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CHAPTER 1INTRODUCTION1.1An overview to Islamic Republic of IranFigure 1.1Map of IRANSource: Atiehbahar (2004, P.1)Iran is between the Caspian Sea and the Persian Gulf. The countryneighbor‘s are Armenia, Azerbaijan and Turkmenistan Afghanistan and Pakistan andTurkey and Iraq. Iran has one of the largest areas in Middle East, which is 1,648,000square kilometers. North of Iran where the Caspian Sea is located is the largest lakein the world (Atiehbahar, 2008).Iran‘s population is almost 67 million in 2009 (The world fact book, 2008).Approximately 1.8 million are living in the country and the rest settled in cities andtowns. The density population of Iran is 42 people each square kilometer. Accordingto the last survey taken 52% of the population are less than 25 years old (Atiehbahar,2008).

2Iran has huge resources of oil and gas. The production of oil and gas are 135billion barrels and natural gas 25 trillion cubic meters. Mineral resources currentlyexploited include bauxite, chromium, coal, copper, gold, iron ore, red oxide, salt,strontium, sulfur, turquoise, and uranium (Library of Congress, 2008).Iran‘s economy is highly impacted by oil resources that are totally under thecontrol of the government. Generally, the economy of Iran is divided into threedifferent sectors that are state, cooperative, and private. The state or governmentalsector focuses uponallstrategic industries such as internationaltrade, mostimportant minerals, banking, power generation, dams and large-scale irrigationnetworks, radio and television, post, telegraph and telephone services, aviation,shipping, roads, railroads and the like; all these are controlled by the government.Regarding the cooperative section, we can refer to companies that are responsible fordistribution and production in the country.The last sector is private, which concentrates on activities such asagriculture, animal husbandry, industry, trade, and services that helps the economicactivities of the government and other sectors (Atiehbahar, 2008).The goal ofeconomic development plan of Iran has focused on increasing international andglobal trades and also on underutilized resources and more investment in privatesectors.(Amirahmadi, 1996).To be successful in the above plan the country has to increase its exports andhaving duty free and international zones can be helpful. Other than these, controllingthe domestic market, maintaining a well-functioning supply of basic commodities aswell as reasonable prices for necessities and services, and increasing foreigninvestment are the rest of Iran‘s economic development plan(Karshenas and Pesaran,1995).1.2Manufacturing IndustryManufacturing in Iran was cut down during the 1978–79 revolution and thecondition of the industry was not satisfactory. However, the imposed war with Iraq

3had impacted positively the growth of the industry. In the 1990s, Iran‘s economy didnot improve and the investment in private section was low, but the high world oilprices helped the government in public investment especially in petrochemicalsindustry. The petrochemicals industry, which has been controlled by the government,has improved remarkably. According to the economic development plan, thegovernment tries to increase petrochemical output and due to this, the above industryhas received many attentions for foreign investment.The steel industry in Iran is improving quickly in three cities namely Ahvaz,Esfahan, and Mobarakeh. According to the plan of the government in 2004, 8.5million tons must be produced and the goal was attained. Regarding car makers itshould be pointed out due to those contracts with foreign car makers they benefitedgreatly. For example, Iran national car manufacturer could manufacture 260,000units in 2002. Planting and growing of agricultural products is also a strategic andcritical industry in Iran, and controlled by private sector. Two other major industriesin Iran are related to grain processing and textile industry. The two said industrieshave created many job opportunities for Iranians (Library of Congress 2008).1.3Background of the StudyBusiness environment, lifestyle and consumption patterns are changingdramatically and customers expect to be served individually with directcommunication and because of these changes, companies are experiencing newsituation of business (Buttle, 1996, Filiatrault and Lapierre, 1997, Dyer, 1998,Homburg et al., 2000, Stone et al., 2000, Boudreau et al., 2001, Bateson, 2002,Gefen and Ridings, 2002, Newell, 2003, Gummesson, 2004). Technology revolution,which has improved information technology, has caused fundamental changes inbusiness that can be used as a competitive weapon (Harvey Élisabeth and Lefebvre,1993, Kraemer et al., 1994, Holland and Naudé, 2004). Due to this, customers arewell informed through various media(Bitner et al., 2000). Consequently, they canaccess to helpful information from different companies (Peppard, 2000, Dussart,2001). Kotler and Armstrong(2003) exemplify internet as one of the results oftechnology revolution and explain that internet is the most the dramatic technology

