International Marketing - Essay Example

International Marketing - How important is the country of origin effect in influencing consumer choice Introduction In order to evaluate the effect of country of origin on consumer choice around the world, we should primarily present the particular aspects of marketing and the methods used by marketers internationally in order to influence the consumer choice regarding specific products and services within the international marketplace. In fact, the ability of a firm to influence the consumer choice is considered to be the major indicator for the performance of the firm within its industry. For this reason, it is suggested by Moore (1995, 282) that ‘a successful company uses marketing techniques such as focus groups, surveys, and so on to discover what particular features consumers desire in a product’. On the other hand, it should be noticed that the marketing strategies used by firms internationally in order to attract the interest of consumers can be differentiated in accordance with the commercial practices used within each country but also the social and cultural and social framework of the particular society. Any relevant marketing strategy could be efficiently promoted only if the appropriate communication techniques are used by marketers worldwide. Indeed, the study of Dobie et al. (2003, 289) showed that ‘marketing communications are an important element of any marketing strategy as it is essential to inform potential and existing customers regarding product/service availability and application’. Current paper examines a particular aspect of marketing activities worldwide: the so called ‘country of origin effect’, i.e. the effect of country of origin on the consumer choice regarding a particular product/ service internationally. A series of experiments are going to be presented and evaluated compared with examples from the industrial practice regarding the effectiveness of the promotion of country of origin related with specific products/ services around the world. The theory that has been developed in the particular sector is also going to be presented justifying the existence and development of ‘country of origin effect’ in marketing strategies applied by firms in the global marketplace. 2. Country of origin and consumer choice The country of origin has been traditionally considered as a major criterion in the development of consumer choices within the international marketplace. It should be noticed that consumer opinions regarding a specific product/ service cannot be precisely estimated and evaluated because they tend to change continuously. Regarding this issue it is stated by Hall (2002, 24) that ‘consumers "change their minds" about a product, then they change their attitude, and then they act’. In other words, marketers cannot rely on the consumer preferences for a particular product/ service in a specific period of time. They would rather have a series of elements that present the trends of consumers within the particular market in general terms (i.e. not specifically at a particular time point). If the above issue is not taken into consideration, the marketing strategy based on the consumer choices made during a specific period (or under a specific social, financial or political framework) are very likely to be proved inappropriate after a specific time period (when the above described conditions) will be differentiated. On the other hand, the introduction and the application of a specific marketing strategy within the international marketplace should be combined with the appropriate research. If not, the marketing strategy attempted to be implemented will be led to a failure. The above issue has been examined by Diamantopoulos et al. (2003, 80) who stated that ‘the methodological pitfalls of international research often lead to questionable research results’. The above presented issues are related with marketing strategies that are applied in all markets within the international community. Despite the importance of these issues to the development of a specific marketing strategy within the international market, there are other elements that have a significant influence on the marketing strategy chosen for a particular market. Specifically regarding the development of consumer choices within the international market, it has been found that this is related mostly with the culture of the region on which a specific marketing strategy is applied. Indeed, the study of Zhang et al. (1996, 41) revealed that ‘an advertiser who takes such a market seriously will seek to align message with culture’. In fact, the role of advertiser in the success of a specific marketing strategy should be considered as crucial. Advertiser has the responsibility in order to retrieve the necessary material and prepare a specific marketing strategy – i.e. a thorough research of the targeted market is a prerequisite for every relevant effort. At a next level, the advertiser/ marketer should proceed to the appropriate promotion of the product within a specific market taking into account the social and cultural characteristics of this market, the trends that characterize this market and the ‘buying power’ of consumers (as it can be revealed through the relevant market indexes). Regarding specifically the country of origin and its influence on the development of particular marketing strategies internationally, it is supported that ‘country of origin has been identified in the literature as an important cue that might be used by global marketers to influence consumers valuation of the brand’ (Agrawal et al., 1999, 255). In accordance with the above findings, country of origin should be taken into account by all marketers internationally when attempting to apply a specific marketing strategy on a particular region/ market. However, it should be noticed that the level of influence of country of origin (described also as country of origin effect) on the development of specific consumer choices worldwide cannot be precisely estimated in advance. It seems that the social and political culture of each region defines the level at which country of origin will influence the consumer choices within the particular region. On the other hand, it is supported by Agrawal et al. (1999) that consumers choices within a specific market are formulated under the influence of other parameters (social and political conditions, prices of products/ services and so on) and in