Country of origin, consumer’s Perception and Brand Image Essay

Introduction The impact of country of origin (COO) on the consumer’s perception of products has been one of the most widely studied areas of international marketing. Increasing globalization of today’s business has resulted in unprecedented problems for manufacturers, marketers, and consumers (L. Y. Lin & Chen, 2006). The country of origin (where a product is made) touches both consumer evaluations of the product as well as the firm’s decision to manufacture its goods in certain countries and how to brand (Parkvithee & Miranda, 2012). Country-of-origin or in other words the â€Å"Made in† is a concept which states that people constitutes attitudes and believes shaping the perceptions to products from specific countries and this influences purchase and consumption behaviors in international markets. The â€Å"Made In† image is the picture, the reputation, the stereotype that businessmen and consumers attach to products of a specific country (Bilkey and Nes, 1982; Gaedeke, 1973; Johansson, 1989; Nagashima, 1970, 1977, Zain and Yasin, 1997). Country-of-origin image (COI) has a strong influence on consumer behavior in the global market, as it is associated with mass communication, personal experience, as well as brand image. COI is defined as the consumer’s perception formed of a certain product offering according to this offering’s country of origin (Samiee, 1994; Peterson and Jolibert, 1995, Leonidou et al, 1999). The country, the type of product, and the image of the company and its brands all influence whether the country of origin will engender a positive or negative reaction. A variety of generalization can be made about country of origin effects on products and brands. Consumers tend to have stereotypes about products and countries that have been formed by experience, hearsay, and myth (Piron, 2000, p. 308; Roth and Rameo, 1992, p.479). Stereotypes of country and the preference of customer influence the purchase intention. Political system, culture and the economy of the country can be a  cause of sensitivity to people (Teo, Mohamad, & Ramayah, 2011). For instance, in 2006, protestors across the Muslim world demonstrated against the publications of cartoon images â€Å"Prophet Mohammed† in a Danish newspaper therefore many boycotted Danish products and many supermarkets in Cairo removed Danish products from their shelves. The question that this paper will attempt to answer is â€Å"To what extent does the country of origin image affect consumer perceptions, brand image and purchase intentions†. Previous research indicates that consumers’ and businesses’ evaluations are based on their assessment of product cues, which may be intrinsic (taste, design, performance) or extrinsic (brand name, country of origin). Buyers often make judgments about product quality and purchase value on the basis of extrinsic cues, especially when it is difficult to evaluate the intrinsic value of a product. This justifies the reason behind using the country of origin as an extrinsic cue in order to judge any foreign product. This paper also aims to fill the gap between the impact of country of origin on the brand image, consumer’s perception and purchase intention, more specially; the research objective is to develop a better understanding of the effect of positive and negative country of origin image on consumer’s buying decisions. Literature background The impact of COO applies to products in general, classes of products, specific types of products, specific brands, image among developed countries, between developed and less developed countries, or among less developed countries (Bilkey and Nes, 1982; Prendergast, Chan and Tsang, 2010, p.181). Country image is ‘‘the overall perception consumers’ form of products from a particular country, based on their prior perceptions of the country’s production and marketing strengths and weaknesses’’ (Roth and Romeo, 1992; Koubaa, 2008, p.140). Brand-image has been described as part of branding strategy at the country level (Meenaghan, 1995; Koubaa, 2008, p.141). Consumers tend to recall the  stored information about the brand and the country in question and then they relate the brand name with the COO to form a brand image and infer the product evaluation (Scott and Keith, 2005; Koubaa, 2008, p.141). Brand image is the reasoned or emotional perceptions consumers attach to a specific brand. It consists of functional and symbolic brand beliefs (Dobni and Zinkhan, 1990; Koubaa, 2008, p.141). Brand image is made up of brand associations. ‘‘Brand associations are the category of brand’s assets and liabilities that include anything ‘‘linked’’ in memory to a brand’’ (Aaker, 1991; Koubaa, 2008, p.141). â€Å"The ‘essence’ of the brand is a single simple value, easily understood and valued by consumer† (Arnold, 1992, p. 17; Pappu, Quester and Cooksey 2006, p.697).When brands are competing in the international arena, marketing managers should understand how to maintain the core essence of their brand across international boundaries. Examining how country of origin impacts brand image and its associated dimensions (e.g. perceived quality, brand associations) should reveal the means to protect or enhance the core essence of a brand. The country of origin of a product is an important marketing element known to influence consumer perceptions as well as behavior. Conversely, an