East Asian Rapidly Developing Countries and Marketing to the United States: the Effects of Country-Of-Origin Advertising

ABSTRACT - In marketing to developed countries like the United States, the rapidly developing countries (RDCs) of East Asia have all been concerned with country-of-origin (COO) issues that affect consumer perceptions of their country and products. Through a longitudinal survey, this exploratory paper examines the effects of country-specific ads from the more developed RDCs of South Korea and Taiwan in comparison to that of a lesser developed RDC, Thailand. The findings reveal differences in American consumer perceptions and the effects that COO advertising can have. The study concludes that country-specific advertising can be beneficial to RDCs and managerial implications are offered.



Citation:

Francis M. Ulgado, Mark P. Leach, Tyra A. Mitchell, and Annie Liu (1994) ,"East Asian Rapidly Developing Countries and Marketing to the United States: the Effects of Country-Of-Origin Advertising", in AP - Asia Pacific Advances in Consumer Research Volume 1, eds. Joseph A. Cote and Siew Meng Leong, Provo, UT : Association for Consumer Research, Pages: 52-57.

Asia Pacific Advances in Consumer Research Volume 1, 1994      Pages 52-57

EAST ASIAN RAPIDLY DEVELOPING COUNTRIES AND MARKETING TO THE UNITED STATES: THE EFFECTS OF COUNTRY-OF-ORIGIN ADVERTISING

Francis M. Ulgado, Georgia Institute of Technology

Mark P. Leach, Georgia Institute of Technology

Tyra A. Mitchell, Georgia Institute of Technology

Annie Liu, Georgia Institute of Technology

[This manuscript reports the partial findings of a survey, of which other findings have been submitted elsewhere.]

ABSTRACT -

In marketing to developed countries like the United States, the rapidly developing countries (RDCs) of East Asia have all been concerned with country-of-origin (COO) issues that affect consumer perceptions of their country and products. Through a longitudinal survey, this exploratory paper examines the effects of country-specific ads from the more developed RDCs of South Korea and Taiwan in comparison to that of a lesser developed RDC, Thailand. The findings reveal differences in American consumer perceptions and the effects that COO advertising can have. The study concludes that country-specific advertising can be beneficial to RDCs and managerial implications are offered.

INTRODUCTION

The rapidly developing countries (RDCs) of East Asia have been among the world's fastest growing economies since the 1960's. The business media have examined and discussed these economies as the success story of the modern era. The Asian "Tigers" of South Korea, Taiwan, Hong Kong and Singapore have doubled their real GDP every eight years during 1960-85 (Economist 1993). Beginning in the 1970's, the four emerging economies of Thailand, Malaysia, Indonesia and China, have followed in the same direction. Although at a slower pace, their economic growth has also been remarkable. The phenomenal economic growth for these Asian countries has persisted even during world recessionary periods, and is envisioned to continue through this year. While the U.S., Europe and Japan foresee an average growth rate of only 2.7 percent for 1994, Asia's leading economies forecast an average growth rate of 7 percent for the same period. Having grown four times faster in each of the previous three years, the region is expected to exceed the growth of the world's 24 top industrialized countries by over six-fold for 1993 (Zuckerman 1993).

Much of this growth has been attributed to export-oriented development policies and export promotion (Levy 1988; Wortzel and Wortzel 1981). Although a considerable amount of trade takes place with neighboring countries, Japan in particular, much of these exports have been directed to the United States. For example, the combined trade surplus of South Korea, Taiwan, Thailand and Malaysia with the U.S. reached $25 billion by 1988 (Business Week 1988). U.S. trade with East Asia has grown with imports from the region exceeding $100 billion by 1992, while exports to East Asia grew to over $50 billion (Business Week 1993). Significantly, the leading export trade partner for South Korea, Taiwan and Thailand has been the United States (Labate 1992). For these three countries, the American consumer has been a vital market for their products. Nevertheless, exporters from these same countries have had to contend with two primary issues, protectionist barriers to trade and country-of-origin (COO) perceptions of American consumers.

