Theme: Domestic & Global

CONCEPTUALISING THE COUNTRY OF ORIGIN OF BRAND

Ian Phau Gerard Prendergast Ph.D. Address for all correspondence: Ian Phau DBA Candidate, (Paper Presenter) Henley Management College (UK) 109 Jurong East St 13, #20-330, Singapore 600109 Tel: 65-5676889 Fax:65-5610289 Email: ianp@pacific.net.sg

Gerard Prendergast Associate Professor Hong Kong Baptist University, School of Business, Kowloon Tong, Hong Kong. Tel: 852-23397570 Fax:852-23395586 Email: gerard@hkbu.edu.hk

1999

CONCEPTUALISING THE COUNTRY OF ORIGIN OF BRAND

ABSTRACT Forces of globalisation have escalated offshore manufacturing activities exploiting the economies of scale and costs. We are invariably faced with the complexities and confusion of the emergence of products with multi-country affiliations. However, globalisation is perceived to have homogenised a consumer buying culture for premium brands. In the process, the recognition of brand names is accentuated. Thus the country of origin of made of a product is no longer the most important determinant for evaluation of brand image and product quality. This paper therefore extends prior country of origin research by conceptualising the country of origin of brand as a product evaluation tool.

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INTRODUCTION We cannot deny that the global economy has been stretching geographic borders and redefining alliances. Indeed, the forces of globalisation are making the world an ever more connected and interdependent place. For the past two decades, globalisation has been a phenomenal interest and the dominant trend in the world economy. Notably so is the acceleration of globalisation over the last decade through the rapid development of a growing number of non-OECD1 economies. The world trade/GDP ratio has increased three times faster than in the previous decade (and twice as fast as in the 1960s) and the foreign direct investment (FDI)/GDP ratio has doubled (Taniguchi et al 1996)2. Levitt (1983) argues that globalisation will create and lead to a common culture worldwide whilst Ohmae (1992) echoed the notion of a "borderless" world. In a keynote address, Sheth (1998) asserted that globalisation has brought about similarities between blocks of countries instead of cross-functional integration. This renders the obscurity of country of origin of products. Multi-lateralism is far from the only game in town. New agreements or alignments have emerged adding to existing ones, including ASEAN, FTAA, APEC, NAFTA, Mercosur and BIST-EC. The power of the "Triad", consisting of USA, European Union and Japan (and ASEAN), will have considerable effect on the nature of the international business culture. Throughout the world, economic and technological forces are breaking down walls, reaching across borders and weaving together a single world economy. It is perceived that as consumers develop more familiarity with the products, the use of the made-in label will inevitably diminish. As more countries develop the necessary skills to manufacture the product, the country of origin of products will be of little importance. Country of origin research has thus embarked on a global village where boundaries are becoming blurred, thereby constantly adding a dubious country of origin tag to a hybrid product. A hybrid product is defined as one that is branded or designed by one country but manufactured in another (Chao 1993; Han & Terpstra 1987). There is a pertinent need to look beyond one region to be able to compete in the global marketplace (Bijlani 1994). The phenomenon of globalisation is the main thrust of this paper. It proposes a revisit of the issues pertaining to country of origin research. Extending existing literature, the framework of this paper is structured into 4 sections. The first section reviews relevant literature relating to country of origin issues. In the second section, we will
Globalisation and Linkages to 2020 :Challenges and Opportunities for OECD Countries. Report of meeting in 1997 2 Summary of Discussion - OECD Proceedings 1996
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present the construct of country of origin of brand as a product evaluation tool for hybrid products. Conceptual, strategic and practical relevance will be discussed to justify our stand. The third section presents some research propositions in view of our contention. Finally, some concluding comments are presented. Theoretical Background Lampert and Jaffe (1998) define country of origin as "the impact which generalisations and perceptions about a country have on a person's evaluations of the country's products and brands". It manifests itself as an extrinsic cue to provide consumers with a basis for purchase decisions (Bilkey and Nes, 1982; Cordell, 1992; Erickson et al; 1984; Han, 1989). It is a potentially powerful image variable, which may be used to influence competitive positioning and success in the global market place. Prior findings indicate that consumers hold stereotyped images of certain countries and that these images affect the way the countrys products are perceived (Cordell 1992; Lim and Darley, 1997; Maronick, 1995; Papadopoulas et al 1990; Tse and Gorn 1993). While country stereotypes are often deeply entrenched and tend to be enduring over time, negative country images may be improved through advertising or national export promotion campaigns (Nagashima 1970,1977; Nebenzahl and Jaffe, 1991; Morello, 1984; Wall and Heslop 1986). Findings of the effect of the economic development of a country (where products are made) on consumers' perception are inconclusive. On the one hand, there is a steady stream of studies that indicate consumers' preference for foreign products from developed countries (Cordell 1992; Lumpkin and Crawford, 1985). However, there is also a strong existence of negative biases towards products made in foreign countries (Nagashima 1970; Kaynak and Cavugil 1983; Morello, 1984; Papadopoulas et al, 1990). The preference for domestic goods tends to be stronger in countries where consumers have a strong sense of patriotism or national pride. Forces of globalisation have escalated offshore manufacturing exploiting economies of scale and costs. The result is a proliferation of products produced and assembled in different parts of the world. The complexity of the multi-country affiliation gives rise to what is known as a hybrid product. As such, country of origin may be best viewed as a multi-dimensional construct involving a hybrid of factors that makes the distinction between the country of manufacture or assembly and the country of the companys home. Research has gone beyond made in or assembled in to also include concepts of designed in, engineered In and parts supplied by (Ahmed and Astous 1996; Astous & Ahmed 1992; Chao 1993; Ettenson 1993; Han & Terpstra 1988). The findings indicated that several countries with different stereotypes appear to exhibit different impacts of country of design, country of

