COO-effect on European Consumers’ Quality Perception of ... · COO-effect on European onsumers’ Quality Perception of Mobile Phone 1. Introduction “If you think ‘Made in China’

Master Thesis:

COO-effect on European Consumers’ Quality Perception of Mobile Phone

Mengting Wu

31. OKTOBER 2018

KASSEL

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Abstract

Chinese high-tech brands are starting to be recognised all over the world and are beginning

to change the perception of “Brand China.” On the other hand, the old “made in China” image

remains negative in many (especially older) consumers’ mindset. This study is conducted to

find out how consumers living in Europe perceive “made in China” high-tech products, that are

positioned and priced in premium segment. Among all the product categories, mobile phone

is chosen as research subject to fill in the gap in the current country-of-origin (COO) effect

studies. To be more specific, smartphone models from the Chinese brand HUAWEI are

considered. This study applies quantitative approach to investigate consumers’ product

evaluation in response to products’ COO. A variety of moderator variables which affect the

strength of the COO effect are tested. An online survey is developed for data collection.

Key words: COO, Chinese brands perception, mobile phone

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List of Content

Abstract .................................................................................................................................................... i

1. Introduction .................................................................................................................................... 1

2. Problem Statement ......................................................................................................................... 4

3. Research Questions ......................................................................................................................... 5

4. Literature Review & Hypotheses Development............................................................................... 6

Country of Origin Effect ....................................................................................................................... 6

4.1 The Role of COO in Consumer Product Evaluation and Purchase Intention ...................... 6

4.2 Moderating Factors of COO Effect ...................................................................................... 9

4.3 COO Effect in the context of globalisation ........................................................................ 15

4.4 The Interaction of COO Image and Brand Image .................................................................. 16

4.5 Common Research Methods in COO Effect Studies ............................................................. 17

5. Methodology ................................................................................................................................. 21

5.1 Measures ............................................................................................................................... 21

5.2 Research Method .................................................................................................................. 21

6. Overview of Chapters .................................................................................................................... 23

7. Plan of Work .................................................................................................................................. 24

Bibliography ...................................................................................................................................... 26

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List of Figures

Figure 1: Mobile vendor market share Europe from July – September 2018 ........................................................ 2

Figure 2: Brand China influence by age ................................................................................................................ 10

Figure 3: A model of COO-effect and brand image on consumers' product quality perception .......................... 17

List of Tables

Table 1: Cognitive, affective and normative aspects of COO effect ....................................................................... 6

Table 2: Comparison of exploratory research results from Urbonavičius and Gineikienė (2009) with findings

from previous studies ........................................................................................................................................... 11

Table 3: COO effect research design .................................................................................................................... 18

Table 4: Plan of work ............................................................................................................................................ 24

List of Abbreviations

COA Country of Assembly

COD Country of Design

COM Country of Manufacture

COO Country of Origin

COO-effect on European Consumers’ Quality Perception of Mobile Phone

1. Introduction

“If you think ‘Made in China’ and think of cheap and low-quality goods, then think again. DJI –

the first choice of millions of drone fans – is headquartered in Shenzhen and it dominates the

drone market, accounting for 70% of all drones sold in the world. Huawei, the

telecommunications company that developed its first branded smartphone only five years ago,

has already become the third largest brand in the sector with a 9,4% market share worldwide

– only Samsung and Apple sell more phones. YOUZU and ELEX are both young Chinese

gaming companies that continue to gain more fans and more revenue in foreign markets…”,

written by Doreen Wang, the Global Head of BrandZTM1, Kantar Millward Brown, in her letter

contributed to the latest report (BrandZ, 2018, pp. 118—119). Indeed, Chinese brands are

starting to be recognised all over the world and are beginning to change the perception of

“Brand China”. In the last few years we have seen some strong Chinese brands (especially in

consumer electronic and e-commerce) emerging, which have significant technological

advances, and are developing high-end devices with great quality. The co-founder of Skype,

Jonas Kjelberg, said in an interview with Xinhua Newspaper, “they are thinking how to innovate

and be at the forefront…” (China Daily, 2018) when he was talking about his impression of

Chinese high-tech companies.

The largest global brand equity platform, BrandZ™ covers over 100,000 brands across 45

countries. In its newly released BrandZ™ Top 100 Most Valuable Global Brands 2018, six

brands (JD.COM, ARGRICULTRAL BANK OF CHINA; CHINA LIFE, BANK OF CHINA; THE

REALIFE COMPANY, SF EXPRESS) are indicated with the country of origin China. Among

the top 20 risers, the brands that appreciated most in value year-on-year, seven are Chinese

brands, with Chinese retailers JD.COM and ALIBABA leading the ranking with increases of

94% and 92% respectively, followed by MOUTAI (a traditional white alcohol), which rose 89%.

Besides, the consumer electronics brand HUAWEI was awarded as the Second Best Chinese

Global Brand Builder 2018 (the best was LENOVO) by BrandZ™. Furthermore, HUAWEI was

included in the annual ranking of the world’s Most Valuable Brands compiled by Forbes in year

2017, being the only Chinese brand featured. In the “Forbes 2018” list HUAWEI was ranked

79th with a brand value of US$8,4 billion.

