Evaluation of Country-Of-Design and Country-Of-Assemble in a Multi-Cue/Multi-National Context

ABSTRACT - This study explores the effects of brand, price and warranty strategies in the framework of global marketing and production decisions across three countries-of-design, three countries-of-assembly, using two consuming countries (Belgium and Canada) to cross-validate the results. The results show that the effect of price on perceptions of the purchase value of a car is not very important but that the effect of warranty is. Also, brand name seems to be a more important informational cue than made-in considered as a single cue, but the overall impact of two types of made-in, namely country-of-design and country-of-assembly, is much stronger than that of brand name alone. In addition, the evaluations of purchase cues were found to be fairly consistent cross-nationally. Implications for international marketing and production decisions are derived from the findings.



Citation:

Sadrudin A. Ahmed and Alain d'Astous (1993) ,"Evaluation of Country-Of-Design and Country-Of-Assemble in a Multi-Cue/Multi-National Context", in E - European Advances in Consumer Research Volume 1, eds. W. Fred Van Raaij and Gary J. Bamossy, Provo, UT : Association for Consumer Research, Pages: 214-221.

European Advances in Consumer Research Volume 1, 1993      Pages 214-221

EVALUATION OF COUNTRY-OF-DESIGN AND COUNTRY-OF-ASSEMBLE IN A MULTI-CUE/MULTI-NATIONAL CONTEXT

Sadrudin A. Ahmed, University of Ottawa, Canada

Alain d'Astous, University of Sherbrooke, Canada

[This study was funded by the Social Sciences and Humanities Research Council of Canada. The authors would like to thanks Benoit Bouchard, Nicolas de Bussac and Anne Mathieu for their help in designing this study and collecting the data. Thanks are also extended to Christian Jospin of the Institut Superieur d'Enseignement Economique de Mons for his support during the data collection process in Belgium. The names of the authors are listed alphabetically, reflecting an equal contribution to this research.]

ABSTRACT -

This study explores the effects of brand, price and warranty strategies in the framework of global marketing and production decisions across three countries-of-design, three countries-of-assembly, using two consuming countries (Belgium and Canada) to cross-validate the results. The results show that the effect of price on perceptions of the purchase value of a car is not very important but that the effect of warranty is. Also, brand name seems to be a more important informational cue than made-in considered as a single cue, but the overall impact of two types of made-in, namely country-of-design and country-of-assembly, is much stronger than that of brand name alone. In addition, the evaluations of purchase cues were found to be fairly consistent cross-nationally. Implications for international marketing and production decisions are derived from the findings.

INTRODUCTION

The globalization of business has brought about numerous changes in the marketing of consumer goods. One important aspect of globalization has been the proliferation of hybrid products which may be made in one country but carry a foreign brand name (e.g. a Ford car made in Mexico). While country-of-origin effects have been studied for three decades, except for a few exceptions research has been limited to uni-national studies using survey designs and simple cues. Studies using multiple cues and experimental or conjoint designs are just beginning to appear (e.g. Ahmed, d'Astous and Zouiten 1992, Chao 1990, Wall, Heslop and Liefeld 1991). However, the multiple cue approach has yet to advance beyond the traditional practice of collecting data from a single country.

In addition, most previous studies have not presented any direct evidence with respect to how hybrid products may be globally marketed. In a world environment where product markets are globalizing and regional trading blocks such as the European Common Market and the North American Common Market are being formed, one needs answers to such questions as: (1) are product cues like brand name, country of design, country of assembly, price and warranty perceived similarly across nations?, (2) what is the relative weight of these cues in consumers' buying process? and (3) and what are the implications of these differences, if any, for marketing strategy and product manufacturing regionally and/or globally?

This paper presents the results of a study conducted in Canada and Belgium. The study sought to investigate the effects of variation in the country of design, country of assembly, price and warranty levels of three different brand names of cars on consumers' perceptions of quality and purchase value. One important objective of the study is to estimate the main effects of the product cues, their relative importance and the interaction effects between the cues and the two selected consuming countries. We discuss the implications of these results for domestic, regional and global marketing management and research, with particular attention given to the eventual participation of Mexico within the Canada/U.S.A. trade agreement.

