Bank’s Money Transfer Service in Sweden : Qualitative study of Swedbank, Nordea and Handelsbanken

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N T E R N A T I O N E L L A

H

A N D E L S H Ö G S K O L A N

HÖGSKO LAN I JÖNKÖPI NG

I n t e r n a t i o n e l l a p e n n i n g

-ö v e r f -ö r i n g a r

Kvalitativ studie av Swedbank, Nordea och Handelsbanken

Filosofie magister uppsats inom Företagsekonomi Författare: Yulia Kristensson

Quang Vinh Evans-Luong Handledare: Cinzia Dalzotto

J

Ö N K Ö P I N G

I

N T E R N A T I O N A L

B

U S I N E S S

S

C H O O L

Jönköping University

B a n k ’s M o n e y Tr a n s f e r S e r

-v i c e i n S w e d e n

Qualitative study of Swedbank, Nordea and Handelsbanken

Master thesis within Business Administration Author: Yulia Kristensson

Acknowledgments

We would like to thank Professor Bengt Henoch at Jönköping Engineering School who

provided us with useful information of Money Transfer Service and Remittance as well as

inspired us to conduct this research.

Moreover, we also want to express our gratitude to our supervisor, Research Director of

MMT Centre, Cinzia Dalzotto and the opponents who gave us very helpful feedback

dur-ing the whole process.

We would like to appreciate the interviewees in Swedbank, Handelsbanken, Nordea and

SEB.

Special thanks to family and friends for cheering us.

Yulia Kristensson & Quang Vinh Evans-Luong

Magister uppsats inom Företagsekonomi

Magister uppsats inom Företagsekonomi

Magister uppsats inom Företagsekonomi

Magister uppsats inom Företagsekonomi

Titel:

Titel: Titel:

Titel: Internationella penninInternationella penninInternationella penninInternationella penninggggöverföringar överföringar överföringar överföringar Författare:

Författare: Författare:

Författare: Yulia KristenssonYulia KristenssonYulia KristenssonYulia Kristensson och och och och Quang Vinh EvansQuang Vinh EvansQuang Vinh EvansQuang Vinh Evans----LuongLuongLuongLuong Han

Han Han

Handledaredledaredledaredledare:::: Cinzia DalzottoCinzia DalzottoCinzia DalzottoCinzia Dalzotto Datum Datum Datum Datum: 2008-06 Ämnesord Ämnesord Ämnesord

Ämnesord Utlands betalningar, Betala utomlands, KunUtlands betalningar, Betala utomlands, KunUtlands betalningar, Betala utomlands, KunUtlands betalningar, Betala utomlands, Kunddddrelationrelationrelationerrelationer och erer och och och KunKunKunKund-d-d- d-kommunikation,

kommunikation, kommunikation,

kommunikation, Diaspora,Diaspora,Diaspora, KundsDiaspora, Kunds Kunds Kundservice hanteringervice hanteringervice hanteringervice hantering och Remissa och Remissa och Remissa och Remissa

Sammanfattning

Pengaflödet från Diaspora av människor med invandrar bakgrund till deras respektive hem-länder har blivit en viktig inkomstkälla för familjer och släkt i dessa hem-länder och Remissa är den största källan för extern finansiering i de fattiga länderna. (Rath, Mohapatra, Vija-lakshmi & Xu, 2007)

I takt med att remissa flödet ökar för varje år, blir även forskarna mer uppmärksamma på hur man kan gå tillväga för att skicka pengar till respektive hemländer. Ett stort akademisk intresse har visats i att studera omarbetningen av det informella sättet att överföra pengar på till det mer formella, för att öka säkerheten och för att förhindra finansiell brottslighet, pengatvätt och finansiering av terrorist verksamhet.

Författarnas akademiska intresse för den struktur och de anläggningar som banker i Sverige har ledde till viljan att undersöka huruvida banker i Sverige kan förbättra tjänsten för pen-ningöverföring till utlandet för att ytterligare öka kundvärdet. För att uppnå studiens syfte analyserade författarna anledningen bakom valet att använda sig av en informell penning-överföring tjänst, samt granskade hur situationen ser ut idag i svenska banker. Studien genomfördes i tre svenska banker; Handelsbanken, Swedbank och Nordea, samtliga beläg-na i Jönköping.

Tidigare studier inom ämnet, vilka undersökte anledningarna bakom Diasporas val att an-vända sig av den informella penningöverföring tjänsten samt service hanterings teorier, kundrelationshantering och Porter’s generiska strategier togs i åtanke, vilket resulterade i att en kvalitativ undersökning med en fallstudie som verktyg utfördes. Fallstudien inkluderade fyra förundersökningar av Handelsbanken, Swedbank, Nordea och SEB samt tre ingående intervjuer med Handelsbanken, Nordea och Swedbank.

Resultat av denna studie visar att priset, snabbhet, bekvämlighet, gemensamma kulturella värderingar och rekommendationer fån vänner är de huvudsakliga motiven till varför Dia-spora väljer den informella penningöverföring tjänsten. Vad gäller de penningöverföringar som erbjuds av Handelsbanken, Nordea och Swedbank, visar studiens resultat att det kan uppstå vissa svårigheter för användare att förstå den information som erhålls från banker-nas hemsidor och Internet bank gällande den pennigöverföring som sker till utlanden. Kas-sa och kundservice ansvariga har begränKas-sad tid per kund för att kunna förklara hur tjänsten fungerar.

Generellt sett, bör samtliga tre banker hitta ett sätt att strukturera informationen kring tjänsten på deras hemsidor för att underlätta dess tillgänglighet för kunden. Dessutom bör bankerna ställa tryckta papperskopior eller online broschyrer till kundens förfogande för att ytterligare förmedla tjänstens procedur. Detta kommer i sin tur leda till att kassaservice

per-sonalen fordrar mindre tid per kund då kunden får snabbare tillgång till den information som behövs. Dessa förändringar kommer därtill att förbättra relationen mellan kunden och kundservice ansvarig, som har som uppgift att stå till kundens förfogande men som även har en viktig roll i fråga om att uppmuntra kunden till att använda tjänsten för internatio-nell penningöverföring.