The issue of COO has emerged from the belief of consumers in developed countries, such as the U.S., that products made in lesser developed countries, RDCs in particular, are of questionable if not inferior quality. The existence and nature of COO or "made-in" effects on consumer perception has been widely research since the 1960's. To deal with this phenomenon, RDCs have resorted to advertising designed to persuade consumers that their products are of high quality. Print ads have appeared in the very same U.S. business periodicals that have marveled at their economic success. The advertisements seek to inform the American consumer about the quality of products made in Thailand, or the economic growth of South Korea. In 1993 for example, the China External Trade Development Council commissioned ad agency Hwa Wei & Grey to launch a 4.2 billion print ad campaign to address the prevalent belief that Taiwan-made products are either clones or of doubtful quality (Advertising Age 1993).

This type of advertising approach raises the concern over the effectiveness of the ads in creating a positive image and a high-quality perception of products made in these countries. Such COO advertising runs the risk of increasing negative country and product attitudes. COO ads may only serve to reinforce already existing negative perceptions, or may even create them. The purpose of the following research is to address these issues and investigate the effects of COO advertising. Specifically, this paper examines and compares four different COO print ads from South Korea, Taiwan and Thailand, and looks at their effects on American consumers.

REVIEW OF THE LITERATURE

In providing a research basis for the COO concerns of RDCs, one direction of country-of-origin literature has focused on proving the existence of COO considerations. Evidence that consumers prefer products from some countries over others has been found in earlier research (Tongberg 1972; Yaprak 1978). Subsequent studies have contributed to supporting the existence of the COO effect on consumer perceptions. A number of researchers have provided evidence that some developed countries enjoy a positive COO effect on their products (Cattin, Jolibert and Lohnes 1982; Darling and Wood 1989; Gaedeke 1973; Papadopoulos, Heslop and Beracs 1990). In contrast, others such as Khanna (1986) and Krishnakumar (1974) have discovered that less developed countries suffer a negative influence from COO identification.

Other research has sought to explain the COO phenomenon (for example, Bilkey and Nes 1982; Johansson, Douglas and Nonaka 1985; Thorelli, Lim and Ye 1989; Wall, Liefeld and Heslop 1991), while others have focused on the nature of the COO effect. For example, studies have discovered that COO characteristics depends on the type of product/product category (Bannister and Saunders 1978; Kaynak and Cavusgil 1983; Lumpkin, Crawford and Kim 1985), or on the type of consumer (Anderson and Cunningham 1972; Eroglu and Machleit 1988; Wall, Heslop and Hofstra 1988).

More recent research direction has led to the investigation of the COO effect relative to the influence of other cues such as extrinsic product attributes like brand name (Han and Terpstra 1988), warranties, or retail store image (Thorelli, Lim and Ye 1989). For example, Ulgado and Lee (1993) suggested that the impact of a strong brand name can moderate any COO effects. Other recent studies have investigated the patriotism dimension of COO and the "buy American" marketing strategy (Han 1988; Harvey 1993). There has also been interest in how to alleviate negative COO effects as found in the research of Cordell (1992, 1991), Suaer, Young and Unnava (1991), Tse and Lee (1993), and Tse and Gorn (1993).

However, some COO issues have not been adequately examined. Although studies have looked into developed and developing country COO implications, none have specifically focused on COO characteristics among developing economies at different levels of development. For example, although both Taiwan and Thailand have been considered rapidly developing, Taiwan is also generally considered to be more developed relative to Thailand. Moreover, although studies have looked at the effectiveness of a "made-in-America" intra-country campaign (Ettenson, Wagner and Gaeth 1988), research has also been generally lacking in examining COO advertising.

This research considers inter-RDC country-of-origin advertising, and its affect on U.S. consumers' attitudes towards a foreign country's image and products. Specifically, the answers to the following questions are sought:

* Do different levels of RDC economic development influence different COO effects?

* What are the effects of COO print advertising for RDCs?

* Do neighboring countries benefit from COO advertising of a particular RDC?

RESEARCH METHODOLOGY

To address these questions, the current study utilized a longitudinal experimental research design with an experiment conducted to collect attitudinal information toward foreign country and product images. A pre-test, treatment, post-test design was utilized with a one week interval between pre and post measurements. The advantages of the longitudinal design in this study facilitated the examination of the changes in attitude over time and link these changes to the effects of COO print advertisements. Since the same respondents were measured twice, variations caused by changes in the sample are eliminated (Malhotra, 1992). Therefore, changes only occurred when respondents have altered their previous opinions. However, it was recognized that the disadvantage of longitudinal research lies in its non-probability sampling method.

