The Effect of the Country of Origin Towards Consumer Perception - Essay Example

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"Responses to humorous ads: does audience involvement matter?", Journal of Advertising, Winter 2006 Issue 57 < 1% match (publications) Journal of Consumer Marketing, Volume 23, Issue 1 (2006-09-19) 58 < 1% match (publications) Journal of Consumer Marketing, Volume 26, Issue 3 (2009-05-03) paper text: CHAPTER2: LITERATURE REVIEW 2 1.0 Introduction 2 2.0 Country of Origin – the Concept 3 3.0 Consumer Behaviour and COO 5 4.0 COO and Brand Values 6 5.0 COO and Image of a Country 8 7.0 Country Image and Marketing 10 8.0 COO and Brand Image 12 9.0 Consumer Behaviour and Marketing 13 10.0 COO and its effect on Luxury Branded Products 17 11.0 Chapter Summary 18 12.0 Hypotheses 19 13.0 Bibliography 21 CHAPTER2: LITERATURE REVIEW 1.0 Introduction The 14effect of country of origin (COO) of product on consumers’ perception has been one of the most widely studied phenomena in the international business, marketing and consumer behaviour literature since the mid-1960s (Peterson and Jolibert1995). There are actually several issues involved here; the place of manufacture, the brand and the company; and it is the individual preference or an image that is the combination of one or more or all that matters in consumer perception and therefore the influence of one or all these factors is what is broadly considered as the cognitive value. The literature review will therefore cover all these aspects and a few more in order to understand the implication that is termed as the COO effect on purchase decisions. Sometimes the preference of the customer is narrower and in that sense he or she prefers goods produced within the home country for reasons of superiority or quality. In such cases it is termed as ethnocentricity and this becomes a reason for negativity towards COO. In other cases the patronage of the home country products is due to the perception that it weakens the economy and it is a show of unpatriotic behaviour to prefer goods produced elsewhere. This brings in the concept of economic nationalism. This too aids the negativity towards COO. This review will cover these features as well to understand how COO is used by both the consumer and the company and how they finally influence purchase decisions. The research objective of the paper is to resolve this issue in relation to the luxury items, more specifically to the Thai consumer’s attitude towards the Long Champ brand handbag manufactured in France and China; significantly of the three factors of 25Country of origin including Brand image, Country of Origin of Manufacture and Country of origin of Brand.  Due to globalization and liberalisation the worldwide market of all goods, including the luxury items, has crossed national boundaries and has posed various problems for companies. Consumer behaviour is the driver of demand and this literature review will undertake a study of this conduct and its effect on marketing. 2.0 Country of Origin – the Concept According to Erickson et al (1984), country of manufacture referred 49to the specific country where the product was manufactured from, which regarded to the 48consumer’s general perceptions about the quality of product toward the country. This was the general impression about COO. The country of origin (COO) as a concept was developed by LeClerc and Schmitt (1994) to ascertain that this established the place of manufacture not withstanding the ownership of the products. Ever since production has been disintegrated and shifted to under developed countries by the multinationals on economic grounds a new concept of Country of Origin (COO) has gained prominence and has influenced consumer perceptions about quality, brand and other variables associated with it (O’Cass and Lim 2002). Indeed internationalisation of production has brought COO into limelight in a different way. Whereas earlier the COO was a simple case of a declaration of the place of manufacture, later it became associated with the brand and ownership of the product as will be seen later in this review. In a theoretical study Silva et al (1999) stated that the (COO) is one necessary method that has been studied for decades because of an international market which is expanding rapidly. In term of country of origin (COO), it is can be described as consumer’s beliefs toward the quality and performance of the products (Bilkey1992). Therefore COO was originally related to where the product was manufactured. COO can affect the interdependence of a product and its nationality or its country image (Karunaratna and Quester, 2007) as under global production it is spread over many countries before it can be said to become a product. The case of Barbie doll is an example in point. It is partly manufactured in Taiwan, China and Thailand before it is shipped to the US where further value additions finally make up the marketable product. Kaynak and Kucukemiroglu (2001) mentioned that the country of origin can influences consumers perception and attitudes based on features and qualities. In the above case of Barbie it is projected as a US product hence it carries a higher image. If it were to be called a Chinese product, its image would suffer a dramatic fall. These variables will be stated as an inner controlled behaviour that can changed the perception of the product as viewed by the customer. There is some difference of opinion about what is COO; according to Yong (1996) the COO is where the product is manufactured while Johansson et al (1985) describe it as the place where the company has its headquarters. Much later Thakore and Lavas found in a study of the consumer’s view that place of manufacture had less importance than the brand of the product. For them it was the brand that eventually evaluates the product. This is the main reason that production moves to low cost centres and still be accepted in the home country; one of the greatest examples being Nike products that are made in the Far East for US and European markets. However consumers generally linked ethnocentricism to the country of origin to strengthen their belief 24(Sharma et al 1995; Shimp and Sharma 1987). The ethnocentric consumer as he perceives the quality of his home country products as superior in quality and performance over other countries, especially if they are from the underdeveloped world. This combination of ethnocentricity and COO can become lethal in the hands of domestic producers, local labour unions and some consumers and produces a bias against products manufactured at overseas locations 4(Bilkey and Nes, 1982; Netemyer et al 1991). 