescribes the sequence of actions while service delivery. After completion of this document, organizations middle level management should have the accountability to keep an eye on the service encounter stage just to know the process is executing according to sketch or not. If any divergence they have observed, they should correct it then and there itself. In the meantime organizations think-tank should recognize where things are particularly at jeopardy. From a customer perspective, the most serious fail points should be better to identify and address them with paramount care. Service delivery to customers entails decisions about where, when, and how. At the time of service delivery, there is also the leeway of delays between specific proceedings, requiring the customers to wait.

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Very frequently, management should spot those kind of locations and healthier to control the operations which are leading to delays in service delivery. Through both constant official research and on-the-job experience, service managers can find out the nature of customer expectations at every stage of service encounter and bring in required modification in the existing service delivery process to enhance customer satisfaction. If any service firm unsuccessful in identifying the loopholes in their service delivery process, it is an uphill assignment for them to retain the customers even though the firm is scheduling to introduce service recovery as a healing stratagem.

There is a connection between service delivery process and customer satisfaction.

Service recovery process: Failure to ensure customer satisfaction, both initially and belatedly, through service recovery could lead to a decline in customer confidence, lost customers, negative word-of-mouth, possible negative publicity and the direct cost of re-performing the service (Berry and Parasuraman, 1992). In essence, the service firms true test of commitment to service quality and Customer satisfaction depends on how it responds after disconfirmation (Zemke and Bell, 1990). Effective managerial responses depend, however, on effective research of the phenomenon. Unfortunately, several limitations in consumer complaint behavior research have been noted. The elucidation above suggested that the significance to firms of ensuring that if something goes wrong, then there is a mechanism in place to recover it. Of greatest substance in the service recovery process is the assertion that customers have a dedicated means by which they can express their dissatisfaction. A range of techniques must be used to ensure customers have adequate means by which they can register their views. Self-completion questionnaires are the most commonly used of these as they are able to identify all potential problems. They may also be completed once the service has been received, either immediately or at a later date. However, if the latter option is taken and a complaint is registered, there is little an organization can do to recover the situation. Therefore a more customer-focused approach is mandatory. Rather than to depend on the service recovery system, its better to ponder more on curbing the deficiencies in the service delivery process based on old proverb prevention is better than cure. To ensure customers are satisfied, staff members can be selected to walk around the service area checking that all needs are being properly met. This ensures that customers can voice their dissatisfaction in an environment where the situation may be considered and rectified. It is here that a professional and efficient service recovery process operates. Successful service recovery strategies can reinstate customer satisfaction and

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can also manipulate other important organizational outcomes including loyalty, positive and negative word of mouth behavior, and profitability. Poorly executed service recovery tends to exacerbate customer dissatisfaction, may drive customers to competing firms and, at the very least, encourages customers to badmouth the organization.

There is an association between service recovery process and customer satisfaction.

Customer complaint handling procedure and its outcome: Most of the organizations in these days have treated customer handling procedure as a strategic marketing tool. Service providers are frequently exhorted to strive towards a zero defects service; the ability to get it right first time is thought to offer significant benefits to organizations in terms of both customer evaluations and costs of delivery (Schaefer and Christine, 2005). If any organization is striving for zero defects, they need not give that much importance for complaint handling sections. In practice, it is often difficult to imagine how service providers can attain such a goal, not least because of the inherent heterogeneity in service provision and limitations on the extent to which a provider can control the range of different interactions with customers. In general, customers are complaining with four major ideas like to get compensation, find expression for their anger, and help to improve the service and for unselfish reasons. Service organizations should build up the culture of straightforwardly to invite the complaints with a motive to improve the service and with selfless reasons. And at the same time, organizations should be cautious enough about the complaining nature of some consumers with an intention to demand compensation and spoil company image. Whatever the reason in the customer mind behind the complaining nature, that is irrelevant to the organization. Their main accountability is to genuinely solve the complaint and be successful in explaining the reasons for that in a convincing way. However service businesses in advance clearly recognize the various reasons behind the complaining nature of the market and should devise special strategies to give a legitimate reason and another important element in this aspect, organizations has to develop complaint procedure with minimum of fuss. If customers are treating complaint procedure is too lengthy and clumsy, it will also affect the performance of entire organization. Thus, organizations should be very carefully design the complaint procedure with minimum of paper work. Related to the outcome of the complaints, market has one strong notion i.e., result is always in favor of organization whatever the problem, whoever may be the reason for that. The market is feeling that they are not treated fairly and far away for adequate justice. This kind of belief in the market is more dangerous for any business in the present days highly cut-throat competitive business world. Therefore, while analyzing the complaints, service firms complaint handling sections should be more vigilant in finding the legitimate reasons and also the

