Country of Origin

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Country of Origin

  1. 1. 1 COUNTRY OF ORIGIN
  2. 2. 2 Executive Summary NWP is a New Zealand based company that sells differentiated focused (skin care and health care) products targeted mainly at women, formulated using truly natural herbal ingredients by predominantly focusing on Country of Origin. This report is further describing how Country of Origin plays a vital role in affecting consumers purchase decisions. Furthermore, the report is highlighting the perks and pitfalls of pursing growth strategies focused mainly on Country of Origin, along with some recommendations in order increase sales, increase market share and gain competitive edge.
  3. 3. 3 Table of Contents S.no Topic Pg no 1. Introduction: Research purpose………………………………………………………………. Objectives of Research…………………………………………………………. Scope of investigation………………………………………………………….. Limitations of the study………………………………………………………... Assumptions……………………………………………………………………. 4-5 4 4 4 4 5 2. Literature Review: Country of Origin concept……………………………………………………... The Influence of Country-of-Origin Image on a Consumer Purchase Decision………………………………………………………………………… Pursuing growth strategy predominantly focused on COO to gain competitive advantage……………………………………………………………………….. Pitfalls of pursuing growth strategy for its products to be focused predominantly on COO………………………………………………………… 6-10 6 6 8 9 3. Conclusion 10 4. Recommendations for NWP 11 5. References 12
  4. 4. 4 Introduction Country of Origin (COO) is a concept that explains how consumers consider a product coming from a particular country, relating to the general perception about the quality of products made in a particular country and the nature of people from that country. Research Purpose: To have a clear understanding about how COO will impact purchasing decisions for NWF's natural skincare and health care products in both domestic and international markets. Objectives of the Research:  To find out how COO affects consumers purchasing decisions when evaluating products and brands  To find out how NWF will have competitive advantage by implementing growth strategies linked to COO in both domestic and international market  To find out about the advantages and disadvantages NWF can have by implementing growth strategies focused mainly on COO in both domestic and international market.  To determine whether COO will impact NWF consumers purchasing decisions positively or negatively  To derive effective actions in order to improve NWF consumers purchasing decisions Scope of investigation: This is an investigation about how 'Country of Origin' affects natural skin care products/brand including, consumers purchasing decisions, implementation of growth strategies to gain competitive edge and increase market share domestically and internationally, and recommendations for improvements. Limitations of the Study: The investigation was limited to secondary sources (online, books) only. No direct sources or interviews were available, with no further forensic investigation conducted.
  5. 5. 5 Assumptions:  Expanding to Asian markets for overseas growth as products from western countries have a positive COO effect on Asian people.  Updating the current online channel (website) to nationwide and worldwide to expand geographically, alongside other distribution channels to increase local and global market share.  Charging premium price for products by creating a niche market.  Other cues like intrinsic and extrinsic, alongside COO are considered as equally important when evaluating brands/ products by consumers.
  6. 6. 6 Literature Review Country of Origin concept According to Ozretić Došen and Previšić (2001), Country of Origin is a concept which reflects and describes consumers’ perceptions about the quality of products coming from a particular country and its people. It can also be defined as a picture, reputation, and stereotype that businessmen and consumers attach to products from a certain country (Johansson, 2000). It was found that products from countries with positive image were being considered of higher quality, whereas, products from negative image countries were being underrated. This image is usually created by variables such as, representative products, national characteristics, technological advancement, economic and political background, history and traditions of a country. A negative country image affects products coming from those countries, setting a barrier for them to enter and position themselves in an international market, while a positive one facilitates business internationalization (Ozretić Došen and Previšić, 2001). The Influence of Country-of-Origin Image on a Consumer Purchase Decision Consumers make purchase decisions based on brand/product image, which is created by a systematic process of acquisition, evaluation and integration of product information or cues. A cue can be defined as an informational stimulus available to the consumer before consumption (Ahmed et al., 2004), and can either be intrinsic or extrinsic. Intrinsic cues are the product traits that are intrinsic to the product (i.e. they cannot be changed/ manipulated) without changing the physical characteristics of the product. Some intrinsic cues can be, design, taste, sound, fit, shape, etc. Extrinsic cues are those traits that are not physical (Olson and Jacoby, 1983). Some extrinsic cues may include brand name, packaging concept, store image, price, country of origin, etc. Country-of-origin is classified as an extrinsic cue as the ‘made in’ label can be removed from a product without altering its physical characteristics (Eroglu and Machleit, 1988) and plays a part in forming a whole brand/product image. The two most frequently cited models can be used to explain the influence of country-of- origin image on brand/product’s quality evaluation, the ‘Halo Model’ (Johansson et al., 1985) and the ‘Summary Construct Model’ (Min Han, 1990). The halo effect may cause consumers to rely on country-of-origin image mainly when unfamiliar with products of a particular country. On the other hand, a summary construct model operates when consumers are familiar with a country’s products, and infer a country’s image from its product information,
