Country-of-origin: A useful marketing tool?

Content

Introduction

Country image
The concept of images
Input factors of country images
Marketing implications
Measurement problems

COO across product categories
Product-country matches and mismatches
Marketing implications
Special role of Japan

Consumers’ use of COO
Risk reduction
Ethnocentrism

Decomposition of COO

Critics

Conclusions

References

Introduction

“At the cash register, you don't care about country-of-origin or country of residence You don't worry about where the product was made. ... All you care about is the product quality, price, design, value, and appeal to you as a consumer.”

This quote is from Kenichi Ohmae, McKinsey’s leader in Japan (Ohmae 1989, p. 144). In this paper, In this paper, I want to take issue with the statement and show why Ohmae is wrong and why the country-of-origin is important for purchase decissions.

Country-of-origin (COO) analysis focuses on buyers’ opinions regarding the relative qualities of goods and services produced in various countries.

Origin cues are available to consumers in a far broader set of circumstances than is usually realized or acknowledged. Some of the main manifestations of the origin cue can be categorized as follows:

- Embedded directly into the company name or brand name: e.g., Norsk Hydro, Telenor, Alitalia airline.
- Indicated indirectly through the brand name: e.g., Lamborghini is Italian and Toyota is Japanese, although neither brand contains the respective country’s name.
- Inc luded as the centerpiece or a part of package design: a nation’s flag, flag colors, or some other internationally recognized symbol (e.g. Viking hats, Australian Koala, Eiffel Tower) as a print on or form of the packaging.
- In connection with the company's sales staff: e.g., by wearing traditional costumes in Bergen’s tourist shops or at trade fairs.
- Written on the made-in label.

This list is partial but enough to make the point: product origin information is provided to consumers through hundreds of thousands of brand and company names, promotional messages, product labels, and other means, whether directly or through symbolism. The images of countries and their relationships with products are an integral part of daily life.

“Made in“ labels as such have been used to identify product origins for at least 100 years. But the practical use of country-of-origin identifiers became important with the international trade explosion that followed the Second World War. Many of the country/product images now spread through practically all social ranks and influence the attitudes of, hundreds of millions of buyers.

There are product-specific characteristics which may be linked strongly to country-of-origin which involve for instance specific design or workmanship skills. These have been linked historically to certain countries. This might be used by consumers to reduce risk in purchasing. Some examples are the skills and technologies associated with the production of Persian carpets, Scandinavian design of furniture, French or Italian design in clothing, U.S. know-how in the production of military equipment and so on. Sometimes it is the raw materials that a country produces, which creates a comparative advantage for the production of certain products (e.g., Colombian coffee, Canadian furs, French wine, or South African diamonds).

Even when they are not expressed as country-of-origin, the decision criteria used by consumers may lead to country-related choices.

Country image

In general the country image as reflects consumers’ general perceptions about the quality of products made in a particular country and the nature of people from that country.

One of the first conceptualisations of the country-of-origin phenomenon was that of Nagashima (1970). He defined the image that consumers associate with a given country-of- origin as “the picture, the reputation, the stereotype that businessmen and consumers attach to products of a specific country. This image is created by such variables as representative products, national characteristics, economic and political background, history, and traditions (p.68).” Most researchers acknowledge COO’s role in overall product evaluation. So the COO acts as a proxy for other, more intrinsic, qualities, which are difficult to discover for consumers.

Intrinsic cues involve the product's physical composition, including such quality attributes as reliability, operator convenience, flavor and fit. Extrinsic cues are external, but related, to the product, such as price, brand, warranties, and country of design, manufacture and assembly.

Buyers use these extrinsic cues as the basis for their evaluations of product quality because it is often difficult for them to recognize a product’s true intrinsic quality.

The concept of images

Now I want to have a closer look on the nature and meaning of images, their functions. According to Papadopoulos (1993, p.5) the functions of images include the classification of objects, the development of element hierarchies and the symbolization of elements or objects and of the bundles of attributes that characterize them, which facilitates recall.

The images of objects result from people’s perceptions of them, which will be different for each individual. Therefore each object has a different image for each individual observer but you can probably observe similar perceptions within the same cultural group because the group members are all culturally conditioned in the same direction of perception. Hofstede (1991, p.5) defines culture as “the collective programming of the mind which distinguishes the members of one group or a category from those of another.”

This will lead to the stereotyping of objects. People use it as a means of coping with the world around them. Stereotyping begins in the form of abstract generalizations from a limited number of observations. The stereotype is likely to move closer to something that might be called “objective reality”, if the number and intensity of observations about the object increases. The use of stereotyped images by sellers and buyers may make their decisions easier.

Input factors of country images

There is also some research which tried to identify the inputs to origin images. The study of Wang and Lamb (1983) was explicitly designed to eliminate the effect of product influences so that the result would reveal environmental influences independently. They investigated whether consumers' readiness to accept foreign products is influenced by the environmental conditions that exist in the product's country of origin. Specifically they wanted to find out, if

U.S. consumers' willingness to buy foreign products is influenced by the culture, political climate, and level of economic development of the products' country of origin? In this research, the environmental influence of 36 countries with variations in the dimensions of socio-economic development, political climate, and culture was tested with a sample of 500 randomly chosen people.

The results provide evidence to suggest that U.S. consumers’ willingness to buy foreign products may be partially explained by variations in the economic, political, and cultural environments of products’ country of origin.

Based upon these findings, Figure 1 illustrates an environmental segmentation model composed of 54 (3x3x6) distinct environmental segments. Every individual country belongs to one of the 54 segments.

Figure 1 : Environmental Segmentation Model

illustration not visible in this excerpt

Source: Figure 1, Wang/Lamb; p. 80

Specifically, the findings indicated that U.S, consumers were most willing to buy products from highly economically developed and politically free countries with an Australian, New Zealand, or European culture. Products from countries in the shaded segment enjoy the highest consumer acceptance. And the closer a segment is to this shaded optimal segment, the more willing are consumers to buy products from these countries.

The findings of Wang and Lamb also support White and Cundiffs (1978) conclusion that firms interested in exporting to the U.S. should consider the bias phenomena when selecting production facility locations. They note that, although this clearly is not a determining factor in location decisions, the implications for marketing in highly competitive industries should not be ignored.

Marketing implications

How could these results be used for actual marketing acticities? Let’s take a seller who knows that products from the home country are perceived favorably. Then he or she may want to emphasize the country of origin in advertising. Alternatively, if products from a particular country of origin are perceived unfavorable, the seller may want to gloss over the country of origin. Packaging and labeling strategies might also be developed based upon these results.

One could now argue that this study is rather old and outdated. Of course, in the last 17 years a lot of things in the economic and political environment has changed and COO effects are not stable as perceptions change over time. Country images will change when consumers become more familiar with the country, the marketing practices behind the product improve over time, or when the product's actual quality improves. A classic example therefore are Japanese-made cars where COO effects took a 180° turn during the last couple of decades, from a very negative to a very positive country image.

But I think, that’s not the important point here. What is really remarkable about that study is that it shows that consumers’ willingness to buy foreign products may be partially explained by variations in the economic, political, and cultural environments of the country of origin of a product.

Measurement problems

In this case it was also intended to use the single-cue approach, as Wang and Lamb were only interested in identifying inputs to origin images. But in general there is no question that any study which attempts to measure the effect of any one cue, independently of others, on buyers’ preferences, will overestimate its importance. This will be true regardless of whether the single cue that is presented is origin, brand, price or any other variable.