Master’s

Master’s

Master’s

Master’s Thesis in

Thesis in

Thesis in Business Administration

Thesis in

Business Administration

Business Administration

Business Administration

Title:

Title: Title:

Title: Bank’s Money Transfer Service in Sweden Bank’s Money Transfer Service in Sweden Bank’s Money Transfer Service in Sweden Bank’s Money Transfer Service in Sweden Author:

Author: Author:

Author: Yulia KristenssonYulia KristenssonYulia KristenssonYulia Kristensson and and and and Quang Vinh EvansQuang Vinh EvansQuang Vinh EvansQuang Vinh Evans----LuongLuongLuongLuong Tutor:

Tutor: Tutor:

Tutor: Cinzia DalzottoCinzia DalzottoCinzia DalzottoCinzia Dalzotto Date Date Date Date: 2008200820082008----060606 06 Subject terms: Subject terms: Subject terms:

Subject terms: MoMoMoney Transfer Service, Money Transfer Service, ney Transfer Service, ney Transfer Service, Customer Relationship MaCustomer Relationship Management, CuCustomer Relationship MaCustomer Relationship Management, Cunagement, Cus-nagement, Cus-s- s-tomer Relationship Communication,

tomer Relationship Communication, tomer Relationship Communication,

tomer Relationship Communication, DiasporaDiasporaDiasporaDiaspora, Service Ma, Service Ma, Service Man, Service Mannnagagage-age-e- e-ment, Remittance

ment, Remittance ment, Remittance ment, Remittance

Abstract

The flows of money from Diasporas or immigrants to their countries of origin (i.e. remit-tance) have become a more and more important source of income for their families and relatives in their home countries. ‘Remittances are the largest source of external financing in many poor countries.’ (Ratha, Mohapatra, Vijayalakshmi & Xu, 2007).

As the remittance flows increase year by year, the researchers pay more and more attention to the ways they send money back home. There has been substantial academic interest of conducting different researches on the money transfer service. One of those research top-ics is shifting remittance transfer method from informal to formal money transfer channels to enhance the security when sending money internationally. This can help combat finan-cial crime, money laundry and terrorism funding.

This academic interest together with the increasing number of immigrants and the good structure and facilities of banks in Sweden intrigue us to conduct research on finding out how banks in Sweden can improve the international money transfer service to enhance cus-tomer’s value. In order to do that we analyzed why Diasporas choose to use informal money transfer channels and looked into the current situation of money transfer service of-fered by banks in Sweden. This research was conducted in three banks in Sweden: Han-delsbanken, Nordea and Swedbank in Jönköping.

Different previous researches on the reasons why diasporas choose to use informal money transfer channels and theories of service management, customer relationship management and Porter’s generic strategies were blended together to formulate the frame of reference of this thesis.

Qualitative research method with case study was employed in this thesis. The case study cludes four pilot studies with Handelsbanken, Nordea, SEB and Swedbank and three in-depth interviews with Handelsbanken , Nordea and Swedbank .

The result of this study shows that price, speed, convenience, mutual cultural sharing and recommendations from friends are those main reasons for Diasporas to choose informal money transfer channels.

In term of money transfer service offered by Handelsbanken, Nordea and Swedbank, the result implies that there may exist some difficulties for the users to understand the informa-tion of money transfer service obtained from the banks’ websites and internet banking sys-tems. Another shortcoming is that front line employees have limited time to spend on each customer to explain how the service works.

In general, all three banks should find ways to structure the information related to the ser-vice on their websites in a way that customers find it easy. They should prepare hard copy or online brochure to help customers understand how the service works. It will also mean that employees will spend less time on each customer since they have quick access to the information needed. All of these changes will improve the relationship between customers and front line employees in the banks, who directly handle every customer and have an im-portant influence of persuading them to use the money transfer service.

Table of Contents

1

Introduction ... 1

1.1 Background ... 1 1.2 Problem discussion ... 2 1.3 Purpose... 3 1.4 Research Question... 3 1.5 Perspective ... 3 1.6 Delimitations... 3 1.7 Definitions ... 4 1.8 Abbreviations ... 4 1.9 Methodology... 5 1.10 Disposition... 6

2

Frame of reference ... 7

2.1 Previous research ... 7

2.1.1 Reasons for choosing informal MTS channels from sender’s perspective ... 8

2.1.2 Reasons for choosing informal money transfer service channel from receiver’s perspective... 8

2.1.3 Client preferences in money transfer service... 9

2.2 Six rules of service ... 10

2.3 Model on Relationship communication... 12

2.4 Employee’s role in service delivery ... 16

2.5 Porter’s generic strategies... 16

2.6 Customer Value Management Model:... 18

2.7 Summary of frame of reference... 19

3

Method ... 20

3.1 Research approach... 20

3.1.1 Exploratory research... 20

3.1.2 Explanatory research... 20

3.2 Research method: qualitative... 20

3.3 Research strategy ... 21

3.3.1 Pilot study ... 21

3.3.2 Case study... 21

3.4 Sample selection... 22

3.5 Method of collecting data ... 22

3.5.1 Secondary data... 22

3.5.2 Interview ... 22

3.6 Method of analyzing data ... 23

3.6.1 Cross case analysis... 23

3.7 Quality and Trustworthiness... 24

3.7.1 Credibility/internal validity ... 24

3.7.2 Transferability ... 24

3.7.3 Reliability ... 24

4

Empirical findings ... 26

4.3 Handelsbanken ... 29

4.4 Swedbank ... 31

5

Analysis... 35

5.1 Why some of the Diasporas choose to use informal money transfer channels? ... 35

5.2 Current situation of money transfer service offered by Handelsbanken, Nordea and Swedbank ... 36

5.2.1 From the scope of previous research ... 36

5.2.2 From the scope of 6 Rules of Service... 38

5.2.3 From the scope of relationship communication model. ... 40

5.3 How banks in Sweden improve their money transfer service ... 40

5.3.1 Strategy of improvement: Porter’s generic strategy and customer value management ... 40

6

Conclusion... 42

6.1 Recommendations for future research ... 43

Reference List ... 45

Figures

Figure 1 Process of relationship communication ………..15

Figure 2 Three generic strategies ………16

Figure 3 Customer Value Management Model………...18

Figure 4 Summery of Frame of Reference ……….19

Tables

Table 1 Summery of Pilot study………26

Table 2 Comparisons of Bank services using previous research………36

Table 3 Summery of which aspects that bank could improve under the assessment of the six rules of services……….39

Appendices

Appendix 1: Remittance as the second largest source of finance for developing countries………..47

Appendix 2: Questionnaire for pilot study………....48

Appendix 3: Questionnaire for in depth interview ………...49

Appendix 4: Nordeas form for money transfer ………..50

Appendix 5: Nordea’s price list for money transfer………....51

Appendix 6: Nordea’s online form for money transfer service……….52

Appendix 7: Handelsbanken’s form for money transfer service (Swedish)...53

Appendix 8: Handelsbanken’s form for money transfer service (English)….55 Appendix 9: Terms and conditions for cross-border payments in Handelsbanken………..57

Appendix 10: Swedbank’s form for money transfer service……….59

1

Introduction

This initial chapter presents the background that has led to the problem discussion and purpose of this the-sis. The debate is introduced from a broad perspective, leading to the current problem regarding money trans-fer service in banks in Sweden. There are clarifications of the perspective, delimitation, definitions and ab-breviations. The research theory is also discussed in methodology part. This chapter concludes with disposi-tion of the thesis.