BACKGROUND DISCUSSION

A great number of marketing studies have shown that the perceived country-of-origin of a product C what is referred to as "made-in" C significantly influences consumer product evaluations (Bilkey and Nes 1982). Inferences that consumers make about specific product attributes appear to be affected by country-of-origin (Johansson, Douglas and Nonaka 1985). Consumers tend to negatively evaluate products made in less developed countries (Gaedeke 1973). Even in developed countries, there is often a tendency for consumers to prefer products made in their own country (Nagashima 1977). However, as Papadopulos, Heslop and Bamossy (1991) have shown, preference for domestic products is not universal.

Clearly, international marketing managers are greatly interested in learning how to succesfully overcome market resistance to negatively evaluated foreign products. Our review of research findings pertaining to the use of marketing mix variables to improve consumer acceptance of products with different country affiliations reveals the need for a multi-cue/multi-country approach to the study of this subject. It also reveals the necessity of more clearly defining the made-in cue: a country with which a product is associated and/or a country where the product is simply manufactured (Oszomer and Cavusgil 1991).

Recently, a number of researchers have looked at the effectiveness of brand, price and service strategies across different countries-of-origin, in the context of global marketing and production decisions. Chao (1989) has conducted such a study on electronic products in a large mid-western United States city and Wall, Heslop and Liefeld (1991) report on a multi-cue study using three consumer products in the Canadian province of Ontario. Ahmed, d'Astous and Zouiten (1992) have carried out a multi-cue study with a student sample in the Canadian province of QuTbec, using automobiles as stimuli. The common characteristic of all these studies is that they have been conducted in a single North-American location. Further research by Ahmed and d'Astous (1992a, 1992b, d'Astous and Ahmed 1992) has sought to remedy this situation by investigating cross-national differences between Canada and Belgium. Results coming out of this research indicated the need for a more rigourous treatment of the made-in concept before making general statements about its relative importance vis-a-vis other cues such as brand name.

Some empirical evidence suggests that country-of origin effects may be consuming country specific. Studies have found respondents from different consuming countries to differ on their attitudes toward products made in a given source country: Nagashima (1970) for American and Japanese, Yaprak (1978) for American and Turkish, Krishnakumar (1974) for American, Indian and Taiwanese, Cattin, Jolibert and Lohnes (1982) for American and French, and Johansson, Douglas and Nonaka (1985) for American and Japanese respondents. It seems therefore interesting to find out how the impact of country of design and/or assembly varies across consuming countries in a multi-cue environment. Global marketers have been discussing the merits of using standardized marketing strategies across nations, adjusting global marketing strategies to the specific characteristics of countries or using a combination of these approaches (Levitt 1983). Further information on these issues is of both theoretical and practical interest.

TABLE 1

THE STUDY DESIGN

Finally, high level talks are now going on between the U.S., Canada and Mexico regarding the possible entry of Mexico in the North American Common Market. Therefore, it would be interesting to evaluate the image of Mexico as country-of-origin, from the point of view of product design and product manufacturing, in a systematic way. For Mexico, it is important to know the impact that cues such as "designed in Mexico" and "assembled in Mexico" will have on the sale of its products to its eventual free trade partners.

METHOD

Two consuming countries were chosen for the study: Canada and Belgium. This choice of countries was made because the researchers were interested in extending upon a previous study (Ahmed and d'Astous 1992b) by using two made-in dimensions (design and assembly) and two dependent variables (perceived quality and purchase value). The previous study did not specify the nature of made-in and used only purchase value as dependent variable. The procedure used to estimate the impact of the made-in dimensions and the other informational cues is metric conjoint analysis. The procedure is similar to that of an experimental design with repeated measures (d'Astous and Rigaux-Bricmont 1987), i.e. profiles are constructed by combining in a factorial manner the attributes chosen for the analysis. Subjects must then provide evaluations of all profiles on rating scales.

