Country of Origin
Introduction In the production of this report, the information is obtained from several different sources. The sources of information are collected from books, the internet, and journals databases in relation to consumer behaviour and the country of origin. The information is used to support the discussion and analysis. The report assumes the status oriented consumers as the market assumptions. The scope of the report covers the theoretical concept section in the following section. It is about the theory of country of origin and the steps in consumer decision making.
Also, there is discussion and analysis section, where the importance of COO and the steps impacted by the COO are discussed. Finally, conclusion and recommendation are presented in the last section of this report. 1. Theoretical Concept 1. Country of Origin (COO) Country of origin plays an important role in consumer decision making process. Consumers strongly associate certain items with specific countries, and products from those countries often attempt to benefit from these linkages (Solomon 2009, pp. 375). Sometimes it is being used as a determining factor for consumers when they buy a product.
Consumers buy products not only because they perform well or are produced by a well known corporation, but also based on the country of origin (Maheswaran 2006). Saeed (1994) points out that country-of-origin means the country that a manufacturer’s product or brand is associated with; traditionally this country is called the home country. The country of origin of a product, typically communicated by the phrase “made in (country),” has a considerable influence on the quality perceptions of a product (Ueltschy 1998). Swiss watches can be an example.
Federation of the Swiss Watch Industry (2009) mentioned that ‘Swiss made’ embodies a concept of quality, which includes technical quality of watches (accuracy, reliability, water-resistance, and shock-resistance) and aesthetic quality (elegance and originality of design). Consumers use the term “made in Swiss” as a way to judge the products’ quality. Consumers perceive that the watches made in Swiss have the best quality compared to the other countries. 2. Consumer Decision Making Process Consumers who want to buy a product might have a process of making the decision whether to buy or not to buy.
The process is called consumer decision making process. The process is shown in Figure 2 below: Figure 1 – The Consumer Decision Process [pic] Source: Neal et al. (2004), pp. 19 The consumer decision making process comprises 5 steps, which begin with problem recognition stage. Next, information search, evaluation and selection, store choice and purchase follow the first step. At the end of the process, the post purchase processes is occurred. The five steps are affected by situations. The process shown in figure 2, there is two types of arrow.
First, it is the dotted line. It allows the consumers to step back the process. Second, the full line which allow the consumers to jump over to the next step. 1. Problem Recognition Problem recognition is the first step in the consumer decision making process. A problem exists because there is a need. Needs are what individuals must have or wants to have (Griffin & Pustay 2005, pp. 432). The recognition of a problem is the result of discrepancy between a desired state and an actual state, which sufficient to arouse and activate the decision process (Quester et al 2007, pp. 0). 2. Information Search After the problem has been recognized, then the information needs to be collected. The searching of information involves internal and external search. The internal search is generally information stored in the memory. Meanwhile, external search can come from many sources, for instance friends, family, advertisements, and so on. 3. Evaluation and Selection Once the information has been gathered, consumers have to evaluate the information. They might have evaluative criteria before purchasing a product.
The consumer sees each product as a bundle of attributes with different levels of ability of delivering the problem solving benefits to satisfy his/her need (Matsuno 1997). When they find a product with the desired characteristics, the decision to select can be made. To decide the alternatives, consumers can think of brands that are preferred the most (evoked set). If the most preferred is not available, then they can have second choice brands used as a back up (inert set). However, when consumers can not get products from both of evoked and inert set, the inept set occurs.
It consists of brands rejected by consumers. 4. Store Choice and Purchase After the consumers already know what brands that they want, they go to the stores to purchase it. There are some forms of stores, which are virtual and physical store. Virtual stores are stores that sell products online or via the internet. On the other hands, physical store is the store that sells products through an outlet in which a consumer can typically see and feel the products. The consumers purchase the products in the chosen store. 5. Post Purchase Processes Post purchase processes is the last step in the decision making process.