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responsibility to provide ample justice to the customers community. This class of legitimate judgment will give great confidence in the minds of customers while solving their indisputable problems and in turn increase the image of the firm. Finally, service firms should be better to realize the importance of complaint handling procedure and its outcome and also well again to bring into play this one as a strategic marketing tool to accomplish the benefits such as customer satisfaction, customer loyalty, favorable wordof-mouth publicity, and to decrease litigation.

There is a relationship between customer complaint handling process and customer satisfaction.
Customer satisfaction: The concept of customer satisfaction occupies a central position in marketing thought and practice. Many companies today are aiming for TCS- Total Customer Satisfaction. Satisfaction is a major outcome of marketing activity and serves to link processes culminating in purchase and consumption with post purchase phenomena such as attitude change, repeat purchase and brand loyalty. Satisfaction is defined as a judgment that a product or service feature, or the product or service itself, provided (or is providing) a pleasurable level of consumption-related fulfillment, including levels of under-or-over-fulfillment (Oliver, 1981). According to Tse and Wilton (1988), satisfaction is the consumers response to the evaluation of the perceived discrepancy between prior expectations and the actual performance of the product as perceived after its consumption. Attitude also shapes consumer expectations and expectations are, therefore, either positively or negatively inclined. Expectations, according to the disconfirmation paradigm, exert an important influence on customer satisfaction with the service encounter and thus on service quality perceptions (Bitner, 1990). Customer satisfaction is the individuals perception of the performance of the product or service in relation to his or her expectations. The concept of customer satisfaction is a function of customer expectations. A customer whose experience falls below expectations will be dissatisfied. And customers whose expectations are exceeded will be very satisfied or delighted. Customer satisfaction will occur only through conscious efforts to alter the way the firms approach to work. Service firms must not only change their attitudes but also change the way they organize their effort. Therefore, organizations must rethink how they do business as customers move from the periphery to center stage, old ways of doing business no longer work. Every company would be wise to measure customer satisfaction regularly because one key to customer retention is customer satisfaction. Understanding what customers expect from a service organization is necessary for service managers, because expectations provide a standard of comparison against which consumers judge an organizations performance.

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Customers of services have expectations about what they will receive from the delivery system. Undoubtedly, customer satisfaction is the key to survival and thriving in the competitive time is to win the customer and to keep them in service or product range. Obsession with customer satisfaction is what drives change today particularly in service sector. Customer satisfaction will occur only through conscious efforts to alter the way we approach our service delivery process. Service companies must not only change their attitudes towards market but also change their way in providing services with market expected parameters like quality, reliability, tangible evidences, responsiveness, assurance, empathy, price, availability, accessibility, etc. Therefore, organizations in general, service firms in particular must rethink how they do business as customers move from the periphery to center stage, old ways of doing business no longer work.

Methodology
This study was conducted in the Ethiopia Capital Addis Ababa in the first quarter of this year 2011. In view of the fact that customers are the decisive for the success and survival of any organization, bearing in mind the views of customer expectations and satisfaction is an indistinguishable in service delivery for Ethiopian service sector. The prime objective of this research is to explore issues related to Ethiopian service sectors customers satisfaction levels from the point view of customers. More specifically, to investigate the causes of customer dissatisfaction across service encounters related to all kinds of services offered by the Ethiopian telecom, banking and insurance, civil aviation and tourism, and health sectors. This study used a quantitative survey recall research design to recognize their satisfaction levels and also used personal interview method just to collect the views about the reasons for their dissatisfaction. Structured questionnaires were used for primary data collection. The questionnaires were translated into local language Amharic. Research participants were drawn from existing customers of all services of Ethiopian telecom, banking and insurance, civil aviation and tourism, health sectors. The method of data collection was convenience type. The research was conducted only in the Addis Ababa Administrative Council. The sample frame for this study selected was only the present Ethiopian telecom, banking and insurance, tourism and health services customers which are living in the Ethiopia countrys capital Addis Ababa in the first quarter of this year. The sample size was 600 customers, out of which 300 male and 300 female customers who were proportionately selected from telecom, banking and insurance, civil aviation and tourism, health services. Mostly these were selected based on the issues like willingness and the time allotted by the respondents for the collection of information. Data was collected at various areas of Ethiopias capital Addis Ababa City. The analysis was completely done on the basis of data and information collected from six hundred