1 BrandZ™ is the largest global brand equity platform covering over 100,000 brands across 45 countries. It’s the only brand valuation ranking that measures the contribution of the brand that is validated to in market sales. Unlike other brand rankings, BrandZ is 100 % customer centric. In addition to identifying the strengths and weaknesses of a brand, BrandZ also tells us why. And, based on the global scope of our research, BrandZ is the first to identify worldwide trends and high potential brands in fast growing markets.

2 COO-effect on European Consumers’ Quality Perception of Mobile Phone

In the 80s, the Chinese government began to modernize the country’s underdeveloped

telecommunication infrastructure. As part of this modernisation attempt, Zhengfei Ren

founded Huawei Technologies Co., Ltd. in 1987 in the Shenzhen Special Economic Zone,

aiming to create a Chinese brand that can compete with established foreign brands and one

day become a world leader in telecommunication. Especially in the product category mobile

phone, HUAWEI has marvellous performance in domestic and world market. According to

International Data Corporation, Huawei shipped worldwide 54,2 million smartphones in the 2nd

quarter this year, moving into second position with a record high market share of 15,8%. In

comparison, Apple dropped to 3rd place for the first time, with a shipment of 41,3 million

iPhones (China Daily, 2018). By launching smartphones in the premium segment under its

own name and in the mid-range segment with its sub-brand HONOR, HUAWEI has achieved

robust growth in Europe. In April and the first two weeks of May, Huawei has overtaken

Samsung to become top smartphone seller in Poland. The market shares reached 36% and

34% respectively, nearly 10% higher than Samsung (Xinhua News, 2018). HUAWEI’s overall

performance on European market in the 3rd quarter is shown on the following chart:

Figure 1: Mobile vendor market share Europe from July – September 2018

Source: StatCounter Global Stats


On the 16th of October 2018, HUAWEI unveiled its most powerful product in London, as it

steps up efforts to maintain its growth pace. The Mate 20 Pro, priced at 1,049 euros ($1,214),

“is designed to compete with the iPhone XS Max and Samsung Technology Co's Galaxy Note

9. It is arguably Huawei's biggest push to differentiate its device from rival products by bringing

a handful of unique features to the table.” Nicole Peng, senior director of market research

company Canalys, said: “The Mate 20 series marks a steady improvement from its

predecessors. They are positioned as Huawei's major weapon in the fourth quarter when

consumers tend to spend big money on new gadgets.” (China Daily, 2018)

It is clear, also on the evidence of the high selling price, that the emerging high-tech Brands

like HUAWEI are not following the “conventional” Chinese style, which is mainly focused on

generating revenue through large sales at low prices and requires low investment and thus

production costs. In contrast, HUAWEI is aiming to become world leading brand since the first

day of establishment. In alignment with this ambitious goal, HUAWEI has been continuously

working on obtaining good product quality and developing new technologies. But how likely is

it for HUAWEI to be able to compete with APPLE and SAMSUNG in premium segment? Can

a brand with Chinese origin be accepted by high-end consumers in Europe? From a “hard

skill” point of view, HUAWEI’s innovation achievements make it possible to win the leading

position on the mobile phone market. In fact, China’s high innovative advancement level has

gained more and more attention from foreign established high-tech companies, including

competitors. According to the CEO of Apple, Inc, Tim Cook during his trip in China in the

middle of October, a string of research and development centres is planned to be established

in China in the coming 2 years, including a joint research facility focusing on advanced

technologies like machine learning and computer vision with Tsinghua University. (China

Daily, 2018) Still, there remain a question mark in terms of consumers’ perception of Chinese

high-tech brands. Are these brands having a hard time dealing with negative stereotypes of

Chinese products? Or other way around, can these emerging Chinese high-tech brands

achieve success in the world leadership battle and change the old negative “made in China”

image into a positive one? How do consumers perceive the products with Chinese origin at

the current time? This study is aimed to find out the answers to the above-mentioned

questions.


2. Problem Statement

Many Chinese emerging high-tech companies have disrupted at the low-end and gradually

moved up the value chain. Some of them has already gained high recognition for their

innovative technologies. But only very few of them is known as Chinese companies. Take DJI

for instance, those sales cover 70% of all drones sold in the world. There is no doubt that DJI

has obtained the leading position on the drone market and it has won a very positive brand

image. Yet their customers are rarely aware of its Chinese origin (BrandZ, 2018). Therefore,

when people are asked about their perception of Chinese brands, many score Chinese brands

much lower, than in the case that they would have known beforehand how innovative many

Chinese brands are (BrandZ, 2018). Yet how wide is the gap between the perception and the

reality from the perspective of consumers living in Europe? For those emerging high-tech

companies from China, which have gone through a long way to obtain world leading position,

how likely is it to be eventually perceived as premium brands despite the old negative “made

in China” image? This study is conducted to find answers to these questions since the current

state of research cannot provide any.


3. Research Questions

Products with made-in-China labels used to be considered as low price and low quality. This

study aims to find out if this old perception is still remaining, and in particular how the

consumers living in Europe assess the quality of the mobile phones with Chinese origin, that

are positioned and priced in premium segment. The Chinese brand HUAWEI is chosen as the

main subject of this study, considering its ambition to become the world leader in mobile phone

sector. With the findings from this research, suggestions regarding consumer differentiation

can be made to Chinese emerging companies on their way of building a global brand.