this way the country of origin can be regarded as having limited influence on the development of specific consumer choices within the international market. The above view ignores the fact that nationalism within a specific country has a powerful role in the development of social and cultural perceptions of citizens. In other words, it cannot be stated that the country of origin has no influence on the consumer preferences regarding specific products or services; it should be made clear that this influence can be differentiated within each particular market in accordance with the local culture, the social ethics and the trends of the specific market. Also the influence is usually related with the country of origin (i.e. if a car has been manufactured in Germany it would be preferred from a car manufactured in a country of the East Europe because of the existed tradition that cars manufactured in Germany are of high quality). Generally, it could be stated that the evaluation of country of origin effect on consumer choices worldwide can be a challenging task in case that many countries involve in the production process (or the delivery in case of services) of products worldwide. In modern commercial market, the above events related with the production process applied worldwide are quite common and many countries can be involved in the production of products internationally. In this case, the country of origin effect on consumer choices can be limited especially when the country of origin cannot be precisely identified. However, when the country of origin is precisely mentioned on the relevant product, it has been found in the literature that it can influence significantly the consumer choices regarding the particular product. In this context, the study of Knight et al. (2007) has revealed that ‘consumers in many markets are willing to pay a premium for manufactured products from more industrialised countries (Johansson, 1993, in Knight et al., 2007, 108). The above view is also supported by Wang and Lamb (1983) who noticed that ‘consumer evaluation of products is influenced by the stage of development of a country from which the product originates’ (Wang and Lamb, 1983, in Knight et al., 2007, 108). In other words, country of origin effect on the development of specific consumer choices worldwide can be significant. However, the level of influence of the country of origin effect on consumer choices regarding specific products/ services cannot be precisely identified in advance. Many factors – as explained above – can be proved to influence consumers’ choices within a particular market in accordance with the social, financial and political conditions of the specific market. It is for this reason that many strategies (including branding) have been developed within the international market in order to ensure the success of marketing plans related with specific products/ services. On the other hand, the development of consumer choices could be influenced by a series of measures taken by governments and private organizations around the world, the initiatives of which within their local market could lead to the formulation of specific consumers’ choices. This view is in accordance with the findings of the study of Carter et al. (2006) who came to the conclusion that ‘in order to raise prices, a key complement to branding is some restriction on the volume of product going out under the brand name; these restrictions may be accomplished by supply controls, quality controls, or entry barriers’ (Carter et al., 2006, 513). In accordance with the issues developed above, country of origin is expected to have a significant influence on the formulation of consumer choices regarding specific products/ services worldwide. However the country of origin effect should not be considered as having a decisive role on the development of specific consumer choices within the international market; other factors are also likely to influence the preferences of consumers internationally. The level of influence of country of origin effect on consumer choices worldwide can be estimated and evaluated using specific social and cultural criteria in each specific case. The study of relevant cases – in which country of origin has been proved to have the major role for the development of specific consumer choices worldwide – could be also proved particularly helpful in order to understand the level of influence of country of origin effect on consumer choices regarding particular products and services within the international market. 2.1 Effects of country of origin on consumer choice – implications in practice - examples from industries internationally Empirical research Trying to estimate the level of influence of country of origin effect on the development of specific consumer choices worldwide, Liefeld et al. (1996) made a research within the Dutch market using as variables the product choice and the quality of the products included in the relevant survey. In fact, a series of products ‘mens shirts, smoke detectors, and pickles’ (1996, 57) were presented to consumers in Netherlands who were asked to state their preference on the products used in the survey. In accordance with the findings of this research, consumers in Dutch do not follow specific patterns of consumption. They rather tend to follow their own attitudes and perceptions when having to decide on the purchase of a specific product. However, these results are related with the specific market. In other studies conducted internationally, country of origin has been found to be a significant criterion for consumer choices regarding specific products/ services within the international market. In this context in the research made by Karunaratra et al. (2007, 349) it was proved that ‘nationalism appeared to play a strong role in consumer attitudes to product components’. On the other hand, it has been found that consumer knowledge plays a significant role in the development of specific consumer choice especially when this knowledge is related with the country of origin. Regarding this issue, it is noticed by Schaefer (1997) that ‘consumer knowledge has frequently been mentioned in the literature as a potential mediating factor in consumers’ use of country of origin as a product information cue’ (Schaefer, 1997, 56). In other words, consumer knowledge can be related with consumer choices but it is necessary that the country of origin is known to customers and