Table 1 presents the study design. Three brands of automobiles were chosen for the study: Toyota, Ford and Hyundai. These makes are presently available in Canada and Belgium. Canada, Japan and Mexico were selected as countries-of-origin. Toyota represents the most prestigious brand whereas Hyundai is the least prestigious one. Japan is the most desirable made-in and Mexico the worst. The price levels in Canada are 8,000$ (low), 11,000$ (medium) and 14,000$ (high). In Belgium they are 250,000 BEF (low), 350,000 BEF(medium) and 450,000 BEF (high) [BEF=Belgian franc. At the time this study was conducted, the exchange rate of a Canadian dollar was about 27 BEF.]. The three levels of warranty are 1 year/20,000 km, 3 years/60,000 km and 5 years/100,000 km. The set of brand, design and assembly country-of-origin, price, and warranty levels were established on the basis of a pilot study conducted in each country to reflect the market choices actually faced by consumers.

Combining all attribute levels results in 243 (35) profiles for each country. In order to make the profile evaluation task easier for respondents, a fractional factorial confounded block design was used (Cochran and Cox 1957). Subjects had to evaluate only nine automobile profiles [All subjects did not get the same nine profiles. Nine blocks of nine different profiles were constructed in order to be able to estimate all main effects and most two-way interaction effects (see plan 6A.19 in Cochran and Cox 1957, page 291). The number of respondents was about the same in each block, in both country. Subjects also provided quality and purchase value judgments for two other sets of nine consumer product profiles (VCR's and shoes). Other questions concerned product familiarity, product involvement, evaluations of countries as well as manipulation checks for the various levels of factors considered in the study design. These data are not considered in this paper.]. With this reduced plan, it is no longer possible to estimate all interaction effects. However, the fractional factorial design is constructed such that the interaction effects of interest are estimable. A nine-point "very bad buy/very good buy" bipolar scale was used to collect subjects' perceptions regarding purchase value. A nine-point "very poor quality/very good quality" bipolar scale was used to assess subjects' perceptions of quality.

TABLE 2

ANOVA RESULTS

Data Collection

The Canadian data were collected in Sherbrooke, a mid-size (about 80,000 inhabitants) city in the French-speaking province of QuTbec. In order to get a probabilistic sample of re- spondents, a modified area sampling procedure was used. The city was first divided in three geographic residential areas. Streets were then randomly selected in each area. Interviewers visited all streets and tried to obtain the collaboration of residents. Visits were made at every two residences on each street. In order to be eligible, all participants had to be males of 18 years old or more. This was decided because research has shown that husbands have more influence in the purchase decisions of automobiles (Davis and Rigaux, 1974). When there were more than one individual eligible in a dwelling, respondent selection was made using the birthday method. That is, the person with the most recent birthday was asked to participate (Salmon and Nichols 1983). After giving appropriate instructions concerning how to proceed with the materials (including information on the distinction between design and assembly), the interviewer left the questionnaire with the respondent and picked it up the next day or some time after. Out of the 414 households visited there were 363 eligible individuals. Of these, 230 accepted to participate in the study. A total of 209 questionnaires were collected and 190 were usable for analysis.

In Belgium, the data were collected in Mons, a French-speaking city of approximately 90,000 inhabitants located south-west of Brussels, the capital. The data collection procedure was essentially the same as in Canada. The interviewers knocked on the door of 538 residences and there were 398 answers. Of these, 93 individuals refused to participate and there were no males in 80 houses. Of the remaining 225 would-be participants, there are 222 usable questionnaires.

RESULTS AND DISCUSSION

Table 2 (panel a) presents the analysis of variance results including the main and statistically significant (only) effects of informational cues (country-of-design, country-of-assembly, brand name, price, warranty) and country for the perceived quality variable. On the basis of mean squares, it appears that brand name explains the largest proportion of common variance of the quality dependent variable, followed by country-of-design and country-of-assembly. The effect of price is not significant. Some interaction effects are also present. Thus, both warranty and brand name interact significantly with the consuming country factor.

