Made In China Literature Review
Table of Contents
TOC o “1-3” h z u HYPERLINK l “_Toc286332791″1.Introduction PAGEREF _Toc286332791 h 1
HYPERLINK l “_Toc286332792″2.The country of origin effects PAGEREF _Toc286332792 h 2
HYPERLINK l “_Toc286332793″2.1.Country of origin and consumer decision making PAGEREF _Toc286332793 h 2
HYPERLINK l “_Toc286332794″2.2.Principle elements forming country of origin effect PAGEREF _Toc286332794 h 3
HYPERLINK l “_Toc286332795″2.3.Consumer bias and discrimination economics PAGEREF _Toc286332795 h 4
HYPERLINK l “_Toc286332796″2.4.Case studies PAGEREF _Toc286332796 h 4
HYPERLINK l “_Toc286332797″3.Made in China effects PAGEREF _Toc286332797 h 5
HYPERLINK l “_Toc286332798″3.1.The growth of the Made in China brand PAGEREF _Toc286332798 h 5
HYPERLINK l “_Toc286332799″3.2.China brand perceptions PAGEREF _Toc286332799 h 6
HYPERLINK l “_Toc286332800″3.2.1.Quality PAGEREF _Toc286332800 h 7
HYPERLINK l “_Toc286332801″3.2.2.Price PAGEREF _Toc286332801 h 7
HYPERLINK l “_Toc286332802″3.2.3.Reliability/ Safety PAGEREF _Toc286332802 h 7
HYPERLINK l “_Toc286332803″3.3.China as an emerging economy PAGEREF _Toc286332803 h 8
HYPERLINK l “_Toc286332804″4.Conclusion PAGEREF _Toc286332804 h 8
HYPERLINK l “_Toc286332805″5.References PAGEREF _Toc286332805 h 9
IntroductionThe literature review section aims at examining what other scholars have established about the consumers’ attitude towards Chinese products, based on the ideology of ‘country of origin effects’. The section will review literature available on the country of origin effects and how this has affected Chinese products in the international market. The chapter is divided into four sections whereby the first and the last section represent the introduction and conclusion respectively. In the second section, the literature review will entail views and findings about the country of origin effects and how it affects decision making, the factors that cause it and why consumers discriminate. The section will also include case studies to show the impact of country of origin. In the second section, a review of literature on Made in China perceptions will be established. This will include identifying how China is penetrating the international market, people’s perceptions about Chinese products and how the China’s stage of economic development has affected perceptions about its products.
The country of origin effects
Country of origin and consumer decision makingIn the process of decision making, consumers make use of both the intrinsic and the extrinsic informational product cues in evaluating the product. Intrinsic cues denote the physical aspect while the extrinsic cues are product related but not part of the physical product (Cai, 2002). It is in the extrinsic cues that the consumer considers the brand name, reputation of the retailer and country of origin among other factors (Verlegh & Steenkamp, 1999). While the country of origin as an extrinsic cue has no direct impact on the performance of the product whatsoever, the importance of the country of origin on consumer perception is incontestable. The country of origin effects is a subject that has triggered interest among many researchers and the impact of the country of origin on the customer’s choice has been declared undeniably true. As established in the empirical study by Schooler (1965), the made in country label had significant effect on the product evaluations by a consumer.
Contemporary studies have often used the dual process models developed by Chaiken (1980), Maheswaran and Chaiken (1991) and others as the theoretical framework for examining the country of origin effects. The systematic and heuristic processing are considered the two main criteria through which individuals evaluate the products in this theoretical framework. This framework distinguishes between different types of motivation which can affect the human perceptions on different products. It is these motivations that single out the country of origin as an important factor in the customers’ decisions.
Principle elements forming country of origin effectIt is widely accepted that the consumer’s choice based on the country of origin emanates from a myriad of thoughts, attitudes and experiences that customers have towards products from a particular country. Vrontis and Thrassou (2007) in their study established that the consumers’ product perception based on the country of origin was dependent on experience, knowledge, stereotypes, ethnocentrism, general country of origin image, brand image, political/cultural relationship with country. These are factors that can also be identified in other studies. In the study by Lang and Crown (2007), it was established that the age and educational background of customers impacted highly on the country of origin effect; factors that may be attributable to experience and knowledge. In a study conducted by Nes and Gripsurd (2010), a concept of micro and macro societal images were introduced in explaining the impact of the country of origin. The macro country images included societal images, people images and political images. The micro images included the images associated with a product developed by a nation (Nes & Gripsurd, 2010). The factors described highly resemble those established in Vrontis and Thrassou (2007), insinuating that a variety of factors influence perception.