Sub-questions:

1. Does COO have an impact on consumers living in Europe when assessing the quality

of mobile phones?

2. Does Made-in-China labelling (still) have a negative image?

3. To what extent are consumers living in Europe aware of the Chinese brand HUAWEI?

4. Can a high brand awareness compensate the negative COO-effect caused by a not

favourable country image?


4. Literature Review & Hypotheses Development

Country of Origin Effect

The country of origin (COO) effect refers to a psychological effect describing how consumers’

attitude, perceptions and purchase intensions are influenced by products’ origin. Customers

tend to generalize the quality of all products from the same country (Chao, 1998; Jaffe &

Nebenzahl, 2001). In the literature, COO was mentioned for the first time by Dichter (1962),

who argued “a product’s origin may have a tremendous influence on the acceptance and

success of products.” Shortly after that, the first empirical test was conducted by Robert D.

Schoolers (1965), who observed that the Guatemalan students preferred local and Mexican

products to the ones from EI Salvador, although the products were identical in all other

respects. Since then, COO effect became a subject of a large amount of studies. The country

where a product originates has been found to influence consumers’ decision making in two

ways: perception of product’s quality (Khachaturian & Morganosky, 1990) and perception of

purchase value (Ahmed & d’Astou, 1993).

4.1 The Role of COO in Consumer Product Evaluation and Purchase Intention

According to the framework developed by Obermiller and Spangenberg (1989), the COO has

impact on product evaluation from three aspects: cognitive, affective and normative. This

framework has been widely accepted and used as a theoretical foundation for many further

studies in COO effect. It should be noted that these three aspects are not isolated from each

other and the boundaries between them are fuzzy.

Table 1: Cognitive, affective and normative aspects of COO effect

Aspect Description Major findings

Relevant studies

Cognitive COO is a cue for product quality

COO serves as “signal” for overall product quality and/or some product attributes, such as reliability and durability.

Li and Wyer, 1994

Steenkamp, 1989

Ahmed and d’Astous, 2004

Baker and Ballington, 2002

Knight and Calantone, 2000

Affective

COO has symbolic and emotional value to consumers

COO regarded as an image attribute which brings consumers additional symbolic and emotional benefits, such

Batra, Ramaswamy, Alden, Steenkamp and Ramachander, 2000

Jin and Chansarkar, 2006


as social status and national pride.

Normative

Consumers hold social and personal norms related to COO

It may be considered as “correct” to purchase domestic products, because that supports domestic economy. Contrarily, consumers may refuse to buy products from the countries with objectionable activities or regimes.

Balabanis, Diamantopoulos, Müller and Melewar, 2001

Klein, Ettenson and Morris, 1998

Shimp and Sharma, 1987

Watson and Wright, 2000

Source: own representation based on Verlegh and Steenkamp (1999)

4.1.1 Cognitive Aspect of COO Effect

Bilkey and Nes (1982) see a product as a cluster of intrinsic as well as extrinsic attributes.

Intrinsic attributes (e.g., design, material, weight and taste) are inseparable from the physical

product. Extrinsic attributes (e.g., price, warranty, brand name and COO) are not physical

components of the product and therefore non-indicators of the actual product quality, yet they

can serve as cues that may affect consumers' quality perceptions (Kirmani & Rao, 2000).

Research has found out that consumers usually rely more on intrinsic attributes to form their

opinions towards products. However, under some circumstances, consumers tend to use

extrinsic attributes as “mental short cuts” to simplify the process of evaluating product quality

(Mai, 2011; Miyazaki, Grewal, & Goodstein, 2005; Pharr, 2005; Rao, 2005). With respect to

COO, consumers may generalise and transfer the image of a certain country to its output

products quality (Liefeld, 1993). A country’s image composes a range of dimensions, such as

innovation (technology, industrialisation level), design (style, elegance) and workmanship

(reliability, durability, skills of national manufacturers) (Godey et al., 2012). This image-

transfer, being known as product-country image, contains commonly shared country

stereotypes. According to Schmitt and Dube (1994), French-sounding brand names have a

negative influence on the evaluation of cars and computers, while “hedonic” products like

perfume and wine were perceived with better quality. Product-country image also contains

general impressions which are left by the origin country to the consumers in their previous

direct or indirect experiences with products from that country. For example, if consumers think

that the production of high-quality technical devices required highly skilled and well-educated

workforce, they perceive that the products produced from developed countries have a better

quality. The preference of German cars worldwide might be explained by its high

industrialisation, technological advancement and workmanship of German engineers. The fact


that Japanese cars have been gaining more and more popularity since the 80s shows that the

country image can change/be improved over time, partially through the direct or indirect

interaction with the products from that country (Verlegh & Steenkamp, 1999).

4.1.2 Affective Aspect of COO Effect

Besides signalling function of product quality, consumers may prefer products from certain

countries due to emotional or symbolic associations they have with the origin countries. The

affective connotations countries have may be formed by consumers in a direct way through

e.g. experiences in holidays and encounters with foreigners, or in an indirect way through

education and social media. Research shows that such connotations do have significant

influence on consumers’ product or brand attitude, especially on luxury products (Piron, 2000).