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assembly and price on consumer product design and product quality perceptions. There is no clear distinction between domestic and imported products and hybrids blur a products place of manufacture (Ettenson & Gaeth 1991). These events question the success of hybrids that are highly dependent on consumers willingness to purchase products co-produced through joint ventures or manufactured in transplant facilities. Particular attention must be paid to the role that brand name and country of origin play in consumers decision-making behaviour. Influence of Brand on Hybrid Products Empirical and experimental studies indicate that country of origin has a considerable influence on peoples attitude toward specific brands (Bilkey and Nes 1982; Gaedeke 1973; Han and Terpstra 1988; Johansson and Nebenzahl 1986; Tse and Gorn 1993). However, there are also notable studies that question its validity (Erickson et al 1984; Johansson et al 1985). This inconclusiveness may be due to the single cue information that has plagued earlier country of origin research. Han (1989) has established that when consumers are not familiar with a countrys product, a summary construct model operates in which consumers infer product information into country image which then influences brand attitude. In the same vein, Astous and Ahmed (1992) have also concluded that the favourableness of a brand and the country of origin are considerably modified when a consumer is provided with additional product related information. It has been reported that the brand quality image may diminish if it is designed or assembled in a less prestigious country (Chao 1989; Johansson and Nebebzahl 1986) suggesting that perhaps the marketing effort should stress country of design (Schweiger et al, 1997). On the other hand, Han and Terpstra (1988) found in their study that both the country of origin and the brand name affect consumer perceptions of product quality. In fact, the sourcing country is found to have a greater effect on consumer evaluation than the brand name. Consequently, studies reporting the widely held belief of the predominance of brand name in consumer perception of quality are contrasted. However, there is considerable evidence that the preference for domestic products/brand may be an issue of consumer patriotism or mainly for practical reasons. In their study, service and product warranty were extra information cues associated with the product. In summary, the findings of the impact of brand names on hybrid products are unconvincing. The multi-dimensional constructs and consumer patriotism are issues that add to the complexity. It is prudent to take note that stereotype effects changes over time. Consumers' perception ratings of goods changed after a replication several years later (Morello 1984; Nagashima 1970;Wall and Heslop 1986). Therefore, it is time to relook at the issues that have shaped our stereotypical perception of country of origin. There appears to be a need to search for a common parameter for hybrid

