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This research was funded by the Social Sciences and Humanities Research Council of Canada. The authors acknowledge the support of the Canadian Association of Purchasing Managers during the data collection phase of the study. Address correspondence to Alain dXstous, Faculty of Administmtion, University of Sherbrooke, Sherbrooke (QuCbec), Canada JlK 2Rl.
Industrial Marketing Management 23, 323-332 (1994) o Elsevier Science Inc., 1994 655 Avenue of the Americas, New York, NY 10010
323 0019-8501/94/$i.O0
SADRUDIN A. AHMED is Professor of Marketing University of Ottawa. ALAIN dASTOUS is Professor of Marketing Sherbrooke.
at the
at the University of
MOSTAFA EL ADRAOUI is a Ph.D. student at the icole Hautes Etudes Commerciales, Montreal.
des
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studies have shown that country-of-origin effects vary across different product categories [16]. The importance of the country-of-origin cue seems to depend on such product characteristics as technological complexity, financial risk, and country specialization (e.g., French perfumes, Turkish carpets). For this reason and also because of the need to generalize findings, country-of-origin effects must be studied across different types of products. Finally, among researchers who have used a multi-cue approach to examining madein effects, very few have used Mexico as a country of origin (but see [15]). As mentioned previously, Mexico is of special interest for industrial marketers in the context of NAFTA. In this article, we present results from a study conducted with members of the Canadian Association of Purchasing Managers. The first objective of the research was to get a better understanding of the impact of country of origin on purchasing managers product perceptions by distinguishing between country of design and country of assembly. The second objective was to examine how purchasing managers perceptions of products made in Mexico are affected by a change from a single cue setting to a multiple cue setting.
DEVELOPMENT OF RESEARCH PROPOSITIONS
Research indicates that knowledge of country of origin does indeed influence buyers perceptions of products [!!I. A major criticism of early studies is that country of origin was the only information respondents received about the products they had to evaluate. Recent studies [2,28] have addressed this problem and confirmed the significant impact of country of origin on the subjective evaluation of consumer products when other information concerning various product characteristics is available. The few studies that have examined country-of-origin effects on industrial buyers evaluations have reached similar conclusions [l, 6,9,30]. Three studies have also examined the impact of additional information cues besides country of origin on the evaluations of industrial buyers [17,22, 3 11. The findings of these studies have enhanced our understanding of the role of information cues in industrial buying and have also provided insights about the mediating role of individual characteristics such as education, income, and age. In most studies, country of origin has so far been treated as a unidimensional concept, i.e., the country where the product is made.As Oszomer and Cavusgil[26] have noted however, the concept of country of origin has not been
clearly defined by the great majority of researchers. Due to the globalization of markets, for many firms the design and assembly operations associated with the making of a product may not take place in the same country. According to Chao (81, hybrid products will be more and more present in the global marketplace because of the changing strategies of global corporations. Research must therefore adopt a multidimensional perspective on country of origin by distinguishing between the country of design and the country of assembly. According to Johansson [19], country of origin is extrinsic information allowing buyers to make inferences about the intrinsic value of a product. Hastak and Hong [18] argue that the relative importance of country of origin diminishes when additional information regarding the product such as brand name, price, warranty, etc. is provided. Brand name is commonly used by buyers when making judgments about quality and purchase value and has been shown to moderate the effects of country of origin [20]. In addition, brand names carry some of the information usually associated with countries of origin with their implicit reference to corporate headquarters. In general though, for industrial buyers who have a greater expertise in purchase decision making and who have a greater willingness to devote cognitive efforts to this task, brand name would be less informative, since it would not serve as a good proxy for country of origin. Quality assurance programs such as warranty reduce purchase risk and may also have a positive impact on perceived quality. Price information should affect the perceived purchase value of products. In light of these considerations, our research design includes relevant extrinsic cues (brand name, price, quality assurance) to moderate the impact of country of origin on buyers perceptions. In general, the importance of a summary cue such as country of origin is directly related to its ability to reduce the uncertainty surrounding a decision. When there arc perceived differences between countries regarding their competency in the design and production of products, the effect of made-in should be stronger. On the other hand, when design and production technologies are standardized and markets are relatively homogenous, buyers are less likely to use country of origin as a proxy for quality and purchase value. Inversely, when markets are heterogeneous and there is a noticeable variability in manufactured products, one should expect significant country-of-origin effects. When a product is at the beginning of its life cycle, with unstandardized design and production technologies, variability in the quality of design and production between coun325
products was guided by our desire to include products representing different levels of financial risk, technological complexity, purchase difficulty, and organizational involvement [29], so as to increase the generalizability of the findings. Each product profile comprises five cues: country of design, country of assembly, brand name, price, and guarantee (or delivery for pens). The cues themselves are operationalized using three levels chosen to correspond to the market conditions prevailing at the time the data were collected. Canada (developed country) and Mexico (newly industrializing country) were included as countries of design and assembly along with a third prestigious country (Japan for the computer system and the fax machine, Germany for the ballpoint pens). Brand names were chosen so as to create differences in prestige and reputation. Prices and levels of warranty (or delivery) also show significant variations. Combining all attribute levels results in 243 (37 profiles for each product category. In order to make the profile evaluation task possible for respondents, a one-ninth confounded block fractional factorial was constructed [lo], so that only nine profiles had to be evaluated for each product.