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respondents equally from both the sexes through questionnaires and personal interviews. Statistical analysis techniques frequency was applied to compute percentages and other quantitative data to analyze and interpret the outputs. The analysis was done using frequency distribution and percentages to show which part of the service delivery were more accountable for the dissatisfaction of customers in the selected services. Data manipulation was done by using Microsoft Excel software package. This research covered only the customers service delivery areas in Addis Ababa Administrative Council. It does not include the point of view of Ethiopian service sector employees. This study was unable to include the views of other parts of Ethiopia service customers due to time and resource constraints. The research is designed to undertake the point views of customers, therefore, some respondents may probably bias in filling questionnaires.

Results and Discussion

The customers at different parts of the countrys capital were asked to fill questionnaires to evaluate Ethiopian service sectors service delivery system. Those who are willing to fill the questionnaire were only approached. The questions which were asked to know the satisfaction levels about employees interaction, service delivery processes, customer complaint handling procedure and its outcome, overall evaluation of customers satisfaction and finally about improvement of service quality in the last five years. Service interaction: Out of 600 respondents, as mentioned in Table 1 only 36% expressed their dissatisfaction about the interactive expertise of the front desk employees of the Ethiopian service sector. One important point in this facet, when compared to female customers, male customers were more dissatisfied about the service interaction skills of the service providers of Ethiopia. This means the frontline employees were showing clear variation while interacting with the male customers. This should be curbed by the middle level management with careful introduction of change in the minds of front desk people. In our qualitative research, most of the respondents said employees were more mechanical and straight to the point while clearing or giving information about services. Some of the respondents expressed doubts about the product/service knowledge, interactive and problem solving abilities of the frontline employees of the selected services areas for the study. This hypothesis is valid that there is a relationship between service interaction and customer satisfaction.

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S/ N 1. 2. 3. 4. 5. 6.

Considered Parameters Service interaction Service delivery process Service recovery process Customer compliant handling procedure and its outcome Overall customer satisfaction level Last 5 years service improvement

Satisfie d (%) 54 40 47 22 40.75 90

Male Dissatisfie d (%) 46 60 53 78 59.25 10

Female Satisfie Dissatisfie d (%) d (%) 74 26 66 34 49 56 61.25 94 51 44 38.75 06

Satisfie d (%) 64 53 48 39 51 92

Total Dissatisfie d (%) 36 47 52 61 49 08

Table 1. Service interaction summary Customer Service Delivery Process: Forty seven (47) % respondents articulated their displeasure on service delivery process. They treated the service delivery process has lot of complications and clumsiness in the areas of applying, receiving services, and bill payments etc. This means market is expecting certain changes in the service delivery process of Ethiopian service sector. Based on the expectations of the market, Ethiopian service sectors think tank should better study the clumsy parts of the existing service delivery process and if they observe any duplication at any area, it is better to get rid of that kind of activity to save the time and effort of both their employees as well customers. So the hypothesis is also applicable. Service Recovery Process: Related to the service recovery process strategies introduced by the Ethiopian service sector, only 48% are pleased and the remaining 52% of customers were uttered their discontentment. Most of the Ethiopian customers whispered straight away pessimistically about the service recovery mechanism introduced by the service industry in Ethiopia. And at the same time, there is no proper follow-up in get rid of the discontentment of the affected customers by clearing the doubts about the service and its delivery process. In this state of affairs, the top and middle level executives of the companies should develop proper professional mechanism to service recovery process and also educate their employees to properly listen their customers problems in the first phase and then advocate best customer-oriented solution which furnishes reciprocal benefit. Hence the hypothesis showed that there is an apparent relationship between service recovery process and customer satisfaction. Customer complaint handling procedure and its outcome:

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Significantly 61 % of customers uttered their unhappiness about this issue. They were thinking complaint handling procedure was lengthy and time taking, most of the times the outcome is also in favor of service provider. The Ethiopian services market was feeling that they were not treated fairly and far away for adequate justice while handling their complaints. This means a serious thinking is required from the top officials on complaint handling procedure and its outcome to regain the confidence among the customers as well to bring in the benefits like customer satisfaction, customer loyalty, and positive publicity and also to minimize litigations. Finally, it provide evidence there is a strong relationship between customer complaint handling procedure and its outcome and customer satisfaction means hypothesis 4 is too appropriate. Overall satisfaction level: As mentioned in Table 1, about 49% respondents conveyed their disappointment on the overall performance of the service sector activities of Ethiopia. This means it should be healthier to identify the areas which led to this kind of dissatisfaction and introduce complete overhaul to recover the situation. The researcher identified some areas of dissatisfaction particularly service quality, tariff structure, service encounter, service delivery process, bill payment areas, complaint handling procedure, after sales service etc. through his qualitative research. The Ethiopian service sector has already working on above areas which has led to great customer dissatisfaction with the support of overhauling of most of the existing plans, procedures, programs, strategies, policies and even budgets also. Service providing ability: In the entire 600 respondents, 92% expressed confident opinion about the improvement of service providing ability of the countrys service sector in the last five years as mentioned in the last column of Table 1. The majority of the customers even now has treated Ethiopian service sector operations are far better than so many African countries. But some respondents opined that the pace of improvement in providing quality service is not sufficient when compared to the World Changes. Most of the Ethiopian service sectors customers are totally in high spirits with the way the service firms improve its infrastructure, service quality, service recovery strategies for maximizing their customer satisfaction levels. In their feelings, Ethiopian service sector is immaculate and number one service provider in the entire African continent. Thus whatever the hypotheses selected for the study is absolutely valid and highlights the association between service interaction, delivery process, recovery process and customer complaint handling and customer satisfaction. Managerial implication:

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The present study offers insight to service firms senior officials about the customer dissatisfaction areas in delivering quality services. Since noteworthy dissatisfaction percentage levels among customers, service firms top officials need to seriously appraise its customer service delivery system in the first phase. Principally, the service delivery processes require more attention from the top officials and it will need to undertake redesigning just to speeding up processes and weeding out unnecessary steps to avoid wastage of time and effort of both employees as well customers and in the second phase, Ethiopian service sector has to concentrate on staffing and training of frontline employees and their interactive skills. Furthermore, it is better to initiate absolute changes in customer complaint handling system and its outcome by giving clear cut instructions to the concerned sections for legitimate evaluations on customer complaints. Finally, this sector is also supposed to assign a paramount priority to the Total Quality Management that focuses on quality technologies, quality employees, quality maintenance, and quality environmental conditions at work to achieve Total Customer Satisfaction.

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Seminar Nov, 2011 Chapter 2 Financial Service in Ethiopia Financial service overview in Ethiopia
Accelerated and sustained economic growth is on the top of Ethiopian Governments policy agenda. The Government of Ethiopia in its various policy and strategic papers has clearly documented that the countrys long journey to industrialization and transformation to middle income nation should be led by agriculture. Thus there is a need to enhance agricultural production and productivity. Financial service is at the heart of boosting investment and thus growth in the country. Financial systems mobilize scarce financial savings from the public and channel it to productive investments. They reduce risk of investors and thus lessen the barriers to new entry. Similarly, they lower risk of savers and help to raise financial savings. They also facilitate efficient exchange of goods and services by operating the countrys payment and settlement systems. It is, therefore, very difficult, if not impossible, to achieve the Governments goal of rapid and sustainable economic growth and development objectives without having vibrant, efficient and strong financial system which is accessible to majority of the population, if not all. To make the financial system accessible to all, there is a need to create enabling environment for the expansion and growth of the financial institutions and markets. In absence of enabling environment, financial institutions fail to improve their services on sustainable basis as to quality and quantity. Creation of enabling environment for financial systems includes, maintaining stable macro-economic condition, ensuing their soundness and developing stronger underlying infrastructure including in information and legal dimensions. This paper briefly presents policy initiatives taken by the GoE since early 1990s to foster development and accessibility of finance to the rural areas in particular and the country in general. Accordingly presents overview of Ethiopian financial system, outlines important policy measures taken by the government.

Financial Service Systems in Ethiopia

Financial markets and institutions interact and combine in various ways to form a countys financial systems. At the centre of the system there are financial instruments in which financial institutions deal in the market. Financial systems evolve over time. They reflect a countys political and economic history. Financial systems in many African countries, for example, evolved from colonial times. Evolution of modern institutionalized financial system in Ethiopia started in 1905 following the establishment of the first bank by historically reminiscent name of Bank of Abyssinia. This Bank introduced for the first time in Ethiopian financial systems history banking services and instruments such as

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deposit accounts and export financing. This particular strategy aims at improving access to finance, in the country as a whole and in rural areas in particular, by creating conducive environment for expansion, and operation of financial institutions and market. It extensively outlines policy measures to be taken by the government to build and preserve a stable, efficient and inclusive financial system. All strategic documents of the government stated above recognize that access to finance and stronger financial systems promote growth by financing entry to business of new firms (particularly small and medium scale enterprise which are often most dynamic and innovative) and expansion and growth of existing enterprises.

