Consumer perception of global vs. local


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Consumer perception of global vs. local

  1. 1. Consumer Perception of Global vs. Local Brands: The Indian Car Industry By Shyamala Mathan Sankar 2006A Dissertation presented in part consideration for the degree of MA Marketing. 1 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  2. 2. AbstractKey words: Consumer Perception, Global brands, Local brands, consumerpreference, Country-of-origin, foreign brand, globalness, Consumer ethnocentrism.This study examines consumer perception of global brands vs. local brands in theIndian car industry. Consumer brand perceptions have substantial implications inMarketing. The study explores and understands consumer perceptions of global andlocal car brands in India by accomplishing the secondary objectives. The secondaryobjectives were achieved by highlighting the factors that effect consumer preferencefor global brands; by examining the effects of country of origin on consumerperceptions of global brands and local brands; and by studying the effects ofconsumer ethnocentrism towards global brands.For creating a deep understanding of consumers’ insights of global car brands againstlocal car brands, qualitative approach was adopted with an in-depth and semi-structured interview process. Interviews as a qualitative tool helped the researcher touncover individual’s covert feelings and emotions towards perception of globalbrands vs. local brands.The findings of the study advised that the consumers who possessed global carbrands, preferred their car brands due to factors such as global presence, worldwidereputation, and quality of being a foreign make. Prestige or status had a very little orno influence in their preference for global car brands. Consumers made favorable I Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  3. 3. perceptions of the country, wherein they tend to associate factors such as superiorquality, technical advancements, modernization, etc…to the country from which thebrand had taken its origin. Consumers who owned a local car brand evaluated thelocal brand in a favorable manner, wherein they tend to associate the brand to India’sstrong automobile sector that makes quality and technically efficient cars. The studyfound to have both non-ethnocentric consumers and consumers who were low onCET. Most of the respondents perceive local brands to be good in India, but not asgood as the global ones in quality, technical expertise and designs of the cars. II Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  4. 4. Table of ContentsAbstract……………………………………………………………………………… IList of Figures……………..………………………………………………………..VIList of Tables………………………………………..………………………………VIDedication………………………………………………………………………….VIIAcknowledgement…………...……………………………………………………VIIIChapter One – Introduction………………………………………………………...1 1.1 Introduction……………………………………………………………....1 1.2 Objectives of the study…………………………………………………..2 1.3 Synopsis of Chapters…………………………………………………….2Chapter Two - Literature Review…………………………………………………..5 2.1 Introduction………………………………………………………………5 2.2 Brands and Branding…………………………………………………......5 2.3 Local Brands and Global Brands…………………………………………8 2.4 Pros and Cons of Local brands and global brands……………………......9 2.5 Shifts from Local Brands to Global Brands……………………………..12 2.6 Basic factors that effect consumer preference for Global Brands….......13 2.7 Consumer Ethnocentrism and evaluation of global brands and local brands by consumers…………………………………………….....17 2.8 Consumer Brand Knowledge………………………………………….....20 2.9 Effects of Country-of-Origin (COO), Culture-of-Brand Origin (COBO) and consumer perception of global brands vs. local brands…...21 2.10 Conclusion………………………………………………………………28 III Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  5. 5. Chapter Three -Industry Overview……………..………………………………….30 3.1 Introduction…………………………………………………………….30 3.2 Indian automobile industry – an Overview……………………………..30 3.3 Advent of cars in India………………………………………………….34 3.4 Local Car Brands in India………………………………………………35 3.5 Global Car Brands in India……………………………………………..36Chapter Four - Research Methodology…………………………………………...40 4.1. Introduction………………………………………………………….....40 4.2 Research purpose…………………………………………………….....41 4.3 Qualitative Research…………………………………………………....42 4.4 Why Qualitative Research?.......................................................................43 4.5. Interviews………………………………………………………………44 4.6. Sampling…………………………………………………………….....46 4.7. Telephone interview……………………………………………………46 4.8. Summary…………………………………………………………….....49Chapter Five - Analysis and Findings…………………………………………......50 5.1 Introduction……………………………………………………………..50 5.2 Background of the respondents………………………………………....50 5.3 Analysis and Discussion of the interviews…………………………......51 5.4 Accomplishing objectives of the study………………………………....52 5.4.1. Objective one: Highlighting the factors that effect consumer preference for global brands……………………………..52 5.4.2. Objective two: Examining the effects of country-of-origin on consumer perceptions of global brands and local brands…………..57 5.4.3. Objective three: To study the effects of consumer ethnocentrism IV Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  6. 6. over global brands………………………………………………….62 5.4.4. Key Objective: To understand consumer perception of Global brands vs. local brands……………………………………..66 5.5. Review of key Findings and Conclusion………………………………72Chapter Six – Conclusion………………………………………………………….77 6.1 Conclusions of the study………………………………………………..77 6.2. Limitations of the study and recommendations for future research……………………………………………………...82ReferencesAppendix One – Interview templateAppendix Two - Interview Transcripts V Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  7. 7. TABLE OF FIGURESFigure 1: Conceptual model of Perceived brand Globalness................................................................................................ 14Figure 2: Strong growing automotive sector in both domestic and global markets.................................................................................................... .32 LIST OF TABLESTable 1: A background of the respondents......................................... ……………51 VI Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  8. 8. DedicationI dedicate this work to my dearest grandpa with fond and everlasting memories of him. VIIConsumer Perception of Global vs. Local Brands: The Indian Car Industry
  9. 9. AcknowledgementsI would like to convey my heartiest appreciation to Dr Heidi Winklhofer for intensifying mylearning curve. Without her guidance and persistent help, this dissertation would not havebeen possible.I also extended my gratitude to my Mom, Dad, and my Brothers for their unconditional loveand support throughout my work. Their steadfast support and encouragement accompaniedme throughout this journey. Shyamala Mathan Sankar VIII Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  10. 10. Chapter One1.1 IntroductionBrands are at the heart of marketing and business strategy (Doyle, 2002)Advances in communications and information systems technology have shrunkdistances, thereby linking markets through flows of information across markets. Thesetrends enhance the management of global operations and drives up the need to dealeffectively with global competition. As firms enter international markets, brandingplays an important role in its marketing strategy. Many consumers use brands as cluesto indicate product performances, instead of engaging themselves in search forinformation when deciding between competing brands. Consumers use brands as cuesto make decisions to purchase or try products (Ger et al., 1993). During the recentyears, there has been a great shift from local brands to global brands due to thedisplay of similar needs and preferences by the consumers.As the world is shrinking in to a global marketplace, it is increasingly significant tounderstand the consumers’ perception of global brands to local brands. Studyingconsumer perceptions towards global vs. local brands have substantial implications inmarketing and will also serve as a citation for future research. There would also beseveral reasons for consumers’ perceptions and attitudes towards the brand. Thusthere is also a need to uncover the reasons for consumers’ preference for globalbrands over local brands.This study aims in understanding consumer perception of global brands vs. localbrands in the Indian car industry. The car industry in India is undertaken for the study 1 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  11. 11. for the simple reason being the strong growth of the automobile sector in India. Thecar segment is specifically chosen as it is highly competitive with well established andflourishing global and local brands. Moreover, consumers in India are now moreinformed, sophisticated and demanding. Urban consumers have been especiallyexposed to western lifestyles through overseas travel (IBEF, 2006). This served thepurpose for studying the Indian car industry.1.2 Objectives of the studyThe key objective of the study was to understand consumer perception of globalbrands vs. local brands in the Indian car industry. The research explores andcomprehends consumers’ perceptions of global brand vs. local brands. The secondaryobjectives of the study are to highlight the factors that effect consumer preference forglobal brands; to examine the effects of country of origin on consumer perceptions ofglobal brands and local brands; and to study the effects of consumer ethnocentrismtowards global brands. The study originally achieves the secondary objectives in orderto accomplish the primary objective.1.3 Synopsis of chaptersThe outline of the chapters that are included in the study is depicted as follows;Second chapter of the study reviews the literature which discusses, what is alreadyknown of the main themes and issues. It covers past research and studies and articlesfrom relevant journals, books, newspapers, etc. It is a summary of what other peoplehave written and published around the theme of this particular research. The literaturereview is of course critical. The chapter starts by explaining the basics of the study, 2 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  12. 