Counterfeiting and Pricing in China and UK - Dissertation Example

? Counterfeiting and Pricing in China and UK Chapter 2 - Literature Review: 2.2 Counterfeiting vs. High Street Fashion: Counterfeiting a product is atype of cheating the consumers. “Counterfeiting is such a problem in China that it may drive away some foreign investors that manufacture designer label goods, companies warn. They say that despite efforts by the authorities, they were still losing millions of dollars in revenues because of availability of counterfeit products” (International Management, Phatak, 2006)” (Designer Concern Over Mainland Fakes Threatens Future Investment 2002). Now a day, fashion industry is seen using the counterfeit products on a large scale. More number of designers is using the style and color of the same product which are being designed by the other designers. Girls of young age are attracted towards it, as when different colors emerge of the same design. Such consumers believe that the label name, brand name, and recognizing characteristics of design such as color, logo, outline, and models are very precious. Consumers will have the difficult dilemma whether they use a counterfeit product or an original. Fashion counterfeits may perform as a risk-free test form, make attention between consumers, and create them increase constructive word-of-mouth to other customers. When compared fashionable products to physical appearances, the customers will choose either the counterfeit products or the original one depending on the convenience for shopping, or income as both offer a better appearance irrespective of its product and service quality. “Counterfeiters serve customers who aspire to own luxury goods but who are unable or unwilling to pay for the real thing” (Han et al. n.d.). Consumption of luxury goods is high in the United Kingdom. It is anticipated that about one-eighth of consumers in the United Kingdom buys counterfeit luxury products and the greater part of these buyers also buy legitimate luxury commodities. The purchasers are choosing for luxury products for the brand icon as well as for the usage of products. The consumer‘s most important inducement for purchasing these branded commodities is to position themselves in the society. Consumers are inclined to buy counterfeit products from market places, even though about thirty percent of consumers purchase from auction sites in internet such as eBay. A greater part of counterfeit commodities bought in the UK are purchased after the importing of those commodities into the country. The majority of clients buys counterfeit products deliberately; while some consumers have been mislead to purchase counterfeits as they supposed were legitimate at the point of sale. 2.3 Mass Production of Counterfeit Products: Products in huge demand can be produced on the basis of the equal or similar features, often enclosed and branded in means to create them indifferent from the existing one. “The most popular counterfeit market is clothing, followed by shoes, watches, leather goods, and jewelry. Louis Vuitton, Gucci, Burberry, Tiffany, Prada, Hermes, Chanel, Dior, Yves St Laurent, and Cartier are frequently pirated. Knockoffs of fashion brands are usually manufactured in China, South Korea, Taiwan, and South America.” (Ritson 2007). The counterfeit products are then sold through counterpart markets, or even familiarize into the product supply series. Without the expenses of the other similar products, the counterfeits are rated particularly with regard to the competitors. Owing to the viable circumference, in a number of marketplaces in some division of the world, counterfeit goods are faraway more widespread than the previous products. When compared to UK with regard to the counterfeit products, half of the unsafe products come from china. “Counterfeiting requires advanced and costly production equipment is seen as limiting the number of parties that would engage in infringing activities. For example, the automobiles or products of similar complexity are difficult targets for counterfeiters, even if they can utilize cheap labor and substandard parts for production. This follows, since the production requires special and costly equipment (Peter Averey, 2008)” The activity of counterfeiting of the product does not include in production. Simply packaging or labeling the product did not break the rule. The products which are produced and transferred from one country are being repacked and transferred to another country. The advancement in the technology has lead to the mass production of the fake products. Technology enlargement have helped the unlawful and illegal manufacturers the right to produce the product again and again.  2.4 The Professionalization of Genuine Shope: In china and UK, they employ special investigation team to found out the shops which sells the counterfeit products. Unsafe counterfeit goods are always taken place in the news headlines to make the customers aware about the issues. “MU registration can prevent the fake products from coming into the UK and MU affiliated stores across the world.”