In this step, consumers evaluate the product that is already bought. The evaluation can bring two results: satisfaction or dissatisfaction. If the satisfaction occurs, then consumers will likely to be loyal to the brand. However, consumers can go back to the problem recognition stage if the dissatisfaction happened. 2. Discussions and Analysis 1. The Importance of Country of Origin (COO) The country of origin is important as a source of competitive advantage. A competitive advantage exists when the firm is able to deliver benefits that exceed those of competing product (Porter n. . ). Kotler & Armstrong (2006, pp. 206) defined competitive advantage as an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices. One attribute that has the potential for conferring a competitive advantage is the product country image, which is more generally described as the country of origin effect (Baker & Ballington 2002). In handbag industries, it is important to see the product’s country image so that consumers can determine whether the handbags are good or not.
The handbags made in Italy have a competitive advantage compared to handbags made in China. The Italian handbag is made to be more prestigious, exclusive, and elite because it used good materials from Italy. In contrast, it is not seen as prestigious, exclusive, and elite as the Italian made when the handbag used materials from China. The used of production in China can not create competitive advantage for Alberto. Without the existence of competitive advantage, it can make Alberto becomes more difficult to attract consumers to buy his handbags.
The selection of country to manufacture his handbags is essential so it requires careful thinking to move the production. 2. The Impact of COO on the Decision Making Process 1. Problem Recognition In the case of status oriented consumers, the country of origin does not affect to the problem recognition stage. It is because in this problem recognition stage, the consumers just realized that they have a problem, which is they need a handbag. They only think to buy handbags to solve their problem and thus can fulfill their needs. They do not think whether the handbags are made in Italy or are made in China.
So, the country of origin does not take place. 2. Information Search After identifying the problem, consumers tend to search more information that they need to solve their problem. Consumer seeks a lot of information about the handbags. The information search process is not affected by the product’s country of origin because when searching for information, consumers do not have any limitations in determining the amount of information needed. They look for the handbags’ information without seeing the home country that makes the products. They do not search the information about the handbags that is just made from one country.
The information of the handbags is collected from many different sources. Erickson et al (1984) stated that there is no study has attempted to incorporate country of origin as a potentially important determinant of the amount of search. 3. Evaluation and Selection Consumers’ evaluation on a product can be affected by the products’ country of origin. Country of origin has an impact on product evaluation (Schaefer 1995). Consumers will look at the product country image since they are status oriented people. Country of origin is sometimes known as country image (Morish & Lee n. d. ).
Country image also has a big contribution to make to brand perceptions (Yasin et al 2007). If the country image of handbag industry is good or positive, then it will enhance consumers’ desire to buy handbag from those country. In the reverse way, consumers will not buy the handbag if the country image of the handbag industry is bad or negative. Consumers often use perceptions of a country’s image in product evaluation when they are unable to detect the true quality of a country’s product (Balestrini & Gamble 2006). They tend to rely on the country image to judge the quality of handbag.
Sohail (2005) mentioned that consumers seem to have a positive or a better perception of products from developed countries, as compared to products from developing countries. Consumers will have more positive perception to handbags made in Italy rather than the Italian handbags made in China since Italy is recognized as more developed than China particularly in the fashion business industry. As it is known by plenty of people, Italy is a country that has positive image in terms of fashion products. Therefore, the handbag made in Italy is famous in the world.
People do not have any doubt toward the handbag made in Italy because they believe in the Italian craftsmanship are able to make a high quality handbag. In contrast to Italy, the handbag made in China might have negative image for most of people. The reason is because China is not popular as a country of fashion in the world. There are a lot of people perceive that any Chinese handmade products are not reliable. Consumers believe to the price-quality relationship, which means that the more expensive the product, the better the quality that it has. The Chinese handmade is cheaper than Italian due to cheaper production and labor costs.
The cheaper price of the handbag make consumers evaluate that it does not have good quality as the Italian handbag has. Since the evaluation step is affected, the selection has also affected by the country of origin. Consumers might not select the Italian handbags made in China. According to Baker & Al-Sulaiti (1998), the quality perception of designer brands was lowered when made in Korea, China, and Costa Rica. In other words, it can be said that people perception toward products made in China is low even though the product is Italian handbags. As a result, they might not want to buy the handbags made in China.
