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The Country of Origin (COO) Effect by Doreen Soutar

This literature review is divided into three main sections: This section looks at The Country of Origin (COO) Effect…

Introduction

Complementary to research on internal and external influences on purchase behaviour motivation, research has also been carried out which looks at the intrinsic and extrinsic cues individuals use when making purchasing decisions. The intrinsic cues are based on the product itself, such as the quality of the materials it has been make from. The extrinsic cues are those which are not directly related to the product, such as the brand label or the price. Some researchers (Lantz & Loeb, 2006; Okechuku, 2004) suggest that the country of origin of a product can be a stronger cue for purchasing behaviour that brand name, price, or quality. Scottish whisky or Egyptian cotton are prime examples of the COO effect.

The Country of Origin (COO) Effect

It has been suggested that attitudes to products are also shaped by the culture, economy, and politics of the producing and consuming countries: so, for example, it has been suggested that there is an assumption that if a product comes from a developed country, then it is likely to be a superior product. However, the two examples given above show that this may not necessarily be the case (e.g. Bilkey & Nes, 2012). One of the complexities of the COO effect is the product image (Peris et al, 2003) in relation to the country of origin image. Researchers such as Heslop et al (1998), Wang & Lamb (2003) and Watson & Wright (2000) found that there is a correlation between the acceptability of a product and the similarity of culture of the consumer.

 

2.2. Country of Origin and Relative Developmental Status

Manrai et al (1998) define the economic development status of a country as being a combination of two components: the level of industrial development, and the level of market development. They suggest that in capitalist countries, the level of development of markets and industries tend to be at a similar level of complexity, but in countries with a socialist influence, such as China, the market tends to be less developed than industry. Papadopoulos et al (1990) suggest that products which are produced in countries where the market is less developed, the country-of-origin effect tends to be more negative. For example, work done by Hampton et al (1977) suggested that products produced in the USA were viewed as less risky than imported products, and Nes & Bilkey (1993) reported that products made in low-income countries tended to be viewed as being lower quality products than those produced in high-income countries.

This can also be the case for customers in less developed countries, who may view home-produced goods as being inferior to imports (Tan & Farley, 1987). However, the COO effect can also occur in the opposite direction, with own-country products sometimes being considered inferior to imports even in highly developed countries, and opinions about the quality of products from a given country changing over time (Manrai et al, 1998).

A further complicating factor is the type of product under consideration. Cordell (1991) suggests that products with a high level of financial risk or status-related products, such as cars or televisions, are more susceptible to a positive correlation between highly developed country and quality of product. So, although the literature is far from clear-cut, Manrai et al (1998) suggested that there is some evidence to suggest a perceived link between the social and economic development of the country and the quality of the goods they provide (see Fig.9). The country halo and summary contract effects refer to models of the way in which the product and the COO interact in the minds of consumers.

The country halo effect states that the country image influences the perception of product attributes (Erickson et al, 1984), whereas the summary construct concept (Han, 1989), consumers associate product attributes to the country of origin. Manrai et al (1998) also suggest a third effect, whereby a default heuristic comes into play when there is some information about the country of origin, but insufficient to make a definitive judgement about the quality of the products. However, they suggest that this balance between country and product knowledge does not change the impact of the COO effect on purchase decisions.

 

Interactive effects of country of origin

However, Manrai et al (1998) did note that there is a correlation between the development of market systems and perceived quality of products. Therefore it could be argued that the level of exposure to marketing messages may be a key factor in how products are perceived, with a high market profile equating to a more positive COO image (Manrai & Manrai, 1993). Rao & Munroe (1989) suggested that the reason for the positive correlation between market development and quality of production may be a result of having to rely on external rather than internal cues.

That is, when a product originates from a country the consumer is not familiar with personally, they need to rely on opinions other than their own. In this case, the marketing of products can play a large role in the COO effect.

Some early research suggests that the COO effect is likely to be modified by other information present at the time of purchase (Erickson et al, 1984), so that a single piece of information will be highly salient when seen alone, but is less important when viewed as a single element in a wide range of information. Tse & Gorn (1993) suggested that the country of origin cue can be more enduring than a brand name, but in more recent studies, it has been suggested that strong brand names can offset the COO effect. Jo et al (2003) argued that many companies now conduct manufacturing processes globally, often in countries with a low ranking in the COO hierarchy. However, where a brand is associated with high quality, the precise country of manufacture was unlikely to make a difference to the way in which the consumer views the quality of the product.

