COUNTRY OF ORIGIN EFFECTS

Buyer behavior is affected by the national origin of products and services. Many consumers are relatively indifferent to where a product is made. Other consumers favor goods produced in their home country. Country of origin (COO) refers to the nation where a product is produced or branded.  Origin is usually indicated by means of a product label, such as “Made in China”. When consumers are aware of a product’s COO, they may react positively or negatively. For example, many people favors cars produced in Japan, but would be less upbeat about cars made in Russia. Most people feel confident about buying clothing made in Italy, but would be less receptive to clothing from Mexico. Such attitudes arise because consumers hold particular images or conceptions about specific countries. Consumers assume that Japan produces high-quality cars and that Russia makes low-quality cars. While such beliefs are often rooted in reality, many are simplified opinions, false stereotypes or effect the slowness of accepting change.

Buyer reactions to COO are influenced by various factors.  First, COO stereotypes vary depending on the origin of the judge and on the category of the product being judged.  For instance, while Japanese cars are disdained by Indians, they are prized by Russians. While people in Brazil love Japanese consumer electronics, they spurn Japanese apparel.

Second, opinion varies depending the national origin of the firm and the location where its product is actually made. Many consumers love German Volkswagens, even if the car is produced in China, Poland, or some other location outside Germany.

Third, as the capacity of countries to perform well in specific industries improves, the COO phenomenon varies over time. Until recently, for example, few Westerners would have visited India to undergo surgery.  However, many now perceive India as an excellent value for obtaining medical care for various conditions, and spend the time and money to travel there to receive heart operations, cosmetic surgery, and other procedures.

Finally, the tendency of consumers to discriminate against foreign products varies by demographic factors.  For example, senior citizens and people with limited education tend to shun products that originate from abroad.

Private Label Products: Competition or a New Opportunity

Branded products are facing increasing competition worldwide from private label goods from intermediaries. Thanks to an increase in price sensitivity and a decrease in brand loyalty as consumers look to save money, private label products are enjoying significant penetration in many regions. A study of seven countries by the Private Label Manufacturers Association revealed that private label market share has exceeded 40 percent in the United Kingdom, Germany, Belgium, and Switzerland. Market share for retailer brands is at an all-time high in France and Spain, where one of every three products sold carries a private label.

While private brand success is known to be strongly affected by economic conditions and the self-interest of retailers who want to improve their bottom lines, other factors contributing to the growth include improved quality and the development of segmented private brand products. Some private label brands even have a premium category now. Emboldened by the success of private label brands, manufacturers have expanded this “privatization” to new product categories, hoping to expand the success.

This is an excerpt from Dr. Czinkota’s book Global Business: Positioning Ventures Ahead, co-authored by Dr. Ilkka Ronkainen.

Michael R Czinkota and Ilkka A Ronkainen, Global Business: Positioning Ventures Ahead (New York: Routledge, 2011), pg. 187.