Factors Influencing Customer Loyalty

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CHAPTER 1

INTRODUCTION

1.0 INTRODUCTION

This chapter defined the overviewed of the study, which is the overall view of the research. Besides that, this chapter also defines about company profiles and their product. It also includes problem statements, research questions and research objectives. This chapter also states the significance of the study, limitations and definitions of terms that will be used in this study.

1.1 OVERVIEW OF THE STUDY
The financial services and banking facilities industry has seen a growing intensity of competition within the market place over the last decade. A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers with capital deficits to customers with capital surpluses. Banking is generally a highly regulated industry, and government restrictions on financial activities by banks have varied over time and location. The most well known bank in Malaysia like Maybank, Affin Bank Berhad, Alliance Bank, AmBank Group, HSBC Bank Malaysia Berhad, Bank Islam, Bank Muamalat, Agrobank, Bank Rakyat, BSN Utama, CIMB, and many other banks that compete with each other competitively nowadays.

The bank that considered as a market leader for finance and banking institution industry in Malaysia is Maybank Berhad because it is the second largest listed company on the Malaysian Stock Exchange, Bursa Malaysia, with a market capitalization of over RM48.6 billion (accessed at 2009, 31 December, available at www.skorcareer.com). Maybank operates in over 14 countries worldwide including Singapore, Brunei, Philippines, Vietnam, Indonesia, United Kingdom, United States, China and its native country, Malaysia.

The bank that considered as market challenger to Maybank is CIMB bank. It is Malaysia’s second largest financial services provider, and fifth largest in Southeast Asia by total assets. It is owned by CIMB Group Holdings Berhad, which is listed on Bursa Malaysia with a market capitalization of RM46.6 billion of the last days of 2009, 31 December (www.skorcareer.com). Today, CIMB serves close to seven million customers in over 600 locations through over 36,000 staff. Nowadays, financial services and banking facilities has force to pass by intense competition by other bank that growth from inside also outside this country because of the regulation for financial institution to establish was deregulation by government, and causing the adding in growth of the bank in Malaysia. Thus, people also have various banks to choose and directly give the big impact to manager of bank to search the way to enhance the loyalty of current customer from switching to other bank.

They are many strategies that have been attempted by managers of the banks to retain customers in order to increase customer loyalty. It is costly than to attract new customer compared to retain the current customers. Thus, many banks have introduced innovative products and services (Alam and Khokhar, 2006) in order to retain current customers. Another strategy is to understand the factors influencing customer loyalty.

Figure 1: Graph profit of Agrobank Seri Iskandar branch in April 2009 until April 2010 1.2. Background of the organization

Agrobank is an institution which provides holistic financial services and banking facilities. It give their utmost priority to the needs of their customers by providing attractive products and services such as savings activities, banking services, loan facilities, insurance coverage and advisory services. Agrobank is a Government-linked-Company (GLC) under the Minister of Finance Incorporated (MFI). The bank’s financing of the agricultural sector is driven by a policy set forth by the Ministry of Agriculture and Agro-based Industries.

Agrobank is a continuity of the former Bank Pertanian Malaysia which has 40 years of experience in agricultural banking and an...
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