The review made by Vittachi (2004) provides a series of survey. A survey conducted by Synovate Ltd (2004) mentioned that the majority of respondents bought European-labelled goods because they were better designed and of higher quality. It shows that the consumers have a positive image of European goods in their mind. Therefore, the handbags made in Italy will be selected over the Italian handbags made in China because of the image. Consumers with their positive attitude towards the Italian handbags will encourage themselves to buy the one made in Italy even tough the price is very expensive, but it has better design and quality.
In contrast, there is a counter viewpoint, Dongdae and Ganesh (1999) mentioned that changes in country of manufacture will not affect brand image much. The Italian handbag made in China does not bring a significant effect for consumers. Consumers are not affected by the changes of country of origin of the handbags, which is from Italy to China. So, they do not evaluate and select the handbag based on its country of origin. In summary, the country of origin gives impacts to the evaluation and selection step in the consumer decision making process.
Even though there is a contrasting view point, it can not be applied to the evaluation and selection step in this case because the market for the handbag regards status as the most important. Finally, the changes of country of origin cause consumers change their perception of the handbag. 4. Store Choice and Purchase Store choice and purchase processes are affected by products’ country of origin. After the product has been selected by the consumer, they will choose the store that sells the product with the made in label as they want.
Since the consumer thought that the handbag made in Italy is better than the handbag made in China, they will only choose the store that sells the handbag made from Italy. In other words, country of origin limits the number of outlets visited by consumers. Next, the purchase process will likely to occur when consumers have decided the store. The country of origin gives impact to the purchase step. Lin and Chen (2006) stated that the country-of-origin brand and its country image do play a very important role when a consumer makes a decision and would affect a consumer’s preference level and furthermore affect his/her purchasing intention.
Han (1991) concluded that COO had indeed affect consumer’s purchase decision. The country of origin limits the purchase options for consumers. Consumers who highly view status as important will only purchase handbags made in Italy. As a result, they will purchase the handbags made in Italy straight away. The handbag made in China is not preferred to be purchased by them because it does not have values that can increase or maintain their status. 5. Post Purchase Processes The country of origin does not give impact to the post purchase processes because consumers already know which handbag to buy.
Moreover, the country of origin of the handbag is already evaluated by consumers. As a result, it does not give any effect to the post purchase processes. 3. Conclusion In conclusion, the market assumption for the handbags industry made by Alberto is status oriented consumers. By looking at these consumers, the consumer research team can investigate the impact of country of origin on consumer decision making process. The country of origin is shown by the made in label of a country.
In addition, the country of origin is important for the handbags industry as a source of competitive advantage, in which the competitive advantage can be used to attract more consumers to buy the products. The decision making process consists of five steps, which include problem recognition, information search, evaluation and selection, store choice and purchase, and post purchase processes. The country of origin, which is often see as country image, affects two steps in decision making process in the handbag industry. The steps are evaluation and selection and store choice and purchase. 4. Recommendation
There is a recommendation from the consumer research team to Alberto. Alberto should not move his handbags production to China. The reason is the product can lose its competitive advantage. The status oriented consumers see his handbags as the one that has more value than the others. If Alberto moves the production, the consumers will not buy his handbags anymore because it can lower their status in social living. The moving production to China can harm the brand itself. It won’t sell as high as handbag made in Italy. The other reason is the status oriented consumers believe in price-quality relationship.
The expensive handbag is perceived as having a good quality. If the handbag changed to be made in China, they would not buy. Third reason is related to the two steps affected by COO. Consumers already have more positive evaluation toward handbags made in Italy than handbags made in China. Therefore, they will not select made in China. It is difficult to change people perception to the brand image that is already stuck in their mind. Also, through keeping the production in Italy make consumers easier to purchase the handbag as there is limited store that sell the product.