“Consumers link COO to autobiographical memories, to national or ethnic identities and to

feelings of ‘status’ and ‘pride’ associated with the possession of products from certain

countries.” (Verlegh & Steenkamp, 1999). Through purchasing and using these products,

consumers express their feelings related to COO and form their self-image. Expressive

motives “would embrace esteem, social and self-actualization needs...'' (Mittal, Ratchford, &

Prabhakar, 1990, p. 138). Image attributes “reveal how product use and/or ownership

associates the consumer with a group, role or self-image” (Lefkoff-Hagius & Mason, 1993, p.

101). On the contrary, it could also be the case that consumers develop a negative attitude

towards products from certain countries due to country animosity. There are animosity

sensitive (e.g., gasoline) and animosity non-sensitive goods (e.g., cheese, tea,

pharmaceuticals) (Urbonavičius & Gineikienė, 2009).

4.1.3 Normative Aspect of COO Effect

Individuals tend to persuade conformity. Conformity is the act of matching attitudes, beliefs,

and behaviours to group norms (Cialdini & Goldstein, 2004). If governments’ political practices

are not in line with the widely accepted ethical norms or legal rules, consumers may choose

to refrain from purchasing goods from those countries. This phenome is described by Smith

(1990) as “customer voting”. As purchasing goods from a country is generally considered as

a way of supporting its economy, consumers “vote” pro or contra its political statements and

practices by deciding to buy or avoid products from that certain country. Klein et al. (1998)

found out that the willingness of Chinese consumers to purchase Japanese products was

negatively affected by the tense political relationships between the governments and also the

wars broke out by Japan in the past decades. Purchase or use of Japanese products was


regarded as treason at that time and Chinese consumers were urged to boycott Japanese

products. Another phenome in purchasing decision related to COO is consumer

ethnocentrism, when consumers consider it morally appropriate to support their own country’s

economy by buying domestically manufactured goods. Shimp and Sharma (1987) confirmed

in their study the positive relation between consumer ethnocentrism and their preference for

domestic products, as well as the negative relation between consumer ethnocentrism and the

preference for foreign products. Additionally, it can also be the governments, labour unions or

industry groups who call on the citizenship to buy domestic, for instance the irrational U.S.

tariffs targeting Chinese imports announced by U.S. president Trump.

4.1.4 The Interplay of Cognitive, Affective and Normative Aspects of COO Effect

While the majority of existing studies on COO effect are focused on the cognitive aspect, the

affective and normative components began to gain attention in the current research. In fact,

the cognitive, affective together with normative aspects of COO effect are consistently

interacting with each other and cannot be taken into consideration separately in the process

of product evaluation (Mai, 2011). Cohen and Areni (1991) pointed out that affection has an

influence on the amount of information needed for a decision making and how the decision is

made based on the information. Regarding normative aspect of COO, for instance when

consumers decide to boycott products from a certain country in case of a violation of norms,

strong emotions like anger are involved (country animosity).

4.2 Moderating Factors of COO Effect

As already discussed above, COO may affect consumers’ purchase intention through product

evaluation from three interdependent aspects. In other words, there exists a correlation

between COO and product evaluation. The strength of this correlation is under the impact of

a series of factors, which are called moderator variables. The most frequently studied

moderator variables in the COO effect are as following:

4.2.1 Individual Moderating Factors

The extent to which COO influences the judgement in product quality perception and

purchasing process varies among individuals. Some sociodemographic characteristics are

identified to be relevant: mainly older and male consumers with a relative low education level

are more likely to be influenced by COO bias (Liefeld, 1993). As stated in the latest report


released by BrandZ™ (2018), younger consumers between 18 and 24 years old are far more

likely to think positively about Chinese brands than older consumers being and over 55 years

old.

Figure 2: Brand China influence by age

Source: BrandZTM/Kantar Millward Brown

While the overall image of a foreign country affects consumers’ judgement to its products only

to a small extent directly, consumers’ psychographic features like ethnocentric attitudes have

a stronger impact on the assessment (Ahmed & d’Astous, 2008). Consumers with

conservative political views and/or patriotic priorities (Chen, 2009) and those who rarely travel

abroad or interact with people from different cultural backgrounds tend to devaluate the quality

of foreign products (Peng & Zou, 2007). Taking all these into consideration, the first three

hypotheses are stated as following:

H1: COO has an influence on consumers’ product quality perception.

H1a: Age has an impact on the strength of COO-effect in terms of quality perception.

H1b: Consumers with higher intercultural competence are less influenced by COO-effect in

terms of quality perception.


H1c: Consumers with a higher education level are less influenced by COO-effect in terms of

quality perception.

4.2.2 Product Categorial Moderating Factors

Research has shown that the strength of COO effect varies by product category (Bilkey & Nes,

1982; Roth & Romeo, 1992; Pappu & Quester, 2006). The levels of impact of COO on

consumers’ product perception across product categories has been compared in empirical

studies: e.g., carpets, air conditioners and refrigerators (Al-hammad, 1988); TVs (Han &

Terpstra, 1988); beer, shoes, crystal, bicycles and watches (Roth & Romeo, 1992); fruits,

home appliances and clothes (Costa, Carneiro, & Goldszmidt, 2016). Only very few

researching has included mobile phones into the comparison with other product categories

like Urbonavičius and Gineikienė (2009), who conducted a survey with 204 respondents

(51,5% female and 48,5% male) in Lithuania. First of all, they asked the respondents to

evaluate the importance of the following factors when purchasing goods: quality, experience,

price, brand, recommendations, COO and advertising. The results mostly confirmed that

“COO does influence consumers’ product evaluation and purchase decisions… However, the

standard deviation of COO is higher than in case of any other factor”. The standard deviation

in this case serves as an indicator for the homogeneity of the evaluations of COO importance.