  7. 7. 7 using COO to eliminate brands and develop an evoked set rather than make inferences about the quality, saving consumers from extensive evaluation of intrinsic attributes. Moreover, as Papadopoulos and Heslop (1993) points out, a country’s image does influence a consumer’s purchase decision, as described earlier that products from countries with positive image were being considered of higher quality, and vice versa. Also, the consumers may consider the product pricing with regards to the COO, i.e. for brand/product from a country with positive image, they may be willing to pay premium and low for brands/products from countries with negative image. Therefore, the country-of-origin image does play a vital role when a consumer makes a purchase decision. Although there is no question to the fact that COO influences consumers' perceptions of a product, and impacts purchase decision for the use of a product/service. However, still no reliable method actually exists. Reasons for such a situation should be looked for in the multi- dimensionality and complexity of the concept of COO image and into different number of influences regarding its formation, like: country-of-origin and countries of production stereotypes, ethnocentrism, interrelationship between country-of-origin image and other product’s attributes, demographic, social and economic factors changing influence in the course of time. Consumers may often also tend to link COO to personal memories, national identities and to feelings of “pride” associated with the possession of products from certain countries (Hirschman, 1985). Ethnocentrism and patriotism also tend to have an emotional trigger on some consumers who may prefer to buy their own country’s products to imported products (Baumgartner and Jolibert, 1977; Wall and Heslop, 1986; Darling and Kraft, 1977). It was recently found out by Archarya and Elliot (2001) that the type of product (expendable/durable) can influence intensity of COO image, they may reflect more on COO when deciding to acquire durable/luxury goods. In addition to that, even consumer bias towards imported products may impact consumer purchasing decisions greatly. A Country's image may be referred as “the sum of information in the consumers’ mind about a country”, according to Sullivan Mort and Han (2000), the less information consumers have about a given country the more will the sales of its products suffer (country-of-origin image effect is inversely proportional to available information). It was noted by Usunier (1996) that younger consumers rather than an average consumers, show lesser country-of-origin effects due to their higher level of education. Therefore, it may be quite reasonable to expect a consumer to be willing to allocate more processing effort in a real life purchasing decision than a hypothetical one, as COO on actual choice behavior competes head to head with other extrinsic and intrinsic cues.
  8. 8. 8 Pursuing growth strategy predominantly focused on COO to gain competitive advantage Marketing is a process of gaining a competitive advantage and sustaining it. Competitive advantage may refer as an advantage that a firm has over its competitors, allowing it to generate more sales or margins and/or retain more customers than its competition. Various firms around the world like NWP may get to a point in domestic market, deciding to start their business in other international markets, this process is known as internationalization and with proper strategy and market entry it can lead to gain a competitive advantage in a new geographical market. Every business needs growth strategies to increase its value, examining generic growth strategies can prove to be a good start as they apply to all types of businesses, and focusing on one aspect of your operations such as COO and specifying the actions you must take to achieve your goals i.e. to be able to gain competitive advantage. Since NWP is a business focusing on the niche market and offering differentiated products from its competitors, it's possible for NWP to gain competitive advantage even by predominantly focusing on COO. According to Markgaraf (2013), Ansoff's approach Market development (entering new market) is one of the effective growth strategies, which NWP can implement as it allows having access to more customers, resulting in greater products sales. This further allows NWP to target new market by adding alternative channels of distribution like opening additional retail outlets domestically and internationally, updating current website which is currently only focusing on lower and central North Island of New Zealand to global, introducing catalogue sales, etc. Though the strategy may be focusing predominantly on COO but if NWP focuses on targeting market of less developed (Asian) countries rather than developed (Western) countries, they will have a positive COO effect on products from western countries, which will help to impact consumer's quality perceptions positively along with the perceived value as well. Also, since NWP produces differentiated focused products (which concentrates on a narrow segment and attempts to achieve a cost advantage or differentiation within that segment) as they are formulated using truly natural herbal ingredients that are valued by consumers (target market being women only), they may be perceived to be unique and better from competitor's products as exact substitute products may not exist, creating a niche market and allowing NWP to charge premium price for their products, enjoy economies of scale and simultaneously gaining cost and competitive advantage in an international market.