12. being brands. Local brands and global brands are brought to light. The reasons for theshift from local to global brands are then discussed. The factors that are believed toeffect consumer preference of global brands are also discussed. In order to examinecountry-of- origin and culture of brand origin effects on consumer perception ofglobal brands and local brands, the literature regarding it is critically discussed. Thechapter then reviews effects of consumer ethnocentrism with regard to the evaluationof global brands and local brands by consumers.Third chapter of the study presents an overview of the chosen industry. The industryoverview starts with the purpose of choosing the Indian car industry for the study andan overview of the respective industry is presented. This chapter also discusses theadvent of cars in India along with a brief description of the local and global car brandson Indian roads. This would facilitate the reader to comprehend the study in anenhanced way.Fourth chapter of the study describes and evaluates the methods, techniques andprocedures used in the investigation. In this chapter, the methods used are alsojustified for the reason it has been used. In order to create a deep understanding ofconsumers’ insights of global brands against local brands, qualitative approach wasadopted with an in-depth and semi-structured interview process.Fifth chapter of the study discusses and critically analyses the findings of thequalitative data by tentatively examining the interviewees’ responses and beliefs. Thegathered qualitative data are analysed accordingly to accomplish the objectives of thestudy. This was done by meticulously comparing the most relevant distinct responses 3 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  13. 13. by the interviewees. These distinct responses were also critically analysed with thesupport of the past literature and also the researchers’ own personal view andexperience during the interviews. Thus the unique personal quotes of the respondentsremained as the rationale for the analysis of the study. This chapter begins with thebackground information of the respondents who possess a car in India. The chapter isthen pursued to analysis and discussion of the findings from the interviews made,wherein the responses are analysed and discussed with regard to the researchobjectives of the study.Lastly, the Sixth chapter of the study sketches out the conclusion of the study. Thechapter also presents the limitations of the study and provides recommendations forfuture research. 4 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  14. 14. Chapter Two2. Literature Review2.1. IntroductionThis chapter reviews concepts and theories by researchers that are highly related tothe area of study. The chapter provides a critical analysis of the views and insights ofvarious researchers on the subject area. The chapter starts by explaining the basics ofthe study, being brands. Local brands and global brands are brought to light. Thereasons for the shift from local to global brands are then discussed. The factors thatare believed to effect consumer preference of global brands are also discussed. Inorder to examine country-of- origin and culture of brand origin effects on consumerperception of global brands and local brands, the literature regarding it is criticallydiscussed. The chapter then reviews effects of consumer ethnocentrism with regard tothe evaluation of global brands and local brands by consumers.2.2. Brands and BrandingBranding is the art and cornerstone of marketing (Kotler, 2003).A brand is defined as a specific name, symbol or design- or, more usually somecombination of these- that is used to distinguish a particular seller’s product (Doyle,2002). Branding exists from the very early times to distinguish the goods of oneproducer from those of another. The word ‘brand’ derives from the Old Norse word‘brandr’ which means to burn and brands were, and still are, the means by whichowners of livestock marked their animals. From branding his livestock, early manmoved on to branding his wares- where a potter for example would identify his pots 5 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  15. 15. by putting a mark like a thumbprint into the wet clay on the bottom of the pot and thepotter would expect customers to seek out those products which carried his mark(Interbrand,1990). Today with a considerable change over time, there is an increase inmodern and sophisticated branding of both tangibles and intangibles.Aaker (1997) asserts that brand is a complex symbol and presents six levels ofmeaning that convey it: Attributes: A brand brings to mind certain attributes; Benefits:Attributes being translated into functional and emotional benefits; Values: The brandalso says something about the producer’s values; Culture: The brand may represent acertain culture; Personality: The brand can project a certain personality; User: Thebrand suggests the kind of consumer who buys or uses the product.Brand names have become increasingly valuable assets for many multinationalcompanies. In a cluttered marketplace, brands stand up as the source of differentiationfor providers of products and services that can be quickly tracked with easy access totechnology and information (Lim and O’Cass, 2001). Many consumers use brands asclues to indicate product performances, instead of engaging themselves in search forinformation when deciding between competing brands. Consumers use brands as cuesto make decisions to purchase or try products (Ger et al., 1993). Monroe and Krishnan(1985) define cue as all informational stimuli available to the consumer beforeconsumption, and can be intrinsic or extrinsic. Few examples of intrinsic cues aretaste and design, while extrinsic cues include COO, brand, and price (Rao andMonroe, 1989). It is said that consumers tend to rely more on extrinsic cues (Jacoby etal., 1977). Moreover, Han and Terpstra (1988) assert that consumers utilize extrinsiccues in evaluating a brand because they often are unable to detect its true intrinsic 6 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  16. 16. quality. It is also said that country-of-origin is also found to be one of these extrinsiccues to a greater extent as consumers tend to be less familiar with products of foreignorigin.To a large extent, the brands also speak of familiarity and credibility (Fatt, 1997)about the product. In developing economies, consumer choice is significantlyincreasing. However, in the early stages of economic transformation, there is littleinformation available to the consumer. Thus, consumers in transitioning economiesrely on cues from brands by default (Reardon et al, 2005). In less-developedcountries, many brands are still desired and trusted for their functional values and inthese markets, for many people, it is often enough that a brand has a guaranteed originand a guaranteed consistency of quality (Interbrand, 1998). Brands are used as asurrogate to inform the consumer about the product, including relative product qualitysince direct experience with a product is not available (Rao, 1972).Forty years ago, a British or American housewife might have performed all herdomestic cleaning chores with only three or four branded products, but now she mayhave twenty or thirty specialist products for floors, baths, windows, stubborn stains,tiles, fabrics, toilet bowls, even chandeliers. Brands provide consumers with a meansof shopping with confidence, even when faced with bewildering choice (Interbrand,1990).Doyle (2002) asserts that brands are bought by consumers for emotional as well asfunctional reasons. It is also said that people use brands to show off their lifestyles, 7 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  17. 17. interests, values or wealth. Not only customers choose brands that they perceive asmeeting their ‘needs’, but also for gaining a sense of belonging, esteem, etc..Brand attitudes are a central construct of marketing and have received wide attention(Gardner and Houston, 1986). Both the short- and long-term health of a business aredependent upon the brand image of a firm’s products, as brand equity can lead tohigher market share, increasing brand loyalty, and being able to charge premiumprices (Chaudhuri and Holbrook, 2001). It is increasingly significant to know whatlocal and global brands are and how they differ from each other before reviewing thecore concepts regarding the study.2.3. Local Brands and Global BrandsLocal brands are defined by Wolfe (1991) as brands that exist in one country or in alimited geographical area. It is also noted by Schuiling et al (2004) that local brandsbelong to a local, international, or global firm. Local brands provide a link betweenthe national economy and individual well-being. Levitt (1983) defines global brandsas brands that use the same marketing strategy and mix in all target markets.Johansson and Ronkainen (2004) assert that global brands benefit from the scale andscope of having presence in multiple markets. The researchers define global brand as“a brand that is marketed under the same name in multiple countries with similar andcentrally coordinated marketing strategies.” However there are some selected globalbrands that don’t have the same name but share some marketing program elements.For example, “Mr. Clean” also sells under the “Mr. Proper” and “Maestro Limpio”names, among others. Although global brands play a dominant role in today’s world, 8 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  18. 18. the advantages of the local brands are still stronger and this is reviewed in thefollowing part.2.4. Pros and Cons of Local brands and global brandsAn exploratory research on the Y&R (Young & Rubicam’s) database was conductedby Schuiling et al (2004) across four largest European countries: the United Kingdom,Germany, France, and Italy. The study affirms that local brands benefit from strongbrand equity and specifically, local brands benefit from higher consumer awarenessthan international brands do, and they enjoy a strong brand image. Local brandsbenefit not only from a good quality image but also from a better value and trustperception than international brands do (Holt et al, 2003). Value is linked with the factthat prices of local brands are usually lower than those of international brands,providing consumers a sense of better value for the money (Schuiling et al, 2004).According to the research by Schuiling et al, (2004), local brands are also perceivedas more “down to earth” than international brands, meaning that local brands offer amore basic/no frills brand proposition. The study also indicates that local brands areperceived as more traditional than international brands, because local brands arelinked more to local traditions and local cultures than international brands are. It wasalso found that trust is an important advantage for local brands, because it provides aunique relationship with consumers that take years to develop. It also indicated thatthere is no significant difference between the perception of prestige for internationalbrands and that for local brands. Another significant finding was that consumers areattracted to international brands but in reality, they prefer to purchase local brands(Schuiling et al., 2004). In the words of Johansson and Ronkainen (2004), although 9 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  19. 