Perusal of the analysis of variance results associated with the purchase value dependent variable (Table 2, panel b) indicates that warranty explains the largest proportion of common variance followed by brand name, country-of-design, country-of-assembly and price. Brand name and warranty both interact with consuming country.

TABLE 3

MARGINAL MEANS OF THE STATISTICALLY SIGNIFICANT MAIN EFFECTS

Interestingly, Ahmed and d'Astous (1992b) found that the effect of brand name was more than twice that of made-in (comparing mean squares) in the perceived purchase value of a car. In the present study, the combined explained variance of country-of-design and country-of-assembly is slightly greater than that of brand name (see Table 2, panel b). In the case of perceived quality, country-of-design explains a little less variance than brand name, but the combined explained variance of the two made-in factors is more than 50 percent higher than that of brand name. Clearly, when consumers are presented with more specific information regarding countries-of-origin, the overall effect of brand name diminishes. That is, consumers rely on a lesser degree on brand name as a proxy for evaluative information when country-of-design is also known.

It is interesting to note that whereas the effect of price is not statistically significant for the perceived quality dependent variable, it is significant in the case of perceived purchase value. As shown later, a lower price leads to a perception of higher purchase value.

The main effect of consuming country is present for perceived quality but not for perceived purchase value. Significant interactions between brand name and consuming country as well as warranty and consuming country are obtained for both dependent variables. However, neither country-of-design nor country-of assembly interacts significantly with consuming country for both dependent variables. Therefore, it can be concluded that the impact of made-in (design and assembly) on the perceptions of quality and purchase value is felt across national boundaries.

Table 3 shows the country-of-design and country-of-assembly main effect marginal means for the perceived quality and purchase value dependent variables. These effects are averaged over consuming countries since no significant interaction with the latter factor was obtained. As can be seen, Japan consistently gets the highest utility as both design and manufacturing location, followed by Canada and Mexico. It is interesting to note that although Mexico is evaluated as the least preferred design and assembly country, the size of drop in preference is not very large. Mean evaluation of Mexico is roughly 10 percent lower than Canada. This can be contrasted with the drop of 40 percent for Russia as country-of-origin observed in the Ahmed and d'Astous (1992b) study. Table 3 also presents the marginal means of the other significant main effects (price and warranty for purchase value; warranty for perceived quality). These effects show expected patterns.

The plots of the interaction between brand name and consuming country for both perceived quality and perceived purchase value are presented in Figure 1 (panels a and b). As can be seen, in Canada Toyota is best evaluated, followed by Ford and Hyundai. In Belgium however, the evaluations given to Toyota and Ford are about the same and Hyundai is less well evaluated.

The plots of the interaction between warranty and consuming country for the perceived quality and perceived purchase value variables are presented in Figure 1 (panels c and d). By examining the slopes of the marginal means, it can be seen that the effect of warranty is more important in general for purchase value than for perceived quality. It appears also that the evaluations of Canadian consumers are more affected by variations in warranty than those of Belgian consumers.

FIGURE 1

PLOT OF THE STATISTICALLY SIGNIFICANT INTERACTIONS

Our results indicate that brand name and country-of-origin are both significantly related to consumer product evaluations. In this respect, the results support the findings of Chao (1989), Ahmed and d'Astous (1992a, 1992b), Ahmed, d'Astous and Zouiten (1992), d'Astous and Ahmed (1992), and a stream of findings summarized by Bilkey and Nes (1982). In general, it seems that consumers across nations use cues like brand name, country-of-design, country-of-assembly, warranty and price to infer the quality and purchase value of products such as automobiles. The contribution of the country-of-origin cues in the making of consumer evaluations is quite strong cross-nationally.