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Seminar Nov, 2011 Chapter 3 Model service industry National Bank of Ethiopia February 15, 1906 marked the beginning of banking in Ethiopia when the first Bank of Abyssinia was inaugurated by Emperor Menelik II. It was a private bank whose shares were sold in Addis Ababa, New York, Paris, London, and Vienna. One of the first projects financed by the bank was the Franco-Ethiopian Railway which reached Addis Ababa in 1917. In 1931, Emperor Haile Selassie introduced reforms into the banking system and the Bank of Abyssinia became the Bank of Ethiopia, a fully government-owned bank providing central and commercial banking services. The Italian invasion in 1935 brought the demise of one of the earliest initiatives in African banking. During the Italian occupation, Italian banks were active in Ethiopia. On April 15, 1943, the State Bank of Ethiopia became the central bank and was active until 1963. And the National Bank of Ethiopia was established in 1963 by Proclamation 206 of 1963 and began operation in January 1964. Prior to this proclamation, the Bank carried out dual activities, i.e. commercial banking and central banking. The proclamation raised the Bank's capital to 10 million Ethiopian dollars and granted broad administrative autonomy and juridical personality. Following the proclamation the National Bank of Ethiopia was entrusted with the following responsibilities: To regulate the supply, availability and cost of money and credit. To manage and administer the country's international reserves. To license and supervise banks and hold commercial banks reserves and lend money to them. To supervise loans of commercial banks and regulate interest rates. To issue paper money and coins. To act as an agent of the Government. To fix and control the foreign exchange rates.

However, monetary and banking proclamation No. 99 of 1976 came into force on September 1976 to shape the Bank's role according to the socialist economic Principle that the country adopted. Hence the Bank was allowed to participate actively in national planning, specifically financial planning, in cooperation with the concerned state organs. The Bank's supervisory area was also increased to Operational Strategy and Efficiency of Ethiopian Service Industries 16

Seminar Nov, 2011 include other financial institutions such as insurance institutions, credit cooperatives and investment-oriented banks. Moreover the proclamation introduced the new 'Ethiopian birr' in place of the former Ethiopian Dollar that ceased to be legal tender. The proclamation revised the Bank's relationship with Government. It initially raised the legal limits of outstanding government domestic borrowing to 25% of the actual ordinary revenue of the government during the preceding three budget years as against the proclamation 206/1963, which set it to be 15%. This proclamation was in force till the new proclamation issued in 1994 to reorganize the Bank according to the market-based economic policy so that it could foster monetary stability, a sound financial system and such other credit and exchange conditions as are conductive to the balanced growth of the economy of the country. Accordingly the following are some of the powers and strategies vested in the Bank by proclamation 83/1994. Regulate the supply and availability of money and credit and applicable interest and other hangs. Set limits on gold and foreign exchange assets which banks and other financial institutions authorized to deal in foreign exchange and hold in deposits. Set limits on the net foreign exchange position and on the terms and amount of external indebtedness of banks and other financial institutions. Make short and long-term refinancing facilities available to banks and other financial institutions. Competitive Service Strategies (Overall Cost Leadership)
Seeking Out Low-cost Customers Standardizing a Custom Service Reducing the Personal Element in Service Delivery (promote self-service) Reducing Network Costs (hub and spoke) Taking Service Operations Off-line Making the Intangible Tangible (memorable) Customizing the service Product Reducing Perceived Risk Giving Attention to Personnel Training Controlling Quality

Competitive Service Strategies (Differentiation)

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Seminar Nov, 2011 Note: Differentiation in service means being unique in brand image, technology use, features, or reputation for customer service. Customer Criteria for Selecting Banking Service Provider in Ethiopia Example we can apply our concepts of service to an Automation banking service provider in Ethiopia. We investigate the service being provided by the bank by checking for availability, convenience, dependability, personalization, price, quality, reputation, safety and speed. This should help us understand the strength of service industry in a competitive environment especially in our country.