Sampling

The study sample consisted of business students from a university in the southeastern United States. The total number of useful respondents was 68. Respondents were first given a pre-test questionnaire to establish preconceived attitudes toward several foreign countries and products from these countries. These students were then randomly assigned into two treatment groups. 35 respondents were exposed to advertisements from Taiwan. The other 33 were exposed to advertisements from South Korea and Thailand. After the respondents were exposed to the advertisements, they were given a post-test questionnaire. Therefore, these two groups acted as control groups for one another.

Questionnaire Design

For this longitudinal study, two questionnaires were constructed. A pre-test questionnaire was given before exposure to COO advertising, while a post-test version was given just after the respondents had been exposed to COO print advertisements. Both questionnaires were structured, and self-administered. They required respondents to indicate their opinions of eight counties, the general attitude toward products from these countries, and attitudes toward specific product categories from these countries.

The objectives of the pre-test were (1) to pre-screen respondents for general attitude toward Taiwan, Thailand and South Korea, and (2) to form comparison anchors for attitude changes after reviewing COO advertisements at the second stage. The pre-test questionnaire consisted of multiple measures (at least three) of the attitudinal constructs of country image and product images from eight countries. Constructs examined were (1) the general image of each of the eight countries, (2) the products-in-general construct: the general image of all products produced in each of the eight countries, and (3) the specific product-category constructs: the image of six specific product categories for each of the countries. Supplementary attitudinal and demographic questions concluded the survey. Respondents used a rating scale of -4 to 4 with 0 considered as neutral. For the post-test stage, respondents were randomly assigned into two groups to evaluate one of two different sets of print ads. The post-test questionnaire included the same multiple measures found in the pre-test questionnaire without the supplemental or demographic questions. Copies of COO advertisements were attached at the beginning of the post-test questionnaire.

Thailand, Taiwan, South Korea, Japan, Mexico, Germany, Italy, and United States were the eight countries selected for this study. Thailand, Taiwan and South Korea were chosen because they were the focus of this study and have been using COO advertising to promote their country or product image in the US. The remaining countries were selected to disguise the intention of the study. To minimize any potential fatigue factor, the order that respondents saw individual countries was randomly assigned in both stages of questionnaire construction.

A range of six product categories were included in both questionnaires. They were jewelry, computers, electronics, athletic equipment, automobiles and clothing. An equal representation of durable and non-durable goods was considered when picking the specific product categories. The first four products were selected because they were advertised in the COO print advertisements in U. S. magazines. The last two products were included as anchors to indicate a pattern for a country that has earned a reputation for this type of product (Such as Italian clothing).

Primarily based on media availability, four advertisements were derived from current US business magazines. During the post-test stage of the study, four-color copies of actual COO advertisements precluded the post-test questionnaire. The major difference between these ads was that the Korean COO advertisement emphasized the quality of all Korean products (products-in-general ad) and the confidence of its economy, while the ads from Thailand and Taiwan emphasized specific product categories (product category-specific ads). A brief description of the four advertisements is provided:

* The advertisement for Thailand showed an intricately designed ruby and diamond jeweled broach pinned to a large green tropical leaf. Its headline read "The Focus of Craftsmanship: Yes" followed by the tagline "Made in Thailand".

* The South Korean advertisement depicted a child examining a global map pointing to the geographic location of South Korea. Two headlines read "Korea for Quality" and "Change, Progress, Quality: Korea". The copy emphasized a plan for a new economy committed to the expansion of world trade, globalization, and quality reform.

* Two advertisements from Taiwan had similar formats. One pictured a mountain bike in rugged use. The headline read "Made in Pikes Peak, Taiwan." Copy described how a Taiwanese mountain bike had been road tested on Colorado's Pikes Peak. The bottom right corner showed a campaign specific logo and the tagline "It's very well Made in Taiwan" The other pictured a laptop computer in use. The headline read " Made in Wall Street, Taiwan." Copy discussed Taiwanese computers with "cutting-edge technology". The same logo and tagline appeared at the bottom right corner.

TABLE 1

CENTROIDS FOR THAILAND PRODUCT CLUSTERS

The use of a "filler" advertisement promoting US cotton products to foreign countries was used to disguise the nature of the study.