19. global brands may have more success in high-profile, high-involvement categories,consumers may still give local brands preference in purchasing every day products.The advantages cherished by local brands can be dominated by the enormousadvantages enjoyed by global brands. Eckhardt (2005) avows that local brands are notmore flexible than global brands in terms of their marketing activities when theycompete in a foreign product category due to cultural categories being associated withthe product category. Just as global brands need to conform to international marketingdictums, local brands sometimes need to conform to deeply held preconceptions aboutthe product category in which they operate.Johansson and Ronkainen (2004) assessed brand realities on the global - localcontinuum using data from Young & Rubicam’s Brand Asset Valuator (BAV). Thisdatabase is considered to be the most exhaustive of its kind, covering 20,000 brandsacross 40 countries. Data have been collected since 1993 across a wide range ofindustry sectors to measure brand perceptions of more than 100,000 consumers. It wasnoted that local brands exhibit higher familiarity among consumers, but whenfamiliarity levels are similar, global brands enjoy higher levels of esteem. Also thatGlobal brands were known for their perceived quality. The researchers asserted thatglobal branding will arguably face different challenges by product category. Certaincategories, such as automobiles and computers, are deemed more global in terms ofthe similarity in consumer preferences. Apart from discussing the pros and cons oflocal and global brands, it is necessary to comprehend the shifts that occurred due toincreased consumer preference from local brands to global brands. 10 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  20. 20. 2.5. Shifts from Local Brands to Global BrandsDuring the recent years, a number of multinational companies are reducing theirbrand portfolios to manageable sizes in favor of global brands. For example, bothProcter and Gamble (P&G) and Unilever have greatly pruned the number of brandsthey market around the world, often disposing of those with limited global potential(Pitcher, 1999). Massive presence of Global brands is fuelled by the increasingsimilarity that consumers display in their consumption habits and preferences. It hasalso been argued that Global brands, are perceived to be more value-added for theconsumer, either through better quality (as a function of worldwide acceptance) or byenhancing the consumer’s self perception as being cosmopolitan, sophisticated andmodern (Johansson and Ronkainen, 2004). Consumers throughout the world arebecoming increasingly sophisticated and international brands offer a measure ofexclusivity or even eccentricity that are increasingly sought after and valued becausesuch appeals are universal (Interbrand, 1990). According to Schuiling et al (2004),this trend has been occurring not only in fast moving consumer goods sector but alsoin other industrial sector including services. Although global brands are becomingmore significant, it is asserted that there are many local brands than internationalbrands in Europe. As examples, in Germany’s oil industry, British Petroleum acquiredthe local leader Aral and decided to retain the local brand name due to its strong brandequity; In Belgium, Spa being the local leader in mineral water, has shares aboveinternational leader Evian (Schuiling et al, 2004).A number of reasons have been presented by various researchers for the movestoward global brands. Out of which, the main reason would be the one given byHassan and Katsanis (1994), being meaningful segments of consumers around the 11 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  21. 21. world develop similar needs and tastes. According to Neff (1999), globalizationspeeds up a brand’s time to market by reducing time- consuming local modifications.Another important reason given by Shocker et al. (1994) for moves toward globalbrands would be consumer preference for brands with ‘global image’ over localcompetitors, even when quality and value are not ‘objectively’ superior. Conversely,in the view of Terpstra (1987), consumer preference has not has not been the primaryreason for companies to decide to move to international and global brands. As anexample, P&G accelerated its development of global brands since the early 1990s andits aim being to achieve competitive advantage in markets (Schuiling et al 2004).As the world is shrinking in to a global marketplace, it is increasingly significant tounderstand the consumers’ perception of global brands to local brands. There is alsoneed to uncover the reasons for consumers’ preference for global brands over localbrands.Consumers become perceptive to global brands when consumers believe the brand ismarketed in multiple countries and is recognized as global in these countries(Steenkamp, 2003). This perception occurs in two forms; consumers realize that thesame brand is found in other countries through media exposure, word of mouth, orduring travel overseas. Secondly, as studied by Alden et al., (1999) that a brand mayassert or imply its ‘globalness’ through marketing communications that use brandnames, endorsers, advertising themes, etc.. Consumers prefer brands that theyperceive as originating from a non-local country, especially from Western countries,more than they do local brands and that preference is linked not only to perceivedquality but also to social status (Alden et al., 1999). In the words of Peterson and 12 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  22. 22. Jolibert (1995), consumers in developing countries generally seek to emulate westernconsumption practices and lifestyles and purchase foreign brands. It is asserted thatconsiderable similarities exist in the needs of consumers around the world (Domzaland Unger, 1987) And this convergence in consumer needs is largely attributed toincreased cross border population mobility and electronic mobility facilitated bytelecommunications technology (Quelch, 1999). On the other hand, there existsdifferences between the markets of different countries due to factors such as culture,history, and geography; and also there exists difference between many regions of theworld in the way consumers perceive products and brands (Lim and O’Cass, 2001).This shift from local brands to global brands can be reinforced by the following basicfactors that effect consumer preference for global brands.2.6. Basic factors that effect consumer preference for Global BrandsResearch shows that perceived brand globalness for global brands could createconsumer perceptions of brand superiority (Shocker et al., 1994). International andglobal brands have been associated with high prestige or status, in addition to quality(Batra et al., 2000). Empirical study conducted by Steenkamp et al (2003) hasrevealed that prestige is the second factor driving global brand preference. Foreignbrands of most consumer durables and non-durable categories were givensignificantly higher mean attribute ratings on “status and esteem” except where “colddrinks” and “ice creams” were concerned. A study conducted by Kinra (2006) heldthat COO credibility of foreign brands was a significant factor influencing consumerattitudes and preferences as it was correlated highly with “quality” and “status andesteem”. 13 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  23. 23. Steenkamp et al (2003) made a study on consumer preference for global brands tolocal brands. The researchers framed three pathways through which perceived brandglobalness (PBG) influences consumers’ purchase likelihood were hypothesized. Thepathways were higher perceived quality, higher prestige, and the psychologicalbenefits of PBG. The hypotheses were tested in Korea and the United states, acrossdifferent product categories and brands.Fig 1. Conceptual model of Perceived brand Globalness (Steenkamp et al., 2003)The result of the study being PBG positively associated with both brand quality andprestige. The researchers found that both in Korea and the U.S.A., PBG exerted itsstrongest effect on purchase likelihood through perceptions of superior quality.Although global brands were found to communicate higher prestige and status, qualityappears to be more heavily weighted by consumers. According to Han (1990), higherperceived quality, higher prestige, and the psychological benefits of PBG are the 14 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  24. 24. pathways through which PBG can directly affect purchase likelihood and indirectlyaffect through brand quality and brand prestige.Bearden and Etzel (1982) state that, if global brands have higher prestige, it wouldbecause of their relative scarcity and higher price compared with local brands.Consumers develop prestige meanings for brands based upon interactions with people(e.g., aspired and/or peer reference group), object properties (e.g., best features), andhedonic values (e.g., sensory beauty) (Vigneron and Johnson 1999). Kapferer (1997)suggests that consumers may prefer foreign brands because of associations of higherprestige. Steenkamp et al. (2002) argue that the influence of perceived prestige onpurchase intention is stronger when the product category is more conspicuous and itsownership or consumption is more publicly visible. Furthermore Veblen (1899)asserts that conspicuous consumption was used by consumers to signal wealth, power,and status.Despite exceptions (like Coca-Cola, Nestlé, etc...), evidence indicates that globalbrands are typically more scarce and more expensive than local brands (Batra et al.,2000). Global brands may also connote cosmopolitanism (Thompson and Tambyah,1999). In the words of Friedman (1990), consumers are said to buy global brands toenhance their self-image as being cosmopolitan, sophisticated, and modern.The worldwide scale of global brands allows people to associate themselves withglobally recognized events (World Soccer Cup, Formula one, etc…) and celebrities(Steffi Graf, Michael Schumacher, David Beckham, etc… for example). Through a 15 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  25. 