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The effect of country-of-origin on foreign brand names in the Indian market

Neelam Kinra
Indian Institute of Management, Lucknow, India
Abstract
Purpose To investigate consumer attitudes in India towards local and foreign brand names, against a background of increasing prevalence of foreign brand names and stereotypes of countries of origin covering the range from positive to negative. Design/methodology/approach A structured questionnaire administered face-to-face to 112 consumers in the city of Lucknow. Attitudes to brands categorized as foreign or Indian were measured by seven-point semantic differential scales, and consumer ethnocentrism by CETSCALE. Factor analysis with varimax rotation was used to identify factors contributing to the observed degree of ethnocentrism in brand choices. Findings It was found that the quality of foreign brands was perceived to be generally higher and superior to local brands. Most consumers also associated greater accessibility of foreign brands in the Indian market with better quality at lower prices. Despite high levels of nationalism and preference for indigenous manufacture, as evidenced in high factor ratings on an ethnocentrism scale, which might indicate a positive bias towards local brands, Indian consumers were not prejudiced against foreign brand names. In fact, they evaluated them higher on technology, quality, status and esteem than Indian brands, and attributed higher credibility to those countries-of-origin. Research limitations/implications This study adds to the body of knowledge about country-of-origin effect, in a massive and fast developing market. Practical implications The strategy of marketers of foreign brands in the Indian market should be to position their products on attributes of technology and quality, rather than economy and value for money. Originality/value Shows that ethnocentricity does not necessarily result in hostility to foreign brands. Keywords Country of origin, Brands, India, Consumers, Ethnocentrism Paper type Research paper

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Received April 2004 Revised September 2005 Accepted October 2005

Introduction Products with foreign brand names are frequently associated with the country-of-origin (COO) of the brand. The promotion of such brands means, either emphasizing the COO as has been the case with American Jeans, Marlboro cigarettes, Italian pasta, and French perfumes such as Chanel or alternately, ignoring the COO depending on the perception of consumers in the foreign country market. Numerous rms have used positive associations with the COO to good advantage in the marketing of goods (Papadoupoulos et al., 1993), as for example, the favorable association of Germany with beer, Sweden with cars, and Japan with microelectronics. However, if the COO stereotype is negative, it can pose formidable barriers for marketers attempting to position their goods within a foreign market ( Johansson et al., 1994). In yet other cases, there are product categories not distinctively

Marketing Intelligence & Planning Vol. 24 No. 1, 2006 pp. 15-30 q Emerald Group Publishing Limited 0263-4503 DOI 10.1108/02634500610641534

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associated with any COO image as in the case of the car industry, where it 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, and which do not use their national COO association in their promotion and marketing strategies. The gradual trend towards liberalization of the Indian economy during the past decade has served as a major factor in its progressive shift towards a global economy and the entry of foreign brands from Europe and US into this market. In fact the 1990s decade and beyond have been characterized by major structural changes in the Indian consumer markets evolution, including those of increased competition, product availability in terms of both quality and quantity, as well as increased levels of awareness and propensity to consume. A large and rapidly growing urban middle and upper class consumer market made up of 300 million, which approximates one-third of its present population, constitutes the market for branded consumer goods, with the latter estimated to be growing at 8 percent per annum. In fact, demand for several consumer products has been growing at 12 percent per annum (India Market Demographics Report, 2002). While rising incomes and shifts in consumer tastes and preferences are evolving predictably as a trend, Indian consumers are faced with increasingly complex sets of choices across all categories of consumption (Business World, 2003). A host of foreign branded goods are now freely used as well as easily available. A related trend contributing to these shifts has been the reduction in trade barriers due to trade agreements, and the globalizing inuence of associations such as the WTO with the result that the Indian economy, the third largest in Asia, is expected to grow at 7 percent in the year ending March 2006 (CMIE, 2004). The concomitant decrease in import duties of goods, has paved the way for entry of companies among others, from Germany, France, US, Korea, Japan, and China. The main strategies of these companies have included strategic alliances with domestic Indian companies to provide Indian consumers greater variety with regard to foreign branded goods. Thus, foreign companies like Hyundai (S. Korea), Daewoo (S. Korea), General Motors (US), Ford (US), are prevalent in the Indian car market, while TV brands range from Sony ( Japan), Samsung (S. Korea), LG (S. Korea), to local brands such as Videocon (India), and BPL (India). Similarly, the washing machine market is dominated by Whirlpool (US), and the refrigerator market by brands such as LG (S. Korea), Godrej (India), Voltas (Indian conglomerate). In the consumer non-durables product categories such as chocolates, tea, coffee, and detergents the competition from foreign brands has been relatively less, and there is a predominance of local products as in the case of tea (Taj Mahal), coffee (Tatacafe), detergents (Nirma), toothpastes (Babool, Dabur, Vicco along with Close-up, Pepsodent), and ice creams (Vadilal, Kwality). Foreign brands in the Indian market have thus begun to compete for both market share and the psychological mind share of consumers, even while widening the range of brands under consideration. The Indian market now holds a position of strategic eminence with several foreign retail chains setting up their stores. Opportunities in the retailing sector are seen to be increasing with the emergence of fast food chains like McDonalds, Dominos, Wendys, department stores, electronics goods and exclusive retail outlets like those of Nike and Adidas. While shopping malls have made themselves conspicuous in the metros, smaller cities, and non-metros of population sizes up to 100,000 are also following suit

