Country of Origin Effect

Looking Back and Moving Forward

Isaac Cheah, Ian Phau, Gaetano Aiello, Isaac Cheah, Ian Phau, Gaetano Aiello, Isaac Cheah, Ian Phau, Gaetano Aiello

• Publisher: Routledge
• Year: 2020
• ISBN:
  9780429535659
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This book evaluates Country of Origin (COO) research from new critical perspectives, providing insights on how COO shapes both consumer behaviour and business trends, and how marketers can overcome or take advantage of COO in their strategies.

The contributors explore a variety of strategies for utilising Country of Origin, including how country image can influence market entry positioning strategies, and how brand heritage can be utilised as a communication tool. There is also a study of what percentage of online products require COO identification, and whether this percentage correlates to customer satisfaction. Several contributors look at consumers' preference for food in relation to COO and authenticity, and further chapters explore the impact of consumer identification with a nation on how they evaluate brands.

As Country of Origin is increasingly evaluated by consumers and used by marketers to safeguard locally-owned products, this book will be of interest to those studying the relationship between country-authentic brands and their promotion in the global marketplace. This book was originally published as a special issue of the Journal of Promotion Management.

How Much More (or Less) Is a Brand Worth When Made in a Low Labor-Cost Country? It Depends Upon Who and Where You Ask

Foo Nin Ho, Glen H. Brodowsky, and Seonsu Lee

ABSTRACT

This multinational adaptive conjoint study measures how much more, or less, consumers might be willing to pay for different brand/manufacturing country combinations. Chinese, South Korean, and US respondents were asked about their preferences for laptop computers carrying different combinations of price, country of manufacture (CM), and country of brand (CB) cues. For all three respondent groups, price was the most salient attribute, followed by country of manufacturing, and then CB. Nonetheless, respondents from different countries differed in their preferences for price/country of manufacturing/brand combinations. The findings suggest that brands having both positive CB and CM images can charge premium prices in their home countries and abroad. Brands with weaker CB and CM images may enjoy home court advantages domestically; however, they may have to price their products lower when competing in countries with stronger CM and CB reputations.

Introduction

Kabadayi and Lerman (2011) state “the three words ‘Made in China’ have turned out to be a marketer’s nightmare.” Yet, in spite of scandals concerning the quality of Chinese manufacturing, marketers of premium-branded goods associated with developed economies continue to outsource production to low-labor-cost countries like China. Srinivasan, Jain, and Sikand (2004) argued that outsourcing makes profit-maximizing sense. However, it only makes sense if consumers are still willing to pay premium prices for branded products regardless of where they are produced. This study attempts to estimate the additional costs (or benefits) to brands based on country-of-manufacturing location decisions that should be reflected in pricing discounts (or premiums).

In a world where the country associated with a product’s brand may differ from the country where it is manufactured, Usunier (2011) suggested that researchers should focus more on brand than country of manufacturing. Nonetheless, in a recent conjoint study, Coskun and Buraz (2016) found country of manufacturing to be more important than country of brand (CB) when the cues are presented together, but the reverse is true when they evaluate country of origin (COO) and brand as separate cues. After six decades of product-country image (PCI) research, the relative salience of brand and country of manufacturing cues on consumer purchase decisions remains an unsettled question.

This study addresses this question and explicitly asks how much more or less consumers might pay for a branded product associated with a more (or less) developed economy if it is produced in a country perceived as more (or less) developed. Rather than considering brand and country separately, the adaptive conjoint model simulates a realistic compensatory choice. Respondents are asked to indicate their preferences for various brand/manufacturing country/price bundles. Beyond identifying the relative importance of brand or country, this approach can be used to determine the relative monetary values consumers assign to various brand/country of manufacturing combinations.