3.0 Consumer Behaviour and COO. COO can also be an influencing factor in consumer evaluations about quality and fairness (Hulland, 1999) however it is important to separate the brand owner and the brand country where it is produced. The two can be entirely different and the impact of each in purchase decisions can be dissimilar. It has been established for long that both (Phau and Prendergast, 2000) that the consumer evaluates the quality and before making a purchase decision and both brand and COO influence this. Nevertheless the country where the brand originates from, the brand itself and its image are much more significant attributes than the COO (O’Cass and Lim 2002). Whenever There will be no impact of the COO where product evaluation is done on the basis of the brand name and ownership are more superior (O’cass and Lim, 2002). A fine example of this is seen in Sony that is a Japanese brand that is produced is several countries around the world and sold everywhere on the glob. No consumer can be ethnocentric about it yet it does not hurt or effect national patriotic egos of the consumers in their purchase decisions. It is the brand and not the country of manufacture that lures the consumer. This strengthens the argument that branding overcomes the COO problems. 4.0 COO and Brand Values The consumer also takes into account the brand equity (Myers 2003), the construct of brand loyalty (Knox and Walker 2001) and his own assessment about its quality while making a final purchase decision. This is what marketers take into account when building a brand for products their companies produce on an international scale. Conversely using of celebrities in Branding of a product, service or company is also being used to promote ethnocentricity. The present day consumer has great and free access to information. He is also conscious of variables that effect product pricing and is naturally inclined to make a purchase decision based on these factors rather than on patriotic or nationalistic values; yet in this time of greater awareness there are many subtle ways that can be used to lead normal and bright consumers to believe that a locally manufactured product has the proclaimed qualities. The marketing men have also made extensive studies of the customer in every segment in order to overcome the resistance and reluctance factor and to play upon the irresistibility and fascination factor. People, despite their higher knowledge still give weight to the anecdotal evidence and uncontrolled observations and are swayed by other peoples opinions. Right from early age children are forcefully taught to obey instructions of elders, teachers and more experienced individuals and groups. The traits of honesty, belief and trust on the systems are so well grounded that in most cases an average person accepts most things on face value. It is only when they have suffered that this belief is first shaken and then shattered and cynicism starts taking roots. The distinguished psycho-analyst Festinger (1957) states that there is a mental distress when consumers face or experience contradictions and this results in disbelief and produces cynicism. Alcock (1986) confirms that where a strong belief exists there is usually evidence of a distortion of reality behind it. Marketers also realise this and therefore weave a different storyline to circumvent the COO related issues. They attempt to play down negativity and impose positivity over it through individuals who have a wide appeal across sections of people. The purpose of this exercise is affect the judgment of the consumers by the overlay of the personalities of the those who are considered as having a superior status in society and whose opinion carry weight. This seeks to superimpose on the judgment of ordinary people who then believe in such personalities instead of reasoning it out for themselves (Gilovich 1997; Shick and Vaugn 1995). Their own judgment there is overcome by such people and they value their declarations to be true and correct. These celebrities carry a huge clout due to the trust and support that is held by ordinary people in them 5.0 COO and Image of a Country Along with 50the decision making process, the country of origin seems to be an information cue, which affords consumers with a basis data to evaluate a product or service. The country of origin 10may also act as a summary construct which can directly affect consumers’ attitudes towards the product of a country instead of through product attribute ratings (Wright, 1975). According to 39Erickson et al (1984) and Johansson & Thorelli (1985), consumer may 10be influenced by a halo effect which 23a country’s name triggers feelings may be transferred on the product. According to Young et al (1991) the effect transfer process is the theory that expressed about the feeling, or country’s image that consumers have on the country’s origin of the product transferred directly to their overall product evaluation. Even though, there is a positive attitude toward the features of the product but there might be the negative to the consumer react or evaluation it originated from a country that is negatively evaluated. Another process underlining from Young et al (1991) is the direct behaviour process, the 41country of origin create an effect on consumer behaviour without the mediate effect of the product attributes or attitudes. However, COO has both indirect and direct effect on evaluation of the products (Hong and Wyer 