The high standard deviation can be explained through varying evaluations of the COO

relevance among the 10 investigated product categories: automobile, cell phone, TV set,

furniture, clothing, cosmetics, wine, cheese, beer and candies. Below are their findings

compared with other studies:

Table 2: Comparison of exploratory research results from Urbonavičius and Gineikienė (2009) with findings from previous studies

Findings from previous studies Findings from Urbonavičius and Gineikienė

(2009)

Jacoby (1977) and Zeithaml (1988) found that when

intrinsic cues (product characteristics that are

inherent in one product itself, such as engine

capacity of a car or a flavour for a soft drink) are

missing or cannot be assessed easily, consumers

tend to rely more on extrinsic cues (product

characteristics that are not fundamental to a

COO cue is not important for these 2 low-

involvement products: candies and beer.

But research indicated that COO cue is

relatively important for cheese, which is

also regarded as a low-involvement

product. Consumers usually do extensive

researching before making purchase


product itself, but are externally attributed to it,

e.g., price, brand, place of purchase and COO). This

happens often with low-involvement products, since

the cost of searching for intrinsic cues exceeds the

benefits.

Matoati and Syahlani (2017) found that consumers’

involvement is a moderator variable that affects the

strength of the relationship between the country of

design (COD) and the perceived quality. The COD

has a stronger influence on perceived quality when

consumers’ involvement is higher rather than lower.

However, consumers’ involvement did not have any

moderating effect in the relationship between the

country of manufacture (COM) and the perceived

quality.

Josiassen, Lukas and Whitwell (2008) identified that

low consumer involvement strengthens the

importance of the product quality evaluation. In this

case, consumers tend to search for all the

information related to the products’ intrinsic

attributes, but not to the extrinsic attributes, such

as its origin, price and brand.

Ahmed and D’astous (2008) and W.N. Lee, Yun and

B.K. Lee (2005) found different results than

Josiassen et al. (2008) and argued that greater

consumer involvement with the product triggers the

consumers to consider all the products’ attributes

including its country of origin when evaluating the

product.

decision when buying an automobile. A

minimal amount of research is devoted to

products like shampoo and candies.

Contrary to the expectation, COO was

evaluated with low importance by

respondents while purchasing a mobile

phone (also high-involvement product).


According to Hugstad and Durr (1986), consumers

are most sensitive to country of manufacture (COM)

with durable goods.

COO is considered as an important factor

when purchasing durable goods:

automobile, TV set and furniture. The COO

information was evaluated with low

importance by respondents while

purchasing a mobile phone.

Piron (2000) noted a significant impact of COO on

consumers’ purchase intention when buying luxury

and conspicuous (publicly used) products. This

impact was not observed with necessities or

privately consumed goods. The moderating effect of

“product type” on the relation between COO and

purchase intension was proven.

None of the listed products belongs to

luxury products.

COO factor was seen more important

while purchasing conspicuous goods, such

as automobile, TV set and furniture.

For necessities and privately consumed

goods (candies and clothing), COO is not

considered important. This is contradictory

to the findings with cheese and wine.

Lin and Kao (2004) found that the magnitude of the

COO effect on brand equity was moderated by

product familiarity, product importance and product

complexity.

Technical products with high complexity are

especially sensitive to COO effect, because these

technologies are too sophisticated for average

consumers to evaluate and regularly very costly. In

order to be safe/reduce risks in making purchasing

decision, also in a financial point of view, consumers

tend to rely on COO information and choose

products from highly industrialised countries (Batra

et al., 2000; Liefeld, 1993).

The high complex products here include

automobile, TV set, furniture and mobile

phone. COO is considered as expected

important when purchasing automobile,

TV set and furniture. Surprisingly, COO was

evaluated with low importance by

respondents while purchasing a mobile

phone.

Source: own representation based on Urbonavičius and Gineikienė (2009)


Urbonavičius and Gineikienė (2009) conducted this survey with 204 Lithuanian postgraduate

students in Business. That gives rise to the question if the conclusions in that study can be

generalised to other (Eastern)European countries. As stated in the study, COO has no

significant effect on Lithuanian consumers’ purchase intention in the product category mobile

phone. However, this finding seems to be surprising in comparison to previous research. In

this light, the following hypotheses are made to re-examine the significance of the above-

mentioned categorial moderator variables, taking consumers in the main European counties

into regard.

H1d: Consumers provided with sufficient intrinsic product cues are less influenced by COO-

effect in terms of quality perception.

H1e: Consumers with higher involvement for mobile phones are less influenced by COO-effect

in terms of quality perception.