(Yang, 2003) This is prominent and evident in the designer wears. The customers are cheated in all the ways by the unlawful manufacturers. There are shops functioning on the corner of the cities which are doing illegal businesses. The customers can make an easy test to make certain that the shopping in designer clothes shops online or direct marketing is genuine. While the customers are shopping online, the professionalism of the site will provide a design about the professionalism of the designer clothes shop. Well organized websites will provide the widespread online shopping services. If there is any doubt the customers can directly always make sure that the website provides clear contact details, with a contact number and an address. Designer clothes shops having provisions on the high street as precisely as an online shop signify that the shop is trustworthy and genuine and deal in a respectable name. When the customers are purchasing from a market place there are the possibility that they will buy the counterfeit products. There will be sign that the cost of the product will be down, the tag could be defined wrongly and a reduced symbol be supposed to provide the counterfeit away.  The customers will get those products that they are given the price. If he/ she want a genuine product he needs to purchase at the professionalized and well reputed shops. They could found the well reputed brand products at reasonable online rates and seem out for online exclusive tender at well established online sites. If the customers are shopping the products through online websites which they are never heard before, they have the right to examine whether the website is established one or not on the basis of the various counterfeits manufacturers operating in China.   2.5 Consumer Behaviour: Consumer behaviour is the action that the consumers buying and using the product or services. It is a social and mental process. Consumer behaviour is “the study of individuals, groups, or organisations and the processes they use to select, secure, use, and dispose of products and services, experiences or ideas to satisfy needs and the impacts that these processes have on the consumer and society” (Consumer Behaviour: The Road to Effective Policy-Making n.d.). The behaviour of consumers is entirely different from each other. In the counterfeited market the behaviour of consumers is involved in many factors they the attitudes of consumers, social status, image etc. The consumers having high preference with low budgets regard as counterfeit products as a substitute to owe a luxurious product of a well-known brand. Buyer behaviour includes simple and complex psychological processes. “When the preponderance of people in a particular group feel one way or another about a product, service, entity, person, place or thing, it is said to be a generalized consumer attitude that could affect the marketing of that person, product or entity in positive or negative ways.” (Currie 1999). 2.5.1 Psychological Influences: The psychological factors like motivation, perception, values and beliefs also may influence the consumer’s purchasing decisions. Consumers frequently purchase prestige or luxury products for their capability to communicate the information concerning their social class, or to point out their connection with a valued orientated group. The consumers who buy costly luxury items regularly place a higher significance on the image or status related with the product than with commodity itself. A few consumers of counterfeit luxury products will attempt to have benefit from the emblematic character of a prestige brand devoid of the premium price payment. If prestige brands and luxury products communicate information regarding the social status of the owner to others, consumers of genuine looking fake products are transferring imprecise information regarding their status in the society. The consumers’ choice for the genuine brand will be negatively affected by the exposure to a fake brand as their attitudes to luxury brand provide a function of adjustment in the society. This attitude towards the luxury brands is related with a high preference for fake brands for the reason that they are designed to seem like luxury brands, but with low quality. “Consumers’ moral beliefs about counterfeit consumption affect their likelihood of consuming a counterfeit brand only when their luxury brand attitudes serve a value-expressive function” (Wilcox et al. 2008). 2.5.2 Personality: The purchase decision of customers is also influenced by personality variables like value consciousness, and demographic variables like age, income and education. There exists a positive correlation between attitude and purchase intention of consumers in UK and in China.  The UK and Chinese customers are value conscious. The buying habit of counterfeit goods by individuals is predicted by their value system. When sales personnel of counterfeit products offers branded goods for a lower price, it is possible to think by customers that the product may be either stolen or fake rather than they are fortunate to get an offer of a great deal. The educated people having higher income will never go for counterfeited product, as they are aware of the economic impact on the country. They will always prefer branded products, unlike the less educated and lower income group. The other factor that may forecast an individual’s desire to search and buy counterfeit products is the value that they set on materialism. “The preoccupation with the pursuit of material objects while neglecting mental and spiritual aspects of life is called Materialism” (Journal of Socio Economics (2006) 2006). The statistics estimates that the industries of counterfeited products are growing continuously.  