1989). For indirect effect, it involves a moderating 28effect of the country of origin cue on effect of other attribute cues of the evaluation measure, whereas the direct effect involves only the 21country of origin cue or country image. As Schiffman et al (2008) explained “one research study found that the product attitude of consumers with little knowledge about the product is 51more strongly influenced by country-of-origin perceptions than the product attitude of consumers with high knowledge. Regarding to Schiffman et al (2008), consumers rated quality and which brand they select is 57influenced by the country of origin. Moreover, consumers are 35less likely to base judgments on country of origin information when consumer motivation is high and when a specific model of product is being evaluated. However, the 40country of origin becomes an important extrinsic cue when consumers are less familiar with foreign product. 32It is known that the country of origin effect is as the 6image of countries in their role as origins of products, however, it can be said as some other terms to be more representative by other authors such as Product-Country –Image (Papadopoulos and Heslop 1993), ‘Made in’ concept and Country-Image- Effect (Nebenzahl et al 1997). Regarding to the Nagashima (1970) studies country of origin is referred as ‘Made in’ and this 5made in labels have been use as indicators of product origin (Morello 1984). 9According to Johansson et al (1985), COO is 19defined as the country where the corporate headquarters of the company marketing the products or brand are located. It can be called as the company’s home country. As an example, Louis Vuitton and Gucci, imply that Louis Vuitton has French origins and Gucci has Italian origins. According to 5Papadopoulos and Heslop (1993), ‘made in’ can mean not only manufactured-in but also assembled-in , designed-in, , or invented-in, which made by the producer whose home is -in and want to look like it was made-in. The studies conducted by Cattin et al (1982) also revealed that the among the valuation of a product its workmanship actually determines the quality and value and as such the COO becomes an important contributor to this knowledge. Moreover, the principal image variable is changed by COO and can easily change the competitive positioning and achievement of brand in the global market place. Lampert and Jaffe (1998) suggested that “the impact that generalisations and perceptions about a country have on person’s evaluations of country’s products and brands”. Where the knowledge of buyers about the product is limited, country of origin perceptions influences their buying decision. It may be a significant factor in the consumers’ perception that has toward the services or products when there is a paucity of knowledge about its origin. In the global context firms aim to seek collaboration and cooperation with other firms in different part of the world to achieve the best production capacity and lower costs for the production. This is can be generated through assignment of different production processes to different countrues due to their cost effectiveness in the relevant area (Chao, 1993). For example the brand origin of Long Champ is in Italy but some of its products are manufactured in China. Yet the brand carries its image of the home country. 7.0 Country Image and Marketing. From previous studies the country image construct is built on the nature and habits of its residents and the perceptions about them become the perceptions of the product made there (Parameshwaran and Yaprack 1987; Haubi 1996). Nagashima (1970) defined the 33country image as “the picture, the reputation, and the stereotype that businessmen and consumers attach to products of specific country”. Moreover, from the marketing perspective, 33Roth and Romeo (1992) stated that “Country image is the overall perception, consumers’ form of products from a particular country, based on their prior perceptions of the country’s production and marketing strength and weakness”. It can be said that when consumer lack in other information of the product, country image can become a significant tool for them to judge 56the quality of the product that they are interested in. Samiee and Insik (1994) and Gregory and Ross (1994) have stated that consumer decision making is influenced by the information cues that are divided into two parts. First 43is the intrinsic of the product or the physical characters of the product such as design, performance and taste. Another cue is the extrinsic or intangible 9product such as price, country of origin, brand name and warranties. The past studies of most researchers said 9that the country of origin cue may not has the direct bearing on the product performance but it may act as quality cues for consumer to evaluate the competitive offering when they cannot evaluate from the tangible traits. In general, many past studies have found that products which made in different counties lead to the significant different in the consumers’ perception and 55country image. In some case of country image, according to Johansson and Papadopoulos (1993), it is restricted 12to a type of product within a product category. 12For example, France has a strong country image in clothing, wine and perfume (Lampert and Jaffe, 1998). 