1.1

Background

As globalization is taking place all over the world, there are more and more people moving from one place to another to find jobs, to live or to study. The flow of people moving from one country to another leads to the demand of exchanging and sending money to dif-ferent countries as well. People working abroad would need to send money back home or parents would need to send money to their children studying in other countries.

The money transfer industry is growing year by year. According to a research done by Con-sultative Group To Assist The Poor in 2006, the worldwide cross-border payments is pro-jected to grow to $604 trillion by 2011 (Isern, Donges & Smith, 2006). A large pattern of money is sent to developing country in Asia, Eastern Europe, Latin America and Africa every year. The recorded remittances to developing countries were estimated to reach $240 billion in 2007. The actual size of remittances, which includes unrecorded flows is even lar-ger ( Ratha, Mohapatra, Vijayalakshmi & Xu, 2007). The Consultative Group To Assist The Poor reported that, in 2005, formal international remittances exceeded $232 billion (Isern et al., 2006). This amount of remittance constitute the second largest source of ex-ternal funding for developing countries, ahead of both capital market flows and official de-velopment assistance (see appendix 1).

A large part of those remittances is sent by immigrants living in developed countries, for example, those in Western Europe or North America to developing countries in Africa or South East Asia. The amount of remittance is increasing year by year. However, there is a large portion of remittance is sent using informal channels such as hand delivery, travel agency, Hawala system (Hernández-Coss & Bun, 2007). When sending money using those informal way, there is no international transaction from one country to another in the bank system, which is not secured, not safe and also may be abused to encourage money laun-dering, terrorism or financial crime in general.

According to Hernández-Coss (2005a), (2005b) and Hernández-Coss and Bun (2007), there still exist these informal ways within many immigrant communities to send money from developed countries to developing countries. One example is the hawala system of sending money from Sweden. In Dagens Industry, on 29th _{of February 2008, article called}

“Infor-mal Bank System Revised” (Inofficiella banksystem granskas):

” Two men from Stockholm were suspected for transferring money through hawala, in-formal bank system, for financing terrorist activities. From now hawala system in Sweden will be investigated.

- There is big amount of money transferred this way, says district prosecutor Björn Rosenlöf from Swedish National Economic Crime Bureau.

the world. Rosenlöf points out that the system is used for non-illegal transactions as well. But it is also used for sending money anonymously by criminal groups. Rosenlöf says to Sveriges Radion Ekoredaktion that the UN estimates that hawala system in the world has turnover USD 200 billions annually.

Another reason for criminals choosing informal hawala is that banks and other official fi-nancial departments has obligation to report suspicion of money laundry to fifi-nancial police department.” (retrieved from http://di.se/).

In the group of high income or developed countries, Sweden shared an amount of outward remittance from $545 million to $589 million during the period 2000-2006. The share of migrants’ transfer has gone up during this period of time from $23 million in 2000 too $25 million in 2006( retrieved from www.worldbank.org/prospects/migrationandremittances). This increasing figure of money transfer can be explained by the increase of number of Swedish inhabitants with foreign background during the last five years. According to Statis-tics Sweden, in 2005, the stock of immigrants in Sweden was 1,117,280 and it made up 12% of the whole Swedish population size of 9 million. It is obvious that there is a growing demand in sending money to the home countries among immigrant communities in Swe-den.

The question arises here is what are the reasons for using underground ways of sending money instead of other legal money transfer service through widely available and extensive network of bank branches and high level of popularity of banking service all over Sweden as well as Western Union branches in many places.

1.2

Problem discussion

The increasing amount of immigrants and foreign born citizens in Sweden may lead to in-creasing demand of sending remittance to their home countries. It is important for them to use formal money transfer channels, which later on can minimize the problem of sending money through informal channels to support money laundry or financial crime in Sweden. As we did a pilot study of formal money transfer channels in Sweden, we found out that there exist two main types of formal money transfer channels in Sweden: banks and money transfer organization such as Western Union or MoneyGram. In general, Western Union or Money Gram and banks offer similar services; however, banks in Sweden have better fa-cilities and better network of branches in Sweden. Therefore, we think that it is more ap-propriate to investigate the money transfer service in the banks in Sweden and find a way to utilize that channel and encourage Diasporas to use it.

The first reason to focus on the banking channel in Sweden is the extensive network of branches all over Sweden. By the year of 2003, Sweden had a total of 127 banks (Swedish Bankers’ Association, 2004). There are 1947 branches of banks all over Sweden (Swedish Bankers’ Association, 2007). The largest Swedish commercial banks are Swedbank, Han-delsbanken, Nordea and SEB. All four banks have strong positions and account more than 80 per cent of the total assets on the banking market (Swedish Bankers’ Association, 2004). These four banks also have largest network of branches in Sweden. The top bank in the list is Swedbank with 477 branches, and then Hadelsbanken is at the second place with 457 branches. The third place is 257 branches owned by Nordea and the fourth one is SEB with 196 branches (Swedish Bankers’ Association, 2007).

Another reason is the high level of popularity of online banking in Sweden, which can serve as a good foundation for further development of online banking service. The Swed-ish Bankers’ Association (2004) stated that SwedSwed-ish banks are among the most advanced in internet banking services. All major banks in Sweden offer online status on accounts and other assets, online payments as well. By the end of 2006, Sweden’s banks had 7,210,000 internet customers out of a total 9 million of population (although it must be remembered that some of these customers use more than one bank) (Swedish Bankers’ Association, 2007).

However, when we did our pilot study of how easy to access and obtain information re-lated to sending money abroad in four largest banks in Sweden (Swedbank, Handels-banken, Nordea and SEB), we realize that the information provided by the front line em-ployees is not structured and sometimes not clear. This may hinder the chances for first time customers in general and Diasporas in specific to use the service, therefore, they may shift to the informal channels. This intrigues us to conduct this research on money transfer service in banks in Sweden.

1.3

Purpose

The aim of this thesis is to analyze why Diasporas choose to use informal money transfer channels, to examine the money transfer services offered by banks in Sweden, and finally to suggest how banks in Sweden can improve their money transfer service to increase cus-tomer’s value.

1.4

Research Question

• Why do some of the Diasporas choose to use informal money transfer channels? • What is the current situation of money transfer service offered by banks in

Swe-den?

• How can banks in Sweden improve their money transfer service, especially with face to face interaction?

1.5

Perspective

The research focus on private banking sector in banks in Sweden with the concentrations of international money transfer service to non E.U. countries for Diasporas.