Computer
designed
in Canada
Assembled
in Mexico
The methodology used to estimate the impact of country of origin and the other informational cues is conjoint analysis. This methodology uses product profiles constructed by combining in a factorial manner the attributes chosen for the analysis. Subjects provide evaluations of all product profiles on rating scales. Figure 1 shows an example of one of the profiles employed in the study. Perceptions on perceived quality and purchase value in this study were measured with two nine-point bipolar scales. Table 1 presents the conjoint research design. Three categories of products were selected for study: computer system, fax machine, and ballpoint pens. The choice of these
Your Evaluation:
Very bad quality Very bad buy 1 2 3 4 5 6 7 8 9 1
FIGURE I.
Example
of conjoint
profile.
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In addition to the conjoint task, the questionnaire comprised a first part where 13 countries had to be evaluated as locations for the conception, design, and engineering (country of design); and manufacturing and assembly (country of assembly) of industrial products using a nine-point scale (mediocre/excellent). In order to make sure that the concepts of country of design and country of assembly were clear for all respondents, these were explained in detail. This was followed by a series of questions concerning product familiarity, product involvement, purchase expertise, purchase experience, and company and personal characteristics. Data Collection The data were collected with the collaboration of the Canadian Association of Purchasing Managers (CAPM) in the province of Qukbec. The questionnaire was written in French language. At the time the study was conducted (between June 23 and July 23 1992), the Qu6bec division of the CAPM comprised 1,193 members. A total of 943 telephone calls were made to contact these individuals and 332 were reached. In order to be eligible for the survey, the individual had to be personally involved in the purchasing function. A total of 306 persons directly involved in purchasing accepted to answer the questionnaire. Completed questionnaires were received by mail from 175 purchasing managers. Only two questionnaires were discarded because they were not filled out properly. The final sample thus comprises 173 purchasing managers representing 14% of the Qukbec division of the CAPM.
TABLE 1 Study Design Computer System Country of design Canada Japan Mexico Canada Japan Mexico IBM Fujitsu Seikocha $16,ooO $12,ooo $8,000 or delivery 3 years 2 years 1 year Fax Machine Canada Japan Mexico Canada Japan Mexico Xerox Toshiba Samsung $1,300 $1,000 $700 24 months 18 months 12 months Ballpoint Pens Canada Japan Mexico Canada Japan Mexico Paper-Mate Staedler Bit $1.20 $0.80 $0.40 Fast Medium
SIOW
RESULTS Sample Description Table 2 presents some descriptive statistics about the sample. The mean age of the organizations to which members of the CAPM belonged is 42 years, with average annual sales and purchasing budgets of $63 and $30 million (Canadian dollars), respectively. These firms employ on average 500 employees, and 50 % of them are involved in manufacturing operations. The mean age of the respondents is 43 years, and their purchasing experience is 14 years on average. About threefourths of the respondents are male, and 56% occupied a managerial position at the time the study was conducted. The respondents who occupied a managerial position tended to be from smaller-size firms. Comparisons between the sample and the membership population on characteristics where information was available indicated that there were no systematic sampling biases. By and large, the sample appears to be representative of the population. Direct Evaluations of Countries Table 3 presents the mean evaluations of the 13 countries as locations for the design and assembly of industrial products. As mentioned before, these evaluations concern industrial products in general. As can be shown, developed countries are better evaluated in general than newly industrializing countries as locations for the design and assem-
TABLE 2 Sample Characteristics Characteristics Organizational Mean age Mean yearly sales Sector of activity Manufacturing Government Other Mean number of employees Mean purchasing budget Personal Mean age Mean purchasing experience Sex Male Female Function Managerial Buyer Other
42 years $63 million 50% 14% 36% 500 $30 million 43 years 14 years 76% 24% 56% 35% 9%
Country
of assembly
Brand name
Price
Warranty
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TABLE 3 Evaluations
A series of repeated-measures analyses of variance [24] were conducted in order to verify that there were significant differences between the three product categories in terms of importance of purchase, search for information, and difficulty in decision making, as well as significant differences between the brands and countries of origin making up the conjoint design. All differences were statistically significant and in the predicted direction. Evaluation of Product Profiles
of Countries
Countries Developed countries Japan Germany United States Canada France Italy Belgium Overall mean Newly industrialized country South Korea Newly industrializing countries Brazil Mexico Morocco India Russia Overall mean Comparisons Japan/Mexico Canada/Mexico Germany/Mexico Japan/Canada Germany/Canada Developed/newly industralizing
Mean
Rank
1 1 3 4 5 6 7
(1.0)
0.2 (0.2) _ (0.1) (0.2) (0.2)
2 4 3 5 6 7
Table 4 presents the analysis of variance results for the three product categories. The two dependent variables are perceived quality and purchase value. The mean squares indicate that for both dependent variables, country of design explains a larger proportion of common variance than country of assembly. This result holds across the three product categories. Also, country of design explains a relatively
and Statistical
5.1
5.8
Computer System
Fax Machine
Ballpoint Pens
4.2 3.9 3.5 3.3 3.2 3.6 3.1 2.8 3.7 0.9 0.9 2.9
9 10 11 12 13
4.9 4.8 4.0 3.6 3.7 c 3.8 2.1 2.8 1.7 0.7 2.5
9 10 11 13 12
Perceived quality Country of design Country of assembly Brand name Price Warranty/delivery Total of the five cues Purchase value Country of design Country of assembly Brand name Price Warranty/delivery Total of the five cues * Significant at p < 0.01.