S/N 1. 2. 3. 4. 5. 6. 7. 8. 9.

Characteristics Availability Convenience Dependability Personalization Price Quality Reputation Safety Speed 24 hour ATM transaction.

Remarks or automated financial

Site location from any banking service. On-time performance and correct information. Know customers name and ID. The fee a customer pays for the service. Reflected in service. Word-of-mouth and audited and examined by neutral bodies. Customers data is safe and inaccessible to others and hackers Avoid excessive waiting in service delivery.

Table 2. Customers criteria for selecting banking service Operational efficiencies of banking services Banking service providers are often checked to operational efficiencies for:
Anti-competitiveness Whether are not allowing other banking service providers to enter the market by constructing barriers to entry. Fairness indicates the concept of Yield management Meaning whether the bank is actually providing the same return as it had promised to the customer. Invasion of Privacy Calling people through telephones or visiting offices thus making use of Micromarketing concepts, which often makes the patron and customer feel that his privacy has been compromised.

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Data Security Banks make it a point that the financial records of the customers are not accessed by unauthorized personnel. Reliability Banks always strive that their service is reliable and considered safe and usable by its customers. Most banking service providers allow its customers to access their account statement, free of cost.

Service Purchase Decision In order to understand further we evaluate the service organizations in terms of Purchase Decision.
Service Qualifier: To be taken seriously a certain level must be attained on the competitive dimension, as defined by other market players. Examples are cleanliness for a fast food restaurant or safe aircraft for an airline. Service Winner: The competitive dimension used to make the final choice among competitors.

Example is price/time of service delivery at or above expected level.

Service Loser: Failure to deliver at or above the expected level for a competitive dimension.

Examples are failure to give fast service (dependability), rude treatment (personalization) or late delivery of service (speed). Quality and Time Strategies
Quality-based strategies o Focuses on maintaining or improving the quality of an organizations products or services Quality at the source Focuses on reduction of time needed to accomplish tasks. Time Based Strategies: Organizations have registered reduction in time by employing the following 6 time based strategies. There are 6 time based strategies namely:1. Planning Time The time required to react to a competitive threat, or to adopt new technologies, or to approve changes to an existing facility 2. Products/Service Design Time The time needed to develop or market new or redesigned products or services 3. Processing Time The time required to produce goods or services, includes repairing equipment, quality training, inventory etc

Time-based strategies

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4. Changeover Time is the time needed to change from producing one type of product or service to another. New model, new insurance /health service. 5. Delivery Time is the time needed to fill orders. 6. Response Time for complaints is the required to improve the model or service features according to customer inputs and improving employee working conditions.

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Conclusion In light of the above, authors justification and studies each and every employee in the organization from the board member, top management to the technical core are required to assign due weightage to the areas of dissatisfaction and introduce fundamental changes in their existing practices for meeting the service needs of the country. Just like world service giants in different sectors, Ethiopian Service Sector also better to make every effort for Total Customer Satisfaction (TCS) by expecting the clear attitudinal changes among the existing customers for retaining them. For this they have to once again rededicate themselves and review their existing operational strategies, policies, procedures, programs, strategies, and even budgets for offering confident and market expected services to win the hearts of the 80 plus million Ethiopians. Since then, Ethiopia has made impressive progresses on both economic growth and basic service delivery. This has been supported by progress in long-term institution building and gradual improvements in governance, perhaps most notably in terms of the transparency and accountability of basic service delivery by local governments. To have a blameless service delivery, improving operational efficiency has a direct impact on the company's profit margins and involves adopting flexible organization structures that allow for a network flow of information. Assuming the overall quality is standard, qualified employees and common standards all contribute to greater operational efficiency. In my opinion Ethiopia has to do

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References
Gronroos, C., 1988. Service quality: The six criteria of good quality. Rev. Bus., 9(1):10-13. Kelly, S. and M. Davis, 1994. Antecedents to customer expectations for service recovery. J. Acad. Mark. Sci., 22(1): 52-61. Service industry journal: Ethiopian service industry, Andhra Pradesh march 2011. perceived service

http://www.schawk.com/solutions/business-need/operational-efficiency,2011. http://www.nbe.gov.et/,2011. http://www.ifad.org/evaluation/public_html/eksyst/doc/country/pf/ethiopia/ethiopia.p df,2011. http://www.cop-mfdr-africa.org/profiles/blogs/ethiopias-five-year. Ethiopia-2011-2015 Growth and Transformation Plan.

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