1.6

Delimitations

This research does not cover all banks in Sweden; therefore, the result of this research can-not be generalized for banks in Sweden. The thesis only focuses on examining the men-tioned interested issues within three chosen banks in Sweden namely Swedbank, Handels-banken and Nordea.Moreover, only one MTS agent, Western Union, is examined in order to give an additional perspective on a subject. But once again it can not be generalized for other MTS agents.

1.7

Definitions

Immigrant: ‘A person who moves from one country to another to reside there for a longer period of time, at least a year according to the population register in Sweden’ (The Swedish Integration Board, 2006, p.8).

Diaspora :’ people settled far from their ancestral homeland’ (retrieved 2008-02-20 from

www.merrian-webster.com )

CRM: “A comprehensive approach which provides seamless integration of every area of business that touches the customer namely, marketing, sales, customer service and field support- through the integration of people, process and technology, taking advantage of the revolutionary impact of the internet.” (SCN Education BV, 2001, p.58)

Formal money transfer channel: Formal systems are characterized by participation in the regulated financial sector. Such participation means that the institution involved in money transfer is supervised by government agencies and laws that determine their creation, char-acteristics, operations, and closure. Formal systems typically include banks and credit un-ions, money transfer operators (MTOs) and other wire transfer services and postal services (Isern et al., 2006).

Informal money transfer channel: Informal systems encompass everything else-ethnic stores, travel agencies, money changers, hawala-type systems, courier services, hand-delivery and so on (Isern et al., 2006).

Hawala money transfer system: “Hawala money transfer system is an informal transfer system. A migrant makes a payment to agent (hawaladar) in the country where he works and lives, and the hawaladar gives him a code to authenticate the transaction. The hawal-adar requests his counterpart at the receiving end to make the payment to be a beneficiary upon submission of the code. After the transfer, hawaladars settle accounts through pay-ment in cash or in goods and services.”(Isern et al., 2006, p.102)

Remittance: “Money delivered from people in more-developed countries to families back home.” (Isern et al., 2006, p. 2)

1.8

Abbreviations

FMTS Formal money transfer service IFMTS Informal money transfer service IFT Informal fund transfer

MTS Money transfer service SWIFT

IBAN

BIC SEK

Society for Worldwide Interbank Financial Telecommunication International Bank Account Number

Bank Investment Contract

The ISO currency code for the Swedish Krona, US$1= SEK 6.04 (retrieved on 27-05-08, from http://www.forex.se/ ).

1.9

Methodology

Methodology refers to the theory of how research should be undertaken. Three views dominate the literature when talking about research process: positivism, interpretivism and realism. All the parts have an important role in business and management research (Saun-ders, Lewis & Thornhill, 2003).

When talking that research reflects the principle of positivism usually it is adopting the phi-losophical stance of the natural scientist. In order to facilitate replication there will be an emphasis on a well structured methodology and on quantifiable observations that lend themselves to statistical analysis. The main assumption is that researcher is independent of and neither affects or is affected by the research subject (Saunders et al., 2003).

Many are critical of positivism and argue that the social world of business and manage-ment is far to complex to lend itself to theorising by definite “laws” in the same way as physical science and those rich insights into this complex world are lost is such complexity is reduced entirely to a series of law-like generalizations. Researchers that agree with this philosophy are likely to be connected to interpretivism. Those arguments could be seen be-lievable, because not only are business situation complex, they are also unique. That raises the question of generalisability of the research that tries to capture the rich complexity of social situation. However, interpretivism argues that generalisability is not that important here, since circumstances of today may not be applicable in three month and the value of generalisability gets lost. The role of the interpretivism is to seek to understand the subjec-tive reality of those that they study in order to make sense of and understand their mosubjec-tives actions and goals in a way that is meaningful for these research participants (Saunders et al., 2003).

Realism is based on the belief that a reality exists and that is independent of human thoughts and beliefs. In a social study and in the study of business and management this can be seen as indicating that there are significant social forces and processes that affect people without their necessary being conscious of such influences on their interpretations and behaviours. Realism is applied when studying human subjects, recognizing the impor-tance of understanding people’s socially constructed interpretations and sense, or subjective reality, within the context of seeking to understand broader social forces and perhaps con-strain, the nature of people’s views and actions (Saunders et al., 2003).

In this thesis the approach of interpretivism is implemented as we seek to understand the reasons behind all the Diasporas favors to the informal money channels and examine the current situation of the money transfer service of banks in Sweden. When understanding the Diasporas motives and actions, it would make sense to go further to reach the goal of findings suggestions of how banks can improve their service to generate more customers’ value. Furthermore, the process of understanding those reasons and the current situation is the interpretation of realism, since it involves the understanding the nature of people’s views and actions. Therefore this research’s methodology is the combination of interpretiv-ism and realinterpretiv-ism.

1.10 Disposition

This initial chapter presents the background that has led to the prob-lem discussion and purpose of this thesis. The debate is introduced from a broad perspective, leading to the current problem regarding money transfer service in banks in Sweden. There are clarifications of the perspective, delimitation, definitions and abbreviations. The re-search theory is also discussed in methodology part. This chapter con-cludes with disposition of the thesis.

Ch.1 Introduction Ch.2 Frame of Reference Ch.3 Method Ch.4 Empirical Findings Ch.6 Conclusion Ch.5 Analysis

This following chapter provides an insight into previous researches within the field of money transfer, theories of service management such as six rules of service. Moreover, model on relationship commu-nication, employees’ role in service delivery, Porter’s generic strategies as well as customer value management model is described in depth. At the end of this chapter the frame of reference is summarized in or-der to give an overview of how theories and models are going to be used and applied in the analysis.

Method is a tool to achieve new knowledge. This chapter presents the theoretical and practical mode of procedures when collecting and ana-lyzing data. The reader acquires a thorough insight into the process of data collection, interviews, as well as the way the reasoning has been carried out. We explain the choices that were made to fulfill the pur-pose of this research.

In this chapter the findings of the research is presented. The results from the pilot study are summarized in a table. Furthermore, the find-ing from each in depth interview is presented in separate section.

Based on the theoretical framework and empirical findings, the analy-sis of why Diasporas choose to use informal money transfer channels as well as description of the current situation of money transfer ser-vice in banks is presented in this section. Chapter concludes with evaluation of banks in Sweden under scope of Porter’s generic strate-gies.

In this chapter, we present the conclusions of this research. First part is a summary of prime reasons for why Diasporas choose informal money transfer service and later the current situation in banks in Swe-den is illustrated. Moreover, practical recommendations for the service improvement are described. It also reflects on whether the purpose of this research has been fulfilled. This chapter concludes with sugges-tions for further research within the subject.