(Images Retail, 2004), with growing discretionary consumer incomes. Although COO image measurements in Asian country markets have been attempted (Pereira et al., 2005), there is a lack of concrete information on consumer attitudes, preferences and market place behavior with regard to foreign brand names in these markets. The present research was, therefore, conducted to obtain a better understanding of attitudes and preferences of Indian consumers with regard to foreign versus local brands, and to evaluate their relative strengths in terms of differentiating features. In addition, the extent to which consumer ethnocentrism accounts for a positive bias toward local domestic brands and a negative bias against products originating from foreign countries was also examined, to identify if there was any strong domestic country bias in the choice of brands. These ndings would be of interest to companies in their formulation of foreign marketing strategies by offering a better understanding of how the foreign brands are likely to be perceived in relation to domestic products and those originating from other competing countries in this market. Literature review Foreign versus local brand names and country-of-origin While national reputations for products vary from country to country, consumers tend to generalize their attitudes and opinions across products from a given country, based on their familiarity and background with the country, and their own personal experiences of product attributes such as technological superiority, product quality, design, value for money, status and esteem, and credibility of country-of-origin of a brand. Favorable country perceptions are known to lead to favorable perceptions of associated attributes such as product quality indicating thereby, that consumer evaluations are governed by inuences other than the quality of the product (Peterson and Jolibert, 1995). In this context, COO effect refers to the extent to which the place of manufacture inuences consumers product evaluations. COO has furthermore, been used as a foremost and primary cue by consumers in evaluating new products under several conditions, depending on their expertise (Maheswaran, 1994), with minimal consideration given to other product related attributes. As a primary cue, therefore, it has been found to reect consumers general perceptions about the quality of products made in a foreign country, along with the nature of people from that country (Iyer and Kalita, 1997). It has also been demonstrated that COO, when known to consumers, inuences their evaluation not merely of generic product categories, but also of specic brands (Bilkey and Nes, 1982; Johansson and Nebenzahl, 1986). It has, however, been observed that COO effects predominate only when consumers are able to elaborate on them before evaluations (Hong and Wyer, 1989). Insights to this effect have also been provided by Baughn and Yaprak (1993). They have suggested that culture specic factors inuence the weight given by consumers to the COO as an attribute in their evaluations of foreign brand names. In this context, Papadoupoulos et al. (1993) have suggested that consumer perceptions of a products COO are based on three components associated with the standard attitude model namely their cognitions which include knowledge about specic products and brands, consumer affect or favorable/unfavorable attitude towards the COO, and their conative behavior which is related to actual purchase of a foreign brand.

