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Country-of-Origin Effects and Competitive Advantage

The Role of a Country's Image with Respect to the Positioning Process of International Firms within the Framework of Global Marketing Strategies

Seminar Paper 2011 27 Pages

Business economics - Business Management, Corporate Governance

Excerpt

Table of Content

List of Figures

List of Tables

List of Abbreviations

List of Symbols

1. Introduction

2. Literature Review and Conceptual Background
2.1 Differentiation of Country-of-Origin and Country Image
2.2 Impacts of Country-of-Origin on Product Evaluations
2.3 Conceptualisation and Operationalisation of Country Image: The Three Component View

3. Implications of Country-of-Origin Effects for Global Marketing Strategies
3.1 Implementation of Country-of-Origin as a Competitive Advantage
3.2 Categorisation Problem: Effects of Country-of-Origin Misperception
3.3 Country-of-Origin Implementation Difficulties due to Ethnocentrism
3.4 New Approaches and their Impact on Country-Labelling

4. Managerial Implications and Conclusion

5. Recommendations and Future Research

List of References

List of Figures

Figure 1: Country-Image Discourse Model

Figure 2: Consumer Ethnocentrism-Disidentification-Model

Figure 3: Integrative Framework of CoO and CoI

List of Tables

Table 1: Overview of Empirical Studies about CoO and CoI

Table 2: Image Ratings of Russia and Germany by People in the US

Table 3: 2x2 Matrix of Hypothetical Cars with two CoOs

List of Abbreviations

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1. Introduction

Due to globalisation consumers are able to choose from a great variety of products from all over the world. What is decisive for marketing managers is to understand on which criterion consumers base their purchase decision. One suggestion is that consumers’ product evaluations and the resulting behavioural intentions are influ- enced by the product’s origin (Agrawal/Kamakura, 1999, p. 255). Schooler (1965, p. 396) was the first to analyse empirically that the place of manufacturing plays a role in consumers’ product evaluations. The so-called Country-of-Origin (CoO) construct emerged and caught the attention of plenty of researchers. After the publication of Schooler’s study, numerous papers analysed this construct empirically in order to assess the impact of CoO on consumers’ product evaluations (Perterson/Jolibert, 1995, pp. 883-884). In this respect, product evaluations include consumers’ attitude towards the quality of the product and the brand itself, their assessment of the pro- duct’s attributes as well as consumers’ purchase intention (Agrawal/Kamakura, 1999, p. 255). This whole body of research proposes that consumers make use of an informational cue in the process of evaluating a new product, namely, CoO (Gürhan-Canli/Maheswaran, 2000a, p. 309). Since CoO seems to play a role in con- sumers’ product evaluations it may be concluded that international marketing ma- nagers aim at influencing their country image positively in order to attract consumers (Reirson, 1966, p. 40). The question arises whether they should base their strate- gies on the concept of CoO. It is therefore the purpose of this paper to analyse the construct of CoO in detail in order to examine and evaluate its importance for mar- keting managers and to answer the question whether it may constitute a competitive advantage in the international market place.

To begin with, this paper provides a definition of CoO and a related construct, called the country-of-origin image (CoI), in order to then present an overview of empirical studies on the effects of CoO. The studies are discussed with respect to their validity and several problems in CoO research are revealed. Next, an integrative framework for conceptualising and operationalising CoI will be analysed. In the third chapter, the role of CoO for international marketing strategies will be examined by discussing competitive advantages based on CoO, the problem of categorising and ethnocen- trism. Moreover, the relevance of CoO will be evaluated and an alternative approach will be examined. In the fourth chapter, managerial implications resulting from the analysis of CoO in this paper will be discussed ending with a conclusion. Finally, based on the analysis in this paper areas for future research will be highlighted.

2. Literature Review and Conceptual Background

2.1 Differentiation of Country-of-Origin and Country Image

Conventionally, CoO effects are referred to as the influence of the manufacturing place on the product evaluation (Gürhan-Canli/Maheswaran, 2000a, p. 309). In other words, this concept assumes that consumers evaluate products differently depending on the country in which the product has been manufactured. Thus, con- sumers are inclined to apply CoO as an extrinsic cue in evaluating a products’ quali- ty (Agrawal/Kamakura, 1999, p. 255). Therefore, “a product’s national origin acts as a signal of quality and also affects perceived risk and value as well as likelihood of purchase” (Roth/Diamantopoulos, 2009, p. 726). According to Roth and Diamato- poulos (2009, p. 726), previous research simply concentrated on a product’s nation- nal origin. However, a new and more complex construct emerged, namely CoI. While CoO refers to the question whether consumers prefer a product from, for in- stance, Germany compared to the United States, the image of a country helps re- searchers to understand why this might be the case. As a result, the number of re- searchers intending to assess CoI increases (Roth/Diamantopoulos, 2009, p. 726). According to Nagashima (1970, p. 68), the image of a country can be defined as “the picture, the reputation, the stereotype that businessmen and consumers attach to products of a specific country”. The country image may be the result of, for in- stance, products typical for that country or historical, economic and political aspects (Nagashima, 1970, p. 68). In order to understand CoO and CoI effects, an overview of empirical studies will be presented and discussed in the next section.