2

Frame of reference

This following chapter provides an insight into previous researches within the field of money transfer, theories of service management such as six rules of service. Moreover, model on relationship communication, employ-ees’ role in service delivery, Porter’s generic strategies as well as customer value management model is de-scribed in depth. At the end of this chapter frame of reference is summarized in order to give an overview of how theories and models are going to be used and applied in the analysis.

2.1

Previous research

One of the most discussed topics within remittance and international money transfer re-searches is informal and formal money transfer channels. Different authors in various or-ganizations supporting development in poor countries have conducted many research pa-pers and reports to find out the factors affecting Diasporas to choose informal money transfer channels to send money back home.

The majority of these studies are qualitatively conducted using in-depth interviews with Di-asporas in different communities. An important source of previous study is World Bank Working Paper Archive on remittance with the focus of shifting from informal to formal transfer system. The author, Raúl Hernández-Coss, a Financial Sector Specialist in the Fi-nancial Market Integrity Unit at the World Bank, together with other colleagues working in World Bank Organization have done various reports of remittance on different corridors, for instance, The Canada-Vietnam Remittance Corridor (2005), The U.S. - Guatemala Re-mittance Corridor (2006), The U.S.- Mexico ReRe-mittance Corridor( 2005) and so on. These studies provide information of various reasons and incentives why Diasporas are keen on using informal money transfer channels. The authors in these studies look into this prob-lem both from the side of sender and the receiver, which we found it very useful to imple-ment the results for our analysis using dual scopes of sender and receiver.

Another important source of previous study is the report written by Isern, Donges and Smith (2006) working in the group named Consultative Group To Assist The Poor. It pro-vides background information of the money transfer market and service, which serves as a fundamental ground for our analysis of customer value of money transfer service offered by banks in Sweden.

The previous researches can be considered as essential foundation for this thesis. There-fore, previous researches play the roles as a source of evidence and theoretical framework. Even though the reports done by World Bank on informal and formal money transfer channels were conducted in different countries, there are a lot of similarities in the results in each and every factor. In this thesis, we only brought in those common factors that we found similar in most of the cases. The previous research is divided into three parts: the first two parts are reasons for choosing informal money transfer service channels from sender’s perspective and receiver’s perspective and the third part is a general finding of cli-ent preferences when using the channels.

2.1.1Reasons for choosing informal MTS channels from sender’s perspec-tive

Personal incentives and customer and economic incentives are the main focus of pre-vious research conducted by Raúl Hernández-Coss and other colleagues. The first personal incentive is anonymity. Diasporas find it more convenient with ID verification process when using informal channel since IFT operators often run services through other business such as vendor or jewelry store, so it is not someone outside the community, therefore, the IFT operators can minimize the ID documents requirements for the senders since they know each other within that community (Hernández-Coss, 2005b). Some migrant workers also believe that formal financial institutions, such as banks or credit unions are connected with law enforcement, immigrant authorities. As a matter of fact, undocumented migrant workers avoid contact with these institutions (Hernández-Coss, 2005a).

The second personal incentive is cultural familiarity. Diasporas tend to trust the services offered by people coming from the same countries (Hernández-Coss, 2005b). Many of them also lack of cultural familiarity with formal financial institutions(such as banks), which is the reason why Diasporas seek for informal channel (Hernández-Coss, 2005a).

Personal contact is the third incentive for Diasporas to favor the informal channels. Per-sonal contact is the key aspect of the informal remittance channels. For example, with the Mexican migrants in U.S., the personal contacts represent a personal social link (Hernández-Coss, 2005a). Moreover, remitters tend to use services that they trust based on past transactions, recommendation from friends and relatives or general reputation in the community (Hernández-Coss, 2005b).

Customer service and economic incentives also affect the reasons of choosing informal channels. It is believed that due to the lack of banking culture and lack of financial educa-tion hinder the accessibility to financial service among some group of immigrants (Hernández-Coss, 2005a). The speed factor is another influence within customer service incentive. Some formal fund transfer systems have not yet matched the speed of IFT sys-tem. Transfer through banks and other major formal fund transfer agents can take from 2 to 5 days. A bank usually uses a network which connects banks worldwide to wire the money transfer such as SWIFT (Hernández-Coss, 2005b).

Cost factor affects economic incentive of the service. The cost that an informal agent of-ten charges for a transaction is low, which is 1 to 2 percent of the transferred amount. On the other hand, fees in the formal channels vary from 2 to 10 percent with an added flat fee (Hernández-Coss, 2005b).

2.1.2Reasons for choosing informal money transfer service channel from receiver’s perspective

The receivers also share the same incentives and factors with the senders. From personal incentive point of view, with the consideration of anonymity factor, the receivers enjoy little amount of ID paperwork and door to door service offered by IFT systems (Hernández-Coss, 2005b). In term of cultural familiarity, Diasporas choose the informal way because some recipients, particularly in rural areas, prefer to deal with local people with whom they feel a cultural affinity, rather than with impersonal bankers with whom they feel uncomfortable (Hernández-Coss, 2005a). Furthermore, personal contacts are another personal incentive to choose the service. They can facilitate exchange of value

be-tween sending and recipient economies, especially when the amount involved exceeds the legal amount allowed for a transaction within special period (Hernández-Coss, 2005b). The informal IFT systems are generally more accessible to the recipients. They also have faster speed and more reliable in rural areas since the providers deliver fund to the door (Hernández-Coss, 2005b). Another advantage of customer service and economic incentive of the informal channels is the recipients receive the fund with no additional charge since the senders pay the entire fee (Hernández-Coss, 2005a).

2.1.3Client preferences in money transfer service

If the series of World Bank Working Paper of remittance corridors in different countries reflect the incentives to choose the informal channels in detail both from sender and re-ceiver perspectives, the report written by Isern et al. (2006) touches upon the client prefer-ence in the money transfer service at a glance. The authors pointed out seven important factors:

Accessibility

: a lot of migrants, especially undocumented workers, prefer few or no iden-tity requirements. However, most formal money transfer operators require some type of identity stipulation.

Confidentiality

: “Some clients prefer to keep their receipt of money transfer confidential and may favour using providers like specialized MTCs that may have less stringent identity documentation requirements than multi-service financial institutions”. (Isern et al., 2006, p. 57)

Cost and transparency

: usually, people seek transfer services that offer: • Low fees

• Attractive exchange rates

• Transparency on fees and exchange rates at both the sending and receiving ends.

Ease of use

: preferably, people would like to have limited paperwork to send or collect funds. Some people would like to interact with sale agents to ease the process of sending and receiving money.