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Sometimes, the affect or emotional component may be given overriding predominance by consumers and overshadow the cognitive or rational component in evaluation of a foreign or local brand name. Here, it has also been found that, under ceteris paribus conditions, consumer ethnocentric motivations result in favoring domestic brands, though not in situations where foreign brands are regarded better. In fact, higher levels of domestic country bias have been found in research on Western consumers where domestic products were found to enjoy a generally more favorable evaluation than foreign made products (Bannister and Saunders, 1978; Cattin et al., 1982). Subsequently Balabanis and Diamantopoulos (2004) too, examined eight product categories with regard to consumer preferences for domestic versus foreign brands and found that ethnocentrism was also dependent to a large extent, on the nature of the product category. Owing to changes in the global strategic environment, product country association is, however, no longer just a single country phenomenon and several product and brands are now emerging as a result of multi-rm and multi-country efforts. With the hybridization of country of manufacture, design, assembly and brand name, it is becoming more difcult for consumers to pinpoint a particular country with which a product can be associated. In light of this, the COO paradigm has undergone several shifts so that the brand name, as well as country-of-origin of brand (COB) is taking on a relevance of its own. It is in this context that the present study focused on the issue of comparing preferences for foreign versus local brand names in the Indian market. Objectives and methodology The main objective of this study was to investigate consumer awareness and perceptions toward foreign versus Indian brand names for different product categories and also examine the effect of COO of a brand on consumer preferences. In addition, an attempt was made to relate attitudes toward foreign brands with the level of consumer ethnocentrism, and arrive at the marketing strategy implications for foreign companies entering the Indian market. Consumer ethnocentrism is a psychological construct representing how consumers view products made in their own country markets as objects of pride and identity versus those from other country markets. Operationally, this was measured by the consumer ethnocentrism scale, CETSCALE (Shimp and Sharma, 1987), which has been used and validated in several previous studies (Good and Huddleston, 1995; Watson and Wright, 2000; Supphellen and Rittenburg, 2001). Twelve different product categories were selected to represent varying levels of technology, and ranged from cars (high product technology) to cold drinks (low product technology). The high technology products included cars, refrigerators, televisions, washing machines, cameras, and watches while six categories namely jeans, shoes, perfumes, shampoos, cold drinks, and ice creams were classied as low technology categories. The latter products also fell by virtue of their characteristics into the consumer non-durables category. A survey was conducted on a sample of 150 consumers, out of which 112 completed responses were obtained. Consumers were selected by systematic random sampling in the Lucknow city area. The method of cluster sampling was used with the city of Lucknow serving as a geographical area, which would serve as a cluster identical with

other non-metro, growing city populations. Households were chosen on the basis of quasi-systematic random sampling within selected middle to upper income localities. Respondents interviewed were adult members of the selected households with age above 18 years, and were examined for brands purchased. The sample represented the urban consumer base for MNC foreign brands competing with local brands, and was to this extent considered to be a representative subset of the population under investigation. Respondents were administered a structured questionnaire with language translations undertaken where required. Respondents were asked to name the brands currently used as an indicator of brand preferences. In addition, they were asked whether they consciously looked for country-of-origin of the brand on the product packaging. Attitudes to foreign versus Indian brands were elicited by asking respondents to indicate their level of agreement on a seven-point Semantic Differential scale with values ranging from 1 (least positive), to 7 (most positive), for product attributes related to technology, quality, value for money, status and esteem associated with a brand name, and country-of-origin credibility for a brand. Mean ratings were compared for Indian versus foreign brands on each of these ve attributes to identify if differences were signicant. Respondents were next administered a set of statements comprising a CETSCALE, to determine their extent of agreement on statements relating to the level of ethnocentrism in reference to Indian made products in general. The statements comprising the CETSCALE were adapted for Indian consumers in the present study. In the adapted scale, an internal consistency was identied through Cronbachs a to have a value of 0.87. Mean ratings obtained for the statements were then subjected to data reduction via a factor analysis with varimax rotation, to identify factors that could be considered as contributing to the degree of ethnocentrism in brand choices. Findings and analysis From the ndings it appeared that consumer awareness of the increasing presence of foreign brands in the Indian market for different product categories was high. As many as 70 percent respondents claimed to be generally aware of foreign branded goods for consumer durables, particularly electronics, television sets, cell phones, computers, VCD players, music systems, refrigerators, and washing machines. However, consumer awareness of low technology, consumer non-durables categories like tea, coffee, chocolates, shampoos and detergents, and toothpastes, elicited low awareness levels. Respondents were also not clear as to which brands of tea or coffee were foreign or Indian, and were not particularly concerned about nding out either. Thus, according to them, Babool was an Indian made toothpaste because of its indigenous ayurvedic composition but they were not really sure if Close Up or Pepsodent were Indian or multinational brands of foreign companies. Only 10.4 percent of Indian consumers claimed to Always look for the COO of a brand when buying goods, and 28.1 percent said they often looked for COO on the label (Table I). On an aggregate basis a majority, namely 61.5 percent of respondents reported they never, or only occasionally, looked for the COO of brands they purchased (39.5 22 percent). The x 2 value of 5.30 was signicant at the 0.01 level for those who occasionally or never looked category, versus those who always or often looked. This was despite the increasing presence in the Indian market, of foreign brand names from countries such as S. Korea, Japan, and China, in addition to previously existing brands

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Always look Often Occasionally Never Total

*Look for Country-of-origin on product

label (percent) 10.4 28.1 39.5 22.0 100

Look for Indian Made on product label (percent) 13.2 27.5 34.1 25.2 100

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Table I. Importance of Country-of-origin

Notes: *x 2 value: 5.30; p # 0.01; question 1: How often do you look at the product label to see the manufacturers country-of-origin before you purchase consumer goods?; question 2: When purchasing a consumer durable would you specically look for Indian made product?