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product evaluation. We perceive that the construct "country of origin of brand" fits this objective Country of Origin of Brand We should perhaps start by to re-examining the definition of country of origin by Johansson et al (1985, pg. 389). Extensively cited in many reviews, it is interesting that not many notice that country of origin is reflected as the country of origin of brand of the product. We may have misinterpreted the true definition of the term, country of origin in the plethora of studies hovering over this construct. Country of origin is defined as the country where corporate headquarters of the company marketing the product or brand is located. Though we recognised that the product may not necessarily be manufactured in that country because of multinational sourcing, we assume the product or brand is identified with that country. Studies have been obsessed with the notion of the made in concept and have neglected the concept of country of origin of brand for too long. Considering Ohmaes (1992) vision of the borderless world, it is indeed a fact that the location of production is spread all over the world. In fact, Schweiger et al's (1997) study is a good indication of the plethora of product classes and brand reviewed; and their association with multiple country of origin of made. It is quite evident that the interaction of country of origin and brands produces irregularities when a product is associated with a number of countries. To remove itself from this complexity, it is perhaps more relevant to market the country of country of origin of brand for conceptual, strategic and practical reasons. Conceptual Relevance of Country of Origin of Brand (1) Country of origin of brand as a construct. It can be argued that the role of the country image be replaced by country of origin of brand. Country of origin of brand in consumer choice behaviour may serve as a database of information that disseminates various positive attributes about the brand that consumers develop over time. The overall evaluation of products in that brand can be stored in the memory and retrieved readily when evaluating the brands. Since consumers have confidence in the quality of that brand, the different dimensions of country of origin should not affect their perception. Similarly, the image of the brand is also restored and will be consistently evaluated (Aaker, 1996). (2) Brand Personality. A brand name of a premium brand elicits a personality that is a marketable cue. The personality of the brand is a function of its rational characteristics and benefits but this has to be augmented and communicated to

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consumers through advertising, design, packaging and effective distributions and display (Keegan and Green 1997; King 1990). The position the brands personality occupies in the consumers mind generates confidence and creates the purchasing environment (Doyle 1995). They do so by encouraging customers to perceive the attributes they aspire to as being strongly associated with the brand (Aaker 1996). For instance, Guess and Esprit signify youth, Marlboro evokes image of masculinity, Gucci and "BMW" signify sophistication, "Hewlett Packard" conveys "competence", "Hallmark" and "Kodak" relate sincerity and Nike signifies fitness or even Michael Jordan. (3) Self-Concepts Manifestations. At the same time, the latent but pertinent role of a premium brand is that it provides consumers with a means for making statements about themselves. This is manifested through their self-concepts through the strong images and personalities associated with these brands. In this instance, marketing communication is vital in both creating brand's personality and reinforcing consumers' perception of the brand seen of themselves by the users. Levi jeans have succeeded in creating a distinctive brand personality reaching almost "icon" status in consumer's mind. Their advertising focuses on the "rebellious", "sexy" personality of the brand through strong imagery thereby reinforcing Levi's consumer's self-concepts (de Chernatony & Riley 1998). In the same vein, Swait et al (1993) remark that brand names function as through communicating the brand's position and helping them reinforce the credibility of the position under imperfect and asymmetric information. (4) Status Symbol. Developing from the above assertion, a premium brand may be seen as a status symbol. Consumers create meanings for themselves in the social world of luxury consumption (Duckworth, 1991), and wealth may be one of the manifestations (The Economist 1994) serving as insignia to enable people to tell the world who they are (Marketing News 1983). Carrying a Louis Vuitton handbag creates status affordability and the appreciation of French chic. There is a strong distraction from the country of origin of made label. Thus where it is made, (may it be Vietnam or Thailand) may not be the first evaluation criterion for the consumer. (5) Country and Cultural Signifiers. Many products and brands send out signals that can be traced back to their country of origin thus acting as cultural signifiers (White and Cundiff 1978; Reierson 1966; Schooler and Sunoo 1969; Schooler and Wildt 1968). That origin cues are already firmly imprinted within successful brand names. For instance, YSL is undeniably French. Sony products are made in Malaysia and Indonesia but are still considered as Japanese products. Reebok, an American brand is known to be made in Korea. IBM is always American although its parts are made all over the world. There are certain brand names, which help to remind consumers outright of their origins. For in instance,