4that has caused improvement in marketing since it links individuals and businesses ofall types to one another. Firms, companies, and business organizations are using theinternet to have closer relationship with customers.Marketing activities have changed radically(Brown et al., 1995, Brodie etal., 1997) and it no longer involves producing and selling as what it was in the past.New marketing emphasizes on satisfying customer needs and wants (Fournier, 1998,Batra, 1999, Gummesson, 2004). Kotler, (2003) has defined marketing as "a socialand managerial process by which individuals and groups obtain what they need andwant through creating and exchanging products and values with others.” It seemsthat the most important concept of marketing refers to customer needs.Relationship marketing is another important concept of today's marketing thatis affected positively by improvement of technology such as internet(Anderson,1995, Aulakh et al., 1996, Blois, 1996, Bruhn, 2003, Egan, 2008).Since 1990s,relationship marketing has been accorded much attention especially in business tobusiness marketing(Sharma, 2003). Nowadays, managers try to understand theircustomers so that they can best meet their customers' needs, and thus, by doing this,consequently, the customers avoid switching to other companies (Gallagher, 1998,Fickel, 1999, Dibb and Meadows, 2001).Schiffman and Kanuk(2004) have explained that a successful marketingrelationship is the promise and commitment of the company towards the customers‘long term satisfaction by offering values. It should also be considered that themeaningful exchange of values depends on boundary functions as well as theorganization or the company as a whole. Hence, critical values of cultural orientationare vital to the successful implementation of relationships. Reichheld(1996) hasexplained that during the past marketing period, companies that have the ability tooffer the required products and services and having advantages through productivitygains and lower costs could satisfy their customers. The reason that companies couldproduce massively since customers were happy with those products, but today thegoal of mass marketing that focused upon selling what manufacturing produced hadlost its effectiveness since more firms entered andchanged.market segmentation had

5Firms produce according to the customers‘ expectations and due to thesechanges it is preferred that companies concentrate on small customer segments.Hence, close relationship with customers increased (Chatham et al., 2002)since theyare not same in their wants and expectations. According to the techniques ofcustomer relationship management, relationship marketing focuses on individualcustomers.The firm must also be customer centric rather than product focused.Companies that focus upon customers try to serve them in the best manner to satisfythem. It can be done by integrating marketing activities and the business process ofthe company. They also adopt themselves with changes; hence, they will be moreflexible to respond to changes in customers‘ needs (Field and Shutler, 1990, Bowenand Hedges, 1993, Conlon, 1999, Prabhaker, 2001, Flint et al., 2002, Bigné et al.,2004).1.4Statement of the ProblemNowadays many firms invest in customer relationship management.However, some of them fail to meet management expectations on return oninvestment (Corner and Hinton, 2002, Åkerlund, 2005, Caldeira et al., 2008). Thereason is that firms apply the technology with the absence of a coherent businessstrategy focused on the customers. Another problem in customer relationshipmanagement is the technology implementation. In some firms, because the focus wasgiven to controlling the customers rather than rendering better services to them, itmeans trying to retain the customers affects the organization rather than aiming togive better service to the customers(Stone et al., 2000).Also, Bard (2005) has clarified that only 10% of the business andinformation technology executives believed that expected business results obtainedfrom CRM implementation and a study by Gartner in 2003 revealed that 70% ofCRM projects failed or did not improve due to the reduction in CRM spendingbetween 1999 and 2003(Ledingham and Rigby, 2004).

6However, Hackney(2000) Botwinik(2001) Elmuti(2009)and Goodhue(2002)explained that there were convincing reasons to implement CRM in businessorganizations and companies even though there was no 100 percent guarantee that itwould be successful. On the other hand, CRM software vendors talk about asuccessful CRM in a way that can solve all the problems in the business.Schweigert(2000) and Boulding(2005) claimed that there were some risks such asfailure in the project, inadequate return on investment, unsatisfied employees, andcustomers that should be considered.In one example Patton(2001) explained that, "a large telecommunicationscompany rolled out a major CRM application to more than 1,000 salesrepresentatives in late 1999, at a cost of 10,000 per user, only to find a year laterthat fewer than 100 were using the system.” Other surveys have also shown that theaverage investment in customer relationship management implementation is 2.2million dollars and the failure rate is 65 percent (Apicella, 1999).It is becoming increasingly clear that failing in customer relationshipmanagement projects are the results of companies misunderstanding of customerrelationship management properly (Chen and Popovich, 2003, Cicmil et al., 2006,Foss et al., 2008, Alamgir et al., 2011). Furthermore, they have pointed to otherissues. The first issue is that companies try to implement CRM but they do notdesign and redesign the processes properly. To get better results from CRM,companies have to focus upon the process of sales; they also have to find the ways toconvince, serve, and satisfy customers better, and then identify the steps to changesin the plan software or process.Another issue is that companies are focusing too much on new technologiesand processes rather than focusing on people who are responsible to implementCRM. It means that companies need employees who can offer better services tocustomers, also employees who can be sure that they will have a better situation andenvironment than what they now have after CRM has been implemented(Alexanderand Turner, 2001).Another CRM implementation issue refers to its sourcing, that means becauseorganizations do not have all the required items for CRM implementation they can