inferior country of origin could tarnish a brand name (Thakor and Katsanis, 1997; Pappu, Quester and Cooksey, 2006, p.697). That is, if the country of origin of a brand were to change from a country towards which consumers have favorable associations (e.g. the USA), to a country towards which consumers have less favorable associations (e.g. Mexico), the brand names in question could be tarnished and the consumer-based equity of these brands erodes. Johansson (1989) speculated that consumers may, depending their circumstances, regard the country cue as a silent attribute of the product in question and that this attribute may influence the consumer through affective processes, as in the case of individuals who hold strongly patriotic feelings about their own country (Han, 1988; Knight and Calantone, 2000, p.129), or through behavioral intentions via processes such as social norms (Fishben and Ajzen, 1975; Knight and Calantone, 2000, p.129). Johansson’s (1989) model is an important accompaniment to the empirical work of Han (1989). Household and organizational buyers’ perceptions of the quality and purchase value of products are more favorable when these products are designed and/or assembled in developed countries than when they are designed and/or assembled in a newly industrializing country. A basic premise of the COO effect is that consumers’ image of a given product’s COO influences their subsequent evaluations of the product (e.g. Gurhan-Canli and Maheswaran, 2000; Josiassen and Assaf, 2010, p.296) as well as their subsequent behavioral intentions to purchase or repurchase the product (e.g. Ouellet, 2007). According to Johansson, country of origin is an extrinsic information cue allowing buyers to make inferences about the intrinsic value of a product (Ahmed and Astous, 1995, p.38). Consumers are more likely to purchase products manufactured by countries having distinctive images for that product(s) rather than countries that do not possess a good reputation for producing the same product(s) (Roth and Romeo, 1992; Chuang and Yen, 2007; Ozmen, 2004; Ahmed, Zbib, Sikander and Noujaim, 2012, p.110). The values which consumers associate with a brand are significantly associated with both the macro- and micro-images of the COO of the brand (Pappu et al., 2007; Ahmed, Zbib, Sikander and Noujaim, 2012, p.110). According to Cordell, consumer preferences are more product specific for industrialized than less developed countries. COO becomes of less significance when the product is widely known (Cordell, 1992; Ahmed, Zbib, Sikander and Noujaim, 2012, p.110). The image of countries as origins of products is one of many extrinsic cues, such as price, brand name that may become part of a product’s total image. Country image in respect of customer purchase intention is one of the most significant subjects among marketers for supporting their manufactured goods. The attention to this issue is because many researchers have demonstrated that a country’s image influences the prior purchase decision of customers. These kinds of investigation about country image and other related subjects dates back over three decades in developed countries  (YAMOAH, 2005). According to Laroche et al. (2005) country image and product beliefs affect product evaluations simultaneously regardless of consumers’ level of familiarity with a country’s products. A product’s COO can have a significant effect on consumer’s purchase and consumption decisions. Further, causal observation indicates the importance of COO in many consumer goods, such as clothing, cars, and food products. For instance, some luxury products (e.g. perfumes, fashion clothing) are strongly and positively tainted by being labeled ‘‘Product of France†. Most of the researchers agree that the â€Å"Country of Origin Image† has a significant impact on consumers’ evaluations of product quality and willingness to buy a product (e.g. Bilkey and Nes, 1982; Han and Terpstra, 1988; Maheswaran, 1994) Conceptual development and hypotheses In this study, Country of origin is the independent variable of interest while the dependent variables include 3 main dimensions (perception, brand image and purchase intention) as shown in Figure 1. Each of these dimensions is expected to be affected by the country of origin image. Since the proposed model is being tested for a certain product category therefore, there relation between COI and the 3 main dependent variables will be affected by the product category in question. In other words we can say that Product category will moderate this relation. Country of origin image (COI) The history of country image dates back to 1970, when Nagashima wrote about it in an academic paper. In a statement about country image he defined it as a â€Å"special image, stereotype and standing, which customers have in their mind about specific country, this picture can be shaped by historical, economical and traditional variables† (L. Y. Lin & Chen, 2006). In addition, country image is one of the first variables that researchers test when it comes to foreign product as well as international business and consumer behavior studies (Kotler, 2011). Studying issues concerning country image  has been prominent in international business for many years (Laroche, Papadopoulos, Heslop, & Mourali, 2005). In our research we investigate COI as an independent variable in order to monitor its effect on buyer’s