Cultural Value Economic Value and Purchasing Environment - Case Study Example

Cultural Value, Economic Value and Purchasing Environment Name Institution Date 3. Conceptual framework Gold is essentially among the oldest precious metals valued as a global currency, an investment, as well as a beauty object (Joseph, 2014). In the United Arab Emirates, Gold is more than a precious metal. In fact, it has become a major economic and component of the UAE. In the country, gold-buying behavior is contingent on several determinants and moderators. The four key determinants include economic value, cultural value, and purchasing environment. The key moderators include nationality, gender, and personal income. This research seeks to explore both the determinants and moderators affecting gold-buying behavior in UAE. 3.1 Determinants 3.1.1. Economic value Gold is major economic component of the UAE. Prabhakarrajkumar and Mohandass (2014) observe that while gold has traditionally hedged against internal currencies, such as inflation, and external currencies, it is its economic value and how it influences buyers’ behaviors that matters. Dalvi (2015) also indicates that the investor or buyers’ decision process is influenced by several factors including time, wealth maximization, income tax and issues of profitability. He adds that gold is among the most valued metals because of its economic value attributes, conventional value, and high liquidity. According to Vel et al. (2011), some parts of UAE perceived gold to be a crucial symbol of prosperity and fortune. The stability of the purchasing power capacity of gold, as well as the attributes of its fundamental value ensure that it is a secure investment commodity, particularly in times of recession, which may be characterized by high risks like fluctuations of the exchange rate and inflation (Kumar & Singh, 2014). For instance, a recent study by Honey (2013) of the Indian gold buying behavior revealed that 70 percent of consumers in Cochin, India chose gold as the main investment option compared to 9 percent of consumers that went for real-estate. According to Honey (2013), gold was selected due to its stable nature since its value does not diminish significantly, as well as due to its high returns. Therefore, gold is a securer asset option, as it is a safe investment option. A recent study in India by Honey (2013) indicated that gold is an investment option in Delhi and Cochin because it is a safe investment option. The study revealed that in Cochin, 72 percent of consumers were likely to investment in gold, as it is a safe investment option, better returns, and its less risky nature compared to 67 percent in Delhi. Figure 1: reasons for gold- buying For this reason, economic value of gold influences the consumer’s behaviors. During recession, Joseph (2014) explains that consumers feel more secure buying gold. During economic downturn, currency devaluation happens due to fluctuation of commodity prices. For this reason, consumers are likely to buy gold to avoid losing the values of their investment (Prabhakarrajkumar & Mohandass, 2014). Indeed, scholarly researchers have indicated that gold can protect investment. As a result, more investors are likely to buy gold. What this implies is that emotional and cognitive also influence investment decisions. Apart from the economic value, cultural values also play a crucial role in influencing consumer’s decision to buy gold. Hence, the impact of cultural values is also highly significant when it comes to buying gold. 3.1.2 Cultural value Hofstede (2011) views culture as “human activities, or the manner in which a certain group identifies with and understands common group practices and the criterion the group applies to show value for certain things. In the United Arab Emirates, the exceptionality of gold lies in its inherent ability to carry and convey reminiscences on life, as well as create a special and long-lasting sense of identity (Vel et al., 2011). For this reason, consumer will buy gold with the intention of passing it to their children in future for purposes of heritage. In which case, an ‘attachment’ to gold is usually not necessarily solidified, as gold has often remained unacknowledged as an individualized possession. Vel et al. (2011) bases his premise on this assumption to argue that buying gold in UAE depends on its role in carrying out family and community rituals and maintaining the Arab culture. According to Tariq et al. (2007), consumer behavior is influenced by occasions like cultural heritage, festivals, religious functions, and marriage. As a result, it is the meanings embedded in these functions activities and norms that influence people to buy gold. Indeed, in the UAE, the connection of gold to cultures and the consumer behaviors, as they undertake these ritualistic activities indicates that gold-buying in UAE is ritualistic. Sequentially, the meaning gold brings to the UAE society reinforces the attachment to these functions. In India for instance, a recent study by Honey (2013) indicated that 16 percent of