The development in counterfeiting industry evidently has a direct economic impact on the manufacturers of legal products and on the market place. The adverse impact of economy on the manufacturers of legal products should be clear and should be understood by the end consumer. However individuals go on with searching and purchasing counterfeit products. Basically, companies must recognize the consumer’s attitudes that hold them for the purchase of counterfeit products because this may influence the purchase intentions of consumers, brand equity and evaluation, and the marketing strategy development. 2.5.3 The Important of Uniqueness in Genuine Market: Necessary actions should be taken while the designing the products. Manufacturers should design the product in such a way that it cannot be copied easily by the rival manufacturers. This can be done by bringing in the most complex parts that are harder to copy, which can raise the production costs to an extent. To stop counterfeiting all the way through the supply chain, several companies in China and UK are set in trademarks on all main products’ parts and on packaging. This will pass the liability of counterfeiting to the suppliers of parts of products. Another way to avoid counterfeiting in China as well as in UK is the introduction of efficient management of the trademark. Given, sluggishness of registration system of China, it is necessary that the companies should register the trademarks before use, if it is possible. The companies in China which has the most excellent programs of anti-counterfeiting heavily invested in investigations in order to recognize the main players at the back of the counterfeiting activities. Raiding instantaneously is not the right way, whenever an investigator find out that counterfeit products are about to be transported. Companies have to take necessary action in this context. A strategic plan should be prepared which should not focus only on numbers of captures counterfeiters. If a factory found to be making counterfeits, it should be examined to identify the suppliers, customers, sub-contractors and distribution channels in China and in other countries. At times a raid can be useful to attain such information, but the action should be taken by keeping the goal in one’s mind. There are a number of computer programs are in existence which analyze the intelligence to explain links between different factories and the counterfeiters and thus recognize the master brain behind activities of counterfeiting. 2.5.4 Gender and Self-image: Male customers have more positive attitudes than female customers towards counterfeiting. This positive influence has a great impact on each customer’s purchase intention. Generally honest women and men from an extensive variety of professional backgrounds will be fairly comfortable in discussing their views and practices with unfamiliar peers. Within a short period of time subsequent to the set up of the focused group conferences, clients were gladly chat about the products, their good and bad experiences, channels of distribution and shares even about the “instructions” on their preferred counterfeit seller. This is the striking example of the social approval of counterfeited products across the different countries in the world. Conversely, consumers who value politeness, honesty and the responsibility are expected to show a negative attitude towards the counterfeited products, especially luxury goods. While taking the example of sunglasses, when compared to the UK consumers, the China consumers showed less interest in purchase of counterfeited products. Among the Chinese respondents, gender has showed lower intention to purchase the products and for the UK consumers it was only at a moderate rate. A UK gent is less interested or shows a negative attitude towards fake sunglass brands. 2.5.5 Attitudes towards Fake and Genuine Products: Some supplementary observations recommend that the younger sample, agrees more powerfully that they purchase counterfeit products for the reason that the price of fashionable products are not reasonable. This recommends that the price is always a inspiring factor for the purchase behavior of counterfeit product. Moreover, it is to be reminded that the younger sample opposes strongly than earlier regarding the quality of counterfeit products. The younger people realize that counterfeits aren't of the good quality when compared to legitimate product, but because of their price or values they are motivated to purchase them. If the younger individuals can meet the price of the legitimate product, then they are more likely to buy that product for the reason that they recognize that counterfeits are not better and alike quality.  Consumer attitudes towards counterfeits of luxury brands play an important role in influencing consumer purchase intention. Consumers are less influenced by the perceptions of counterfeits of luxury brands than by the ethical and legal considerations. Consumer’s attitude in the direction of counterfeits of luxury brands act as a significant role in persuading the purchase intention of consumers. Consumers are not as much prejudiced by the perceptions of fake luxury brands than by considerations of ethics and law. Consumers are more tending to buy fashionable products like luxury products. Consumers are ready to pay for the visual functions and attributes without noticing and paying for the related quality. Investigations illustrates that the consumers largely hold the attitude about purchasing or acquiring fake products thinking that that there is nothing mistake with them. In truth, the observations of several consumers are that counterfeiting is a “victimless crime” and “it doesn’t hurt anybody” (Victimless Crimes, Should Not be Illegal 2012). But at last the result is the emergence of an atmosphere of social acceptability where the consumers are liberally and willingly disclose to their colleagues that had bought a fake product. 