25. process of meaning transfer, the prestige attached to these events and celebrities maybe transferred to the sponsoring global brand (McCracken, 1986).Brand name is a key indicator to quality (Rao and Monroe, 1989), and a global imagecan arguably enhance the brand’s perceived quality (Steenkamp et al, 2003).According to Kapferer (1997), if a brand is viewable as globally available, consumersmay attribute higher quality to the brand because such quality is likely to be thoughtof as critical to global acceptance. According to Kirmani and Baumgartner (2000),perceived quality is defined as a consumer’s evaluation of a brand’s overallexcellence based on intrinsic (e.g., performance, durability) and extrinsic cues (e.g.,brand name, warranty).Global brands often advertise their worldwide availability and acceptance (Alden etal., 1999). There has been an enhanced appeal of global brands among certainsegments, such as teenagers and business people (Walker, 1996).One of the other reasons for a global brand preference may be the globalness per se ofsuch brands, independent of any effects through prestige and quality. Perceived BrandGlobalness (PBG) by itself may also be an added value for consumers (Steenkamp etal, 2003). Dawar and Parker (1994) asserted that global brands often appeal to humanuniversals and are purchased to signal membership in worldwide consumer segments.This signifies that global brands are often seen by consumers as brands that conveyworldwide citizenship, when consumed. A number of authors (Appadurai, 1990;Hannerz, 1990) note that media flows, increased travel, and other factors are creatingwidely understood symbols and meanings reflected in global brands that, in turn, 16 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  26. 26. communicate membership in the global consumer community with all its positiveconnotations (McCracken, 1986). Although this was being said some twenty yearsback, this condition has grown eventually stronger.Although there are numerous factors for consumer preference for global brands,consumer ethnocentrism (CET) is considered to have moderating influence inconsumer perception of global brands.2.7. Consumer Ethnocentrism and evaluation of global brands and local brandsby consumersAlthough some consumers prefer global brands to local brands, Shimp and Sharma(1987) have said that the phenomenon of consumer ethnocentrism (CET), wherein awell- established bias exists among consumers in favor of home- grown products.Zambuni (1993) believes that there is evidence that many consumers prefer brandswith strong local connections.Consumer Ethnocentrism (CET) is defined as ‘the beliefs held by consumers aboutthe appropriateness, indeed morality, of purchasing foreign made products’ (Shimpand Sharma, 1987). As defined by Kinra (2006), Consumer ethnocentrism is apsychological construct representing how consumers view products made in their owncountry markets as objects of pride and identity versus those from other countrymarkets. Ethnocentricity has substantial implications for consumer attitude formationtowards foreign products/brands, their purchase intentions and choice betweendomestic versus foreign-made products (Reardon et al, 2005). 17 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  27. 27. According to Steenkamp et al (2003) ethnocentric consumers take pride in theircountry’s brands, symbols, and culture. They are less open to foreign cultures, and areless cosmopolitan. Purchasing foreign made products may be seen as immoral andunpatriotic because it has an adverse impact on the domestic economy; hence,consumers tend to purchase local products even if the quality is lower than that ofimports (Wall and Heslop, 1986).CET is closely linked to economic nationalism (Baughn and Yapark, 1996).According to Shimp and Sharma (1987), consumer characteristics such as nationalismand domestic country preference have been known to have a moderating influence onforeign brands. Kinra (2006), asserts that this moderating influence on foreign brandsis consistent with the fact that consumer ethnocentrism is contingent not only on thedomestic country culture that espouses it, but also the quality of domestic productscoming from it. According to Baughn and Yapark (1996), ethnocentric consumersmay even be willing to sacrifice ‘objective’ gain (higher quality, prestige, etc.) toenjoy the psychological benefit of avoiding contact with the out-group (i.e., the globalculture) by purchasing local brands.According to Vida and Fairhurst (1999), Consumer ethnocentric attitudes can be ratedon a continuum from highly ethnocentric to non-ethnocentric, whereby a consumer atthe high end of the spectrum believes that purchasing foreign-made products ismorally wrong. In contrast, highly non ethnocentric consumers may judge foreignproducts based on their attributes and/or view them as better because they are notproduced in their own country. Consumers who are low on CET are morecosmopolitan in outlook and have a higher degree of cultural openness. Supphellen 18 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  28. 28. and Gronhaug (2003) state that, in transitional economies, low ethnocentricconsumers may have positive stereotypes of foreign brands, whereas highethnocentric viewers tend to reject brands merely because they are foreign. Batra etal., (2000) asserts that ethnocentrism is unlikely to affect brand attitudes in the leastdeveloped transitional economies due to the fact that foreign brands are perceived tobe measurably better than most locally produced brands.Wang and Lamb (1980) found that consumers in developed countries tend to prefertheir own locally-produced goods first, followed by products from other developedcountries, and then products from less developed countries. In a detailed telephonesurvey of 1,000 consumers across the region of United States, conducted just prior tothe war, the aim was to compare American brands to local brands and looking acrossa whole host of categories. It was found that, the most established American brands inthe survey were in fact regarded as more global than American. They were morelikely to be better assimilated into the culture of the country and to be seen to havethat countrys interests at heart than even some local brands. And they were morelikely to enjoy increased purchase intent in the future (Richard, 2003).On the other hand, Baker and Michie (1995) examined British car drivers perceptionsof, and attitudes towards, four makes of foreign cars: Honda, Hyundai, Proton, andToyota. A British car (Rover) was also added to the study in order to establish thepossible effects of ethnocentrism on intention to buy. A detailed description for eachmodel was provided in the exhibit; however, no reference was made to price orcountry of origin. The study revealed that respondents preferred the most expensivecars (Toyota and Rover) but some of them changed their decision when informed that 19 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  29. 29. the prices of these two makes were 50 per cent higher than an available alternative.The results also indicated that product country images and ethnocentrism had asignificant impact (both positive and negative) on the consumers intention to buy.Furthermore it was revealed ethnocentrism can be a strong source of competitiveadvantage, especially when domestic products are equal to imported products on aprice-performance basis.Previous studies on Eastern European countries namely, Russian (Johansson et al.,1994), and Hungarian consumers (Papadoupoulos et al, 1993), has been found toshow that consumers prefer Western products because of superior quality, despiteconsumer ethnocentric tendencies (Kinra, 2006). In a cross-cultural study by Vida andFairhurst (1999), in Central Europe, the study revealed significant differences inconsumer ethnocentrism across the four countries investigated. In studyingantecedents of consumer ethnocentrism, the researchers established a positiverelationship between consumer familiarity with and knowledge of international brandsand their ethnocentric attitudes across the four countries.In order to study consumer perception, it is significant to review concepts ofconsumer brand knowledge.2.8. Consumer Brand KnowledgeThere has been a plenty of research about consumer brand knowledge and its impactson consumer behavior. According to Keller (1993), consumer brand knowledgedetermines how a consumer thinks about a brand. It also determines how theconsumer responds to different stimuli regarding a brand (Lim and O’Cass, 2001). 20 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  30. 30. Rossiter and Percy (1987) assert that brand awareness is a major component of brandknowledge that is reflected by a consumer’s ability to identify a brand under differentconditions and is related to the strength of the brand node or trace in memory.Consumers tend to generalize their attitudes and opinions across products from agiven country, based on their familiarity and background with the country, and theirown personal experiences of product attributes such as “technological superiority”,“product quality”, “design”, “value for money”, “status and esteem”, and “credibilityof country-of-origin” of a brand (Kinra, 2006). Country of Origin (COO) effects playsa vital role in studying consumer perception of global brands vs. local brands.2.9. Effects of Country-of-Origin (COO), Culture-of-Brand Origin (COBO) andconsumer perception of global brands vs. local brandsAccording to Al-Sulaiti and Baker (1998), among the many factors that are believedto influence consumer perceptions of products in an age of international competition,country-of-origin (COO) effects, remains the most researched. Kinra (2006) assertsthat COO is considered an important differentiating factor in consumer attitudes toforeign and local brand names. COO has been defined as the country where thecorporate headquarters of the company marketing the product or brand is situated(Johansson, J.K. et al, 1985). Lee and Schaninger (1996) define COO as the country-of-manufacture or assembly. Research works have documented the importance ofcountry-of-origin (COO) image in consumer evaluation of foreign products andbrands and also favorable country perceptions are known to lead to favorableperceptions of associated attributes such as product quality indicating thereby, thatconsumer evaluations are governed by influences other than the quality of the product 21 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  31. 