MANAGERIAL AND RESEARCH IMPLICATIONS

This study used a bi-national sample with a research design involving the administration of a fractional conjoint full profile questionnaire. Data were collected in a home setting rather than in a real purchase situation. Therefore, the results have to be interpreted with care, particularly since the information base and the level of involvement of respondents would tend to be lower than that of potential car buyers.

Nevertheless, the findings presented above have valuable implications for domestic and global marketers. These concern international sourcing, branding, pricing and warranty strategies. Although the discussion is based principally on the North American and West European markets, similar comments can perhaps be made with regard to other markets.

North American Domestic Marketers

North American firms are facing tremendous competition from foreign producers in their domestic market. This competition arises both from imports and domestic production of foreign manufacturers. The brands of automobiles and countries-of-origin included in the present research exemplify this tough competitive environment.

With regard to sourcing policy, domestic sellers may choose domestic sourcing for their home country markets. Our findings suggest that, when contemplating sourcing from a foreign country, a firm must not only consider labour costs and availability of raw materials but also the sourcing country's design and assembly image, the quality of the product and the level of warranty that can be provided to customers. Specifically, when sourcing from a foreign country, North American sellers may choose to either emphasize or downplay the sourcing country. If the country has a favorable image (such as Japan), the seller may perhaps target its promotional efforts at highlighting sourcing country information (e.g. emphasize the quality of Japanese cars). Such a strategy would seem appropriate for both a North American country like Canada and a West European country like Belgium. If a source country's product quality is high, by associating its brand name with a high quality service, it may be possible to overcome a negative made-in image over time. For example, Darling and Wood (1989) have shown that the perceptions of Japanese products improved considerably in Finland between the years 1975 and 1985 as Finnish consumers became more familiar with Japanese products.

When sourcing in their home country, domestic sellers could emphasize products and attributes for which their country is most favorably viewed. For example, North American sellers whose cars emphasize such features as comfort, style and security (where North American cars appear to be superior to Japanese cars), may mention that their domestic branded product is locally made.

With regard to branding policy, domestic sellers would normally have a domestic brand. There is however some flexibility in choosing brand names for products. When a domestic firm sells a product imported from a foreign supplier (e.g. Mitsubishi cars sold by Chrysler), the firm has a choice of which brand name to use (e.g. Chrysler's Colt). The brand name decision should be influenced by the image of the country for the product under consideration and the market segment at which it is directed. Our findings show that using a Japanese brand name may enhance consumer perceptions of product quality for such countries as Canada. A Japanese brand name with a "made-in" Japan label gets higher ratings in Canada or Belgium than a Japanese brand with a "made-in" Canada label. These results appear to corroborate Iacocca's (1990) contention that the Japanese-made Mitsubishi brand outsells Chrysler's Colt made in Japan three to one in the United States.

Exporters to North American and European Markets

Han and Terpstra (1988) found that Japan has the best country image, followed by the United States and Korea. This compares with our own ranking of Japan, Canada and Mexico. As pointed out in a recent newspaper article (Globe and Mail 1988), these perceptions follow roughly the actual record of defects in North American cars. On the basis of our results, it appears possible for a foreign exporter (or seller) with an unfavorable image to improve the perceived quality of its products by relocating its production facilities to a developed country and by emphasizing "made-in" Canada in its marketing strategy as was done by South Korean manufacturer Hyundai in Canada. However, such an improvement in product image may not always be sufficient to offset the higher costs of manufacturing a product in a developed country. Perhaps, it may be more cost efficient to provide a good warranty plan.

When relocating production to North America, a firm with a favorable country image (e.g. Toyota) should perhaps consider downplaying its production location and insist rather on communicating to consumers its brand quality image. For instance, Honda should emphasize the Japanese origin of its product design and quality control when advertising its Canadian-made automobiles in North America.