  9. 9. 9 resourcese companies agree to pool theiris an approach in which two or morJoint venture This way the companies.)2009,Roll(together to form a combined force in the marketplace risks of their venture. Since NWP is focusingsharebecome capable of doing things and with(joint venture)predominantly on COO, it is recommended for NWP to pool its resources loyalthat aree influence on consumershave a positivder toin or,local companywell knowna for having ready consumers purchasing NWP productsto purchasing domestic products, and into marketing communications/resources/moneyefforttime/in muchhaving to putwithout degreeis theIntegrationSimilarly,ntured company.s loyal to the vebecause of the consumer VerticalForward.to which the firm owns its upstream suppliers and its downstream buyers thecontrol ofincludefirm are expanded toies of thewhen the activitoccurmayintegration ct distribution of its products, and since NWP focuses predominantly on COO, it isdire buy the component companies that are part of the distribution chain, i.e.torecommended t theintegrating with beauty products retail stores as a means to pushing your product a gaining(by eliminating them from the current market) and byexpense of your competition to charge high price for productsableconsumers of the integrated company and being market.internationalentrant in anforeignnewlike awithout feeling Pitfalls of pursuing growth strategy for its products to be focused predominantly on COO Due to the growing competition from international firms, consumers’ sensitivity to COO has become a relevant issue for brand managers. Although the issue of COO effects remains relevant, it has turned out to be an elusive phenomenon to accurately measure. Not only is the very concept of “country” or “origin” expanding, now including not only countries, but also being applicable to regions as well as cities or even neighborhoods (Lentz et al, 2007). Also the very concept of origin may seem to be problematic when pursuing a growth strategy for NWP's products focused predominantly on COO. Patriotism may be the main influencing factor when implementing growth strategies in an international market and consumers are more heavily affected by COO when in competition with local brands/products. Consumers may prefer buying products from their home country more, and may only buy a product with foreign COO if they have a particular liking for that country or if a strong prestigious value is attached to a certain product.
  10. 10. 11 Country of Origin's political (e.g. War) and economical (e.g. Inflation) condition may affect consumers directly; any change in one of the conditions can affect consumer's view and perceptions of that particular country, further affecting consumers purchase decisions along with price, quality and value perception, resulting in low sales and profit. Product differentiation may not be of any value to the consumers anymore (i.e. not wanting to buy natural beauty products anymore) because of better marketing communications done by other beauty and cosmetics companies due to the changing consumers perceptions, taste and psychologically effective advertisements of other companies. As the industry of a country matures (e.g. that of an Asian country) imitation may occur, which may reduce the perceived differentiation of products, as market may not remain niche anymore, but start saturating due to existence of many local companies producing herbal beauty products as NWP. Technological advancements in an international market of less developed countries may make them one step closer to becoming developed; as a result COO effect on foreign products/brands will decrease, due to better quality of local products existing in the market. When production of products is being done in different countries (new market), it may give birth to hybrid products, they are the products with different countries-of-manufacturing - design or –parts and are often regarded as enjoying origin effects from different countries at the same time. These de-constructed conceptualizations leave consumers confused about the product/brand's COO (Samiee et al, 2005). Conclusion: It can be concluded that Country of Origin plays a vital role in affecting consumer purchase intentions, along with numerous other factors. Further research indicates that consumers evaluates products by intrinsic cues (experiencing the product), and extrinsic cues (Country of Origin being one of them) were found to have a greater influence on consumer product evaluation and purchase decisions. Furthermore, the implementation of growth strategies by NWP, predominantly focusing on COO was noticed to have their own set of numerous perks and pitfalls.
