Consumer behavior analysis of Chinese Auto Industry against foreign giant companies

Table of contents

1. Introduction

2. Background

3. Research Question

4. Research Aim

5. Research Objectives

6. Literature Review

7. Research Method

8. Research Limitation

1. Introduction

The automotive industry in China is the biggest in the entire world based on the per unit production of this industry back in 2008. The total annual automobile production in China was much more than of Japan, US and the European Union in the year 2009. Around 44.3% of the total automobile production was of the local brands whereas others were manufactured by joint ventures with the foreign producers like Volkswagen, Hyundai, Honda, General Motors, Nissan, Mitsubishi, and Toyota. The home market in China provides a very strong base to the automakers and the economic planners in China are hoping to establish auto companies that are globally competitive (Zhao, 2009).

The automobile industry of China mainly had Soviet origins and the initial 30 years of the nation produced small volumes only. China was found to produce more than 2 million vehicles in 2000. The national automobile industry of China had grown by 21% on an average from the year 2002 to 2007. The production capacity of China was much more than 7 million in 2006 and by 2007; it was producing around 8 million automobiles. In the year 2009, the production was around 13.79 million vehicles out of which 8 million automobiles were passenger cars and around 3.41 million were found to be commercial vehicles. In the year 2010, both the production and sales exceeded 18 million units, which were the highest in the history of automobile industry. In 2009, there were about 62 million registered trucks, vans, buses, and cars in China which is expected to reach 200 million by the year 2020 (Amighini, 2012).

In the year 2010, China was known to be the biggest global exporter of automobiles and the 2^nd largest country globally after the United States. China attracted joint ventures and foreign direct investments. Foreign brands played a significant role in affecting the manufacturing and consuming sector of this economy. It helped in providing great diversity in designs, attractive appearance, quality, and choice within the consuming sector. These brands also alleviated the shortfalls in the consumer goods existing bds in a large number of product categories.

This research study aims at making great contribution to the existing literature on country of origin concept from the viewpoint of the Chinese customers. This study will specifically investigate two key points. Firstly, the significance of the manufacturing nation of the product compared to the attributes of the choice of the Chinese consumers and secondly, the relative significance of the country image aspect of the consumer’s preference of the foreign goods.

It is important to conduct a systematic investigation regarding the concept of country of origin in the developing countries as it has its effects on the exporters, foreign manufacturers, domestic manufacturers, marketers, and various channel intermediaries wishing or doing business in such countries. It also has its effect on the policy makers and government of the developing nations trying to develop domestic manufacturing competencies during intense competition from the foreign brands and also for the academics that are interested in comprehending the behavior of the consumers in the developing countries (Barbosa, 2010).

2. Background

China is known to be the world’s biggest consumer and producer of automobiles even though the behavior of Chinese consumers within this market is not studied adequately. This study will investigate the significance of country image and country of origin for evaluation of the Chinese consumer and their purchase intentions for automobiles. The respondents who were surveyed came from ten of the Chinese cities. A conjoint analysis had been done to determine the significance of the country of origin compared to the other attributes for making preference judgments. Multiple regressions were used for determining the significance of country image in making the purchase decisions. It had been found that brand name and country of origin are equally important and are more important compared to safety, reliability, and price in making product evaluations. In addition, workmanship, reliability, and superior prestige were more significant reasons for the Chinese respondents to prefer foreign automobiles compared to the Chinese brands (Chiu, 2011).

3. Research Question

Is Chinese auto industry surviving despite the growing competition by foreign auto industry brands? Are Chinese consumer behavior perceptions and preferences leaning more towards Chinese companies than that of foreign companies?

4. Research Aim

The main aim of this research is to examine current situation of Chinese auto industry and the factors which have contributed on the success of immense growth rate of Chinese auto industry confronting sever competition from foreign automobile companies.

5. Research Objectives

- To study the current Chinese auto industry and the growing competition in the industry
- To evaluate the concept of consumer behaviour and the factors impacting the consumer buying behaviour with respect to auto industry
- To review various literatures and academic published in the context of consumer behaviour and Chinese auto industry
- To study the factors which may hamper the growth of Chinese auto industry as a result of growing foreign giant companies

6. Literature Review

According to Batra (2009) consumer behavior is all about the study of organizations, groups or individuals and the processes used by them to secure, select and dispose the ideas, experiences, services and products for satisfying the impacts and needs made by such processes on the society and consumers. It helps in comprehending the buyer’s decision-making process both in groups and individually. It also helps in studying the individual consumer characteristics like behavioral and demographic variables to understand the wants and desires of people. It also helps in assessing the impact on the consumers from groups like society, reference groups, friends, and family (Batra, 2009).

Studying the behavior of customers depends on the buying behavior of the consumers as they play three different roles of being the buyer, payer, and user. Research studies have proved that it is difficult to foretell consumer’s behavior. Consumer retention, one-to-one marketing, customer customization, personalization, and relationship management are also greatly important. Social functions are divided as welfare functions and social choice. Homogeneity, unanimity, monotonicity, anonymity, neutrality, and decisiveness are the key specifications of a social function. Identifying the interactive effect of the alternatives and establishing the logical association with ranks is the most significant feature of social functions (Berkman, 1997)

[...]