consumers in major gold-buying cities of Delhi and Cochin bought gold due to family traditions for gifts and religious functions (See Figure 1). In the UAE in particular, gold-buying is perceived to be a valuable ritual element consisting of diverse social events like marriages, childbirth, and festivals. Some scholars like Vel et al. (2011) have showed that gold witnesses high demand in the Middle East during Arab weddings. For this reason, the high demand for gold has been notable during the wedding festivals or seasons. During festivals, gold-buying has also been commonplace and has been linked to the drive to achieve self-satisfaction. Again, a certain culture’s rituals performed in an environment of a host culture does not automatically replicate the cultural values of the ‘host’ culture (Marco, 2004). For instance, in circumstances where Indians working in UAE enact the gold-buying rituals in UAE’s cultures, the ritual reinforces the Indian cultures. On the other hand, it does not have any influence on the Arab environment. Because of this, gold-buying in UAE can be identified to be a ritualistic behavior, which promotes an understanding of the consumer cultures while simultaneously providing knowledge on how the cultures are instituted and sustained (Tariq et al., 2007). However, the current trend of globalization is making UAE highly diversified. Hence, the highly diversified purchasing environment is influencing gold-buying behavior. 3.1.3 Purchasing Environment The purchasing environment consists of the contextual factors that influence the demand for products and services, as well as which have detrimental impacts on the physical environment (Foxall, 1995). According to Foxall (1995), the unlimited purchase of short-term reinforcements by some consumers may lead to long-term tendency to avoid a product. On the other hand, the effects that are hedonically reinforcing behaviors are likely to meet immediately, as well as directly once an action has been performed. Conversely, the environmentally damaging consequences of the behaviors are likely to meet indirectly after some time. According to Foxall (1995), the direct reinforcement of behaviors with eventually detrimental effects is highly immense, specifically hedonic, or the aversive outcomes. Comparatively open settings where such behaviors tend to occur while they become simultaneously maintained by hedonic reinforcers imply that certain behaviors are likely to be maintained or eliminated. The purchasing environment influences gold-buying behaviors. For instance, buying of gold to embrace a lifestyle in the host country falls into this category (Godbole & Arekar, 2014). These behaviors are actually sustained by the high levels of the hedonic reinforcement, such as the status symbol of owning gold jewelry. Additionally, it is strongly sustained by intermittent reinforcements, such as social approval. The issue of globalization also comes into perspective. Vel et al. (2011) also point out that the current Gulf region has been highly influenced by globalization, which has influenced gold-buying in the Middle East. The traditional tribal cultures alongside the contemporary cultures bring about and sustain a unique cultural society that aims to maintain Arab traditions, as well as to open up to new cultural changes brought about by expatriates working in UAE. For instance, today’s cultural variations, increased ethnic mix, and lifestyle changes brought about by modernization have transformed the consumers’ buying behaviors from the traditional market called “souq” to luxury shopping centers and high-end luxury stores where they can buy gold items. Changes in culture due to the effects of globalization have also been viewed to be threatening the identities of the local society. The cultural shifts have also become a driver for economic, political and social change. For instance, the Emirates currently encounter unusual rapid phase of social and economic transformations. A momentous shift in the buying behavior is occurring in the UAE at an unprecedented manner compared to two decades ago when Arabs tended to buy and consume simple items and goods that could only satisfy their basic needs, instead of those aimed at projecting their image. At present, Western lifestyles have greatly influenced Arab cultures. Subsequently, the UAE lifestyle has eventually changed as consumers have become highly knowledgeable of the luxury items like foreign made gold jewelry that project their image (Vel et al., 2011). Eventually therefore, the consumers begin developing brand loyalty through their experiences with the product. According to Tatt (2010), loyalty exists once the consumers become committed to obtaining certain brand despite the price of the brand. In UAE, it is not only the remarkable buying power that motivates the Emiratis to buy luxury goods like gold. The country topped the list over the last decade as a top destination for luxury brands. It also has some international luxury brands that potentially attract Emiratis to buy and sell gold hence providing them with a diversified portfolio targeted at the high-end customers. The concept of buying power is linked to other factor like income, which moderates gold-buying behaviors. 