2.6 Conceptual Frameworks The conceptual framework counterfeiting and pricing highlights the key driving counterfeiting forces, including the survival of non-satisfied demand at existing prices, a demand of product and services that fuelled by the promotional and advertising activities. The conceptual framework is examining the effect of groups of variables on the buying behaviour of luxury brands and their counterfeits. There are three important aspects of purchasing intentions by the customers; they are buying behaviour of customers, the attitudes toward purchasing counterfeits by the economic benefits and individual character such as perception of social status, materialism, and self-image. The conceptual framework, counterfeits recognized the product price and variables, vendor features, cultural and social context variables, psychographic, demographics variables moderating variables for the intention of consumers’ to buy counterfeit products. Buying Behaviour of Customers “Consumer behavior refers to the mental and emotional process and the observable behavior of consumers during searching, purchasing and post consumption of a product or service” (Khan et al. 2008) the behaviour of consumer involves the study of how customers buy, when they buy, what they buy and why they buy. The consumer’s behaviour blends the fundamentals from the sociology, psychology, anthropology, sociopsychology and economics. It also influences the consumers from the groups such as friends, family, society and reference groups. Buying behaviour is an important part of marketing is to know why a consumer or buyer makes a product purchase. Attitudes towards Purchasing Counterfeits: This framework that integrate the important predictors of behavioural intentions and consumers' attitude toward the counterfeits, it helps the companies to understand the key factors influence behaviour of consumers toward the counterfeits. The market for luxury brands counterfeits relies on the consumers’ wish for genuine luxury brands, the counterfeiting, marketers need to identify why people buy luxury brands in the primary place to determine the motive underlying the counterfeit product brand purchases. The consumer assessment of counterfeits will be main predictor of his/her intent to purchase a counterfeit. In this method, what are the factors influences the consumer assessment of a counterfeit product become the focus of the analysis. “Specifically, on the basis of the functional theories of attitudes, the authors propose that both consumers’ desire for counterfeit brands and the extent to which the availability of such counterfeits alters their preference for the real brands are determined by the social functions underlying their attitude towards luxury brands” (Wilcox 2009). Individual Characters: The individual characteristics of consumers are perception of social status, materialism and self image. Perception is a concept related to the personality of a person. Consumers are different in terms of their physical attributes, personality traits and learning levels etc. perception of consumers is described as a person’s view of reality, it is the process through which the information from the outside environment is selected, relieved and interpreted to make it meaningful so as to reach decisions and actions.  The perception of consumers includes the attitudes, opinions, feelings, values and behaviours of buying. The consumer’s perception of social status is one of the important factors considering the buying luxury brands or counterfeiting products. Materialism: Materialism is materialistic and ethical values, and the association of these variables with buying of counterfeit products. Those customers’ are more ethical in decision making, those customers supposed less materialistic values. Several consumers are holding strong ethical values and less materialistic values for buying counterfeit product. Buying counterfeit products is distinctively a spending activity related to the brand image and prestige, it seems reasonable that the relationship between purchase behaviour and an individual's materialistic values of counterfeit goods could survive. Self Image: “A person's self image is the mental picture, generally of a kind that is quite resistant to change, that depicts not only details that are potentially available to objective investigation by others (height, weight, hair color, sex, I.Q)” (Self Image 1995). Self image is very important in the purchasing decisions of consumers. 2.7 Conclusion: The increase of counterfeit products has become worldwide in recent years and wide range of products subject to violation has increased in significantly. While the consumers buy the counterfeit goods to develop their brand image, ironically they are scratched by the compromise customer’s authenticity. While most of the customers have some assess of understanding of counterfeit, they remain prepared to build a trade off between authenticity and image. Many others are not realizing the negatives involved in counterfeits and most of the people have previously imagined. In the consumers market many factors are involved the buying behaviour of customers, they are the prestige, and social status, image etc tend to buy the counterfeit products. Counterfeit products are making a lot of problems to society; it affects all the aspects of political, society, social and economic. Counterfeiting problem affects all among