Lee (1999) examined the country of origin effects, brand image effects and the interaction between these effects on the consumer evaluation of bi national brands. It was established that the specific product image, country of manufacture overall image and country of brand overall image were highly important in the buyer decision making process. The theoretical foundation for the study was categorization theory and empirical methodology was based on structural equation modeling. The study showed the need for building brand image rather than building country image by a firm because the brand image had a rather strong effect. The main limitations with this study included problems of generalization with only students as the subject of study. The small sample size also signified another limitation and so were order effects and the design problems which also might have provided biased results.
Consumer bias and discrimination economicsThe country of origin as an affective attribute of the product reflects the preferences and biases of the consumer. This is an aspect that has been established by socio-psychology researchers including Becker (1971) and Maheswaran (2006). According to Becker (1971), the country of origin is treated like a subjective attribute which is highly relevant to the consumer’s decision and that a consumer may discriminate or favor a product due to its origin. Maheswaran (2006) indicates how discrimination can be quantified by establishing a discrimination coefficient (DC). In essence, the cost of the transaction may not directly translate into the real costs such as durability; replacement costs and need for repair of products bought hence the need to discriminate through comparing various aspects of products before making purchases. The DC therefore acts as the bridge between the money cost of the product and the net costs and therefore aids the consumer in making a choice. In this regard, any poor reputation regarding the quality of a product is therefore bound to affect the consumer’s choice and exercise of discrimination. Webb and Po (2010) examined the impact of country of origin and brand images on the three dimensions of outcomes namely the intention to purchase, expectations regarding the service quality and the willingness to pay by the consumers. The study was based on a sample of 150 undergraduate students from a university in Western Australia. The study showed significant impact of made in country labels and brand images on the three dimensions of outcomes under consideration. It is an indication that consumers are capable of discriminating foreign products based on their quality and expectations.
Case studiesA variety of studies have sought to examine the practical application of country of origin effects, through the use of surveys and most have concluded that the country of origin indeed affects the perception of customers. Maheswaran (2006) examined the perceptions regarding the Japanese products in South East Asia where the Japan had main investments. This empirical study was based on primary survey of the South East Asian consumers and the results indicated the country associated with a product had significant influence on the consumers. The origin was seen as a factor that creates varied emotions in the customers’ minds, which in turn affect the product evaluations by the consumers. Hence the study demanded the need for a framework based on the emotions of consumers to analyze the made in country labels and their effects on the product evaluations by consumers.
In another study, Lang and Crown (2007) examined the perceptions and preferences of the consumers in Canada about the products made in Canada, China and some other low cost nations like Taiwan, South Korea and Hong Kong. The study which was based on the theoretical foundations of information integration theory showed considerable differences in perceptions regarding the quality, price; style and fit in products different nations. It was therefore undoubtedly established that the country of origin plays a vital role in determining the customer decision. In the study by Lang and Crown (2007), the utility of the products to a large extent influenced the perceptions based on country of origin effects. In particular, the Canadian origin garments were considered to be of the most superior quality but also the most expensive. This insinuates that while the customer considers that Canadian products are of superior quality, he or she must consider the price. The age and educational background of respondents also impacted on their perspectives.
Made in China effects
The growth of the Made in China brandProducts made in China are swiftly infiltrating the world market and they have suddenly become cheaper alternatives for goods produced in developed countries (Williamson (2009). Apoteker (2006) in his study examined the two alternative views regarding the sudden rise in the share of China in world trade, thus reassessing the meaning of made in China. The two alternative views examined were China as merely a low value addition and China as a highly competitive exporting nation. Based on the analysis, it was obtained that trade-processing as a main component of overall Chinese trade performance and FIEs as the main trade processing agents. In conclusion, it was established that the effective competitiveness of Chinese products was lower than the assumed one in the study. As if to support the need to enhance Chinese product competitiveness, Interbrand (2008), notes that the Chinese brands have are not achieving their maximum potential due to various setbacks based on quality and general negative perception of Chinese products. Accordingly, there is need to establish a relevant niche through correcting these setbacks and building the China brand.