Safety

: “Transfer operators must earn the trust of migrants and their families. Client may be reluctant to seek services from banks or formal financial institutions because of mistrust or past experiences in their home or adopted country. Many people prefer to send money transfer through institutions that have a track record in handling transfer and other finan-cial services, and/or belong to a larger, well-known international network.” (Isern et al., 2006, p. 57)

Speed

: “Many people prefer “real-time” transfers, regardless of the cost or urgency of the transfer.” (Isern et al., 2006, p. 57)

Transaction convenience and cost

“Both senders and recipients want to transfer funds at nearby locations and reduce other transaction cost, such as travel time, travel expenses, and bribes paid for better service.” (Isern et al., 2006, p. 57)

According to Isern et al. (2006), informal systems are competing successfully with even the largest players in the formal money transfer market. Due to certain client-friendly features such as fast speed, discreet, minimum of paperwork, less expensive, available in areas where no formal providers exist, a large number of people still choose to use the IFMTS. ‘From a client perspective, informal systems may seem more familiar and trusted than for-mal services, despite the risk of possible theft. For clients who lack identity or residence documentation, informal systems may be easier to use in the short term. Given the benefits of formal systems and government concerns about informal systems, many are working to help clients move from informal to formal service providers. Nonetheless, the client-friendly features could service as a model for financial service providers when designing appropriate money transfer products’ (Isern et al., 2006, p.104).

As mentioned above, the previous researches are treated as one source of reference to re-flect the analysis under different dimensions and angles of the money transfer service.

2.2

Six rules of service

There are differences among firms and industries. Nevertheless, some general guidelines for implementing a service strategy have been put forth. It is incorrect to talk about any rules of service in a strict sense. However, in order to emphasize the common characteris-tics of the customer relationship in most organizations in service competition, these con-cluding guidelines have been labeled as the six rules of service. It is important to understand that these rules are general and overemphasize the role of the employees for some situa-tions (Grönroos, 2004).

The first rule: The general approach

The importance of service elements in customer relationship grows over time. Customer, no matter if it is business customers or individual customers, demands for individual and flexible responses from the service provider. Success in the market requires that the firm can offer help, advice and guidance. In spite of automated service systems, the increased use of information technology and the Internet, the creativity, motivation and skills of the employees are still the drivers behind successful development of new services. If people are authorized to make their own judgements, have the knowledge needed, have the service-oriented approach to their job and to their customers, this will give good results in the mar-ketplace (Grönroos, 2004). The first rule of service is summarized as follows:

“People develop and maintain good and enduring customer contacts. Employees ought to act as consultants, who are prepared to do their duty when the customer needs them and in a way the customer wants. The firm which manages best to do this strengthens its customer relationships and achieves the best profitability.” (Grönroos, 2004, p.377)

The second rule: Demand analysis

When the direct interaction between customers and employees occurs it could lead to a need for direct actions, for example, contact person may need to give some information or change his own way of doing the job depending on the need of the customer. In such situation nobody but the person who produces service can recognize the unexpected shift in the new demand and need of the customer.

Market demand can, of course, be measured in advance through previous researches. However, the change in customer’s needs at the point of service production and consump-tion can’t be, measured in advance (Grönroos, 2004). The second rule of service is ex-pressed as:

“The customer contact personnel producing the service in contact with customers will have to analyze the needs, values, expectations and wishes of the customers at the point and time of service production and con-sumption.” (Grönroos, 2004, p. 378)

The third rule: Quality control

According to traditional quality control models, the quality of the products should be con-trolled by separate unit, where pre-produced goods could be checked. This view is not cur-rent in modern management. Everyone, both in manufacturing and service production, should be responsible for the quality. Producing goods or services is based on an idea that things should be done correctly the first time. However in reality it doesn’t work this way and mistakes are made, which becomes “hidden costs”. Flowingly, it is not possible to have separate control for every unit; therefore everyone should take the responsibility of con-trolling the results of their own jobs.

Those who provide the service in contact with customers will have to check the quality of the service at the time it is produced and delivered. An example of it could be, customer at the restaurant is being served or an elevator is repaired. Of course, the quality could be checked afterwards by market research or asking for the feedback, but the mistakes has al-ready been done and the customer relationship may have been damaged. In order to avoid that managers must provide employees with the knowledge, skills and directions needed to manage quality on their own with their customer contacts (Grönroos, 2004). The third rule of service is expressed as followed:

“The customer contact person producing the service in contact with customers will have to control the quality of the service at the same time he produces the service.” (Grönroos, 2004, p. 379)

The fourth rule: Marketing

In service competition the character of marketing changes as well. Even though traditional external marketing activities, such as advertising, market research, personal selling by a pro-fessional sales force, campaigns and sales promotion, are as important as ever, they are not the only activities to be performed as marketing activities. The marketing process is much larger and spread out through the entire organization. In order to develop existing cus-tomer relationships, the exchange of goods, services, information, financial and social ex-change, are of high importance. Advertising, personal selling and sales promotion are used in such situations, but the impact is usually minor. Price, on other hand, is important in all stages of the Customer Relationships Life Cycle (Grönroos, 2004).

In service competition every contact between contact person and customer includes an ele-ment of marketing. Success of service provider would give the customer a favourable im-pression of the contact person, which could strengthen customer relationship. This may make the realationship last longer and lead to future businesses increase. However, if the marketing aspect of their job is missing, customer might perceive the quality of service more negatively (Grönroos, 2004). The fourth rule of service can be expressed as follows: “The customer contact person has simultaneously to be a marketer of the service he produces.” (Grönroos, 2004, p. 380)

The fifth rule: Technology

Information technology is becoming remarkably important to service industry. If the web-site is designed in such a way that users find it hard to understand or uninteresting, or the support of the site does not work properly and customers do not get quick response to their inquiries they quickly loose interest in firm and its offerings. All kind of the technol-ogy and physical resources used in service processes must be customer-friendly and reli-able. Appropriate technology and equipment, could improve working conditions and in-crease the motivation of the employees to give good service. However, if the employees do not understand the technology or are not willing to use, this will have a negative effect on both internal relationship in organization and on external customer relationships (Grön-roos, 2004). Hence, the fifth rule of service is expressed as follows:

“The impact on customers’ ability and willingness to use technology, system and physical resources (of any kind), as well as the impact of such resources on the employees in interactive and supportive parts of the or-ganization, and on their ability and willingness to serve customers have to be taken into account when in-vestments in such resources are made, so that the service quality perceived by customers is not affected in a negative way.” (Grönroos, 2004, p. 380)

The sixth rule: Organizational support

Employees need the support of the organizational structure, as well as encouragement of their managers and supervisors, in order to be able to successfully meet the new service competition. It is also important to have a clear defined service concept in order for the organization to avoid a chaotic situation, where nobody knows what to do or how to react to changed environment and unpredicted customer behaviour (Grönroos, 2004). There-fore, the sixth rule of service is defined as follows:

”The organization structure and managers, and explicitly defined service concepts have to provide the guid-ance, support and encouragement needed to enable and motivate customer contact personnel and support per-sonnel alike to give good service. ” (Grönroos, 2004, p.382)

The six rules of service generally describe six important aspects of service. The fourth rule, which is marketing, slightly touches upon the communication between companies, in spe-cific, marketers with customers. As communication is one of the main aspects to investi-gate in this research we brought in the model of relationship communication in order to get better understanding of the field.