decision making process which involves two main factors consumer’s perception and purchase intentions and also to examine its influence on the brand image through examining the brand’s perceived quality and brand associations. Brand image Brand image is defined as ‘‘a set of perceptions about a brand as reflected by the brand associations held in consumers’ memory’’ (Hsieh and Lindridge, 2005; Koubaa, 2008, p.140). Brand image is determined not by only the brand’s perceived quality, but also by a host of other factors such as product characteristics, packaging, advertising, price and schemas of the typical user. Purchase intention Scholars define purchase intention as personal action tendencies according to brand. They have also concluded that intention is different from attitude. While attitude means evaluation of products, intention is the person’s motivation in the sense of his or her intention to perform behavior. Another definition declares that purchase intention is the individual’s awareness to make an attempt to buy a brand (Shabbir, M. S., Kirmani, S., Iqbal, J., & Khan, B. 2009). In a very competitive global market consumers are facing a variety of alternatives when they decide to buy a certain product therefore it is important to consider COI as a factor that can influence the consumer’s purchase intentions Consumer’s perception Individual act and react on the basis of their perceptions, not on the basis of objective reality. Thus, perceptions are much more important. Perception can be described as â€Å"How we see the world around us†. Perception is defined as the process by which an individual selects, organizes, and interprets stimuli in to a meaningful and coherent picture of the world. Customers are individuals, and each customer perceives things differently in the same  situation. Perception of the product is more important than the product itself (Dave, 2013). Product category Consumers have associations toward entities such as products, places, brands and countries of origin. These associations can have direction and strength. For example, Farquhar and Herr (1993) argued that product category-brand associations can be bi-directional. That is, consumers may recall a product category when they think of a brand name and they may recall a brand name when they think of a product category. Product category-country associations, which refer to consumers’ ability to evoke a country when the product category is mentioned, are of interest when examining the relationships between country of origin and our 3 main dependent variables. Since consumers are known to associate countries with certain product categories and vice Versa (Terpstra and Sarathy, 2000), consumers’ â€Å"product category-country† associations appear to be bi-directional. Based on the literature review and our research objectives, a conceptualized model for this research was developed and is shown in Figure 1. Previous research results support the following relations: CI directly and positively impacts brand image (Roth and Romeo, 1992; Hsieh et al, 2004). CI directly and positively impacts purchase intentions (Laroche et al, 2005). Brand image directly and positively impact purchase intentions (Esch et al, 2006). Hypotheses H1: COO image significantly affects how consumers perceive the products H2: COO image has a significant influence on the formulation of the brand image H3: The country-of-origin asserts a significant impact on the consumer’s purchase intention. H4: Product category will moderate the effect of COO image on the purchase intentions, consumer’s perceptions, and brand image We expect that the perceived quality levels of a brand will vary by the country of origin of the brand. That is, the perceived quality level of Ericsson made in Sweden is likely to be higher than the perceived quality  level of Ericsson made in Mexico or Hungary, for the product category â€Å"mobile phones†. Furthermore, consumers’ perception of the quality of products is known to be product-category specific (Kaynak and Cavusgil, 1983; Pappu, Quester and Cooksey 2006, p.701) Furthermore, consumers’ product category is believed to moderate the effect of the country of origin on consumer-based brand image. For example, the consumer’s perception of a brand made in a country with positive COO image in a certain product category (e.g. car/Germany) is likely to be substantially higher than that for the same brand made in a country with a negative COO image in that same product category (e.g. car/Mexico), in cases where consumers perceive substantive differences between the two countries in terms of their product category associated with COO (Pappu, Quester and Cooksey 2006, p.702). As concerns brand-origin effects, Takhor and Lavack (2003) declared that brand-origin is one such cue that plays potentially important role in determining a brand’s image. Samiee et al. (2005) found that consumers classify brands with their COO basing on the brand pronunciation or spelling and its similarity with the brand-origin language (Koubaa, 2007, p.142). When the brand is created, it comes out to consumers in association with its brand origin (Koubaa, 2007, p.143). Farquhar and Herr (1993) claimed that brand image will have different dimensions in consumer’s mind (Koubaa, 2007, p.143). Because brands have different perceptions among consumers across brands and across countries of production, and