very serious consequences. Counterfeiting is mostly done in luxurious products. Counterfeiting creating a negative impact on the quality products. In the UK customers feel difficulty in making difference between the original and counterfeited product. The consumers want to maintain their social status with their low budget, it will results in buying the counterfeited product. The counterfeiting of products is mainly affecting the luxurious brand market. Chapter 3 – Research Methodology: 3.3 Research Methods: The research is conducted for an in depth study of the subject. “To understand the use of statistics, one needs to know a little bit about experimental design or how a researcher conducts investigations. A little knowledge about methodology will provide us with a place to hang our statistics. In other words, statistics are not numbers that just appear out of nowhere. Rather, the numbers (data) are generated out of research. Statistics are merely a tool to help us answer research questions. As such, an understanding of methodology will facilitate our understanding of basic statistics” (Research Methods n.d.). There are two types of research: Quantitative Research: This research takes the numerical data. Quantitative Research creates use of techniques such as questionnaires, surveys and other tools to gather numerical or quantifiable information. For an correct estimation of the connection between variables, a expressive study regularly desires a sample of hundreds or even thousands of issue; an experiment. The approximation of the connection is less likely to be prejudiced if it is having a high contribution charge in a trial chosen aimlessly from a population. In experimentation, prejudice is also less possible if subjects are arbitrarily allocate to action, and if topic and researchers are unsighted to the distinctiveness of the action. Qualitative Research: This research represents the non- numerical data and focuses on the verbal information. It is in the form of interviews and discussion, observation with the group members. “Qualitative research is used to gain insight into people's attitudes, behaviours, value systems, concerns, motivations, aspirations, culture or lifestyles. It’s used to inform business decisions, policy formation, communication and research” (What is a Qualitative Research? 2011). The arrangement of information in a Qualitative Research is in the way of words from interviews and descriptions or matter). Qualitative Research will mainly likely develop in debate are statistics in the way of graphs. Quantitative Research will mainly likely develop in the discussion as tables enclose information in the way of figures and statistics.   3.5 Ethics: Consumer ethics refers to the opinion, purpose, and insight of individuals when they connect to consumption. Those consumers with high scores in consumer ethics are inclined to have a lower assessment for counterfeit products than those having lower scores in consumer ethics. “Consumers are generally willing to support business ethics, yet their attitude may not translate into actual behaviour, and there seem to be several obstacles to ethical consumption, e.g. personal value, economic constraints, lack of information and trust, availability of ethical products, etc.” (PhD Research Project 2011). Various studies shows that counterfeit products are very ordinary in China and the ethical problems behind them are completely unnecessary by the Chinese as ethics were not essential at all in result, consumers would purchase the fake products even if they understand it was a corrupt one. The consumers of UK and China have no considerable distinction on ethical principle. This does not influence approach toward counterfeits and ethnic cluster in forecasting the buying of counterfeits. This shows that the Chinese and Western customers are dissimilar in approach toward counterfeits. A huge number of Chinese consumers have paid for counterfeits before and buying of counterfeits is described by ethical belief and social groups. Reference List Consumer Behaviour: The Road to Effective Policy-Making n.d. Directorate – General for Health and Consumers. Available at < http://ec.europa.eu/consumers/docs/1dg-sanco-brochure-consumer-behaviour-final.pdf> [Accessed on 14 April 2012] Currie, M 1999). Definition of Consumer Attitude. eHow. [Online] Available at [Accessed on 14 April 2012] Designer Concern Over Mainland Fakes Threatens Future Investment 2002. Access My Library. [Online] Available at [Accessed on 14 April 2012] Han et al. n.d. Signaling Status with Luxury Goods: The Role of Brand Prominence. American Marketing Association. [Online] Available at [Accessed on 14 April 2012] Journal of Socio Economics (2006) 2006. Mendeley. [Online] Available at [Accessed on 14 April 2012] Khan et al. 2008. Marketing Management. JAMIA HAMDARD UNIVERSITY[Online] Available at [Accessed on 14 April 2012]  PhD Research Project 2011. FindAPhD. [Online] Available at [Accessed on 14 April 2012] Research Methods n.d. [Online] Available at [Accessed on 14 April 2012] Self Image 1995. ScienceDaily.com. [Online] Available at [Accessed on 14 April 2012] Victimless Crimes, Should Not be Illegal 2012. Hardwarehelpers.com, Inc. [Online] Available at [Accessed on 14 April 2012] What is a Qualitative Research? 2011. QSR. [Online] Available at [Accessed on 14 April 2012] Wilcox 2009. Why Do Consumers Buy Counterfeit Luxury Brands?Marketing Power. [Online] Available at [Accessed on 14 April 2012]  Wilcox et al. 2008. Why Do Consumers Buy Counterfeit Luxury Brands? Print. Read More