2.3

Model on Relationship communication

The relationship communication model describes the concept of customer value and pro-vides insight knowledge of communication between customers and marketers through three interaction levels: lover, moderate and high.

The concept of customer value

Value is seen differently in the context of the relationship. Norman and Ramirez (1994) stated that value is created as a result of shared interactive relationship between organiza-tion and their stakeholders. Slater and Narver (1994) linked value to market-oriented cul-ture and stated that marketers should aim to continuously create greater customer value. Ravald and Grönroos (1996) and Gummersson (1999) brought in the relational perspective to value creation and argued that in a relational context, value for the customer is not

em-value is created, co-produced and delivered over time as the long-term win-win relationship develops (cited in Lindberg-Repo, 2001).

Customer perceived value

It is important for organizations to learn and understand how to create and provide a greater value for their customers. Anderson and Narus (1998) in Lindberg-Repo (2001) ar-gue that it is critical for organization to understand the value of a product or service means to the customer. It is through communication that customer considerations of value are transferred to the brand product, service, or relationship as the customer or prospect sees it in contrast to how the organization tries to distribute it. Moreover, according to Ravald and Grönroos, value is considered to be an important element of relationship marketing and the ability of the company to provide superior value to its customers is considered as one of the most successful strategies during 1990s. This ability has become a mean of differen-tiation and a key to the riddle of how to find a sustainable competitive advantage (Lindberg-Repo, 2001).

Customer perceived added value in the relationship context

Grönroos (1997) suggests a broader perspective of the concept of customer perceived value (CPV). He explains that CPV is a sum of the core value of an offering plus added value or minus added value (CPV= Core Value +/- Added Value), where added value is re-ferred to as additional elements in the relationship. In this equation, the time aspect is cap-tured through the added-value component since added value is experienced by the cus-tomer as the relationship develops (Lindberg-Repo, 2001).

Customer perceived relational value

According to Liljander and Strandvik (1995) in Lindberg-Repo (2001), value perceived by the customer should enable and strengthen their commitment to stay in the relationship with the brand. They define distinctive situation of relations between customer and com-pany, in connection with customer perceived commitment. Liljander and Strandvik intro-duced three different combinations in a customer relationship that characterize customer value perceptions. First, a valued relation by both parties implies that the customer is posi-tively committed to the firm; the customer sees relationship as very strong and a mutual in-terest exists for continuing the strong relationship. The second combination presents an indifferent relation which does not require a deeper and stronger commitment and involve-ment. The last combination is a forced relation with the customer, which is the weakest ela-tion in terms of customer perceived value. Customers are usually negatively committed to the company and would like to change (Lindberg-Repo, 2001).

Perspectives on a value

A future summary of the different perspective is presented. Mutual value is created as the re-sult of reciprocal interactive relationship between organization and stakeholders (Norman & Ramírez, 1994, cited in Lindberg-Repo, 2001). Creation of customer value is strongly re-lated to brand value; brands will become more important in the value that they convey the customer in the future (Knox & Maklan, 1998, cited in Lindberg-Repo, 2001). Customer-perceived value is “customers” Customer-perceived preference for and evaluation of those product at-tributes, attribute performance and consequences arising from use that facilitate achieving the customers goal and purposes in use situation (Woodruff, 1997 cited in Lindberg-Repo, 2001). At the core of the customer-perceived value is the notion of a trade off between

per-ceived benefits and perper-ceived sacrifice (Ravald & Grönroos, 1996, Christopher, 1997, cited in Lindberg-Repo, 2001).

View on Relationship communication

Many researches agreed on a consensus of the core processes of relationship development. The key process includes building, enhancing and maintaining the relationships. As the re-lationship develops the marketers need more effective communication strategies to increase the strength of the relationships. Relationship communication serves an increasingly impor-tant role in a relationship. Relationship consists of several stages and customers are ex-posed to individual contact creation activities as the relationship appears. Therefore it is important to have the right mode of communication in order to ensure the efficient con-tact creation (Lindberg-Repo, 2001).

The structure of three modes of communication is formed in relation to the presented cri-teria:

Amount of planned communication
Forms of communication

Level of interactivity

Degree of customer participation in the process

Having those classifications as a base, the three processes- planned communication, con-tact and connectedness – emerged (Lindberg-Repo, 2001).

Planned communications have the highest level of intended messages, for example adver-tisement, events sponsorship, sales promotion, PR releases and so on. This form of com-munication is very traditional and it is focuses on making promises of what company will do. The level of interaction in this type of communication is low (Duncan & Moriarty, 1997, cited in Lindberg-Repo, 2001).

Contact creation is viewed as the ability to create a connection to the other participants, to respond to him or her, and by using the information collected, to address one another the second time. In this case, contact is seen as prerequisite for making the relationship stronger through communications that include two-way interaction (Lindeberg-Repo, 2001).

Connectedness can be seen as result of communication and contact creation. However, it is not sum of them. Connectedness has more distinctive structural features. Through con-nectedness participants can reach higher understanding and shared meanings, and there af-ter jointly involve in value creation. The most efficient way of reaching connectedness is through a dialogue that involves the flow and improvement of tacit and explicit knowledge between the customer and organization (Lindeberg-Repo, 2001).

Explaining the scope of communication processes

Here are the features of every part in terms of the effectiveness in transmission the mes-sage and meaning between the parties (figure 1).

Figure 1 Process of relationship communication (Lindberg-Repo, 2001, p. 95)

The process of communication involves the biggest amount of planned communication and the forms of communication could be seen as having the traditional character of one-way communications. It could be characterized by low level interactiveness and degree of customer participation, as customer is open to the elements of brand messages (Lindberg-Repo, 2001).

The process of contact is defined as the ability of the marketer to address the customer more than once. The contact creation here is more detailed structure in the form of com-munication such as Web, voice mail etc. This means that the level of two-way interaction is relatively high and allows some degree of participation. Value creation in the relationship context is improved by the contact creation. In order for contact to occur two conditions have to be fulfilled. Firstly, marketer needs to have skill to gather specific information about the customer through the two-way interaction. Secondly, the marketer should ad-dress the individual customer by knowing their contact information, taking into account his or her unique response. This way customer responses gain increased importance and the participation of customers needed for the contact to emerge is created (Lindberg-Repo, 2001).