consumers are likely to be different as they have different backgrounds and are under different circumstances of consumption; we expect that brand image will differ across brands and across countries of production (origin) (Koubaa. , 2007, p.143). Nowadays, the international trade market is very competitive and there are many new ideas on the market to attract customers. In this case, customers have many alternatives for buying products; however, there are many elements that have an effect on product success and customer purchase intention. Other researchers believe that purchase intention is â€Å"what we think we will buy† (Park, J. 2002). It also describes the feeling or perceived likelihood of purchasing the products that are advertised, moreover, purchase shows the level of loyalty to products. Other scholars like Daneshvary and Schower (2000) believe that purchase intention has a relationship with demographic factors like age, gender, profession and education (Lu, M. 2007). There is another statement that shows that particular features of products, perception of consumers, country of origin and perception of country of origin, all have an influence on customer purchase intention (C. L. Wang, Li, Barnes, & Ahn, 2012). Purchase intention can also be defined as the decision to act or physiological action that shows an individual’s behavior according to the product (X. Wang & Yang, 2008; Rezvani, Dehkordi, Rahman, Fouladivanda, 2012, p.208). Sample characteristics Respondents were asked in the end of the questionnaire to deliver some personal information related to gender, age, income and education. Thirty eight respondents participated in the investigation. Regarding gender, the sample was selected randomly. Females’ percentage was 57.9 while the males’ percentage was 42.1. As for the income category 15.8 percent earned less than 5000 LE per month, 34.2 percent earned between 5000 LE and 10000 LE while 50 percent earned more than 10000 LE per month. And for the education 5.3 percent of the respondents were high school graduates, 71.1 percent are bachelor degree holder, 23.7 percent are master degree holders. Data collection: Our choice of COI stimuli and our variables (BI, CP and PI) was guided by our conceptual framework, specifically we wanted to test and compare the effect of COI on the three variables shown in figure (1) to enhance the generalizability of our results. To test our hypothesis we asked Egyptian  consumers to answer a questionnaire (see appendix) with regards to the latest purchased items. In addition to hypothesis advanced in this study we explore the reliability of the measurements of each variable to conduct a reliable computation regarding each variable in the questionnaire. Reflective scales were to operationalize the constructs in our conceptual framework. Except for the demographic indicators (gender, age, income and education) Measurements  COI 1. economic development 2. Political structure 3. Industrialization 4. standard of living 5. Product made in this country is reliable 6. Products made in this country of good quality 7. Products made in his country Prestigious 8. It is great to have a products from this country Khosrozadeh Shirin and Heidarzadeh Hanzaee Kambiz, (2011), P.614 Consumer perception 1. Important/ not important 2. Overall quality 3. Durability 4. Technological sophistication 5. Prestigious Gray A. Knight & Roger J. Calantone (1999) P. 144 Brand image 1. brand X offers high quality 2. brand X offers reliable products 3. I feel proud to products from brand X 4. I trust the company which makes brand X (Aakar,1991, 1996; Yoo et al. 2000) Purchase intention 1. the possibility I will buy this product 2. the possibility I recommend this product Khosrozadeh Shirin and Heidarzadeh Hanzaee Kambiz, (2011), P.614 Product category 1. Expensive/ inexpensive 2. Good quality/bad quality 3. I look for the COO to choose the best product available in a product class Ravi Pappu, Pascale G. Quester, Ray W. Cooksey, (2005) Country of origin image We used Khosrocadeh Shirin 9-items scale. The 9-items of the scale measure the extent to which the respondent perceives a particular product category from a particular country to be a good purchase choice, of high quality better than the same product category originating from other countries. The COI is formed according to the economic level of the country, the political system of the country, the standard of living and finally the technological advancement of that country. The items are anchored with strongly agree and strongly disagree. The scale displays lower reliability (ÃŽ ± = 0.66). In comparison with the previous studies reliability, our scale measurements are lower (Alpha = 0.83). Consumer perception We used five items scale from Ali Riza (April 2006). The items measure the importance of looking for COI as an external attribute. It also measures the perceived quality of the product from a certain country, so as the consumer’s association of COI with the technological sophistication of the product, and finally if they don’t have knowledge about the product’s COO; whether they will refuse to purchase the product or agree to purchase this product. The items anchored strongly agree and strongly disagree, the scale displays a good reliability (Alpha = 0.75). In comparison with the previous studies reliability, our scale measurements are lower (Alpha = 0.92). Brand image We mapped the brand image depending on two main indicators; brand perceived quality and brand associations using Aaker, 1991, 1996; Yoo et al. , 2000.  