Well-known and respected brands were likely to be considered of higher quality than those of less well-known brands. Jo et al (2003) suggest that questions remain as to why this might be the case, but it may be suggested that the brand story (Holt, 2004) of the company as a whole originates in a highly developed country with a strong market. Therefore, Apple Inc has its headquarters in the United States, and has a distinct American brand image. This image dominates the brand equity relationship the customer has with the product (Cardy et al, 2007), even when it is understood by consumers that the handsets are manufactured in Taiwan.

 

Cross-Border

2.3. Offsetting Low COO Through Cross-Border Alliances

One way in which countries can combat a low COO image is through a strategic brand alliance (SBA) with companies whose COO image is higher up the hierarchy (Lee et al, 2011). Cross-border SBAs are alliances between companies headquartered in two different countries, where both companies benefit from their collaboration. This type of brand alliance means that each company can gain access to new markets and share in reflected brand equity. For companies in countries with low COO status, this means that they can increase their quality ratings by customers by proxy (Rodrigue & Biswas, 2004 in Lee et al). Although some researchers suggest that the lower rated country’s image may drag down the brand equity of a higher value country (Thakor & Katsanis, 1997), Lee et al (2011) found that cross-border SBAs resulted in an increase in the perception of quality of both the low value COO product and the high value COO product.

As might be intuitively expected, Lee et al (2011) found that the greatest increase in perceived product value occurred when two high COO country companies joined forces to create a hybrid product. The authors suggest that their results lend credence to the power of the COO hypothesis in general, and this may be the case. However, it should be noted that the influence of a strong brand with a reputation for high quality products was still present. In Lee et al’s (2011) study, they used BMW as an example of German car manufacturing quality. In order to ascertain that the country of origin was responsible for the results, rather than the strong BMW brand, they would need to find a way of untangling the company brand with the COO image. For example, comparing two different brands of German car in a similar study may not produce identical results.

 

2.4. COO and consumer resistance

As was mentioned earlier, part of customer equity is an ongoing relationship between the consumer and the product (Cardy et al, 2007). If COO effects are part of this relationship, then it should be possible to demonstrate this effect through the control of variables. Russell & Russell’s (2006) research used movies from the United States and France as their product to investigate whether political animosity between the USA and France could be manipulated to produce a COO effect. Their findings showed that in the country which dominates production – the USA – feelings towards foreign films were relatively benign. However, in the country which is dominated by foreign imports – France – it was possible to increase the animosity to the product by the inclusion of a trigger reminding movie watchers of anti-American sentiment.

What Russell and Russell (2006) demonstrated was that the COO effect is dynamic, depending on the current state of political or social relations between the countries involved, and how aware the consumer is of these animosities when they consider purchase. They also showed up a connection between COO effects and any power imbalance between countries dominated by imports or dominated by domestic products. This is interesting because the earlier, mainstream research (e.g. Manrai et al 1999) suggested that there was a positive correlation between the predominant countries of production and the quality of their products, and therefore their desirability.

In contrast, Russell and Russell (2006) are suggesting that market methods are likely to play a more substantial role, whereby the dominant players in the market have been able to manipulate their brand image more successfully. However, where brand image manipulation is insufficient to combat local political or social opinion about the country of origin, the COO has a greater effect than the marketing message. This supports the opinion of Tse & Gorn (1998), who suggested that the COO image could outweigh the brand image.

However, in suggesting future lines of enquiry, Russell and Russell (2006) suggest that more work would need to be done in terms of the psychological influences on consumers (e.g. Hawkins et al, 2001; Bray et al, 2011). They suggest that intrinsic factors such as levels of national feelings of solidarity (Hofstede, 2012) and extrinsic social information such as news media may also be influential in varying factors in levels of COO in any given country.

 

market forces

2.5. Section Summary

Early work on COO effects suggested that countries with sophisticated industrial and market forces tended to be viewed as the producers of high quality products. The very fact that these products came from a particular country was sufficient to upgrade their perceived value in the minds of consumers. The primary debate at that point was whether the brand or the COO was more influential in perceived quality. However, extricating the COO effect from the effects of marketing or individual brand equity in a research setting is not an easy task. More recent research has attempted to isolate the COO effect, and results suggest that it can make a discernable difference to consumer attitudes. In contrast to earlier work, however, recent research suggests that there is no automatic positive correlation between predominant producers, high quality and desirability.

In some cases, the predominance of an import can lead to consumer rejection of the product which mirrors the rejection of the political relationship with the dominant producing nation.

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