3.2 Moderators 3.2.1 Personal Income According to Vel et al. (2011), historically, the Middle East is a center of ancient civilization where commerce has been significant. The consumers in Middle East have continued to advance their needs, as many of them have high disposable income and the capacity to buy luxuriant items like gold. In this respect, the Arabian Gulf region is unique since it has an exceptional pattern of consumption. In particular, this is attributed to the economic advantages brought about by oil reserves, which play a vital role in ensuring that consumers in UAE have disposable income to buy gold. For instance, UAE’s economic prosperity has transferred the country’s consumers’ buying behaviors from the traditional market called “souq” to luxury shopping centers and high-end luxury stores where they can buy gold items. Vel et al. (2011) explain that the Arab consumers in the United Arab Emirates currently have improved standards of living. At the same time, their disposable incomes have averagely increased over the years. This enables them to buy luxurious items like gold. In fact, current data by UAE’s Ministry of Economy indicates that the nation’s gross domestic product (GDP) has increased by a clear 16 percent from AED168,900 during the year 2007 to AED196,100 during the year 2008. This is almost double the amount witnessed during the year 2003 when the country had AED 90, 400. Additionally, in the face of the 2008-2009 global financial, the country’s GDP persistently grew markedly by 2 percent to 4 percent during the recession (Vel et al., 2011). This persistent economic development enables the Emiratis to maintain high disposable incomes (Kumar & Singh, 2014). Hence, it is indicated that while the rest of the world, such as consumers in the United States, cut their basic expenditures, the consumers in the UAE continued to buy gold. The United Arab Emirates has, over the years, earned a reputation for being a luxuriant destination for individual aspiring to live in luxury. A 2010 study shows that wealth per adult in the UAE is nearly $150,000, which is greater than that of developed economies like the Netherlands. This indicates the high purchasing power of the people in the UAE (Vel et al., 2011). As Vel et al. (2011) reveal, Dubai has witnessed major growth of the luxury market relative to the country’s economic growth and retail per capita increase. Hence, consumers have tended to almost automatically devote a considerable amount of their income on gold because of the environment. When the high income consumers obtain gold, they link it to a brand meaning to society. In UAE for instance, serious purchase of luxury items begins when individuals are 20 years old, relative to 40 years old in Europe. This implies UAE has 20 more years of luxury power than Europe. Hence, when the middle-income group gets more exposure to the “elite” market, it starts to adopt and buy gold as well. Still, the buying power or income is not the only factors influencing gold-buying, as other factors like nationality also play a role. 3.2.2 Nationality According to Marco (2004), the concept of nation is suitably used as a proxy for culture, as the members of any particular nation are inclined to share the same history, sense of identity, language, religion, institutional systems and a sense of identity. Indeed, Marco’s (2004) study of variations in Cultural Values between different Eastern and Western nations indicated that nationality is indeed a predictor of cultural values. Marco (2004) used this premise to apply nationality in conceptualizing cultures, as well as to indicate the general cultural differences that Cultural Values may not captures. The concept of nationality has been widely explored by Hofstede leading to conceptualization. The five dimensions include uncertainty avoidance, individualism–collectivism, power distance, long-term orientation, and masculinity–femininity (Soares et al., 2007). Regarding Individualism–collectivism, in individualistic cultures like in the United States, consumer tend to prioritize individual needs while in collectivistic cultures, consumers tend to prioritize group belonging (Hofstede 2011). The Arab society is essentially a collectivist society. In which case, to be a part of a collective society, an individual has to conform and show commitment to an in-group. Tatt (2010) argues that in the modern-day, this implies embracing the luxurious lifestyle. Vel et al. (2011) explain that this behavior remains a leading reason for the augmented preference for luxurious items, such as gold in the UAE. Vel et al. (2011) suggest that the UAE society values display of wealth, where consumers are tempted to buy gold items to improve their social status. This is different from the Western cultures, such as in the United States, where the society is driven by individualist culture. People are individual-oriented rather