FINDINGS

To establish if the initial COO attitudes toward Thailand, Taiwan and South Korea differed, T-tests on pre-test scores were run for each possible pair of countries for the constructs under current study. No significant differences were found between Taiwan and South Korea on any of the constructs, indicating that the perceived image of products from these countries tended to be similar.

In comparing Thailand and Taiwan, a T-test between Thailand and Taiwan for the products-in-general construct resulted in a t-value of 4.14 at a p<.001 level. Thailand and Thai products were significantly perceived as below Taiwan and Taiwanese goods, on all constructs measured except for the measurement of jewelry. Significant differences were found for the "general country image" construct (t=3.42, p=.001), and for the product categories measures of "computers" (t=6.18, p<.001), "electronic equipment" (t=6.35, p<.001), "athletic equipment" (t=4.00, p<.001), and "clothing" (t=2.14,p=.019).

Similar results were found in the comparison between Thailand and South Korea, indicating once again that Thailand and Thai products were significantly perceived as below South Korea and South Korean products. A significant difference was found between Thailand and South Korea for the products-in-general construct (t=3.52, p=.001). Significant differences were also found for the construct "general country image" (t=2.15, p=.035), and for measures of product categories "computers" (t=5.49, p<.001), "electronic equipment" (t=5.95, p<.001), "athletic equipment" (t=4.96, p<.001), and "clothing" (t=2.51, p=.015). Again, jewelry was the only product category where initial attitudes did not differ significantly. These results indicated that the initial attitudes toward the more developed RDCs of Taiwan and South Korea were generally more positive than those toward the lesser developed RDC, Thailand.

To determine the overall effect of COO advertising conducted by Thailand, T-tests between treatment groups (respondents exposed to certain ads) and control groups (respondents that did not see those ads) were computed on the differences between respondents' replies on the pre-test questionnaire from that of the post-test version. To check for the validity of random assignment, T-tests on pre-test responses were conducted between groups to determine if the groups were similar. The results indicated that on all pre-test questions the two groups were not significantly different. This provides evidence that when comparing the two groups they can be seen as homogeneous.

T-tests indicating the effectiveness of the Thailand jewelry advertisement produced significant results only for the product category of jewelry (t=3.94, p<.001). Product category-specific COO advertising had a positive effect on consumer perceptions of the advertised product category.

One purpose of COO advertising, like any other advertising, is to improve the attitudes of the target market, specifically, to improve the attitude of the people holding neutral or negative opinions. In order to evaluate variances in ad effectiveness between respondents negatively pre-disposed to Thailand, respondents positively pre-disposed, and respondents with neutral attitudes, Ward's procedure for cluster analysis was used to separate respondents into three groups (Milligan, 1980). These three groups were labeled positive, neutral, and negative and were established from the three pre-test measures for products in general. The centroids for the clusters are presented in Table 1.

Oneway ANOVA showed that the Thailand product category-specific advertising had no significant differences between the positive, neutral and negative groups on specific product categories being advertised. However, significant differences on the products-in-general construct (t=4.88, p<.001) were found between the positive and negative groups. This led us to further study the effectiveness of product category-specific advertising on those holding negative attitudes towards the target country. For the cluster with a negative attitude toward Thai products in general, a T-test was performed between the treatments and control group to determine if the ad had a significant effect for those with negative attitudes. The treatment group had a significantly greater differential gain than the control group for Thailand in general (t=2.82, p=.037), for Thai jewelry (t=3.42, p=.019), and for Thai electronics (t=3.10, p=.027).

Because pre-test scores showed that respondents' attitudes toward Thailand and its products were significantly lower than those for Taiwan and South Korea (except in the jewelry category), we next examined whether or not COO advertising can overcome these relatively lower perceptions associated with a lesser developed RDCs. To do so, the attitudes of respondents toward Thailand and Thai products after they were exposed to the "Made in Thailand" ad were measured against attitudes they had toward Taiwan and South Korea before exposure.

Comparing the post-test attitudes for Thailand to pre-test attitudes for Taiwan revealed a strong effect from this particular Thai advertisement. The pre-test scores which indicated that products from Taiwan were perceived to be significantly better than Thai counterpart were no longer statistically significant. Constructs of "general country image", "products-in-general", and product categories of "clothing", and "athletic equipment" no longer showed significant differences (see Table 2 for means and t-values). Only in the high-tech product categories of "computers" and "electronic equipment" were the significant attitude differences not eliminated. Furthermore, a previously non-existent significant difference for jewelry emerged. The Thai COO advertisement was successful in significantly increasing the image of Thai Jewelry above that of jewelry from Taiwan (t=6.06; p<.001).