2.2 Impacts of Country-of-Origin on Product Evaluations

By reviewing the literature on CoO effects it becomes obvious that a huge body of empirical research exists and that its impacts are well known. Schooler (1965, p. 396) conducted the first empirical study about CoO and proved that consumers in- deed rate identical products differently based on the CoO. In order to present an overview of empirical research on CoO, Table 1 presents a summary of several stu- dies ranging from 1965 to 2009. With respect to the methodology most studies made use of Confirmatory Factor Analysis (CFA) or Analysis of Variance (ANOVA). The average sample size is 358.23 which is in line with sample sizes in cross sec- tional research (Roth/Diamantopoulos, 2009, p. 733). By looking at the results an unambiguous conclusion regarding CoO can be drawn, namely, that it has an im- pact on brand/product perceptions, beliefs and attitudes (Häubl, 1996, pp. 84-89; Erickson et al., 1984, pp. 698-699), perceived quality (Han/Terpstra, 1988, pp. 241- 248; Balduaf et al., 2009, pp. 446-449) and evaluations (Reirson, 1966, pp. 35-40; White/Cundiff, 1978, pp. 83-84; Hong/Wyer, 1989, pp. 180-183; Roth/Romeo, 1992, pp. 485-493; Verlegh et al., 2005, pp. 133-136) and that certain aspects interact to moderate the CoO effect on product evaluations (Gürhan-Canli/Maheswaran, 2000b, pp. 104-105).

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Table 1: Overview of Empirical Studies about CoO and CoI Source: Own Illustration.

Only one study came to the conclusion that the effect of CoO is less significant than assumed (Johansson et al., 1985, pp. 393-395). To sum up, Table 1 clearly indi- cates the existence of the CoO effect; however, CoO seems to be more significant with respect to attitude formation and perceptions rather than actual purchase beha- viour (Agrawal/Kamakura, 1999, p. 265). Nevertheless, the applicability of these studies to real world situations has to be treated with caution. Most of the studies presented consumers a particular CoO and ask whether they would buy the product and how they evaluate the product. There are two problems related to this proce- dure. First, only because respondents say they would buy the product it does not imply that they do so in reality (Sun/Morwitz, 2010, p. 356), because actual pur- chase behaviour is normally not decided that quickly, at least not for expensive products or products consumers do not buy every day. Second, in a real world situa- tion buyers are often unaware of the CoO and therefore, the effect may not appear (Samiee, 1994, p. 586). This problem will be discussed in more detail in part three of this paper. Additionally, Table 1 shows other problems related to CoO research. First, most of the studies were conducted in the USA (Roth/Diamantopoulos, 2009, p. 728). Second, the majority used merely one nationality; only three of the studies in Table 1 (Johansson, 1985, p. 390; Roth/Romeo, 1992, p. 484; Häubl, 1996, p. 82) tested their scales in more than one country. Third, many studies do not report vali- dity and/or reliability tests. Out of the 13 studies presented in Table 1 only four re- port reliability assessments and only three validity tests. This result reflects the gen- eral lack of reliable studies in the literature (Roth/Diamantopoulos, 2009, p. 733). Thus, it can be concluded that the CoO effect seems to exist, but cross-national surveys that test for reliability and validity should be conducted in order to avoid the above mentioned problems. Thus, the following chapter discusses in detail how CoI can be conceptualised and operationalised by presenting an integrative framework.