4.2.3 Methodological Moderating Factors

There have been some criticisms about the research design in the previous studies of COO

effect. The first issue concerns the choice between single-cue and multi-cue. Bilkey & Nes

(1982) were the first ones who disapproved the use of single-cue design, in which the

respondents were only provided the information about COO of the products and then asked

to make product evaluation. In this way, the respondents’ attention was fully led to the solo

COO cue. This approach has been criticized for the lack of realism and amplification of effect

size. (Verlegh & Steenkamp, 1999; Bilkey & Nes, 1982; Steenkamp, 1989). On the other hand,

the multi-cue design includes besides COO information also other intrinsic and extrinsic

characteristics of the products. The second issue concerns the use of within-subjects or

between-subjects design. In a within-subjects design, respondents are asked to assess a

series of products from different countries with other features being the same (followed by a

next step to evaluate products from a certain country with varying product attributes in case of

a meta-analysis). The almost unavoidable shortcoming on this procedure is that the

respondents can easily see through the research purpose. Eventually they may adjust their

answers in a certain direction (in order to please the researchers for instance) instead of telling

their own opinions. Furthermore, within-subjects may cause sensitization to the manipulated

product characteristics. When a respondent is presented with one product after another, which

seem to be identical except only a few manipulated attributes, he/she tends to devote more

attention to those varying attributes. Analog to the lastly mentioned shortcoming, also here the


effect of those manipulated characteristics is amplified (Verlegh & Steenkamp, 1999). The

between-subjects design does not face these two problems above, but the issue of individual

differences among the respondent groups. The third issue concerns the sampling. Since the

previous research is mainly made in institutions like universities, many surveys are conducted

with students, with no distinguishing of student sample from non-student sample. Verlegh and

Steenkamp (1999) found that there is no significant difference between “student sample” and

“general consumer sample” in terms of the magnitude of COO effect. But a latent distortion in

the research results aroused through using student sample as representatives for the whole

population should not be neglected. Other moderator factors related to research methodology

are verbal product description vs. real product presentation as well as sample size (larger or

smaller than 260) (Peterson & Jolibert, 1995).

4.2.4 Situational Moderating Factors

Consumers may rely on COO information as key criteria in product quality assessment when

they have limited time or the possibilities to search for other product attributes information. In

this case, products from highly industrialised, economically and technologically highly

developed countries are preferred, thus the COO effect is amplified. On the other hand,

products with COO labelling from newly industrialised or developing countries gain more

attention for those consumers who have a limited budget for purchase (Mai, 2011). An

occasional political event may have impact on the strength of COO effect temporarily. If a

product comes from a not favourable country, but the brand has a very positive brand image,

this strong brand image outweighs the low country image. As a result, COO effect is weakened

(Jo, Nakamoto, & Nelson, 2003).

4.3 COO Effect in the context of globalisation

Globalisation and liberalization of trade has led to proliferation of hybrid products that have

more than one nationality. They are products with companies’ headquarters being registered

in one country, while the design, research and development, components manufacture, and

assembly occur in other parts of the world (Bhaskaran & Sukumaran, 2007; Insch and

McBride, 1998; Chao, 1993; Han and Terpstra, 1988). Matoati and Syahlani (2017) found that

consumers’ involvement is a moderator variable that affects the strength of the relationship

between the country of design (COD) and the perceived quality. The COD has a stronger

influence on perceived quality when consumers’ involvement is higher rather than lower.

However, consumers’ involvement did not have any moderating effect in the relationship


between the country of manufacture (COM) and the perceived quality. According to Hugstad

and Durr (1986), consumers are most sensitive to country of manufacture (COM) with durable

goods. However, Chao (1993) and Li et al., (2000) drew the conclusion that consumers do not

distinguish between the country of design and the country of manufacture or country of

assembly. They noticed that consumers sometimes simply assume that the product design

and later the quality control take place in the same country. Therefore, the country of design

is the surrogate country of manufacture.

Given the fact that consumers nowadays are faced with a proliferation of products with multi-

country affiliations, the accurate identification of COO of these hybrid products becomes more

difficult. Further, it is hard to find a unified way to define the particular one country of origin of

hybrid products. The definition of country of origin by Johansson, Douglas and Nonaka (1985)

is chosen to be applied in this study, especially for hybrid products:

County of origin is defined as the country where the corporate headquarter of the

company marketing the product or brand is located. Though we recognise that the

product may not necessarily be manufactured in that country because of multinational

sourcing, we assume the product or brand is identified with that country (p. 389).

4.4 The Interaction of COO Image and Brand Image

Both the COO of a product and its brand play a role in consumers’ multi-cue decision-making

context. Understanding the interaction of a product’s COO image and its brand image is of

particular importance for global brands, whose country of manufacturer (COM) or country of

assembly (COA) usually differs from the brand origin. This interaction may take place “at

different levels: assimilation of these two concepts, joint effects or influence of COO on the

brand equity”. The concept of a “brand” has a summarizing construct in the eyes of customers

in their purchasing behaviour (Godey et al., 2012). “When customers have insufficient

knowledge to evaluate an offering, brand names tend to be used as a proxy to make

judgements about the quality and suitability of the offering” (Bhaskaran & Sukumaran, 2007).

COO labelling information may be overseen by consumers when making purchasing

decisions, if the brands have striking foreign-sounding names, due to the association between

these foreign-sounding names with specific countries (Bhaskaran & Sukumaran, 2007). In

fact, consumers tend to infer COO of a product from its brand name (Terpstra & Han, 1988).