This cross-cultural study builds upon Koschate-Fischer, Diamantopoulos, and Oldenkotte (2012) study that considered the monetary value of COO choices on German consumers’ willingness to buy branded goods. It simulates product choice using a conjoint design explicitly incorporating two country cues: CB and country of manufacture (CM). In the simulated choice situation, respondents from three different countries are asked to trade off four levels of brand countries (Japan/Sony, Korea/Samsung, Taiwan/Acer, and China/Lenovo) and the same four levels of manufacturing country against five price levels. It addresses three research questions: (1) which cue is more important to consumers and whether this is consistent across countries, (2) whether, and to what extent, a brand with a strong CB image can maintain its premium pricing if it is manufactured in a country with a weaker CM, and (3) how much brands associated with weaker CB and CM images need to reduce prices when competing in countries with both stronger CB and CM images. Such insights can help companies with manufacturing operations throughout the world to balance potential cost savings in their production-location choices with their market-positioning strategies by tailoring their CB/CM and pricing decisions for each country they enter. The next section reviews the PCI literature, followed by sections detailing methodology, data collection, and results of three conjoint studies. The study concludes with a discussion of managerial and academic implications and directions for future research.

Literature review

Asian-focused COO studies date back to the early years of what has come to be called the PCI literature. Nagashima (1970, 1977) was one of the earliest researchers to study COO effects on product-quality perceptions of Japanese products. Since that time, COO studies related to Asian products or consumers have proliferated. Among them were Hamin (2006) who focused on Indonesia, Chandrasen and Paliwoda (2009) whose study focused on Thailand, and a study of Vietnam by Kucukemiroglu, Harcar, and Spillan (2007). Kwak, Jaju, and Larsen (2006) studied COO-moderated online and offline consumer behavior among Korean and Indian consumers. In another study of young Korean shoppers, Park, Rabolt, and Sook Jeon (2008) investigated consumer preferences for global luxury brands.

China is both the world’s largest potential consumer market and the preferred location for manufacturing branded products worldwide. As the so-called “workshop of the world” (Gaulier, Lemoine, & Ünal-Kesenci, 2007), China-focused COO research has emerged in recent years. Soon after Deng Xiaoping’s economic reforms in the late 1980s, Schroath, Hu, and Chen (1993) investigated COO effects on foreign investments in China. From the Chinese consumers’ perspective, Klein, Ettenson, and Morris (1998) examined animosity toward foreign brands while others considered ethnocentrism among Chinese consumers (Wong, Polonsky, & Garma, 2008; Bi et al., 2012). Zhuang, Wang, Zhou, and Zhou (2008) considered confusion between CB and CM in a Chinese context.

From a market-positioning perspective, Srinivasan et al. (2004) recommend “sellers strategically focus on intrinsic quality, choose a developed country as the branding country, while driving cost reductions by shifting manufacturing facilities to developing countries.” This describes the strategy of many famous global companies that have moved at least part of their production to China. As they continue to do so, it becomes more critical for managers to understand how the perceptions about Chinese-manufacturing capabilities may interact with their brand images.

The PCI literature includes many studies concerning hybrid products. Hybrid products, like Apple iPhones made in China, carry brand names associated with one country as well as information about the country in which they are manufactured or assembled. Despite where they are made, some authors contend that perceived origin associations are evident within many brand names (Samiee, 1994). Syntax or language associated with the brand name or advertising can create these associations (Leclerc, Schmitt, & Dubé, 1994). Consequently, a fundamental assumption of many hybrid studies is that brand origin association is among the “most salient personality characteristics” of brands, which, in part, impact consumers’ beliefs and attitudes about the brand (Leclerc et al., 1994; Thakor & Lavack, 2003). These studies contend that consumer purchase decisions do not occur in a vacuum, and for established brands, consumers possess prior knowledge about them, including their COOs.