such as those from Germany, France, Britain, and America. These results are closely mirrored in the second question. Here too a clear majority of respondents 59.3 percent did not attach any special signicance to an Indian-made label during purchase of consumer goods (34.1 25.2 percent), while 13.2 percent respondents said they always looked for an Indian-made product, and 27.5 percent said they often looked for the made in label. As in the previous question, these ndings were indicative of the fact that COO was not an important decision-making factor in consumer decisions affecting purchase behavior of brands in the Indian market since most consumers ignored it as an inuencing variable. A third aspect of the study had been to elicit respondent perceptions on product attributes in the case of both Indian and foreign branded products. Furthermore, mean importance ratings in the case of foreign brands (Table II), were signicantly higher on the technology attribute with p # 0:05, in the case of all consumer durables namely cars (6.35:4.10), refrigerators (5.95:4.75), washing machines (6.00:4.84), televisions (6.25:4.00), cameras (6.31:3.52), and watches (5.85:4.85). Consumer ratings for the quality attribute were also higher for cars (6.00:4.05), refrigerators (6.05:4.75), washing machines (5.73:4.52), televisions (6.10:4.75), cameras (6.26:3.36), and watches (5.75:4.85). Mean ratings for status and esteem associated with foreign brands were signicantly higher for all consumer durables except refrigerators, where the difference was not signicant. However, differences between Indian and foreign brands were not signicant for the value for money provided by the brands they purchased, implying that foreign brands of consumer durables were in no way delivering better value for money than Indian brands or vice versa. Country-of-origin as an attribute reecting the credibility associated with a foreign brand name was signicant in inuencing purchases for cars (5.31:4.05), washing machines (5.36:4.36), television sets (5.55:4.60), and cameras (5.47:3.42), but not in the case of refrigerators and watches. These results indicate that most consumers appeared to prefer buying foreign brands such as LG for televisions, and Whirlpool for washing machines, because of the superior quality and better after sales service and also the associated status and esteem of foreign brands, which is due to their being trendy and more socially acceptable. This trend has been boosted by the increasing inuence of advertising and sales promotion for the product categories. In fact, the marked prevalence of foreign brands in the developing country markets is largely due to advertising images which play on their desirability from a status standpoint and emphasize social acceptability. Previous studies too, have shown that

Product

Indian brands N 112 (mean rating)

Foreign brands N 112 (mean rating) 6.35 5.95 6.00 6.25 6.31 5.85 6.00 6.05 5.73 6.10 6.26 5.75 5.85 5.15 5.31 5.65 5.68 5.50 5.21 5.20 5.00 5.00 5.68 5.05 5.31 5.05 5.36 5.55 5.47 5.40

t value 9.00 5.64 3.87 5.11 7.21 4.60 5.13 4.77 3.49 4.92 8.28 3.60 4.12 1.62 2.58 4.68 5.35 4.15 0.0 0.0 0.13 0.23 5.66 0.23 3.02 1.73 2.09 3.04 4.17 1.85

Signicant level 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 NS 0.05 0.05 0.05 0.05 NS NS NS NS NS NS 0.05 NS 0.05 0.05 0.05 NS

Effect of COO on foreign brands

Technology attribute Car 4.10 Refrigerator 4.75 Washing machine 4.84 TV 4.00 Camera 3.52 Watch 4.85 Quality attribute Car 4.05 Refrigerator 4.75 Washing machine 4.52 TV 4.75 Camera 3.36 Watch 4.85 Status and esteem attribute Car 4.05 Refrigerator 4.40 Washing machine 4.10 TV 4.15 Camera 3.00 Watch 3.95 Value for money attribute Car 5.20 Refrigerator 5.20 Washing machine 4.94 TV 4.95 Camera 3.63 Watch 5.15 Credibility of country-of-origin attribute Car 4.05 Refrigerator 4.30 Washing machine 4.36 TV 4.60 Camera 3.42 Watch 4.50

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Notes: Mean ratings ranged from 1 (least positive) to 7 (most positive); differences were signicant at the p # 0.05 percent level; NS: not signicant

Table II. Product attribute differences between Indian and foreign brands for consumer durables: t values and signicance levels

foreign brands serve as symbolic acquisitions communicative of social distinctions in negotiating status and prestige. This is particularly so, in country markets where economic transition and income disparities are high and, social mobility magnies the tendency to claim differential status through the brands one consumes. This salience of status markers in developing societies serves as an explanation for foreign brand names acquiring a higher status than local products. In the case of consumer non-durables (Table III), however, mean differences were not consistently signicant across all attributes examined. Foreign brands of non-durables were perceived signicantly higher on attributes of both technology and quality only in the case of shoes, and perfumes. Status and esteem were associated with