Moreover, brand image can be damaged by negative COO beliefs (Johansson & Nebenzahl,


1986); while on the other hand, the strength of the COO effect can be largely reduced when

facing a brand that has a strong brand image (Papadopoulos & Heslop, 1993). Further, a

strong brand image, together with a wide brand awareness, may compensate the negative

perception bias caused by COO effect. Thakor and Pachetu (1997) argued that brand beliefs

are the greater influencer of product evaluations and purchase intentions, rather than COO

beliefs. According to Pecotich and Ward (2007), the more familiar consumers are with a brand,

the less extrinsic information (including COO) is required or searched in their purchase

decision. Additionally, a familiar brand can increase the perception of the COO and even

neutralize the negative COO impact on the products from developing countries. In general,

products from brands that enjoy high brand awareness have better quality evaluation (Grewal,

Krishnan, Baker, & Borin, 1998). Thus, the last hypothesis is introduced:

H1f: Consumers with higher brand awareness to HUAWEI are less influenced by the COO-

effect in terms of quality perception.

Figure 3: A model of COO-effect on consumers' product quality perception

4.5 Common Research Methods in COO Effect Studies

Previous studies in COO effect have applied a wide range of research methodologies, some

examples are as following:


Table 3: COO effect research design

Methodology Examples

Single-cue design, in which COO is the only information

provided.

Narayana, 1981

Multi-cue list format, in which more intrinsic as well as

extrinsic information are offered, such as price, quality,

brand name, warranty or comparisons with other

brands

Zhang, 1997

Peterson and Jolibert, 1995

Johansson et al., 1994

Multi-cue advertisement format, in which advertising

messages deliver multiple cues

Gürhan-Canli and Maheswaran, 2000a; Lim and Darley, 1997 Lim, Darley, & Summers, 1994

Single-country versus cross-national designs Ahmed and d’Astous, 1996

comparisons of prior product experience versus post

consumption experience

Kinra, 2006

Source: own representation based on Bhaskaran and Sukumaran (2007)

“Early studies of the country-of-origin effect often used single-cue design, in which subjects

are presented only with information about the product’s country of origin and are asked to

provide a product evaluation. Such studies have often been criticized for their lack of realism

and inflation of effect sizes” (Verlegh & Steenkamp, 1999, p. 532; see also Bilkey & Nes, 1982;

Steenkamp, 1989). It is straightforward that consumers infer product quality from country of

origin, when it is the only information source. As a result, these studies tend to overemphasise

COO influences on buying intentions (Verlegh & Steenkamp, 2005; Peterson & Jolibert, 1995;

Nes & Bilkey, 1993). “Even single-cue, multi-cue list and multi-cue advertisement experiments

under different methods (hetero-method application, non-experiment and post experimental

enquiry) reveal conflicting findings” (Bhaskaran & Sukumaran, 2007; Lim & Darley, 1997; Lim

et al., 1994). Different research methods, such as case studies, focus-group surveys, in-depth

interviews and structured questionnaires can lead to different conclusions.

Another main distinction between within-subjects and between-subjects designs. In a within-

subjects design, the respondents, so called subjects, are presented a series of products that

have identical attributes apart from the countries of origin. After that, they are asked to

evaluate the products and/or score the purchase intention. This procedure may cause the

subjects pay extra attention to COO information since they can easily see through the purpose

of the study. As a result, the COO effect may be overestimated than in real purchasing


condition. Moreover, it could lead the respondents to answer in such a way that they think

might please the experimenter instead of their own opinion (Fern & Monroe, 1996). These

issues are less problematic in a within-subjects design, since the respondents are divided into

groups and every group is asked for judgement for the same product with a varying country of

origin. However, the individual differences in within-subjects design is hard to control which

lead to distorted COO effect size results. In general, within-subjects designs yield larger effect

sizes than between-subjects designs (Verlegh & Steenkamp, 1999).

Peterson and Jolibert (1995), after having reviewed 52 previous articles or papers containing

69 independent studies and 1520 effect sizes, concluded that larger samples with 260 study

participants or more produce larger COO effect sizes than smaller samples. Bilkey and Nes

(1982) argued that the verbal product descriptions (utilizing only a pen or pencil) led to

artificially inflated COO effect sizes than the case of real product representation. Furthermore,

the COO effect in terms of product evaluation is found to be amplified if the respondent comes

from the same country as the country of origin of the stimulus product. This inflation in the

COO effect sizes is not detected regarding purchase intention. The COO effect sizes in terms

of product evaluation are found to be larger when the respondents in a COO study come from

more than one country. Significant differences in COO effect sizes are also detected in relation

to the number of countries that are used as product origins in experiments. The COO effect

tends to be larger concerning the product evaluation if ten or fewer countries are observed.

This is not the case in terms of purchase intention.

To sum up, the following aspects shall be taken into consideration when developing research

designs concerning COO effect (Peterson & Jolibert, 1995):

• Research design employed (within-subject/between-subject)

• Type of respondent (students/consumers/business people)

• Number of cues in study (single cue/multiple cues)

• Sample size (less than 260/260 or more)

• Stimulus context (paper and pencil/stimulus present)

• Country of stimulus (includes respondents' country/does not include

respondents' country)

• Source of respondents (one country/more than one country)

• Number of countries in study (ten or fewer/more than ten)

• Respondent nationality (U.S./non-U.S.)