31. (Peterson and Jolibert, 1995). According to Samiee (1994), one key drawback ofCOO studies is the priori assumption that “customers were typically knowledgeableor sought to acquire CO/M (country origin/manufacturing) information, and that COis a salient attribute in their decisions and that this assumption clearly biased the effectsize because all consumers are not the same with regard to the influence of COO. Theliterature has clearly paid insufficient attention to this customer difference in theirawareness and perceived salience of COO”.Ghauri and Cateora (2006) defines COO effect as any influence that the country ofmanufacture has on consumer’s positive or negative perception of a product. Theresearchers also assert that when the consumer is aware of the country of origin, thereis the possibility that the place of manufacture will affect product/ brand image. Iyerand Kalita (1997) revealed from a study that COO has been found to reflectconsumers’ general perceptions about the quality of products made in a foreigncountry, along with the nature of people from that country. In a study by Eroglu andMachleit (1989) in the case with consumer durables, a product’s technical complexityaffects the importance given to consumer evaluations and that, the more complex theproduct, the more relevant the COO cue.Many brands use cues that are either implied in the brand name or in promotionalappeals in order to elicit perceived country of origin associations (Agarwal andKamakura, 1999). According to Thakor and Lavack (2003), these perceived originassociations are a powerful source of brand appeal, as marketers have revealedthrough focusing advertising on origin associations in many product categories. Asexamples asserted by the researchers, Porsche ads often show a German test track, to 22 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  32. 32. reinforce its German origin; Christian Dior uses the French word, “Parfum”, in itsadvertising to reinforce its French origin association. Brand has been considered as apurely extrinsic variable in country-of-origin effects and consumer perceptions oforigin have been manipulated almost solely through the “made in” label information(Mohamad et al., 2000). Papadopoulos (1993) asserts that there are a variety of waysin which origin information can be communicated, specifically through brand name.According to Kinra (2006), foreign brand names are frequently associated with thecountry-of-origin (COO) of the brand. Papadoupoulos et al. (1993) asserts thatconsumer perceptions of a product’s COO are based on three components associatedwith the standard attitude model, namely their “cognitions” which include knowledgeabout specific products and brands, consumer “affect” or favorable/unfavorableattitude towards the COO, and their “conative” behavior which is related to actualpurchase of a foreign brand. Leclerc et al. (1994) uses the term “foreign branding” todescribe the approach of spelling or pronouncing a brand name in a foreign language,using brands such as Egoiste fragrance, Frusen Gladje ice cream, as examples.Conversely, in the words of Kinra (2006), there are product categories notdistinctively associated with any COO image as in the case of the car industry, whereit has been less easy to market global brands such as “Mercedes”, “Audi”, “Toyota”,“Jaguar” for which brand images have developed quite apart from their COO, andwhich do not use their national COO association in their promotion and marketingstrategies. A study by Leclerc et al. (1994) revealed that perceptions of brandnationality were manipulated through French/ English pronunciation. It was alsofound that for hedonic products, the brand name was preferred when the Frenchpronunciation was used. Furthermore, the French pronunciation resulted in more 23 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  33. 33. favorable brand attitudes. In another study made by Harris et al. (1994), it wasrevealed that English brand names were preferred to French and German brandnames. Thakor and Lavack (2003) states that the studies conducted by Leclerc et al.(1994) and Harris et al. (1994) suggest that brand origin associations play apotentially powerful role in the formation of brand attitudes. Erickson, et al. (1984)analysed the country of origin effects on the evaluation of automobile brands. Datawere collected from 96 MBA students at the University of Washington. Subjects wereasked about their beliefs and attitudes towards ten automobile models (e.g. four US,two German and four Japanese models). The study revealed that country of originaffects beliefs but not attitudes. It also indicated that the effect of image variables onattitude was not direct; any influence they have appeared to be a secondary one actingthrough beliefs.According to Kinra (2006), previous studies on foreign brands reveal that foreignbrands serve as symbolic acquisitions communicative of social distinctions innegotiating status and prestige and this incidence exists in country markets whereeconomic transition and income disparities are high and, social mobility magnifies thetendency to claim differential status through the brands one consumes. Consumersperceive foreign brand that it might have superior quality because of its developednation origin is certainly likely (Batra et al., 2000; Leclerc and Schmitt, 1994).Conversely, Gaedeke (1973) found that CO information did not significantly affectopinions regarding the quality of branded products.According to Thakor and Lavack (2003), though COO studies rely heavily on the“made in” information, such information is not expected to be the only factor in 24 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  34. 34. determining brand origin perceptions. The researcher asserts that there are multipleantecedents of brand origin (such as location of ownership, location of manufacture,location of assembly, etc…) and from which consumers draw brand origin cues. Andthese cues help consumers to formulate perceived brand origins, which they use todevise more general perceptions, attitudes, expectations and intentions about thebrand.Conversely, it is said that the view of COO effects is increasingly becomingmisleading or confusing in the modern marketplace as products are typically designedin one country, manufactured in another, and assembled in another and this hasresulted in a hybrid of products (Chao, 1993). In the words of Lim and O’Cass (2001),Country-of-origin research has revealed two crucial facts about how the origin of aproduct influences consumer behaviour – people tend to prefer products from theirhome country and have a more negative perception of brands from “emergingeconomies”. In a study by Nes and Bilkey (1993), it was found that products fromdeveloping and less developed countries were rated lower on quality and higher inrisk regardless of brand name.Level of education is considered to be significant demographic variable (Al-Sulaitiand Baker, 1998) influencing country of origin effect (Paswan and Sharma, 2004). Aseducation levels increase, consumers are likely to become more knowledgeable ofother countries and cultures, and more tolerant of things that are different. It has alsobeen posited to result in more favorable opinion towards foreign products (Good andHuddleston, 1995; Sharma et al., 1995) and a reduction in consumer ethnocentrism(Bailey and Pineres, 1997). Paswan and Sharma (2004) suggest that as a consumer’s 25 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  35. 35. education level increases their awareness of brand and hence brand’s COO shouldalso increase.Lim and O’Cass (2001) assert that The COO effects have been shifted from theproduct level to the brand level in consumers’ product evaluations. It is also said thatspecific country-of-origin information is becoming less relevant for the fact that it isbecoming increasingly difficult for consumers to extract the multiplicity of countryinformation. The researchers also state that in place of country-of-origin is theculture-of-brand-origin (COBO), which is more readily available to the consumer as aresult of exposure to the marketing activities of the brand. It is also stated that COBOis argued here to provide the next wave of understanding in how consumers perceiveand evaluate brands. Thakor and Kohli (1996) define brand origin as “the place,region or country to which a brand is perceived to belong by its target consumers”.They also advise that the origin of manufacture (country-of-origin) is no longersignificant to buying behaviour in the age of corporate globalisation, and that theperceived origin of the brand is more suggestive as a demographic variable. Forexample, many perfume labels bear the names of major cities: Paris Milan New YorkRome London ... No one assumes that the perfume is actually made in any of thecities, but their names carry the suggestion of quality and tradition. A bottle labelledPrague Helsinki Melbourne Moscow would not carry the same sense of gravitas ormystique, regardless of whether it might be of a better quality (Lindstrom, 2005). Asasserted by Lim and O’Cass (2001), consumers judge products by referring to thebrand and it is the national or cultural associations of that brand that matter rather thanthe precise details of product manufacture and no consumer doubts that a Coca Cola isan American brand but the bottling of the product takes place locally. Thus it is 26 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  36. 