A study by You (2004) examined the brand effect of a product on consumer behavior and established that Chinese manufacturers were becoming more concerned about the consumers as opposed to products. This study indicated that the brand effect while important in perception was being replaced by factors like style, quality hence the need to improve on them. You (2004) established that the aesthetic and social values for the consumers regarding the products played an important role in enhancing brand effect.
China brand perceptionsWhile different studies have established various characteristics of products made in China, the price, quality, reliability and safety concerns remain the most imperative factors expressed by customers when referring to Chinese products.
QualityQuality remains one of the greatest concerns on products made in China and as indicated by Synovate (2006), Synovate (2007), Schnierjans, Qing and Olson (2004), Interbrand (2008), Sohail (2004) and Williamson (2009) among others. In the Synovate (2007) study of Turkish customers’ perceptions of Made in China products; it was established that majority of the respondents considered Chinese products as low quality products. Accordingly, they were considered unacceptable and were it not for the low prices; customers would not choose to buy the products. Interbrand (2008) establishes that Chinese products are having difficulties being accepted overseas because their quality is often considered inferior. A similar view is expressed by other researchers indicated above, with the main recommendation being for China to improve product quality.
PriceA significant number of studies have established that one of the main reasons why Chinese products are becoming increasingly popular around the world is their low prices. In the synovate (2006) and (2007) studies, respondents indicated their preference of Chinese products based on the low costs which offered them overall competitiveness. In William (2009), it is determined that the low cost of Chinese products is highly important in enhancing sales since most other products are likely to be expensive. The same views are notable in Interbrand (2008) and Sohail (2004) who note that a significant percentage of customers are likely to purchase Chinese products as alternatives to regular expensive products.
Reliability/ SafetyThe general perception of Chinese products is that they are not likely to be reliable and that they expose users to many hazards. The issue of safety of Chinese products has mostly been exemplified by the number of Chinese product recalls in the international markets. Beamish and Bapuji (2008) based on the toy recalls in USA between 1988 and 2007 raised serious concerns regarding the safety of made in China products. In this study which established that the recalls were mostly based on design and manufacturing flaws, it was established that such issues downplayed the customer’s ability to trust China products. The significant number of recalls over the years denotes the need for more detailed research in this regard. A similar study by Meyer (2008) indicated the implication of recalls of Chinese products including food and toys in determining people’s preference for China made products.
China as an emerging economyCai (2002) establishes the relevance of the degree of economic development at which the country is in determining the country of origin effects. In this respect, Cai (2002) indicates that there is a significant difference in perceptions when customers are purchasing products from a developed country as opposed to a less-developed countries, noting that the stage of development affects customers’ likelihood to purchase. Customers from developed countries are less likely to purchase4 products from less-developed countries. This was also exemplified in the study by Synovate (2006) which indicated that Western consumers mostly from US and Europe appeared skeptical about buying Chinese products due to perceived low quality. The same was observed in Korea which is an indication that the development stage at which the country is to a large extent determines how others view its products.
ConclusionThe review of literature put forth by different scholars and researchers indicates that the country of origin effects to a significant level influences the perception of customers; and hence determines their willingness to buy products from a particular country. In this section of the research paper, case studies on China, Japan, Canada, South Korea and Taiwan among others indicate that the origin of products indeed has an impact on purchase decisions. Notably, developed countries’ products are preferred to products from developing countries. China as the main focus of this study is affected vehemently by the country of origin phenomenon. As indicated by most studies, Chinese products are likely to be discriminated against in the international market. This calls for increased efforts towards working on the setbacks identified by consumers so as to improve China’s products in the international market. In the Chinese case, there are few studies focusing on different sectors and different consumer groups to examine the Made in China label effects. Further, few studies have offered significant recommendations about policies that can help improve the Made in China brand. This study attempts to fill this research gap through examining the Made in China label effects on different consumer groups and for different products in the UK market. It also offers proactive recommendations for improvement in order to enhance China’s competitiveness in the international market.
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