• Level of stimulus product (general/category)

• Type of stimulus product (industrial/consumer/both or mixed)

• Kind of stimulus product (durable/nondurable/not defined or mixed)

• Mode of data collection (self-administered/other-administered)

• Study context (laboratory/field)


5. Methodology

5.1 Measures

Age is measured by letting the respondents assign themselves to the belonging age group:

under 18, from 18 to 24, from 25 to 34, from 35 to 44, from 45 to 54 and 55 or over. Two items

are used as indicators of intercultural competence (Peng & Zou, 2007): the experience of

travelling abroad and the interaction with people from other cultural backgrounds in one’s

home country. Education is measured by letting the respondents select one of the five

categories that reflected their highest education level attained: (1) primary school (2)

secondary/middle school (3) high school (4) practical training (5) post-/graduate degree. For

the respondent group that is to be provided sufficient intrinsic product attributes, the following

information is available: average call duration, battery cell composition, colour, connectivity

technology, maximal display resolution, display size, display technology, item dimensions,

item weight, Lithium battery energy content, memory storage capacity, model year, operating

system, optical sensor resolution, processor count, resolution and SIM card type. The control-

group is represented the following product features: average call duration, colour, connectivity

technology, item weight and operating system. Both groups have access to extrinsic product

attributes: price, shipping, packaging and varying COO indications. The consumers’

involvement in a certain product category has been defined in various ways in the consumer

literature. Day (1970) defined involvement as "the general level of interest in the object or the

centrality of the object to the person's ego-structure" (p. 45). Other researchers supported

Day’s centrality notion and further suggested that involvement occurs when a product is

related to important values, needs or the self-concept (Bloch, 1981). Coulter, Price and Feick

(2003) employed a series of items to capture consumers’ involvement in the product category

cosmetics. Two of them, product importance and the association with self-image, are used in

this study for the measurement of consumers’ involvement in product category mobile phone.

Further, Diamantopoulos, Schlegelmilch and Palihawadana (2011) used three items to

measure the brad familiarity: brand awareness, brand knowledge and prior usage of the

products from a certain brand. This study follows the same construct.

5.2 Research Method

An online questionnaire is considered as a suitable tool since verbal product descriptions lead

to inflated effect sizes on the one hand, and real product representation requires a high budget

and much time on the other hand (both in experimental environment and under real purchase

condition). A two-group discriminant questionnaire is developed, which means both between-


subjects approach and within-subjects approach are employed. The respondents are

randomly arranged to one of the two groups by computer. They are asked to evaluate product

quality after being presented product pictures, together with sufficient or insufficient intrinsic

product cues according to their group. The respondents in group 1 are given sufficient intrinsic

cues, while only limited intrinsic attributes are available for the group 2. Within every group,

the COO information is manipulated: without COO labelling, made in China, made in Korea.

Korea is included in the survey taking into consideration the fact that the main competitor of

HUAWEI, SAMSUMG is a Korean brand. Afterwards, the respondents from both groups are

asked if they know about the brand HUAWEI and ever have used a cell phone from this brand?

Then a short description about HUAWEI is presented on the screen, with focuses on its

achievements in the technological advancement and increasing market shares in the past

years. The respondents are supposed to score on a 5-point scale, to which extent they were

aware of the information in the description beforehand. This is followed by the questions about

respondents’ age, intercultural competence, education level and their involvement in product

category mobile phone. In the end, the respondents from both groups are provided with

pictures of mobile phones again, with explicit indications of China as the origin country and

HUAWEI as the brand. The survey is completed after the respondents have evaluated the

quality of the cell phones once again.


6. Overview of Chapters

1. Introduction

1.1 Problem Statement

1.2 Research Questions

2. Literature Review and Hypotheses

2.1 The Role of COO in Consumer Product Evaluation and Purchase Intention

2.2 Moderating Factors of COO Effect

2.3 COO Effect in the context of globalisation

2.4 Branding

2.5 The Interaction of COO Effect and Brand

2.6 Common Research Methods in COO Studies

3. Methodology

3.1 Hypotheses Overview and Measures

3.2 Research Method

3.3 Sampling and data collection

3.4 Data Analysis and Discussion

4. Conclusion


7. Plan of Work

Table 4: Plan of work

task period of time description

chapter 5.3 (sampling and

data collection)

—>writing task

01.11.18 – 15.11.18 integrated in questionnaire design

questionnaire design 01.11.18 – 15.11.18 • containing 10-12 questions

in line with the 6

Hypotheses

• variables, scale levels and

statistical tests for each

question to be considered

questionnaire development

using SPHINX

16.11.18 – 20.11.18

data collection 21.11.18 – 22.12.18 moving to the next step as soon as

enough amount on questionnaires

is answered

chapter 4 (literature review)

—>expansion

22.11.18 – 28.11.18 chapter number in expose

chapter 6

—>discussion part which is

related to the advantages

and drawbacks with respect

to methodologies

03.12.18 – 07.12.18

preparation for data analysis 10.12.18 – 14.12.18 refreshing the understanding of

SPSS, Eviews, etc….

data analysis 03.01.19 – 05.01.19


chapter 6&7

—>results and discussion

—>conclusion

06.01.19 –13.01.19 chapter number in expose


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