8.0 COO and Brand Image It has been stated by Kotler (2003) that in order to develop unconfused brand image, the company should determine the brand name which refers to product’s benefits, imagery and quality that makes its easy to remember as distinct from its competitors. Normally this would mean that the consumer should not be in any doubt about the product characteristics irrespective of the place of its manufacture. This has stood the test of time as has been stated elsewhere in this paper. This change of COO affects the product image in a substantial way. Han and Terpstra (1988) have stated that there are “four factors; advanced technology, prestige, workmanship and economy” of the country of manufacture that actually affect the consumer perception about the perceived representation of the product and this different from the image of the country of the Brand. What happens here is that the evaluation is made of the place of manufacture and the four yardsticks measure the product quality. Sometimes this can be even better than the home country. For example a Toyota car manufactured in Japan will be considered superior to one manufactured in USA although the American customer believes that ordinarily the American quality is superior. However this is a rare case. Therefore the country image actually over shadows the brand image and since most production is outsourced to countries that can offer cost advantage, the normal perception is the image of the country affects the quality of the product. The customer’s trust in a country depends of such factors and when unsure he will evaluate the country and not the brand (Erickson et al, 1984). Where the customer is aware of the country image and its high standards the evaluation shifts onto the brand in place of the country of manufacture (Han, 1989). 9.0 Consumer Behaviour and Marketing Perception 29is one of the internal influences in the Psychological Field of Consumer Decision Making (Schiffman and Kanuk, 2007) and moreover, “Perception is the processes by which people select, organize, and interpret the sensations.” (Solomon, 2007, pp.49). According to Berkman and Gilson (1978), perception can be described as a process that individual gathers, processes, and interprets the information from the environment. Even though people received the same stimuli but due to the process of recognition and selection, the consumer organizes and interprets tends to be based on each person’s needs, values, and expectation (Schiffman and Kanuk, 2007). Marketing is a difficult proposition at any time. It bcomes difficult due to the cultural beliefs of the consumers and when a product is made in a different country there is bound to be a clash on this account. In such cases the price factor becomes secondary and ethnocentric attitudes and quality perceptions take precedence over cost effectiveness that was the basis of transfereing production to third country locations. This is seen more in luxury brands as they are considered as luxury items primarily because of their country of origin. The consumers of such items do not go for need satisfaction but ego satisfaction. It is known that generally customers buy products to meet their needs. For example a toy meets the need of either entertaining or educating a child. This need is functional and the ad must show this as a must have feature to be effective. But it has been proven through market research that the emotional need of a customer is equally strong and often compels him or her to a purchase decision whether there is need or not. The advertisers seek to satisfy this emotional need Greater awareness and beliefs together constructs attitudes that lay the foundation of consumer behaviour. Empathy and compassion are used by advertisers to change consumer perceptions and change consumer behavior towards using the product (Puto and Wells 1984). Bagozzi (1994) has also agreed that empathy and compassion affects consumer actions. All Buyers have an opinion about a product or service formed out of experience, and information. These are perceived over a period of time. Companies attempt, through their marketing strategies, to garner this opinion in favour of their product or brand. However the customers have usually built an attitude towards the company and its products. The strategy is to persuade the buyers to purchase this product or service. Extensive use is made of the Elaborate Likelihood Model and is an efficient tool for persuading the targeted segment for producing an attitude change. The company needs to communicate the message effectively for the consumers to respond. There are basically two ways of forcing changes in attitudes. These have been named as Central route and Peripheral route of Persuasion by Petty and Cacioppo (1981). The Central route looks at attitude that has been developed as a result of issue related arguments. This means that this attitude is well thought out and has encompassed all possible views on the subject. Usually this attitude is also rather rigid and not changeable as it has already considered alternatives. Elaboration or explanations tend to impact attitude changes. In such cases careful evaluation of the content of the message is made through the central route to test the strength of the arguments and attempts are made to change the mind-set of the customer. If successful, the result causes a strong change in consumer behavior. The Peripheral route however brings about change based on either positive or negative attitudes. When the views have not become unyielding or rigid they are likely to be either for or against. However these are triggered by some event or phrase/word or activity that sets off this attitude. Here the message is less important but the attack is on motivation and emotions of the buyer. If successful, the result is a change in attitude but since it is a play on sentiments, it is comparatively weak. The central route causes a shift of behavior while the peripheral route draws quick response that may be temporary. Both routes involve message elaboration. By character ELM provides a platform for making a desired reaction or assists in making attitude change possible. Indeed it is quite accurate in demonstrating how attitudes can change despite difficulties. But despite being scientific in approach it is not possible to verify it through the traditional falsification test of true and false. Petty and Cacioppo (1981) conducted studies to arrive at the above conclusions. The study revealed that when perceptions are fixed or rigid, reactions of customers are predictive. People will react in an identical way in a comparable situation. When perception is flexible or unclear then people look for cues or indicative signs to take a positive or a negative attitude. Central and peripheral progressions are a continuous occurrence but there is relative variance in the impact of these processes from time to time. The Elaboration Likelihood Model (ELM) serves the purpose of conveying an explanation of information to test the probability of the likely change in attitudes through the message. The level of motivation these can generate, and the ability of the buyer, will have a bearing on the outcome. Indeed the ethnocentric policies of multinational corporations frequently come into conflict with host-country laws, norms and traditions (Manucher, 1997) and they study the consumers and use the ELM to their advantage. 