One interesting result of this research concerns the design and assembly image of Mexico. We have noted above that it is not very different from that of either Canada and Japan. In comparison with Russia in the Ahmed and d'Astous (1992b) study, it appears that the performance of Mexico is much superior. This relatively good image of Mexico coupled with cost advantages brought about by lower Mexican labour wages makes Mexico an interesting location for assembly and even design of products such as automobiles for the Canadian and U.S. markets. This seems an important result in the context of the actual talks concerning the entry of this country into the North American Free Trade agreement. A car designed in Japan, carrying a prestigious brand name such as Toyota, may be assembled in Mexico at a much lower cost. The impact on its North American market share may not be significantly affected by its country-of-assembly origin, especially if the manufacturer is willing to counter the negative perceptual impact of Mexican assembly by offering an excellent warranty. Such a strategy would be unadvisable for a less prestigious brand such as Hyundai where design is associated with Korea, a less prestigious country.

Globalization of Markets

The marketing of products like automobiles across national boundaries raises the interesting and complex issue of the identification and exploitation of the needs of various national markets. The task of developing global marketing and sourcing strategies is daunting, even for companies with large re- sources. The present results indicate that, in order to be successful in the lauching of new global products, international marketing and sourcing policies should pay some attention to the differences in perceptions of product purchase value and quality across nations. For instance, Belgians who participated in this study are more favorable to the Ford brand name than Canadians. They seem also less concerned with warranty. However, basic marketing strategies may not have to undergo major changes.

CONCLUSIONS AND FUTURE RESEARCH DIRECTIONS

Researchers interested in pursuing research in the area of country-of-origin effects cross-nationally should replicate this study across several countries. It would be interesting to conduct this study in consuming countries with varying levels of economic development and with products evoking different levels of involvement. Such a design would enable a researcher to isolate the interaction effects of economic development and product involvement with country-of-design, country-of-assembly and other information cues. By gathering data on respondents' values and attitudes, it would also be possible to estimate the effects of such psychological variables as nationalism and patriotism.

Results of this study indicate that by providing more than one country-of-origin cue, the salience of made-in stimuli went up. This may be because for many consumers, brand name and country-of-origin are tightly coupled. Provision of the country-of-design cue possibly broke this relationship between brand and country of brand. Results also show that warranty is a strong product cue in Canada. In general, it appears that the more information a respondent is given, the less likely he is to use a particular cue as a surrogate for another cue that was absent in the information set. Future studies dealing with country-of-origin should incorporate as many major cues in the research design as a normal consumer uses in making purchase decisions. We would also suggest measuring the effects of the cues on many different evaluative dimensions (perceived quality, purchase value, expected satisfaction, etc.) deemed relevant to the purchase decision in order to get a better view of the evaluation process. In the present study, for instance, we found that price is not an indicator of quality but seems to have some impact on the perceived purchase value of a car. Similarly, the impact of product warranty on perceived quality was quite small as compared to its impact on purchase value.

Country-of-origin perceptions are dynamic, and future research in this area should address this important issue. What are the factors that help improve or deteriorate country-of-origin perceptions? For example, are the relatively favorable perceptions of Mexico found in this study due to the actual improvement of products designed and/or manufactured in Mexico over time or are they caused by some other factors such as the possible entry of Mexico in a North American Free Trade zone? To better understand such cause and effect relationships, longitu- dinal studies must be undertaken. Research of this type may help answer questions such as these: How would an eventual entry of Czechoslovakia in the European Common Market affect its perception as country-of-origin? What will be the impact of the launching of a high quality automobile brand such as Saturn on the overall perception of the U.S. as a country-of-origin?

The findings reported in this paper show the value to global marketers of carrying out large scale studies using samples from different countries where a global product is marketed. These studies would provide producers with relevant information concerning whether or not it makes sense to design and/or manufacture products in countries such as Mexico, to be able to make use of low-cost labour, and what types of modifications to global marketing strategies (e.g. increased emphasis on warranty) may be needed if such decisions are made. They could indicate what might be the most appropriate branding, pricing and warranty strategies to adopt in marketing a product globally.

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Authors

Sadrudin A. Ahmed, University of Ottawa, Canada
Alain d'Astous, University of Sherbrooke, Canada



Volume

E - European Advances in Consumer Research Volume 1 | 1993



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