that their preference for specific product/ service can be based solely on their knowledge regarding the country of origin of the particular product/ service. However, it could be stated that the above link (between consumer knowledge and consumer preference) is a little difficult to be proved mostly because the consumer knowledge on the ‘origin’ of a specific product/ service cannot be always identified. The issue of role of consumer knowledge on the development of specific consumer choices has been also examined by Liefeld (2004, 85). The above researcher referred especially to the consumer knowledge of potential buyers in American and Canadian markets. In accordance with the findings of the research made by Liefeld ‘of the 91 (6.5 per cent) who had acquired or knew the country of origin of a product they had just purchased, only 27 (2.2 per cent of the total) indicated that their knowledge of the products country of origin possibly might have played a role in their product choice’ (Liefeld, 2004, 85). The above findings are in totally opposition with the ones revealed through the study of Karunaratra (2007) presented above. It seems that the role of country of origin effect on the development of specific consumer choices can be differentiated across markets internationally. In other words, there are markets in which consumer choices seem to be highly depended on country of origin effect whereas in others the above effect has been proved to have no particular influence on the development of specific consumer preferences. Under these terms, the views of researchers regarding the particular issue should be evaluated taking into account the conditions under which the relevant research has been conducted and the personal attitudes of the researchers involved. Towards this direction, it is supported by Samiee et al. (2005, 379) that ‘consumers are knowledgeable of brand origins, and this knowledge is a significant influence that drives judgments of product quality, brand attitudes, and choice behavior in the marketplace’. The above researchers refer especially to the American market which seems to be highly depended on the country of origin effect. Moreover, Teas et al. (2000) tried to examine the potential effects ‘of the so-called extrinsic cues (price, brand name, store name and country of origin) on consumers’ perceptions of quality, sacrifice, and value’ (Teas et al., 2000, 278) came to the conclusion that a series of linkages can be observed between the ‘elements’ presented above. If taking into account the results of the studies related with the particular issue, we could conclude that consumer choices are highly depended on the country of effect origin. However, the above linkage cannot be always proved while there are many factors that can intervene in the development of consumer choices within the international market so that the formulation of a general assumption on the specific issue to be a challenging task. The implications of the above issue (relationship) in practice can be identified through the case studies presented below which refer to the role of the country of origin effects in the formulation of specific consumer choices as this interaction can be observed within the international market. Paradigms from industries worldwide a) An indicative example of the influence of country of origin to the development of specific consumer behaviour has been the following one: in the case of the consumers of Chicago and San Francisco in order to pay for beef flavor from domestic, corn-fed beef versus Argentine, grass-fed beef (Umberger et al., 2002, 491). The above experiment led to a series of interesting results: on average, consumers were willing to pay a 30.6% premium for corn-fed beef; sixty-two percent of the participants were willing to pay an average premium of $1.61 more per pound for the corn-fed beef; the results have important implications for country-of-origin labeling of beef products, as well as niche marketing of corn-fed and grass-fed beef. More specifically, consumers in the experiment presented above were willing to pay additional amount for the requested product which was considered to be of high quality regarding its origin. Country of origin – especially regarding certain products is proved to have particular importance for consumers around the world. b) South African Breweries Limited Another case in which country of origin effect has been found to be extremely useful for the increase of firm’s profits has been that of South African Breweries Limited. More specifically, the above firm used its origin in order to increase and secure its customer base. In this context, it is noticed by Michael Farr, the firm’s communication manager that ‘we felt it was important to encourage South African consumers to recognize SAB Limited is still the company they have always known’ (Colyer, 2005, 1). By promoting its national origins to its customers, the firm managed not only to retain but also to increase its customer base using the strong nationalism observed across the country. c) New Zealand Automobile Market The study of Lawrence et al. (1992) related with the country of origin effect on consumer choice was based on a survey in which approximately 275 questionnaires were mailed (150 of them were actually returned). In the above survey, the consumer preferences of consumers in the Australian market were explored with a special reference to the purchase of automobiles originated from one of the following countries: Germany, Japan, Italy and France. It should be noticed that all the above countries have brands in New Zealand and specifically in the country’s automobile industry. In accordance with the findings of the above research the New Zealand market is characterized by the existence of nationalism when referring especially to the automobile sector. This means that the performance of a firm operating in the particular sector is strongly depended on its country of origin. However, the reasons of this influence (regarding the specific industry) are not explained. It can be assumed that general perceptions related with the quality of the products (automobiles) produced in the countries participated in the research influence the consumer choices within the New Zealand market. d) The Ghanaian Case Another indicative example of the influence of country of origin on the development of consumer choices in markets worldwide is the case of Ghana. In the particular