  11. 11. 11 Recommendations for NWP: 1. Implement new product development (growth strategy) both domestically and internationally, by targeting new market (men, babies) and introducing an extended line of related products like, natural cosmetics, hair products and perfumes, in order to increase market share. 2. While planning to expand business, it is recommended to employ technology to implement flow production, instead of producing in batches to maintain standard quality of products and to meet demand constantly. 3. Start by expanding sales in Asian (international) market rather than western market, due to their positive Country of Origin perception about Western countries (such as, New Zealand). 4. Increase geographical reach by using international online retail shopping websites such as ebay, wallmart, etc, along with updated NWP (global) website. 5. Using effective marketing communications to promote product through social media marketing, health care campaigns, flyers/magazine advertisements. Also, using promotion methods to educate the consumers about the company's origin, differentiated products offering and increasing health awareness. 6. Focus and prioritize other intrinsic and extrinsic cues as well, alongside COO, in order to be able to function without limitations.
  12. 12. 12 References: 1. Ozretić Došen,Đ. and Previšić, J. (2001) ‘Image zemlje porijekla proizvoda i internacionalizacijaposlovanja’, XVII Kongres CROMARa Hrvatske,Marketing države – Marketing hrvatskedržave, Zbornik radova, Zagreb/Pula. 2. Johansson, J.K. (2000) Global Marketing, 2nd ed., Boston, MA: Irwin McGraw-Hill 3. Eroglu, S.A. and Machleit, K.A. (1988) ‘Effects of individual and product specific variables on utilizing country of origin as a product quality cue, International Marketing Review, MCB University Press, Vol. 6, No. 6, pp.27–41 4. Olson, J.C. and Jacoby, J. (1983) ‘Cue utilization in quality perception process', In advances in Consumer Research, Association for Consumer Research, Ann Arbour,pp.167–179. 5. Johansson, J.K., Douglas, S.P. and Nonaka, I. (1985) ‘Assessing the impact of country-of- origin on product evaluations: a new methodological perspective’, Journal of Marketing Research, November, pp.388–396. 6. Min Han, C. (1990) ‘Testing the role of country image in consumer choice behavior’, European Journal of Marketing, Vol. 24, No. 6, pp.24–39. 7. Papadopoulos, N. and Heslop, L.A. (1993) Product-Country Images, Impact and Role in International Marketing, International Business Press. 8. Baumgartner, G. and Jolibert, A. (1977) ‘The perception of foreign products in France’, in H.K. Hunt (Ed.) Advances in Consumer Research, Association for Consumer Research, Vol. 5, pp.603–605. 9. Darling, J.R. and Kraft, F.B. (1977) ‘A competitive profile of products and associated marketing practices’,European Journal of Marketing, MCB University Press, Vol. 11, No. 7, pp.11–23.
  13. 13. 13 10. Wall, M. and Heslop, L. (1986) ‘Consumer attitudes toward Canadian-made versus imported products’, Journal of the Academy of Marketing Science, Summer, MCB University Press, Vol. 14, pp.27–36. 11. Archarya, C. and Elliot, G. (2001) ‘An examination of the effects of country-of design and country-of-assembly on quality perceptions and purchase intentions’, Australian Marketing Journal, Vol. 9, No. 1, pp.61–75. 12. Ahmed, Z. U., Johanson, J. P., Yang, X., Chen, K. F., Han, S. T., & Boon, L. C. (2004). Does country of origin matter for low-involvement products? International Marketing Review, 21, 102-120. 13. Hirschman, E. C. (1985). Primitive aspects of consumption in modern American society. Journal of Consumer Research, 12, 142±154. 14. Usunier, J. -C. (1996). Marketing across cultures. London: Prentice-Hall. 15. Sullivan Mort, Gillian Maree – Han, C. Min 2000: Multifaceted country image 16. Samiee, S., Shimp, T.A. and Sharma, S. (2005) “Brand Origin Recognition Accuracy: Its Antecedents and Consumers' Cognitive Limitations”. Journal of International Business Studies. Vol. 36 No. 4, pp. 379-397. 17. Dahl, D.(2010).How to Develop a Business Growth Strategy. Retrieved from: http://www.inc.com/guides/small-business-growth-strategies.html (9th May,2010) 18. Markgaraf, B.(2013).The five Generic types of Growth strategy. Retrieved from:http://yourbusiness.azcentral.com/five-generic-types-growth-strategy- 14186.html#author (8th May,2013) 19. Roll, M.(2009).Merger, Acquisition, Alliance -Which is the best?.Retrieved from:http://chinabusinessphilippines.com/index.php?option=com_content&view=article& id=249:me (9th May, 2013)

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