7outsource them (MacSweeney, 2000). If customers become satisfied about the valuethat is offered and meet their expectations the benefit will be generated for thecompany(Bateson, 2002). Besides all these issues, pitfalls and difficulties regardingCRM implementation, it should be considered that today we have the concept ofCRM that leads to improve customer retention and satisfaction, increasecompetitiveness, higher revenues, lower operational costs and customize products(Jackson Jr, 1994, Reichheld et al., 1996, Bultema, 2000, Bose, 2002, Roh et al.,2005).Due to the issues and difficulties in CRM implementation, some companiesare reluctant to implement it (Bard, 2005). By searching through databases and Iranannual reports, the researcher has realized that customer satisfaction is remarkablylow regarding the products and services of car manufacturing companies in Iran. Ithas also been found that customer relationship management is not implementedproperly. It seems that because of the current problems, the customer relationshipmanagement technology has been disregarded in Iran automobile industry.The problem of the research revolves around the implementation of customerrelationship management technology in Iran automobile industry. This study isconducted in automobile industry since it is one of the most known and crucialindustries in Iran.1.5Objectives of the StudyConsidering the importance of automobile industry in Iran, this studyattempts to achieve the following objectives:1. To explore the current implementation of customer relationshipmanagement in the automobile industry.2. To identify the barriers in customer relationship management in theautomobile industry.

83. To identify the success factors of customer relationship management withregard to automobile industry.4. To analyze critically the implementation of customer relationshipmanagement in the automobile industry.1.6Scope of the ResearchThis study designed to provide an overview on customer relationshipmanagement implementation in Iran automobile industry within the vicinity of thecapital Tehran, and two other cities Ahwaz, and Boroujerd. These cities are selectedbecause Tehran and Ahwaz have large population, are industrialized cities andBoroujerd is selected since one of the investigated car manufacturing companies islocated there.1.7Significance of the ResearchFirst, based on the previous study this is the first attempt of exploringCRM implementation in Iran automobile industry. Hence it will be helpful for thisindustry specially car manufacturers.Second, customer relationship management implementation has been tested,but the majorities were done in the developed countries or they were not aboutautomobile industry(Nguyen et al., 2007).Third, results are expected to help practitioners and managers understandCRM success factors as well as CRM implementation barriers to influence thefactors that determine CRM success implementation.

91.8Limitations of the ResearchThe research has some limitations. First, it is done merely in automotiveindustry therefore results and findings cannot be generalized in other sectors. Secondlimitation refers to the data collection. As some of the respondents were busy,making appointment with them was difficult. Third limitation refers to number ofcities that will be covered, because difficulties in traveling and long distancesbetween the cities only three cities Tehran, Ahwaz, and Boroujerd were covered forthis study.1.9Guides to the ThesisThis study is organized into five chapters, as follows. The first chapterpresents a general introduction and discusses the statement of the problem, objectivesof the study as well as significance and limitations of the research.The second chapter discusses customer relationship management conceptthrough an overview of CRM literature .The theories in second chapter have beenused in different context and are proposed here as means for studying andunderstanding customer relationship management. In addition, this chapter includesdescription and evaluation of these theories and finally this part ends with aconceptual framework of the study. Chapter 3 begins with the research design, alsodata collection method and data collection procedures, sample design and dataanalyses are discussed. Chapter 4 will discuss data analysis and the results. Finally,the fifth chapter provides a discussion of the results and explains the theoretical,methodological, and managerial implications. Lastly, limitations and directions forfuture research and managerial implications will be discussed in fifth chapter.

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CRM model was used to determine the CRM barriers, critical success factors and show the current implementation of CRM in the Iran automobile industry. The proposed CRM model can be used by different organizations to identify the critical success factors, barriers and the position of their CRM project. To do this, nine