TABLE 2

MEANS AND T-VALUES FOR THAILAND AND TAIWAN CONSTRUCTS (25 POINT SCALE - 12 TO 12)

TABLE 3

MEANS AND T-VALUES FOR THAILAND AND SOUTH KOREA CONSTRUCTS (25 POINT SCALE - 12 TO 12)

Partial validation was achieved by using South Korea, another RDC similar to Taiwan, to compare with Thailand. Comparable results supported previous findings when after-exposure Thailand attitudes and pre-exposure attitudes for South Korea were used. The only exception was that for "athletic equipment" the difference in attitude remained (t=2.01, p=.053). Significant differences concerning "general country image" and "products-in-general", "clothing", and "athletic equipment" constructs were no longer indicated (see Table 3). Again, a significant difference for jewelry that did not exist in pre-test results appeared (t=4.79, p<.001). These results demonstrated that COO print ads placed by lesser developed RDCs can help them narrow their perceived image and product-quality gap with more developed RDCs like Taiwan and South Korea.

To determine if the surrounding RDC's benefited from the COO advertising of one of its neighbors (a ripple effect across countries), T-tests were conducted for two groups on the differences between pre-test and post-test attitudes. Groups were selected based on the advertisements (Taiwan or South Korea and Thailand) they were exposed to. It is interesting to note that for the group that saw the South Korea and Thailand ads, both South Korea and Taiwan benefited from Thailand's jewelry ad. Evidence of a possible "ripple" effect was demonstrated in the results of a significant gain for Korean jewelry (t= 2.81, p=.009) and a significant gain for Taiwan jewelry (t= 3.46, p= .002). For the group that saw the Taiwan ads, a similar effect occurred for Thailand computers (t= 2.69, p=.011) and athletic equipment (t= 2.55, p= .015), which were the focus of the Taiwanese ads. Both of these results indicate a potential for an RDC to be the beneficiary of a neighbor's COO advertisements. However, due to the limitations of the study, further research in this direction is warranted.

DISCUSSION

Several conclusions and implications can be derived from the preceding analysis. The results confirm that lesser developed East Asian RDCs are at a disadvantage relative to their more developed neighbors when it comes to the overall country image and product-quality perception of developed country consumers (Khanna 1986; Krishnakumar 1974). American consumers generally tend to regard Thailand and Thai products as lower in image and quality when compared to more developed counterparts such as Taiwan or South Korea and their products. The study indicates that there is reason for Thai exporters and marketers to the United States to be concerned with detrimental COO effects relative to their more developed RDC competitors.

However, similar to other marketing tools (Cordell, 1991; Tse and Lee 1993), COO advertising can have an overall significant positive effect. As supported by the findings, country-specific print advertising in U.S. periodicals designed to promote the quality of particular Thai product categories can successfully affect negative consumer perceptions. Specially for particular products, such as Thai jewelry, the difference in image and quality perception between RDCs of different development stages can be eliminated through COO advertising. Practitioners should further be aware that such ads may have the side-effect of also improving the overall image of products from neighboring RDCs.

Since this study is the first of its kind, it is exploratory in nature and has its limitations. The major limitation of this study stems from the threat of demand effects from respondents. Priming effect could have occurred because of repeated testing in the same environment. Absence of an increase in attitude towards Thai products-in-general eliminates, at least in part, fears of this demand effect. Another limitation to this study was the use of small treatment groups. Analysis on individual clusters are particularly susceptible to the external validity threats. In addition, while actual advertisements were used in this study, only three print ads were utilized. Inferences about COO advertising closing the gap between the attitudes of more developed and lesser developed RDCs are subject to validity threats from history and testing effects. Pre-test scores were compared to post-test scores taken a week later. Nevertheless, this study has uncovered results which are of considerable interest to practitioners and academicians alike, indicating the need for even further investigation.

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Authors

Francis M. Ulgado, Georgia Institute of Technology
Mark P. Leach, Georgia Institute of Technology
Tyra A. Mitchell, Georgia Institute of Technology
Annie Liu, Georgia Institute of Technology,



Volume

AP - Asia Pacific Advances in Consumer Research Volume 1 | 1994



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