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"DKNY" strongly suggests American and brands like "Guy Laroche Paris" and "Ungaro Rome" actually have the capitals of the countries behind the brand names. Thus merely manipulating the different dimensions of the country of origin construct does not eliminate the effects of these cues. Country of origin of brand should not change with a change in manufacturing location. The perceived origin of a brand need not be the same as the country shown on the made-in label. This difference is particularly relevant in light of the growing trend towards offshore manufacturing by multinationals. (6) Country Ethnicity. Certain products are considered to be more ethnic, more typical of some countries than of others. Producers often attempt to benefit from these linkages by referring to their national origin in the marketing of their products. French lace, Chinese silk, Spanish embroidery, English cotton, Indian saris, Japanese dolls and a host of other "nationalities" of products will not have their country origin extinguished just being produced by another country. This fact may be accentuated by the "convergence of culture" suggested by Levitt (1983), Sheth (1998) and Ohmae (1984). With so many global products around you, ethnic products stand out in the crowd of the global identity. Strategic Relevance of Country of Origin of Brand The design or concept of a product comes from the headquarters or is at least approved by the country of origin of brand (Johansson et al 1985). A brand is seen to have a role in relation to internal communication aimed at establishing a consistent style of behaviour within the firm consistent with the branding literature relating to services (George 1990; Greene et al 1994). Employee commitment is an important requisite for success and branding enables employees to appreciate the proposition being offered to consumers and therefore recognise the contribution expected from them. We also perceive the origin of a brand as the identity of the brand. Aaker (1996) asserts that brand identity should be strategic reflecting a business strategy, which will lead to sustainable advantage, and this will persist over time. Thus, it follows that promoting a product through country of origin of brand will maintain and improve the long-term consistencies of the organisations internal and external marketing focus across cultural and geographic boundaries. Practical Relevance of Country of Origin of Brand Globalisation has brought offshore manufacturing to the ultimatum. In the global reality, consumers are conditioned by the fact that a product is unlikely to be made in the brand country. This is a reflection of point five in the preceding section on conceptual relevance of country of origin of brand. A premium brand, in particular,

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can exploit its brand equity and goodwill by promoting a brand country other than its country of made. In other words, globalisation accompanied by its enhanced technology will certainly ensure superior product quality and brand image. Thus, where it is made, is irrelevant. The consumers will channel all the cues for evaluation towards the bundle of favourable attributes (such as design, style, quality) associated with the "brand" instead of going through the complex clutter of multi-country affiliations. Theoretical Framework In the complexity of multi-country affiliations for hybrid products, we propose that country of origin of brand to be used as a proxy to evaluate products. We have provided conceptual, strategic and practical justifications to state our proposition. Figure 1 presents our theoretical framework. Theoretical Framework of Country of Origin of Brand Figure 1
Conceptual Relevance

Brand Image Strategic Relevance Country of Origin of Premium Brand Product Quality Practical Relevance Economic Development of Country of Origin of Manufacture

The preceding discussion of premium brands in the global village of a converging culture can be summarised with the following propositions. P1. Country of origin of brand is a better evaluation tool than country of origin of made for hybrid products in the global world.

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P2. Consumers recognise hybrid products of premium brands by their brand country knowing that it may be made elsewhere. They have confidence and trust in the brand name itself. P3. Product quality and brand image are not affected by its location of manufacture (countries with different levels of economic development) as they perceive the premium brand through its (1) brand personality, (2)origin cues, (3) country ethnicity and (4) brand names. P4. Consumers also associate themselves with brands that match their self-concepts (status symbol as one of these concepts). The ingrained characteristics of the brand will not change with a change in manufacturing location. P5. Prior studies of negative effects of country of origin of made in developing or underdeveloped countries would have change in the advent of the global village. Globalisation has brought along with it significant enhancement in production skills and technology. Thus, referring to figure 1, it is proposed that the moderating variable of country of made should not have any impact on brand image and product quality.

CONCLUDING COMMENTS This paper introduces a new perspective, which will help to contribute and extend our understanding of country of origin research. The forces of globalisation have converged cultures at an alarming rate rendering discussion of country origins and country boundaries obsolete. The notion of an encompassing construct seems a logical move. We have supported our proposal with conceptual, strategic and practical issues. Caution however has to be exercised as the views are tentative and in need of empirical confirmation. The notion of country of origin of brand is strongly accentuated in this age of the global village as a proxy for the different configurations attached to a global product. The next challenge will be to build on the leads and extend on its value.

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