36. asserted that the cultural associations of the brand that matters. Culture-of-brand-origin could be the reason why consumers still attach certain cultural characteristics toa brand when specific information about the foreign country is not available. Forexample, consumers evaluated Volkswagon Fox favourably in a study because of itsimage as a brand of exceptional engineering based on its German origins and only 8percent of the respondents knew it was manufactured in Brazil (Ratliff, 1989). Asexamples given by Thakor and Lavack (2003), Guinness does not become less Irishfor the average UK consumer by being made in London and those same consumersstill see Toyota as a Japanese car despite it being manufactured at Derby; BMW is byitself a German brand regardless of whether the cars are made in Munich orManchester.In a study made by Lim and O’Cass (2001), the researchers examined consumer’sperception of brands as influenced by their origins and the differences in classificationability between consumers’ knowledge levels. The results of the study indicate thatconsumers can more easily identify the cultural origin of brands over the country-of-origin. In the view of the researchers, the issue of consumer brand knowledge isimportant in order to understand how consumers perceive information about originsof a brand and ultimately perceive and evaluate brands and also that consumers arebelieved to be able to classify culture-of-brand-origin better than country-of-brand-origin.There are few studies that have shown that consumers may prefer brands with localconnections, and few researchers have argued that there is no intrinsic preference forglobal brands (De Mooij, 1998). Higher levels of domestic country bias have been 27 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  37. 37. found in research on Western consumers where domestic products were found toenjoy a generally more favourable evaluation than foreign made products (Bannisterand Saunders, 1978; Cattin et al., 1982). Han (1989) had asserted that consumers tendto evaluate local products more highly than foreign products. Balabanis andDiamantopoulos (2004) studied eight product categories with regard to consumerpreferences for domestic versus foreign brands and found that ethnocentrism was alsodependent to a large extent, on the nature of the product category.2.10. ConclusionThe literature review has discussed concepts and theories regarding the basics ofglobal brands and local brands, the shifts from local brands to global brands and alsothe factors leading to the shift. Country-of-Origin effects are reviewed in order toexamine its influence on consumer perception of global brands to local brands. It ishighly significant to highlight that studies on foreign brands by researchers (such asKinra, 2006) foreign brands serve as symbolic acquisitions communicative of socialdistinctions in negotiating status and prestige and this incidence exists in countrymarkets where economic transition and income disparities are high and, socialmobility magnifies the tendency to claim differential status through the brands oneconsumes. Consumers perceive foreign brand that it might have superior qualitybecause of its developed nation origin is certainly likely (Batra et al., 2000; Leclercand Schmitt, 1994). The literature review also appraises the effects of consumerethnocentrism in the purchase of global brands and local brands.To proceed this study further, the next chapter talks about the car industry in India.The reason for explaining the car industry in India is because this specific sector in 28 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  38. 38. India is tremendously growing with both global players and local players in themarket. Further more, another reason for choosing the car industry is because people(consumers) in the country like cars and they are more concerned about carefullydeciding and buying a car. They are considered to be among the high involvementproducts. Thus, this would enforce the study as it is to study the consumer perceptionon global brands vs. local brands. 29 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  39. 39. Chapter Three3. Industry Overview3.1. IntroductionThe car industry in India is chosen for studying consumer perception of global brandsvs. local brands for the simple reason being the strong growth of the automobilesector in India. The car segment is specifically chosen as it is highly competitive withwell established and flourishing global and local brands.3.2. Indian automobile industry – an OverviewIndia is emerging as one of the most attractive automotive markets in the world, and ispoised to become a key sourcing base for auto components. The Indian automotivesector has a presence across all vehicle segments and key components. In terms ofvolume, two wheelers dominate the sector, with nearly 80 per cent share, followed bypassenger vehicles with 13 per cent. Passenger vehicles consist of passenger cars andutility vehicles. The industry had few players and was protected from globalcompetition till the 1990s. After government lifted licensing in 1993, 17 new ventureshave come up. At present, there are 12 manufacturers of passenger cars, 5manufacturers of multi utility vehicles (MUVs), 9 manufacturers of commercialvehicles, 12 of two wheelers and 4 of three wheelers, besides 5 manufacturers ofengines. With the arrival of global players, the sector has become highly competitive(Automotive, 2006).The growth curve of Indian automobile industry has been on an upswing for the pastfew years. It is the 4th largest passenger vehicle market in Asia and has become the 30 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  40. 40. fastest growing car market in the world in 2004, with a growth rate of 20 per cent.Continuing the upswing, the sector posted an impressive 8.9 per cent growth in 2005-06, says the Economic Survey 2005-06. The latest announcement by the Governmentto cut excise duty on small cars will soon see India emerging as the worlds largestmanufacturing hub for small or compact cars (IBEF, 2006).Indian automobile companies are moving aggressively into foreign markets. As agood example, Tata Motors Ltd., which is one of the largest private sectorcommenced its distribution of Fiat cars across India as part of the new Tata-Fiatdealer network, is also looking at tapping overseas markets through the partnership.The company is gearing up to re-launch its best selling passenger car, Indica, in theUnited Kingdom under its own brand. Indica had made its debut on the British roadsabout two years ago as City Rover under Tata Motors tie-up with the Birmingham-based MG Rover (IBEF, 2006). With few such movements happening tremendously,it wouldn’t be too long for India to have its brands on the international roads.Apart from the automobile brands moving aggressively into the foreign markets, thereare huge foreign brands rolling on the roads of India. The year 2006 will see the entryof many high-end brands into the country. The Indian automobile market will see atleast 30 new launches, spanning everything from affordable hatchbacks to mid-sizemodels to super luxury high-end cars and Sports Utility Vehicles (SUVs) (IBEF,2006). 31 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  41. 41. Fig 2. Strong growing automotive sector in both domestic and global markets(IBEF, 2006)Thus the Indian automobile industry has been performing well both in the domesticand the international markets.According to IBEF (India Brand Equity Foundation), India has several competitiveadvantages in the automobile sector and they can be explained as following; India hasa growing workforce that is English-speaking, highly skilled and trained in designingand machining skills required by the automotive and engineering industries. ManyIndian and global players are leveraging this advantage by increasingly outsourcingactivities like design and R&D to their Indian arms. 32 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  42. 42. India offers a huge growth opportunity for the automobile sector – the domesticmarket is large and has the potential to grow further in the future due to positivedemographic trends and the current low penetration levels. India has nearly 23 percent of the global population and is one of the most attractive consumer markets in theworld today. Income levels across population segments have been growing in India.According to National Council of Applied Economic Research (NCAER) data, theconsuming class, with an annual income of US$ 980 or above, is growing and isexpected to constitute over 80 per cent of the population by 2009-10 (IBEF, 2006).In addition, a large proportion of the Indian population is relatively young - in the agegroup of 20-59 years. This is expected to further boost the automotive domesticmarket as a younger population has a higher consumption index. The rise in incomelevels of the Indians and the emergence of the consuming class that has higherpropensity to spend offers great opportunities for growth to companies across varioussectors. Furthermore, Consumers in India are now more informed, sophisticated anddemanding. Urban consumers have been especially exposed to western lifestylesthrough overseas travel. For example, more than 5 million Indians traveled overseaslast year and this number is expected to increase by 15 per cent to 20 per cent perannum. An increase in the number of working women and the prevalence of nucleardouble-income families, especially in urban areas, are other trends shaping lifestyles(IBEF, 2006).According to IBEF, large infrastructure development projects underway in Indiacombined with favorable government policies will also drive automotive growth in 33 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  43. 43. the next few years. Easy availability of finance and moderate cost of financingfacilitated by double income families will also increase consumption.3.3. Advent of cars in IndiaThe advent of cars in India dates back to 1898 when the first motorcar rode downIndia’s roads. From then till the First World War, about 4,000 cars were directlyimported to India from foreign manufacturers. During 1948, the first car wasmanufactured in India. In 1993, with the winds of liberalization sweeping the Indiancar market, many multinationals like Daewoo, Peugeot, general Motors, Mercedes-Benz and Fiat came into the Indian car market. Since the 80s, the Indian car Industryhas seen a major resurgence with the opening up of Indian shores to foreignmanufacturers and collaborators. The 90s became the melting point for the carindustry in India. The consumer being the king, was constantly wooed by both theIndian and foreign manufacturers. Though sales had taken a dip in the first fewmonths of 1999, it is back to boom time ( High- end models are being launched rapidly and are flourishing.As already said, Indian automobile industry is highly competitive with a large numberof players in each industry segment. Most of the global majors are present in thepassenger vehicle and two wheeler segments. The key players in passenger vehiclessegment in India are Tata Motors, Maruti Udyog, Honda Motors, Hyundai Motors,Toyota, Skoda, Daimler Chrysler, and Hindustan Motors. Mercedes, BMW, Porsche,Audi, Bentley and Rolls Royce are already here (IBEF, 2006). 34 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  44. 