10.0 COO and its effect on Luxury Branded Products Luxury has been defined as the differentiator of a brand in its category from others (Alleres 1991; Kapferer 1997). Cornell (2002) says that limited supply and high value are the fundamental elements of luxury are. Luxuries are also distinguished as highly desreable products (Berry 1994). A luxury item also carries with it a perception of higher quality and this is a value addition for the consumer (O‘Cass and Frost, 2002) and this is considered the main feature of the object (Roux 1995). The self image that it creates is one great factor that induces consumption of luxury products. Jamal and Mark (2003) state that it is in pursuit of a singular identity that consumers opt for luxury branded items. Consequently luxury brands are ego and status builders that consumers use as image builders in society where conspicuous consumption defines the status of a person. Since luxury items signify a special social status of the owner the COO of the product assumes importance as the image of the COO becomes a distinguishing factor in differentiating luxury from the ordinary. Although the sale of luxuries is not bound by national boundaries nevertheless the original country label acts as a barrier to shifting of its production to other countries. Indeed this is a deliberate exercise in creation of the product image as a luxury product (Vigneron and Johnson 2004). As a consequence powerful marketing strategies currently being adopted by companies are creation of strong brand images that can differentiate them easily from competition. 11.0 Chapter Summary The literature review reveals several opinions based on variables about the COO and the consumer behaviour that occurs due to this factor. Since globalisation has introduced fragmented and disintegrated production, the whole concept of COO has changed over the last fifty years. International Trade has been in existence for ages and the original COO concept was a declaration of the country of manufacture. As international manufacturing got decentralised the COO concept changed slightly as then the perception of the Brand remained above the place of manufacture. With globalisation the collaborative nature of production and the strengthening of the supply chain meant that the COO became an established concept and home country production has almost vanished in most cases. This meant that Brand was no longer associated with the place of manufacture but became the image of the company. On its part the company tried to maintain the quality of its product by standardising production irrespective of place of manufacture to produce a quality that was consistent across the globe. Another feature was that with disintegrated production different regions of the globe became part of the same production assembly and as such distinguishing the product manufactured on a global level became impossible as components from different countries merged together to produce the final product. Hence the COO concept became vague in many cases. The case of Barbie doll is a remarkable result of this collaborative and disintegrated production planning. It can therefore be safely said that consumer behaviour that was ethnocentric in the early stages of international production became more liberal in outlook with disintegrated but collaborative production taking over the scene in the global markets. This has made the COO a weak concept and now products made anywhere have become acceptable to the consumer. The Brand became more important and marketing has become more brands oriented than ever before. An exception must however be made in case of luxury brands. The perception of luxury has always been exclusivity and superior quality. This product offers a singular status to the owner or possessor that cannot be diluted with the COO affect. The image of the company and the image of the original country of manufacture play a huge role in the construct of a luxury. There may be better cars than the Rolls Royce but its exclusivity is associated with its place of manufacture. It is the same case with Rolex watches. Replicas may be as good or even better, but the original piece is associated with the original place of manufacture. In such cases if ever the manufacturer contemplates to change the place of manufacture, the brand would loose its appeal and acceptability as a luxury brand. In all luxury brands the price is never the factor. The main reason for changing the country of manufacture is the price. Since this is not the case in case of luxury brands, shifting of production and the need for COO concept does not relate to luxury products. 12.0 Hypotheses This 31objective of this paper is to study the effect of COO toward consumers perception of luxury brand product: specifically the case study of Thai Consumers. The above literature review makes it possible to arrive at the following hypothesis that can be validated through primary research: H1 The COO concept relates to normal products that are manufactured on global scale H2 The COO concept was earlier limited to country of manufacture due to moving of production to cost effective centres H3 The COO concept has gone under radical change due to disintegration of production and the Brand Image has overshadowed it H4 The COO concept does not apply to Luxury goods All the above hypotheses should be validated through primary research and the outcome should be helpful to future marketing. Read More