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Product

Indian brands N 112 (mean rating)

Foreign brands N 112 (mean rating) 5.30 6.00 5.60 5.35 5.40 4.55 5.35 5.70 5.55 5.55 3.95 4.20 6.55 5.85 5.30 5.30 5.15 4.55 5.05 4.60 5.20 4.80 4.65 4.03 5.85 5.15 5.75 5.20 4.85 4.05

t value 1.02 3.61 2.81 1.89 1.16 1.27 1.02 1.87 3.81 1.45 4.56 2.99 3.81 4.64 3.47 3.47 1.22 1.51 1.79 0.88 1.37 1.83 1.36 1.84 1.39 1.58 4.73 2.19 0.28 1.65

Signicant level NS 0.05 0.05 NS NS NS NS 0.05 0.05 NS 0.05 0.05 0.05 0.05 0.05 0.05 NS NS NS NS NS NS NS NS NS NS 0.05 0.05 NS NS

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Table III. Product attribute differences between Indian and foreign brands for consumer non-durables: t values and signicance levels

Technology attribute Jeans 4.95 Shoes 4.85 Perfumes 4.44 Shampoo 4.65 Ice cream 5.05 Cold drinks 5.20 Quality attribute Jeans 4.95 Shoes 5.15 Perfumes 4.40 Shampoo 5.05 Ice cream 5.45 Cold drinks 5.40 Status and esteem attribute Jeans 4.40 Shoes 4.05 Perfume 3.80 Shampoo 3.80 Ice cream 4.75 Cold drinks 5.20 Value for money attribute Jeans 5.65 Shoes 4.90 Perfume 4.45 Shampoo 5.25 Ice creams 5.15 Cold drinks 4.90 Credibility of country-of-origin attribute Jeans 4.75 Shoes 4.45 Perfumes 3.50 Shampoo 4.30 Ice creams 4.95 Cold drinks 4.85

Notes: *Mean ratings ranged from 1 (least positive) to 7 (most positive); differences were signicant at the p # 0.05 percent level; NS: not signicant

signicantly higher levels for jeans (6.55:4.40), shoes (5.85:4.05), perfumes (5.30:3.80), shampoos (5.30:3.80), but not for ice creams or cold drinks. Foreign brands of perfumes were also rated as signicantly higher on the credibility of the COO (5.75:3.50). This is not surprising since previous studies on foreign brands names and COO (Leclerc et al., 1994) found that foreign branding contributed signicantly more to consumer evaluation of hedonistic products than domestic country bias. Value for money was not a signicant differentiating feature in favor of foreign brand names. In fact, Indian brands of non-durables were rated more favorably on this attribute which was higher, though not signicantly, for four of the six non-durables categories.

The effect of country-of-origin on consumer attitudes and preferences Since COO was considered an important differentiating factor in consumer attitudes to foreign and local brand names, its effect was further examined for the consumer durables category by performing a Pearsons correlation between the product attribute ratings of technology, quality, status and esteem associated with the product, value for money, and credibility of country-of-origin of the product. This was done just for the consumer durables category on an aggregate basis, since differences for consumer non-durables were not consistently signicant across all categories. It was found that the country-of-origin variable for consumer durables correlated signicantly at the p # 0:01 level, with status and esteem (Pearsons r 0.74). There was also a strong correlation between country-of-origin credibility with product quality (Pearsons r 0.75) (Table IV). In this context, research on Eastern European countries namely, Russian ( Johansson et al., 1994), and Hungarian consumers (Papadoupoulos and Heslop, 1993), has been found to show that consumers prefer Western products because of superior quality, despite consumer ethnocentric tendencies. Eroglu and Machleit (1989) too, have found that a products technical complexity, as is the case with consumer durables, affects the importance given to consumer evaluations and that, the more complex the product, the more relevant the COO cue. The fact that product category and product COO interact with each other has also been pointed out in related research (Roth and Romeo, 1992), where it has been argued that the country of manufacture effect may be stronger for products with high to intermediate levels of technical sophistication. The relation of consumer ethnocentrism with country-of-origin Consumers were examined for their level of ethnocentrism through an inventory of 19 attitudinal statements comprising an ethnocentrism scale (Appendix 1) with 1 (least positive) and 5 (most positive). The average rating across all 19 items was just 2.14 indicating that Indian consumers were not highly ethnocentric with regard to purchase preferences of foreign or Indian brands. The highest rating (4.37), was for item No. 7, Indian products, rst, last and rst, while the lowest (1.97), was on item No. 16, namely It may not be good for me, but I prefer to support Indian products. A factor analysis performed on the 19 statements indicated ve factors, which contributed to 81 percent of the variance (Table V). An examination of individual item variables contributing to these factors (Appendix 2), suggested that seven variables namely numbers 13-19 had high positive loadings on factor 1, which was labeled the nationalism factor, while variables 5, 6, 7, 10, 11 and 12 loaded heavily on the
Status and esteem 0.12 0.64 * 1.00 0.35 0.74 * Value for money 0.69 * 0.14 0.35 1.00 0.12 Country-of-origin credibility 0.30 0.75 * 0.74 * 0.11 1.00