44. Brief descriptions of both local and global car brands in India are presented below toenhance the comprehension of the study. Local car brands in India are initiallydescribed before pursuing to global car brands.3.4. Local Car Brands in IndiaThe local car brands found in India are;Maruti Udyog Limited is the premier car company in India. Maruti Udyog Limited(MUL) was established in Feb 1981. The company entered into collaboration withSuzuki Motor Corporation of Japan to manufacture cars. Maruti is the highest volumecar manufacturer in Asia, outside Japan and Korea. Despite there being 11 companiesnow in the passenger car market in India, Maruti holds about 60% of the total marketshare. Maruti Udyog Limited has many unique Service advantages for the customers.It has bagged the First Position in JD Power Customer Satisfaction Index for theconsecutive two years. The company has also ranked highest in the India SalesSatisfaction Study. The models of Maruti Udyog Limited cars are Maruti 800, MarutiAlto, Maruti Zen, Maruti Zen Classic, Maruti Esteem, Maruti Gypsy, Omni, WagonR, Versa, Baleno, Swift and Grand Vitara ( Motors Limited (HML) is Indias renowned automobile manufacturingcompany. In 1942 this company was introduced in India by Mr. B.M. Birla of Birlafamily (Indias largest business groups). Since then, it has become a vast company,manufacturing cars like Ambassador, Contessa, and in collaboration with Mitsubishiof Japan now manufactures the new Mitsubishi Lancer ( 35 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  45. 45. Tata Motors Limited is Indias largest automobile company, with large revenues. Itsname comes first in the category of commercial vehicles and the second largest in thepassenger vehicles, mid size car and utility vehicle segments. The company is theworlds fifth largest medium and heavy commercial vehicle manufacturer. Over 3.5million Tata vehicles are moving on Indian roads, since 1954. The models of thecompany are Tata Indigo, Tata Indica, Tata Sumo, Tata Safari and Tata Indigo Marina( Global Car Brands in IndiaApart from local car brands, the global car brands present in India are;Hyundai Motor India Limited (HMIL) was established in 1996 and is a wholly ownedsubsidiary of South Korean multi national, Hyundai Motor Company. HMIL is thefastest growing and the second largest car manufacturer in India and presently selling30 variants of passenger cars in six segments. The Company has set up more than 70dealer workshops that are equipped with the latest technology, machinery, andinternational quality press, body and paint shops, across the country, therebyproviding a one-stop shop for a Hyundai customer. Hyundai also has a fleet of 78emergency road service cars that can provide emergency service to all its customersanytime, anywhere. The models of Hyundai are Santro, Getz, Accent, Elantra, Sonata,Tucson, Terracan. The awaited models of Hyundai Motors are Verna, Getz nextgeneration and Santa Fe ( Siel Cars India Ltd., (HSCI) was set up in December 1995 as a joint venturebetween Honda Motor Co. Ltd., Japan and Siel Limited to manufacture passenger carsin India. The company has brought about three models in India - Honda City, Honda 36 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  46. 46. Accord, and Honda CR-V. Its first model was launched in 1997. Very recently HondaSiel Cars has launched one more market friendly model, Honda Civic on 9th July2006 in India ( Motor Corporation is the premium vehicle manufacturer in the world. Basedin Japan, the company manufactured its first vehicle in 1936. Toyota exported its firstJapanese-made passenger car to the United States in 1957. Today Toyota has globalpresence and Toyota branded vehicles rank among the worlds highest quality cars. InIndia Toyota Motor Corporation has entered into a joint venture with Kirloskar Groupand the new entity is called Toyota Kirloskar Motor Private Limited (TKM). Thecompany aims to play a major role in the development of Indian automotive industry( Motors is a South Korean company. General Motors took decision to take upDaewoo Motors to form GM Daewoo. This brand entered the Indian market duringthe year 2002 with its models such as Daewoo Matiz, Daewoo Cielo, and DaewooNexia ( Motor Company is the worlds second largest automaker. The companys worldheadquarters is in Dearborn, Michigan. Its automotive brands include Aston Martin,Ford, Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. The brands on Indianroads include Ford Icon, Ford Mondeo, Ford Fiesta, Ford Fusion, Ford Escort andFord Endeavor. The company is also waiting for Ford Focus to be launched in Indiashortly ( 37 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  47. 47. Fiat, a make from Italy stepped in India during the year 1905 and later on joinedhands with Premium Automobiles which was a private company in India( Motors Corporation was founded in 1908 and is the worlds largest vehiclemanufacturer ( General Motors enlisted its name for makingoutstanding future performance in the field of automobile industry in India from theyear 1994. The models of General motors in India are Chevrolet Aveo, ChevroletOptra and Chevrolet Tavera, Opel Astra and Opel Corsa ( based company Audi has spreaded its wings of success in the field ofautomobile industry for its technical expertise and creativity. Audi has already startedleaving its footprint in India from July 2004. Audi has launched its bigger models A6and A8 in the Indian market ( (Bayerische Motoren Werke) was founded on March 7, 1916 and is now one ofthe major automobile manufacturers in the international market. Its major brandsinclude BMW, MINI and Rolls-Royce Motor Cars. Although its cars are on Indianroads, it has been announced that 2007 will be the year when BMW will startmanufacturing and selling cars in India ( Republic based Skoda Auto Company is one of the popular brand name in thefield of automobile industry. It is a part of the international Volkswagen Group.Skoda Auto introduced itself in Indian market in November 2001. The models of 38 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  48. 48. Skoda cars on Indian roads are Skoda Octavia, Skoda Superb and Skoda Laura. Theawaited models are Skoda Fabia and Roomster ( Chrysler entered the Indian market and set up Mercedes-Benz India Ltd.during 1994 with the aim to serve the customers in India with the latest products andtechnological excellence from the Mercedes-Benz ( Motor Cars was introduced by Frederick Henry Royce and CharlesStewart Rolls on May 4, 1904. Rolls-Royce model, Phantom is already in the roads ofIndia ( was established by Ferdinand Porsche. In 1931, Ferdinand Porsche foundedthe Porsche Engineering Office in Stuttgart. Porsche started leaving its footprint in themarket of luxury and utility vehicle in India from 2003 (, these descriptions of the global and local car brands would enhance the readingin a better manner. This also depicts India’s richness in automobiles and particularlyin cars. The study is prolonged by presenting the research methodology that has beenadopted for the study, in the next chapter. 39 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  49. 49. Chapter Four4. Research Methodology4.1. IntroductionThis chapter talks about the methods and techniques of data collection and selects themost appropriate method for the study based on the strengths and weaknesses of eachmethod.The data collection methods used in this research involves the search for both primaryand secondary data. According to Malhotra (2005), Primary data are originated by theresearcher for the specific purpose of addressing the problem at hand. Also thatobtaining primary data can be expensive and time consuming. Primary data, being themost significant is gathered through depth interviews, focus groups, observations andsurveys. This particular study has used depth interviews as a means for obtainingprimary data.Secondary data are data that are collected for some purpose other than the problem athand (Malhotra, 2005). Secondary data are usually collected from journals, existingreports, and statistics by public and private authorities. The secondary data for thisparticular study were collected through marketing journals and other existing reportsthat were based on the topic. Secondary data helped the researcher to create bettercomprehension of consumer perceptions. As a general rule stated by Malhotra (2005),“Examination of available secondary data is a prerequisite to the collection of primarydata. Start with secondary data. Proceed to primary data only when the secondary data 40 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  50. 50. sources have been exhausted or yield managerial returns.” Thus the study conductedand analysed primary data with the rationale of the secondary data.Since the aim of the study was to understand consumers’ view of global brands vs.local brands, qualitative research was preferred to quantitative research. In order tocreate a deep understanding of consumers’ insights of global brand against localbrands, qualitative approach was adopted with an in-depth and semi- structuredinterview process. Interviews as a qualitative tool helped the researcher to uncoverindividual’s covert feelings and emotions towards perception of global brands vs.local brands. As it was rightly said by Bate (1997) that qualitative research is aboutdigging into the everyday life of people. It is also that qualitative research produces aquality in a research that no other method gives, and provides a unique way ofillustrating and explaining theoretical issues in everyday, experimental terms.4.2. Research purposeThe purpose of this study is to understand consumers’ perception of global brands vs.local brands in the Indian car industry. The secondary objectives of the study are tohighlight the factors that effect consumer preference for global brands; to examine theeffects of country of origin on consumer perceptions of global brands and localbrands; and to study the effects of consumer ethnocentrism towards global brands.The study originally achieves the secondary objectives in order to accomplish theprimary objective.The research explores consumers’ perceptions of global brand vs. local brands in theIndian car industry. The study is conducted among the adult consumers in the agegroup of 30-60 years old. 41 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  51. 