Nonetheless, Samiee, Shimp, and Sharma (2005) found that consumers correctly match brands to their respective COOs only about 35% of the time, which is higher than the 22% found by Balabanis and Diamantopoulos (2008). Brodowsky, Schuster, and Anderson (2013) found that European and American consumers were able to correctly identify Toshiba and Sony as Japanese-brand names 65% of the time compared with 26% who correctly associated LG and Samsung with Korea. These Japanese-brand associations appear almost twice as strong as those found in earlier studies, while the Korean-brand associations seem consistent with them. Interestingly, most who misidentified LG and Samsung erroneously identified them as Japanese, which is consistent with the findings of Magnusson, Westjohn, and Zdravkovic (2011) study. Brodowsky et al. (2013) found that fewer than 20% of respondents in either Europe or the United States were able to correctly match Taiwanese brands Acer, Asus, and HTC with Taiwan, or Chinese brands Huawei, Haier, and Lenovo with China.

In an extensive review of recent PCI literature, Allman, Fenik, Hewett, and Morgan (2016) showed that the majority of recent PCI studies have focused on country effects on product evaluation or brand equity. Of the more than three dozen recent articles listed in their main literature review, only seven have focused on purchase intention or willingness to buy as the outcome of interest. Among them, Balabanis and Diamantopoulos (2011) used categorization theory to examine COO misclassification on brand image evaluations and purchase intentions. Oberecker and Diamantopoulos (2011) used consumer-identity theory to study how consumer affinity toward a foreign country influences decisions to visit it or buy products that come from there, while Koschate-Fisher et al. (2012) used equity theory to study consumers’ willingness to pay more for products with positive country images.

Several researchers have found that both brand and manufacturing affect product-quality beliefs (Kim & Thorndike Pysarchik, 2000; Srinivasan et al., 2004; Insch & McBride, 2004; Wu & Fu, 2007; Chandrasen & Paliwoda, 2009; Fetscherin & Toncar, 2010; Hamzaoui-Essoussi, Merunka, & Bartikowski, 2011; Godey et al., 2012). Beyond product beliefs, other researchers have examined the strategic implications of factors such as brand, design, and manufacturing-country decisions including Jaffe and Nebenzahl (2001) and Brodowsky, Tan, and Meilich (2004) who found that country of design and country of assembly both affect consumers’ attitudes toward purchasing products carrying both country cues in addition to their judgments and product quality. Other researchers have found similar findings concerning the effects of brand and manufacturing cues on brand equity (Fetscherin & Toncar, 2010; Hamzaoui-Essoussi et al., 2011).

In their efforts to understand the salience of COO cues in consumer-product evaluation and choices, several researchers have used conjoint analysis. Ettenson, Wagner, and Gaeth (1988) were the earliest PCI researchers to use the technique. They measured the importance of COO before and after a “Made-in the USA” campaign, finding the country cue to be far more salient afterward than before. Nonetheless, even after the campaign, the country cue remained less salient than other product attributes, including price. Conversely, Okechuku (1994), in a study involving subjects from the United States, Canada, Germany, and the Netherlands, found COO to be one of the most important attributes consu...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Citation Information
• Notes on Contributors
• Introduction: Country of Origin Effect: Looking Back and Moving Forward
• 1 How Much More (or Less) Is a Brand Worth When Made in a Low Labor-Cost Country? It Depends Upon Who and Where You Ask
• 2 Country of Origin Association in Retail and Wholesale Branding
• 3 The Moderating Influence of Country of Origin Information Seeking on Homophily and Product Satisfaction
• 4 Consumer Knowledge of Country of Origin of Fresh Food at Point of Purchase
• 5 Why Country of Origin Still Matters in Food Retailing: Implications for Promotion Management Research
• 6 Development and Validation of Consumers’ Need for Ingredient Authenticity (CNIA Scale)
• 7 Why Consumers in Developing Countries Prefer Foreign Brands: A Study of Japanese Brands in Vietnam
• 8 Revisiting Country Image – Examining the Determinants towards Consumers’ Purchase Intention of High Technological Products
• Index