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Product attribute Technology Quality Status and esteem Value for money Country-of-origin credibility

Technology Quality 1.00 0.27 0.12 0.69 * 0.30 0.28 1.00 0.64 * 0.14 0.75 *

Note: *Pearsons r: signicance level at p # 0.01, N=112

Table IV. Correlation of country-of-origin credibility with product attributes for foreign brand names (consumer durables)

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second factor, termed the made in India factor. The third factor was described as inuence of advertising, and loaded heavily on variables 4 and 9. A fourth factor was identied as access and availability of foreign brands, with a high loading on items 2, 3, and 8. The last factor, factor 5, loaded highly on variable 1, namely it is prestigious to buy foreign products, and appeared to describe what could be termed the foreign brand prestige factor. Item details of these ve factors are described in Appendix 3. Implications and evaluation The ndings in this study showed foreign brands of consumer goods to have a distinct edge over Indian brands, so far as technology, quality, status and esteem attributes were concerned. Earlier studies too, have found that products from developing and less developed countries were rated lower on quality and higher in risk regardless of brand name (Nes and Bilkey, 1993). However, well-known domestic brand names in developing countries do compensate partially and contribute to favorable quality perceptions. Several studies in the past too, have shown that consumers in developing countries generally seek to emulate Western consumption practices and lifestyles and purchase foreign brands (Peterson and Jolibert, 1995; Supphellen and Rittenburg, 2001). Foreign brands of most consumer durables and non-durable categories were given signicantly higher mean attribute ratings on status and esteem except where cold drinks and ice creams were concerned. The COO credibility of foreign brands was also a signicant factor inuencing consumer attitudes and preferences to the extent that it correlated highly with quality and status and esteem. The relatively low overall rating of 2.14 on the CETSCALE, reinforced the credibility given to foreign brands, despite the high levels of nationalism as revealed in the factor analysis of Indian consumers. It could be inferred that the combined effect of the prestige and advertising factors as well as access and availability are working to the benet of foreign branded goods even as foreign direct investment levels by companies have been increasing and have risen over the past decade from 97 in 1990-1991 to $3,905 million in 2001-2002 (Images Retail, 2004). This is despite the fact that consumer characteristics such as nationalism and domestic country preference have been known to have a moderating inuence on foreign brands (Shimp and Sharma, 1987; Hooley et al., 1988). This is consistent with the fact that consumer ethnocentrism is contingent not only on the domestic country culture that espouses it, but also the quality of domestic products coming from it. In the case of non-durables like cold drinks, or ice creams, Indian brands were perceived to be slightly more preferable to foreign brands to the extent that there was no COO advantage for foreign brands particularly with regard to value for money. Previous research too, has shown that country of manufacture information is not
Factors Nationalism Made in India Inuence of advertising Access and availability Foreign brand prestige Variance accounted for Percentage of variance 28.0 23.0 14.0 9.0 7.4 81.2

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Table V. Factor analysis of items constituting ethnocentrism scale