51. The study undertakes exploratory research in order create a better understanding ofthe consumers. According to Malhotra (2005), the objective of exploratory research isto explore or search through a problem or situation to provide insights andunderstanding. The research process of an exploratory research is flexible andunstructured and the sample size is small and non-representative. The analysis of theexploratory research is qualitative and the results are tentative in nature (Malhotra,2005).4.3. Qualitative ResearchQualitative research methodologies are oriented towards developing understandingof the meaning and experience dimensions of human lives and their social worlds(Fossey et al, 2002).Qualitative research is chosen as the tool for research in order to explore the chosentopic of the study. In the words of Denzin and Lincoln (1994) Qualitative research ismulti-method in focus, involving an interpretive, naturalistic approach to its subjectmatter. This conveys that qualitative researchers study things in their natural settings,attempting to make sense of or interpret phenomena in terms of the meanings thatpeople bring to them. Qualitative research involves the studied use and collection of avariety of empirical materials; case study, personal experience, introspective, lifestory interview, observational, historical, interactional, and visual texts that describeroutine and problematic moments and meaning in individuals lives. “A qualitativestudy is defined as an inquiry process of understanding a social or human problem,based on building a complex, holistic picture, formed with words, reporting detailedviews of informants, and conducted in a natural setting” (Cresswell, 1994). 42 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  52. 52. Denzin and Lincoln (1994) assert that qualitative research tool is “the art of askingquestions and listening”. Qualitative research is unstructured, exploratory in nature,based on small samples, and may utilize popular qualitative techniques such as focusgroups (group interviews), word association (asking respondents to indicate their firstresponses to stimulus words), and in-depth interviews (one-on-one interviews thatprobe the respondents’ thoughts in detail) (Malhotra, 2005). Qualitative researchinterviews vary in methodological features such as length, style of questioning, andparticipant numbers (group or individual), while most of them are carried out face-to-face, and can also be carried out by telephone, or via the internet (Cassell and Symon,2004). This study uses the mode of telephonic interviews as a qualitative researchtool.4.4. Why Qualitative Research?The reason for choosing qualitative research tool instead of quantitative research toolcan be justified in the words of Van Mannen (1991) as he asserted that “Unlikequantitative data, raw qualitative data cannot be analysed statistically and hencequalitative research is always concerned with questions that begin with, why? How?In what way? Etc... Qualitative research is preferred because it is very difficult toexplain human behaviour in simply measurable terms like quantitative researchmethod. Measurements essentially tell us how many people behave in a certain waybut they do not adequately answer the question ‘why’? (Denzin and Lincoln, 1994).Since the study focuses around consumers’ beliefs, opinions, and views, qualitativeapproach is adopted. This can be inferred from the words of Silverman (1999) thatqualitative approach is favoured as it helps the researcher to gain insight into people’s 43 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  53. 53. motivation, emotions and behaviours. Holliday (2002) asserts that qualitative researchis interpretative. Qualitative research carries deep insights into behaviour of peoplewithin specific social setting rather than a broad population. According to baker(1991), qualitative research is appropriate particularly to ‘elicit attitudinal andmotivational factors which influence behaviour’ and ‘to understand why peoplebehave the way they do’. Kaplan (1964) suggested that there is only one thing thatdistinguishes human from natural world; it is our ability to talk, interact. This‘interactive nature’ of qualitative research makes it possible to measure the reactionsof a great many people to a limited set of questions thus facilitating comparison andstatistical aggregation of data.The qualitative research adopted in this study is flexible in nature. As said by Patton(2000), In-depth interviews are flexible as it does not follow the rigid method to carryout the interview. Semi-structured interviews are more suitable when the research areais sensitive and requires the respondents to talk more personally of their experiences.4.5. InterviewsIn-depth interviews were carried out as a qualitative research tool for pursuing thestudy. An interview has been defined as ‘a conversation directed to a definite purposeother than satisfaction in the conversation itself’ (Chisnall, 1997). According toDrever (1995), interviewing people is one of the commonest methods used in small-scale educational research work. An interview is a purposeful conversation “used togather descriptive data in the subjects own words so that the researcher can developinsights on how subjects interpret some piece of the world” (Bogdan & Biklen, 1998). 44 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  54. 54. In-depth interviews were carried out for the study in order to uncover the beliefs,attitudes, feelings and emotions of the respondents. In the words of (Cooper andSchindler, 1999), in-depth interview encourages respondents to share as muchinformation as possible in an unconstrained environment.Interview styles differ in structure. According to Seidman’s (1998) in-depthinterviewing utilizes open-ended questions that build upon and direct the probing ofparticipants’ responses and the goal of in-depth interviewing is “to have participantsreconstruct his or her experience within the topic under study”.In the words of Drever (1995) semi-structured interviews are ‘that the interviewer setsup a general structure by deciding in advance what ground is to be covered and whatquestions are to be asked. This leaves the detailed structure to be worked out duringthe interview. The person interviewed can answer at some length in his or her ownwords, and the interviewer responds using prompts, probes, and follow-up questionsto get the interviewee to clarify or expand on the answers’.One of the most significant techniques in good interviewing is the use of probes.Probes were used in the study, during the interviews to obtain detailed substantiatedanswers. The technique of stimulating respondents to answer more fully andrelevantly is termed probing (Cooper and Schindler, 1999). Patton (1990) identifiesthree types of probes: detail-oriented probes, elaboration probes, and clarificationprobes. This study uses the elaboration probes and according to Patton (1990)elaboration probes is designed to encourage the interviewee to tell the researchermore. Furthermore the researcher indicates his/her desire to know more by such 45 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  55. 55. things as gently nodding his/her head as the respondent talks, softly voicing un-huhevery so often, and sometimes by just remaining silent but attentive. The interviewused few questions such as ‘Could you tell me more about this?’, ‘Why do you thinkso?’, ‘What else can you think about it?’, ‘What is the reason for your reason?’ etc…4.6. SamplingQualitative researchers work with small samples of people, bound by specificcontexts, and studied in depth (Miles and Huberman, 1994). Nonprobability samplingwhich is non-random and subjective (Cooper and Schindler, 1999) is applied in thestudy to carry out the interviews. Nonprobability sampling allows interviewers tochoose sample members ‘at random’ (meaning ‘as they wish’ or ‘wherever they findthem’) which is not random sampling. Judgement sampling, a kind of nonprobabilitysampling, was used in order to select the interviewees. Judgement sampling occurswhen a researcher selects sample members to conform to some criterion (Cooper andSchindler, 1999). With the application of Judgement sampling, people who possess acar in India were alone picked up as per the researcher’s choice from the generalpublic for the study. Thus the sampling frame for this study was the public in generalwho own a car brand in India. As asserted by Malhotra (2005) “Qualitative research isunstructured, exploratory in nature, based on small samples…”, the sample size forthis study is 10.4.7. Telephone interviewCooper and Schindler (1999) assert that telephone makes its greatest contribution insurvey work as a unique mode of communication to collect information fromrespondents. Also that telephone can be helpful in arranging personal interviews and 46 Consumer Perception of Global vs. Local Brands: The Indian Car Industry
  56. 56. screening large populations for unusual types of respondents. Despite telephonicinterviews being expensive than other modes of interviews, they helped the researcherto converse with the respondents who are far beyond the reach. Telephonic interviewsare also less time consuming when the interviews are well scheduled through emailsbefore the interview is carried out.The study consisted of 10 adult customers in the age group of 30-60 years old. All theten respondents were interviewed through telephone. The respondents were alreadyinformed of the interviews and were scheduled through emails according to theirconvenience. This helped the researcher to avoid lapse of time that results frommaking repeated calls in order to check the availability of respondents. Therespondents were well informed of the purpose of the interview before the start ofeach and every interview. Furthermore, the respondents were explained the subjectoriented terms such as ‘COO’, ‘COBO’, ‘globalness of the brand’, etc… The reasonfor explaining these terms were to make the respondents feel more comfortable withthe topic to be interviewed. Each interview lasted for about 30-40 minutes.The interviews were started with questions that were easy to answer such as ‘whatbrand is you car?’, which made the respondents to feel free by answering thequestions. The respondents were then gradually asked questions that took a little timefor the respondents to answer such as ‘How do you perceive global brands (such asFord, BMW, Mercedes, Toyota, etc...)?’, ‘If in case the price of the local brand wascheaper than the global brand, which brand would you choose? Why’, etc…Theinterviews were thus started with easy questions and once the conversations got 47 Consumer Perception of Global vs. Local Brands: The Indian Car Industry