437* 174* 50* 1 14* 676 301* 189* 45* 165* 47* 747
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larger proportion of variance for perceived quality than for purchase value. Moreover, the greater the technological complexity of the product, the larger the statistical effect of country of design. Although brand name has a statistically significant impact on the perceived quality and purchase value of the computer system and the fax machine, its explanatory power is much smaller than that of the country-of-origin cues. On average, the mean squares associated with brand name is 13 times smaller than that of the country-of-origin cues taken together. Brand name has no significant effect when it comes to the evaluation of ballpoint pens. The largest proportion of common variance explained by brand name is for the purchase value of a computer. Price and warranty/delivery have almost no impact on perceived quality, On the other hand, they have a substantial and statistically significant impact on the purchase value of the computer and the ballpoint pens. When considering the purchase value of ballpoint pens, purchase managers are more influenced by price than by country of design or country of assembly. Taken together, these results partially support our second research proposition. The impact of brand name, price, and warranty (delivery) on purchasing managers evaluations of products is contingent upon the product category and the type of judgment considered (quality versus purchase value).
Mexico, and Japan or Germany), taking into account the other informational cues, i.e., brand name, price, and warranty/delivery. As can be seen, for both perceived quality and purchase value, intercountry differences between marginal/multiple-cue means are much narrower than those between direct/single-cue means. These differences are somewhat greater for country of design than for country of assembly. For purpose of comparison, Table 5 shows the differences in single-cue and multiple-cue ratings between Japan (or Germany) and Mexico, Canada and Mexico, and Japan (or Germany) and Canada. Looking at the Japan/Germany-Mexico and Canada-Mexico differences, it can be seen that purchasing managers negative perceptions of Mexico are attenuated when other informational cues are present. For instance, the single-cue difference between Japan/Germany and Mexico for the design of industrial products in general is 3.7. The corresponding differences in marginal means for the purchase value of a computer system are 1.5, 1.3 for a fax machine, and 1.5 for ball-point pens. As for the Japan/Germany versus Canada ratings, Table 5 shows a similar attenuation of differences from
Evaluations
Additional Analyses
Additional analyses were conducted to assess the impact of the firmk sector of activity on purchasing managers evaluations of product profiles. Sector of activity was operationalized as a two-level variable, manufacturing versus other, and included as a supplementary factor in the analyses of variance. Results indicated that sector of activity was not significantly related to the evaluations. Some statistically significant interactions with the other cues were found, but in none of the analyses did the interactions explain more than 2 % of the common variance. It was thus concluded that the firms sector of activity had a minimum impact on the results.
Country of design Computer quality Computer value Fax quality Fax value Pen quality Pen value Average quality Average value Single-cue mean* Country of assembly Computer quality Computer value Fax quality Fax value Pen quality Pen value Average quality Average value Single-cue mean Japan Germany *The single-cue were the same.
Mexico (3)
(4 minus (3)
6.8 6.1 6.9 6.3 7.0 6.0 6.9 6.1 7.6 6.6 5.9 6.7 6.3 6.7 5.8 6.7 6.0 8.6 7.6
6.5 5.8 6.6 6.1 6.6 5.8 6.6 5.9 6.7 6.4 5.8 6.4 6.0 6.6 6.0 6.5 5.9 6.9 6.9 of Germany
5.1 4.6 5.3 5.0 5.5 4.9 5.3 4.8 3.9 5.5 4.8 5.6 5.1 5.8 5.0 5.6 5.0 4.8 4.8
1.7 1.5 1.6 1.3 1.5 1.1 1.6 1.3 3.7 1.1 1.1 1.1 1.2 0.9 0.8 1.1 1.0 3.8 2.8
1.4 1.2 1.3 1.1 1.1 0.9 1.3 1.1 2.8 0.9 1.0 0.8 0.9 0.8 1.0 0.9 0.9 2.1 2.1
0.3 0.3 0.3 0.2 0.4 0.2 0.3 0.2 0.9 0.2 0.1 0.3 0.3 0.1 0.2 0.2 0.2 0.1 0.9 of design
evaluations
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buyers appear to have somewhat different reactions to country-of-origin cues. Given the small number of studies conducted with organizational buyers and the apparent difficulty in generalizing results from studies conducted with household buyers, it is recommended that further research be conducted with industrial buyers. Such studies would be of great interest to industrial marketing researchers and practitioners alike. REFERENCES
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