Seven items scale including the brand’s good quality, reliability, durability, its excellent features and prestige. Items was anchored with strongly agree and strongly disagree, the scale displays a good reliability (Alpha = 0.74). In comparison with the previous studies reliability, our scale measurements are higher (Alpha = 0.70). Purchase intentions The purchase intention was examined using Khostozodel Shirin. Two items scale including the possibility of the purchase and the recommendation of the purchased product. Anchored with very low and very high, the scale displays a very good reliability (Alpha = 0.89). In comparison with the previous studies reliability, our scale measurements are higher (Alpha = 0.87). Product category The research investigated the product category variable using Ray W. Cooksey, 2005. Scale with four items including the value of certain product category relative to the COI, the importance of this product category and whether it depends on the COI or not was also investigated. And finally the choice of the product class according to the COI. Ray W. Cooksey research suggested that four items scale are adequate when measuring this moderating variable. It was examined according to five-point likert scale, ranging from strongly disagree to strongly agree. The scale displays a very poor reliability (Alpha = 0.5) which was very close to the researcher’s reliability (Alpha = 0.56) Correlation Analysis Correlation coefficient of Pierson was applied to study the relation between constructs. The results are listed in Table 3. As it is stated in the table, Pierson coefficients between constructs are significant at 95% confidence level. Several of the constructs in the research were correlated. The highest correlation was 0.36, which was between the COI and brand image, and also between the consumer’s perception and brand image. This correlation appears to be weak, positive and significant, while the lowest correlation was 0.08, which was between COI and consumer’s perception. This correlation appears to be weak, positive and insignificant. Correlations between our independent variable â€Å"COI† and the other 3 main dependent variables are as follows: there is a weak and positive yet insignificant correlation between the COI and consumer’s perception (0.08). The previous studies findings concerning this correlation were (0.48) which is higher than our correlation. These analyses were conducted by (Knight, Calantone, 1998, p.136). When comparing the correlations between COI and brand image with the previous studies, we found that our correlation was significant, positive and weak amounted to (0.36) while (Ahmed, Zbib, Sikander, Noujaim, 2012, p.118) concluded that it was (0.344) which is lower than our correlation. Table (3) shows that there is a significantly weak positive correlation between country of origin and purchase intention with (0.28) while the previous studies correlation was (0.375) by (Shirin, Kambiz, 2011) there correlation was weak significant and positive. COI has a weak and positive yet insignificant correlation with product category amounted to (0.14). It also has an insignificant weak positive correlation with brand image and purchase intention while, it has a negative weak correlation with consumers’ perception. According to the previous studies; the interaction between COI and product category was insignificant  at (correlation less than 0.05). Indicating that the product category will moderate the relation ship between the COI and consumer’s perception, brand image and purchase intention (Pappu, Quester, Cooksey, 2006, p.705) Two new significant correlations were deduced from the analysis; the brand image has a significant, weak, positive correlation with the purchase intentions (0.27) and also with the consumer perception (0.36). The prior correlation corresponds with previous studies (0.53) which states that â€Å"Brand image directly and positively impacts purchase intentions† (bu Esch et al. 2006). In light of our findings it appears to us that; COI has a positive impact on focal country’s brand image. This would be the case for Germany that has a strong reputation for cars in general (product) but also produces strong brands like BMW or Mercedes. Alternatively, a country like Turkey may develop a strong reputation for a certain type of product, such as carpets, but lacks the relevant skills to turn this product-related capability into strong and well-known brands (strong product image/weak brand image) Conceptually interesting are also cases where a country, such as Austria, manages to develop strong brands, for example Red Bull or Swarowski, but is not at all well known for its expertise in the respective product categories (weak product image/ strong brand image). It would be of immediate benefit for companies operating in such countries to analyze whether image advantages accrued by strong brands can also be used to support other less well-known brands in these product categories. Hypothesis Testing To test the hypotheses of the research, we used the correlation analysis in table 3 as an indicator. This testing resulted in several significant correlation and other insignificant ones and this analysis enabled us to reject and accept our previously