signicant for low technology standardized products (Chao, 1993; Ulgado and Lee, 1993). In such cases, value for money plays a greater role in consumption decisions, particularly when it can reinforce ethno-nationalism among consumers and work to the advantage of the domestic country market. Here, it would be to the strategic advantage of foreign companies entering the Indian market to modify and tailor the elements of their marketing strategies to suit Indian conditions and adapt to cultural considerations of tastes and avors as well as to the situational consumption patterns in their advertising and promotional strategies. Conclusions Foreign brands were perceived in this study, to be more reliable and safe by Indian consumers than their domestic country brands. This was evidenced in the high ratings attributed to the technology and quality parameters for foreign brand names. In contrast, the strongest point that Indian brands had in their favor was their value for money while their major weakness was their lower status and esteem value, indicating they were perceived to provide a somewhat lower degree of social status, while a brand made in a developed country like the US or Germany had a greater chance of positive brand image perceptions. Country-of-origin credibility was also rated highly for foreign origin brands, particularly consumer durables, except in the case of refrigerators and watches, but was not so important for non-durable products, where country credibility had lower ratings. As the volume of world trade continues to increase and the international market place becomes more competitive, it is important that marketing managers take into account the fact that consumer attitudes toward a specic product or brand can be substantially changed, either favorably or unfavorably, through the COO image of the brand, which has an effect on inuencing the brand preference of the consumer. This is all the more important when consumer ethnocentrism per se, does not gure as a priority, as is the case for Indian consumers who appeared to be amenable towards buying foreign brands, despite high degrees of nationalism, as evidenced through the CETSCALE. Apparently, the consumption of imported products and brands was not considered as unpatriotic or non-nationalistic. Consumer ethnocentrism can therefore, at best be said to have weak explanatory power even when nationalism is a positive contributory factor. Of strategic relevance to foreign companies entering the Indian market is to use their own foreign country brand names for high technology products whether through joint ventures or licensing but to adapt to local brand names for low technology products. The results suggest that while market opportunities for foreign brands in the Indian market will continue to exist, Indian manufacturers too, need to reconsider their own product quality improvements and offer quality products at competitive prices to halt the further penetration of foreign brands. Since countries too, have their images perhaps not far removed from the marketers concept of brand image, the challenges Indian companies confront in developing Indian brands are two fold, rst, to develop strong brand images and second, to enhance the country-of-origin image. Indian manufacturers of consumer durable products would need to cope with the competitive climate and overcome low levels of consumer ethnocentrism and domestic country bias by considering strategies of cooperation with foreign manufacturers. Such strategies, which are already prevalent in the Indian market include licensing arrangements or, alternately foreign collaborations

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in the form of joint ventures so as to be able to sell under foreign brand names associated with higher status and esteem. This would help in enhancing prestige associations in the minds of Indian consumers. It also signals to Indian manufacturers that in terms of product positioning, their direct competition is not inexpensive products, but rather premium quality brands. Another method of raising the brand equity of Indian products is for companies to use state of art technologies to manufacture high quality products, so that these are in no way inferior to foreign brands, but are competitively priced, along with providing better value for money. Foreign companies in the meantime can capitalize on the mileage that can be gained through positive positioning on the technology and quality attributes. While the present research examined domestic and foreign product categories on an aggregate basis, in the case of both, consumer durables and non-durables, further detailed study would need to examine COO at a more specic product brand level to examine preferences for foreign brands.
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Iyer, G.R. and Kalita, J.K. (1997), The impact of country-of-origin and country of manufacture cues on consumer perceptions of quality and value, Journal of Global Marketing, Vol. 11 No. 1, pp. 7-28. Johansson, J.K. and Nebenzahl, I. (1986), Multinational production: effect on brand value, Journal of International Business Studies, Vol. 17, pp. 101-26. Johansson, J.K., Ronkainnen, I.A. and Czinkota, M.R. (1994), Negative country-of-origin effects: the case of Russia, Journal of International Business Studies, Vol. 25, pp. 157-76. LeClerc, F., Schmidt, B.H. and Dube, L. (1994), Foreign branding and its effects on product perceptions and attitudes, Journal of Marketing Research, Vol. 31, pp. 263-70. Maheswaran, D. (1994), Promoting country-of-origin as a stereotype: effects of consumer expertise and attribute strength on product evaluations, Journal of Consumer Research, Vol. 21, pp. 354-65. Nes, E. and Bilkey, W.J. (1993), A multicue test of country-of-origin theory, in Papadopoulos, N. and Heslop, L.A. (Eds), Product Country Images: Impact and Role in International Marketing, IBP, Binghamton, NY, pp. 179-96. Papadoupoulos, N., Heslop, L.A. and Baossy, G. (eds)., (1993), Product Country Images: Impact and Role in International Marketing, International Business Press, Binghampton, NY. Pereira, A., Hsu, C-C. and Kundu, S.K. (2005), Country-of-origin image: measurement and cross-national testing, Journal of Business Research, January, pp. 103-6. Peterson, R.A. and Jolibert, A.J.P. (1995), A meta-analysis of country-of-origin effects, Journal of Business Studies, Vol. 26, pp. 883-900. Roth, M.S. and Romeo, J.B. (1992), Matching product category and country image perceptions: a framework for managing country-of-origin effects, Journal of International Business Studies, Vol. 23 No. 3, pp. 477-97. Shimp, T.A. and Sharma, S. (1987), Consumer ethnocentrism: construction and validation of the CETSCALE, Journal of Marketing Research, Vol. 24, pp. 280-9. Supphellen, M. and Rittenburg, T.L. (2001), Consumer ethnocentrism: when foreign products are better, Psychology and Marketing, Vol. 18 No. 9, pp. 907-27. Ulgado, F.M. and Lee, M. (1993), Consumer evaluation of bi-national products in global marketing, Journal of International Marketing, Vol. 1 No. 3, pp. 5-22. Watson, J.J. and Wright, K. (2000), Consumer ethnocentrism and attitudes towards domestic and foreign products, European Journal of Marketing, Vol. 34 Nos 9/10, pp. 1149-66. Further reading Durvasula, S., Andrews, J.C. and Netemeyer, R.G. (1997), A cross cultural comparison of consumer ethnocentrism in the united states and Russia, Journal of International Consumer Marketing, Vol. 9 No. 4, pp. 73-93. Ettenson, R. and Gaeth (1991), Consumer perceptions of hybrid and bi-national products, Journal of Consumer Marketing, Vol. 8 No. 4, pp. 13-18. Han, C. and Terpstra, V. (1988), Country-of-origin effects for uni-niational and bi-national products, Journal of International Business, pp. 235-54. Hult, G.T., Keller, B.D. and Lafferty, B.A. (1999), A cross national assessment of social desirability bias and consumer ethnocentrism, Journal of Global Marketing, Vol. 12 No. 4, pp. 29-43. Kaynak, E. and Cavusgil, S.T. (1983), Consumer attitudes towards products of foreign origin: do they vary across product classes, International Journal of Advertising, Vol. 2, pp. 147-57. Sharma, S., Shimp, T.A. and Shin, J. (1995), Consumer ethnocentrism: a test of antecedents and moderators, Journal of the Academy of Marketing Science, Vol. 23 No. 1, pp. 26-37.