than social-oriented. For this reason, consumers in the United States are more likely to buy gold for other reasons (such as economic value of gold) other than maintaining a social class than in the UAE. According to Vel et al. (2011), UAE consumers are intrinsically bound in the collectivist national cultures, which make them be social-oriented. Therefore, they are highly prompted to maintain their class and exclusiveness. Vel et al. (2011) add that the Emiratis tend to be specifically concerned about the impression they make on other people. Hence, they are likely to consume luxuriant items to gain approval into a collective group or society. For this reason, consumers will tend to buy gold primarily to satisfy a need to be associated with a certain larger group (Marco, 2004). For instance, individuals considered to be in a higher social class are likely to buy gold to gain approval into the group. Additionally, those in the higher economic status are expected to buy branded products that express their affluence and associate with a social group. Vel et al. (2011) comment that in such countries, social brand image is significant and the Arabs in the UAE will tend to buy gold to portray their status or be accepted into a collective group. Vel et al. (2011) also argues that the UAE bases its cultures on its rich traditions and histories. Marco (2004) defines it as an anticipating society that envisages its future based on new cultures while simultaneously binding its consumer behaviors to its strong cultures and heritage. Internal factors also influence the consumer behaviors of gold-buying in Emiratis. For instance, the Arabs in UAE perceive the family to be a highly significant institution and, therefore, base its consumptions on family influences. To this end, many UAE families often influence the purchasing decisions on gold. Tatt (2010) defines such influences as internal influencers. Vel et al. (2011) also opine that in the Arab society, the family unit remains a central pillar compared to other factors like religious beliefs. Consequently, when it amounts to buying gold, the family strongly influences the decision, as buying gold would reflect the respectability of the family in the society. Hence, issues of family also points to the role of gender in moderating gold-buying behavior. 3.2.3 Gender Kumar and Varadaj (2013) demonstrate that gender influences gold-buying behavior. When it comes to gender, the researchers argue that emphasis is placed on how males and females fit into the broad social context and how this context influence consumer response to certain products in the market (Kumar & Varadaj, 2013). Vel et al. (2011) also linked gender to gold buying behavior, where men tend to restrict their purchases while women tend to buy luxurious items like gold impulsively. However, it is a study by Iqbala and Ismail (2011) that appeared to offer more comprehensive results. In his findings, women are more open to interpersonal influences from their peers, fashions, traditions, and lifestyle compared to men. Women also have stronger purchase motivations. In which case, gold impacts women’s tendency to identify to certain groups, as well as to affiliate, and conform to group demands. Therefore, the social factors influence women’s tendency to purchasing of gold. A study by Kumar and Varadaj (2013) also revealed that women were more likely to buy luxuriant items based on influences from their friends, and the media compared to the male consumers. A recent study by Kumar and Varadaraj (2013) also revealed that women tended to enjoy shopping for luxurious items in spite of their social class. Despite this, reasons for enjoyment varied among the social classes. While all classes enjoyed the social and recreational aspects of buying luxuriant items, the higher classes found buying luxuriant items more enjoyable. Again, those in the upper and middle-class women tended to shop more frequently. For this reason, it could be reasoned that women are actively engaged in buying gold jewelry and items. Kumar and Varadaraj (2013) cited a study by World Gold Council, which listed India as the leading market for gold jewelry globally. According to the study, India’s gold consumption was nearly 746 tons in 2010 alone. Additionally, 75% of the women acknowledged being actively in searching for new gold jewelry designs. References Dalvi, C. (2015). Consumer Buying Behaviour Relating to Purchase of Gold in Kolhapur City. Economic and Business Review 3(2), 260-264 Foxall, G. (1995). Environment-Impacting Consumer Behavior: An Operant Analysis. Advances in Consumer Research 22(1), 262-268 Godbole, S. & Arekar, K. (2014). Retail Investors and Gold Buying Behaviour – A Perpetual Study of Indian Retail Investors. Accounting and Finance Research, 3(4), 99-104 Hofstede, G. (2011). Dimensionalizing Cultures: The Hofstede Model in Context,” Online Readings in Psychology and Culture, 2(1), 1-26 Honey, M. (2013). Gold and Consumer Behaviour – A Comparative Study Of Cochin And Delhi. 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