The process of connectedness is the most efficient way of creating value between the customer and organization. Connectedness increases through the dialogue. There are sev-eral reasons for why dialogue is becoming central concept of communication and interac-tion. The first reason relates to the interactional nature, which means that it only exists through listening and communicating, and closely related to the relationship development process. The second reason for why dialogue has become central to communication is cause it leads to increased connectedness, which gained through shared understanding be-tween the parties. It is through the dialogue that parties gather their underlying assump-tions and through connectedness enables capturing of the value (Linberg-Repo, 2001). Communication plays an important role in service delivery, especially the front line em-ployees since they are the ones handling customers directly. The theory of employee’s roles in service delivery below would provide more details.

Lover level of in-teraction

High level of in-teraction Moderate level of interaction PLANNED COMMUNICATION CONTACT CONNECTEDNESS FEEDBACK

2.4

Employee’s role in service delivery

Front line employees are crucial to the success of the organization. The service employees are the service, the organization in the customer’s eyes and marketers (Zeithaml & Bitner, 2000).

Zeithhaml and Bitner (2000) claim that reliability, responsiveness, assurance, empathy and tangibles, all of these five dimensions of service quality can be influenced directly by service employees. Front line employees control the reliability level of the service since they are the one handling it with customers. The willingness to help and promptness in serving custom-ers are indicators for responsiveness level in the organization.

The assurance dimension is highly dependent on employees’ ability to communicate their credibility and to inspire trust and confidence (Zeithaml & Bitner, 2000, p. 289).

In order to build good services, companies should take into account different aspects of the services according to six rules of services. However, before deciding to make any im-provements according to those rules, companies should have general strategies to guide the future plans of service improvement. Therefore, the Porter’s generic strategies and cus-tomer value management was presented in our frame of reference as tools of strategizing plans of improvement and enhancing customer’s value.

2.5

Porter’s generic strategies

According to Porter (1985) firm's position within its industry determines whether a firm's profitability is above or below the industry average. The fundamental basis of above aver-age profitability in the long run is sustainable competitive advantaver-age. There are two basic types of competitive advantage a firm can have: low cost or differentiation. When combin-ing those types of competitive advantage with the scope of activities for which a firm seeks to achieve, it leads to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation, and focus. The focus strategy has two variants, cost focus and differentiation focus. The generic strategies are shown in figure below (De Wit & Meyer, 2005).

Figure 2 Three generic strategies (De Wit & Meyer, 2005)

1. Cost Leadership 2. Differentiation

3a. Cost Focus 3b. Differentiation Fo-cus

Competitive Advantage

Lower Cost Differentiation

Broad Target Narrow Target

C

o

m

p

et

it

iv

e

S

co

p

e

Cost Leadership

In cost leadership strategy, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are different and depend on the structure of the industry. They may include the search of economies of scale, proprietary technology, preferential ac-cess to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. If a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, given it can demand prices at or near the industry average (Porter, 1985).

In order to achieve a low overall cost position, a firm should have a high relative market share or other advantages, such as favourable access to raw materials. By implementing the low-cost strategy, the firm may have to invest large amount of capital in equipment, com-petitive pricing and bear start-up losses to build market share (Porter, 1998).

Differentiation

In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more features that many buyers in an in-dustry see as important, and exclusively positions itself to meet those needs. It is rewarded for its uniqueness with a premium price (Porter, 1985).

Differentiation can be done under many forms such as design or brand image, technology, features, customer service and dealer network. Often, the firm will differentiate itself along several dimensions (Poter, 1998).

Focus

The generic strategy of focus depends on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serve them to the exclusion of others (Porter, 1985).

The focus strategy has two variants. In cost focus (3a) a firm seeks a cost advantage in its target segment, while in differentiation focus (3b) a firm seeks differentiation in its target segment (see figure 1). Both variants of the focus strategy rest on differences between a fo-cuser's target segment and other segments in the industry. The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments. Cost focus exploits differences in cost behaviour in some segments, while differentiation focus exploits the special needs of buyers in certain segments (De Wit & Meyer, 2005).

2.6

Customer Value Management Model:

Figure 3 Customer Value Management Model (Kracklauer, 2004 p. 12)

Almquist, Bovet and Heaton in Collaborative Customer Relationship Management book edited by Kracklauer, Mills and Seifert (2004) proposed a model of customer management that generates value dynamically over the customer life-cycle. The value growth depends on the level of understanding of the customer’s behavior, needs and purchase occasions. It is a continuous set of actions taken to capture value throughout the life cycle, including dif-ferent tactics from targeted promotional campaigns to multi-channel customer contact, with continuous test-and-learn loops informing future actions.

Identifying opportunities for value creation has much to do with capturing the information that allows companies to measure customer-level profitability, prioritize different initiatives and track their success. The data illuminates both the current behavior of present custom-ers and the future priorities of current and potential customcustom-ers.

When having the data, the companies can use different tools of management such as cam-paign management and contact management to capture customer value. The results ob-tained from the campaign management and contact management would reflect the success level of the customer management strategy and the companies could use them to, through test and learn process, as feedbacks to build new strategy.

Understanding customer value Current value Future potential Customer ac-quisition Customer de-velopment Customer re-tention

Targeting and tailoring

Campaign ma-nagement

Contact man-agement

Across all channels Identifying opportunities for value

crea-tion

Capturing cus-tomer value

2.7

Summary of frame of reference

Figure 4 Summery of Frame of Reference

The diagram above describes the integration between the set of tools including different re-searches, theories and models. It also shows the inter-connection between different parts of theoretical framework.

The previous research including different reasons why Diasporas choose to use informal money transfer channels was used as a frame of reference to compare with the money transfer service offered in the banks in Sweden. The advantages of informal money transfer service, for example, the personal incentives (cultural familiarity and personal contacts) and customer and economic incentives (cost factor and speed factor) served as a scale of fac-tors to compare relatively with the service in banks in Sweden. It would reflect the current situation of money transfer service offered by banks in Sweden.

Moreover, the current situation was assessed further by using theory of six rules of service. These six fundamental rules were used to analyze which aspects of the service offered in banks in Sweden need improvement. Since the service involves a lot of interaction between employees and customers, therefore, they were examined under the Relationship Commu-nication Model and employee’s role in service delivery.

When knowing the areas which banks in Sweden failed to deliver in the service, a general strategic approach of how to improve the service and enhance customer value was essen-tial. Therefore, the Porter’s generic strategy was employed.

Followed the general strategic approach, a specific action plan to improve the money trans-fer service in banks in Sweden was made by using Customer Value Management Model. They play the roles as the overall guidelines of creating and generate customer value follow-ing the chosen strategy from Porter’s theory: which tactics are required to achieve the goal of improving the service, i.e., which marketing activities, communication activities and so on.

All the previous research, theories and models are interconnected with each other to sup-port intensively the process of finding the answers for the three research questions of this thesis.