stated hypothesis statements. Hypothesis H1 stated that COO image significantly affects how consumer perceives the product. The major substantive finding from the correlation analysis is that the correlation between the 2 variables is insignificant therefore H1 is  rejected. This finding doesn’t confirm the predictions of previous researchers that the country of origin image significantly impacts the consumer perceptions (including two important dimension consumer’s attitude and beliefs). Gary A. Knight and Roger J. Calantone (1999,p.131) stated that COI is a significant antecedent of attitudes and beliefs which form the consumer’s perceptions related to the product in question and this appear to be insignificant in our hypothesis testing. Hypothesis H2 predicted the existents of a significant influence of the COI and the brand image. Our findings support this hypothesis therefore H2 will be accepted. The correlation confirms that the COI is directly related to the brand image which supports the previous studies findings (Roth and Romeo, 1992; Hsieh et al, 2004) which stated that CI directly and positively impacts brand image. Hypothesis H3 stated that the country of origin asserts a significant impact on the purchase intention. The result of the correlation analysis shows a statistical significant relation between the two variables which supports our hypothesis therefore H3 is accepted. This finding confirms with the predictions of previous researchers that CI directly and positively impacts purchase intentions (Laroche et al, 2005) and also with â€Å"the country of origin has a significantly positive impact on purchase intention† stated by ( Shirin; Kambiz, 2011 p.605). Hypothesis H4 offered that the product category will moderate the relation between the COI and consumer perceptions, brand image and purchase intentions. The results supported the predictions made in H4,therefore H4 is accepted. This confirms with the pervious studies findings (Pappu, Quester and Cooksey, 2005 p.705). Conclusion The verification of the hypotheses in this paper leads to five conclusions: (1) Country-of-origin image has an insignificant influence on consumer perceptions (2) Country-of-origin image has a significantly positive influence on brand image; (3) Country of origin image has a significantly  positive influence on purchase intentions; (4) Brand image has a significantly positive influence on both consumer perceptions and purchase intentions; (5) product category moderates the relation between COI and the other 3 variables. The country-of-origin effect is an environmental factor that firms have to deal with whenever they trade in non-domestic market. Yet we can do little to change COI since it is defined by a set of historical and cultural attitudes rather than by anything lying within the control of an individual firm. The good news, however, is that consumer place (COO) below such things as quality and reliability as factor influencing purchase decision for instance Mercedes make good cars but don’t necessarily transfer such positive impression to other German products. Our findings confirms that consumers use a product’s COO as a cue in purchase decisions but this cue can be superseded by the brand image which proves to have a significant relation with the purchase intentions. Also COI insignificantly contribute to the consumer’s perceptions of a certain products this means that other information about the product reliability, quality or brand image will take precedence over COI in determining how people perceive a certain product. So where does this leave us? Companies cannot ignore COO effect but equally they should not rely on those effects in the promotion of their brands because for instance simply being an Italian clothing brand may be an advantage but it isn’t enough for the firm to rely solely on it when promoting its products. Any advantage from COO needs reinforcement through the marketing process this justifies the weak positive correlation between the COI and the brand image. In conclusion, COI is just one of many factors that influence the consumer’s decision to purchase or not to purchase a particular brand. And, yet again we find that consumers do not place a huge emphasis on where a product comes  from- unless they have nothing else on which to base a decision. â€Å"The origin of a product has never been more important in the minds of consumers† (Winter, 2004, p. 46). â€Å"Ninety three percent said it is good to know the origin of products such as where it came from and who made it. People are no longer content to pay for something superficial and hollow† (Winter, 2004, p. 46). Holt et al. (2004, p. 96) Elaborated on this sentiment by stating that consumers expect global brands to tell the myth from the particular places that are associated with the brand. In this research we are presenting both point of views supporting and against the idea that COI is considered an important external attribute that buyers take into account when making a purchase decisions. The research did not attempt to support a certain point of view that is why the predicted hypotheses were not initially directional. One of the limitations of the study was the number of samples collected. In our research we managed to collect 38 questionnaires which are relatively small in comparison to our population. 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