Effect of COO on foreign brands

27

28

MIP 24,1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Note: Mean ratings on a Likert scale ranging from 1 (least positive) to 7 (most positive)

Table AI. Ethnocentrism scale for Indian consumers

Appendix 1

Item variable

Mean rating 2.26 3.11 3.86 3.00 2.20 2.57 4.37 2.69 3.09 2.54 2.43 2.29 3.00 2.74 2.51 1.97 3.20 3.63 2.71 2.14

It is prestigious to buy foreign makes Indian products are inferior to foreign brands Access to foreign products is limited Indian products are not widely advertised Indians should buy only Indian brands Only those products not available in India should be imported Indian products rst, last and rst Buying Indian products is good for labor Advertising foreign brands is non-Indian A true Indian should buy only Indian brands We should buy products manufactured in India It is best to purchase Indian products There should be very little trading of goods Indians should not buy foreign products because it hurts Indian business No Imports should be allowed It may not be good for me, but I prefer to support Indian products Foreigners should not be allowed to sell their products in India Foreign products into India should not be taxed heavily Indian consumers who buy foreign brands are putting Indians out of work and employment Average rating (n 112)

Appendix 2

Variable number 0.659 0.927 0.875 0.601 0.865 0.817 0.659 0.848 0.819 0.505 0.693 0.623 0.752 0.893 0.560 0.653 0.767 0.696 0.928

Factor 1 Nationalism

Factor 2 Made in India

Factor 3 Advertising inuence

Factor 4 Access and availability

Factor 5 Foreign brand prestige

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Notes: Extraction method: principal components analysis; Rotation method: Varimax with Kaiser normalization

Effect of COO on foreign brands

29

Table AII. Rotated factor components and factor loadings of items constituting ethnocentrism scale

MIP 24,1

Appendix 3
Variables accounting Factor 1 Variable 13 Variable 14 Variable 15 Variable 16 Variable 17 Variable 18 Variable 19 Factor 2 Variable 5 Variable 6 Variable 7 Variable 10 Variable 11 Variable 12 Factor 3 Variable 4 Variable 9 Factor 4 Variable 2 Variable 3 Variable 8 Factor 5 Variable 1 Nationalism There should be very little trading of goods Indians should not buy foreign products because it hurts Indian Business No Imports should be allowed It may not be good but I prefer to support Indian goods Foreigners should not be allowed to sell their products in India Foreign products into India should not be taxed heavily Indian Consumers who buy foreign brands are putting Indians out of work and employment Made in India Indians should only buy Indian Brands Indian products rst, last and rst Only those products not available in India should be imported A true Indian should buy only Indian brands We should buy products manufactured in India It is best to purchase Indian products Inuence of advertising Indian products are not widely advertised Advertising foreign products is non-Indian Access and availability Indian products are inferior to foreign brands Access to foreign products is limited Buying Indian products is good for labor Prestige It is prestigious to buy foreign makes Factor loading 0.659 0.927 0.875 0.601 0.865 0.817 0.659 0.848 0.819 0.505 0.693 0.623 0.752 0.893 0.560 0.653 0.736 0.696 0.928

30

Table AIII.

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