2.3 Conceptualisation and Operationalisation of Country Image: The Three Component View

While the last section discussed problems of empirical studies measuring CoO ef- fects, the focus of this section is to understand the underlying conceptual framework of the CoI construct. Even in the literature this distinction seems to be ambiguous. The reply of Samiee (2010, pp. 442-445) to Roth’s and Diamantopoulose’s (2009, pp. 734-737) suggestion on how to operationalise CoI demonstrated explicitly this misunderstanding. Therefore, Zeugner-Roth and Diamantopoulos (2010, p. 449) strongly recommend not to confound CoO and CoI and their respective focus of re- search. Based on this advice, the following part discusses an integrative framework developed by Brijs et al. (2011, in press). As mentioned above, CoO is understood as another extrinsic cue because it may be manipulated even though the product itself remains the same (Verlegh/Steenkamp, 1999, p. 523). However, “country-of- origin is not merely a cognitive cue for product quality, but also relates to emotions, identity, pride and autobiographical memories” (Verlegh/Steenkamp, 1999, p. 523). With regard to the internal structure of CoI, researchers therefore argue that it is composed of three facets: a cognitive, an affective and a conative component (three component theory). Cognitions refer to consumers’ perceptions of the country; affect represents emotional values associated with that country and conations include planned action, for instance purchase intention. Since these three components in- teract with each other, modelling them separately would lead to wrong conclusions (Roth/Diamantopoulos, 2009, pp. 733-734). Nevertheless, Roth and Diamantopou- los (2009, p. 734) found out that most empirical studies merely focus on the cogni- tive component of CoI and that research in general lacks studies that consider the three component view (Roth/Diamantopoulos, 2009, p. 736). Researchers rather tend to operationalise CoI in form of a dummy variable, a holistic network, a con- struct of beliefs or attitudes. However, all these tools disregard the underlying struc- tural interdependence of the cognitive, affective and conative component of CoI. Another problem arises when it comes to the question of how consumers employ CoI. None of the existing theories can explain in one model how CoI is antecedent to consumers’ product evaluations (Brijs et al., 2011, in press). To date, researchers explain CoO effects by three different mechanisms, namely, cognitive, affective and normative. The first states that consumers use CoO as a sign for quality, the second assumes that CoI directly influences product attitude through aspects such as fee- lings or symbols. Lastly, normative mechanism suggests that people make judge- ments about a product based on whether CoI suits their norms and values (Ver- legh/Steenkamp, 1999, p. 524). Since no theory is able to explain CoI as an antece- dent of product evaluations in one model, Brijs et al. (2011, in press) developed a framework that integrates the three component view and the semantic and prag- matic dimension of CoO in order to explain meaning, internal structure and function of CoI. They base their argumentation on the meaning-centered paradigm as well as on semiotics. According to the meaning-centered paradigm, consumers’ behaviour is influenced by the meaning and symbolism they associate with the product. Semio- tics or discourse theory assumes that consumers communicate with products by interpreting certain signs such as icons or colours of the product. These signs are composed of two aspects, a semantic and a pragmatic aspect. The first is the mea- ning of the sign given by the consumer who interprets the sign and the latter des- cribes the intention of the consumer to use this meaning (Brijs et al., 2011, in press).

Based on these theories and the three component view of CoI, Brijs et al. (2011, in press) developed the country-image discourse model shown in Figure 1.

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Figure 1: Country-Image Discourse Model

Source: Adapted from Brijs et al. 2011, in press.

Brijs et al. (2011, in press) conducted a study with 1225 students in order to test their model and in fact, they were able to demonstrate reliability as well as discrimi- nant and convergent validity of the framework. According to their model, the cogni- tive component of CoI positively influences the affective as well as the conative component. The affective component in turn, exerts a positive influence on the co- native component (Brijs et al., 2011, in press). The three components relate to the pragmatic dimension of CoO and beliefs, evaluation and purchase intention result, respectively. This process can be explained by the theory of reasoned action. Indi- viduals’ beliefs about a country develop by gathering relevant information about the country. Based on these beliefs, feelings and emotions with respect to this country emerge and lastly, individuals take actions consistent with their beliefs and percep- tions (Roth/Diamantopoulos, 2009, p. 735).

The study of Brijs et al. (2011, in press) also helped to answer three important ques- tions, namely: what CoI really means to consumers, how CoI is internally structured and how CoI functions. While questions one and two report to CoI (the meaning), the third question relates to the product attitude (the purpose). In respect of the first question, they demonstrated that CoI is composed of the three components cogni- tion, affect and conation towards environmental aspects of the country. These envi- ronmental aspects are language, climate, politics, cultural identity, landscape, politi- cal and technological development, religion, and people.

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Details

Pages
27
Year
2011
ISBN (eBook)
9783656009245
ISBN (Book)
9783656009092
File size
803 KB
Language
English
Catalog Number
v178713
Institution / College
University of Hohenheim – Lehrstuhl für Unternehmensführung
Grade
1,3
Tags
Country-of-Origin Country Image Herkunftsland Ethnocentricsm Discourse Model Consumer Disidentification Nation Brands Index Competitive Advantage Internationales Marketing Marketing Marketingstrategie Wettbewerbsvorteil

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Title: Country-of-Origin Effects and Competitive Advantage