country, the influence of nationalism on consumer choices has been examined using a campaign named as ‘buy local’. In this context, approximately 233 people living in Cape Coast were interviewed. The above research proved that ‘the attitudes of the Ghanaian consumers to the buy locally-made products can be characterized as protectionist, nationalistic, and self-interest’ (Saffu et al., 2006, 183). In accordance with the above, firms that are interested to operate successfully within the Ghanaian market should take into account when designing their marketing strategies that nationalism is extremely developed across the country and that consumer preferences are more likely to be positive towards products/ services that are proved to be related/ support with the country’s historical, political and social development. In other words, cultural and social characteristics of Ghanaian society should be considered as significant parameters in the development of any entrepreneurial activity within the specific country. 3. Conclusion The presentation of all the issues related with the formulation of consumer choices within the international market – specifically with reference to the role of the country of origin effect – leads to the assumption that consumer preferences internationally can be influenced from a series of factors/ events. This assumption should be taken into consideration by marketers worldwide in order for the plans to be successful. Indeed, the study of Hills (1994, 44) led to the conclusion that ‘entrepreneurial behaviour often results in common marketing mistakes’. The extension of these mistakes is depended on the structure of the particular market, the chances for financial recovery (in case of a loss) and the skills of the particular entrepreneur to proceed to the appropriate decisions in order to develop the activities of his enterprise. It should be also noticed that it is necessary for marketers worldwide to follow specific practices when designing and applying marketing plans related with particular products and services. Trying to suggest an effective method in order to promote products/ services within the international market, Cravens (1989) refers to the existence of four significant marketing plans that can be used effectively by firms worldwide. These strategies are quite important for the development of business activities worldwide. Despite the fact that the marketing strategies proposed by Cravens are integrate, it is not made clear however whether the development of specific consumer choices (as targeted by the application of marketing strategies presented above) is related with the country of origin effect incorporated in each of the above plans/ strategies. Moreover, because of the possible existence of different social and cultural conditions in firms around the world, entrepreneurs should try to avoid using strategic plans that are standardized. Instead they should apply innovation when having to design and apply a particular entrepreneurial project. Despite the fact that the country of origin has been found to have an influence on consumers’ perceptions regarding specific products, the use of country of origin as an exclusive criterion for the development of a specific marketing strategy would be inappropriate even if the country of origin has a significant tradition on the manufacturing of specific products (e.g. watch made in Switzerland). Regarding the specific issue, it has been stated by Niss (1996, 6) that ‘while a symbolic linkage between product and country of origin can be a useful positioning strategy in the beginning of a product’s life cycle, brand building through more abstract and emotional imagery becomes increasingly important in the later stages of the product life cycle’. In other words, country of origin can be used as an element of a particular marketing strategy but up to a point; other issues should be highlighted in a particular marketing strategy (apart from the country of origin) in order for the specific plan to be succesful. The effects of country of origin on consumers’ choices have been tested in practice through the research made by Sternquist (1986). In the particular research the participants were asked ‘to assign a price and quality designation to four identical womens sweaters where the information cues, store status and country of origin, were experimentally manipulated’ (Sternquist, 1986, 124). The results of the above study lead to the assumption that the prestige of the store is quite significant for the buyers’ choices while the country of origin was not taken into consideration. In other words, the appearance of the product and the place at which the specific product is exhibited is of particular importance for the sales of this product within a specific market. It is for this reason that the promotion of a product is considered to be quite important while no particular reference is made to the product’s country of origin. On the other hand, the price of the product is defined by the area at which this product is placed and not by the area in which it was manufactured. Generally, it could be stated that ‘successful product placements are supposed to be subtle and should blend in with the context; when placements become too obvious, consumers are likely to infer manipulative intent and become less susceptible to persuasion attempts’ (Shrum, 2004, 109). On the other hand, the study of Chung et al. (1997, 361) revealed that ‘two concepts have been identified as key variables for the long-term success of brands or firms in global markets: brand popularity and country image’. The importance of country of origin on the development of consumer choices around the world has been proved to be significant. However, as already mentioned above, the level of influence of country of origin effect on consumer choices cannot be precisely identified but it should be rather accepted as existed; the level of interaction of consumer choices and country of origin can be differentiated in accordance with the social and cultural characteristics as well as the political and financial conditions of each specific market. References Agrawal, J., Kamakura, W. (1999) Country of origin: A competitive advantage? International Journal of Research in Marketing, 16(4): 255-267 Carter, C., Krissoff, B., Zwane, A. (2006) Can Country of Origin Labeling Succeed as a Marketing Tool for Produce? 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