Product-Knowledge, Ethnocentrism and Purchase Intention: COO Study in India

Abstract

Purpose – The purpose of this research is to model country of origin (COO) effects, intention to purchase foreign products, ethnocentrism and foreign product knowledge among average Indian consumers. Knowledge derived from the analysis can be used in the marketing mix by firms to address the Indian market.

Design/methodology/approach – The literature concerning COO effect is presented. Four scales are used for intention to purchase foreign products (PI), ethnocentrism (E), foreign product knowledge (FPK) and COO. A principal component analysis for the scale of 21 items is conducted using data from a representative Indian sample. Further, correlation and simple linear regression analyses are conducted to test various hypotheses and models.

Findings – Four components were confirmed that correspond with the sub-scales: PI, E, FPK and COO. Significant correlations between i) PI and E, ii) FPK and PI, iii) FPK and COO and iv) PI and COO were found. Interpretation of correlation along with the results of two regression analyses indicated two consumer segments in the Indian sample.

Research limitations/implications –The research is limited to an average consumer group. Further research will be required to address specific brands, products as well as the attitudes of the specific groups like elite consumers.

Practical implications – The paper indicates a series of strategies that retailers could adopt to address the emerging market of India. The findings have significant implications for domestic and foreign marketers.

Originality/value – The study models the interrelationship between four sub-scales within a 21- item Likert type instrument with reference to a representative consumer group, placed into two segments, in the under-researched market of India.


Introduction

With advent of liberalisation and globalisation, consumers worldwide have benefitted from increased access to a wide variety of products and services from other countries. Access to information, higher levels of education and technological progress have also made it possible for consumers to become more aware of the products and services available throughout the world. As a result, the significance of products’ country of origin (COO) in influencing consumer behaviour is increasing rapidly; this calls for the formulation of better marketing plans, strategies and policies by companies of both domestic and international origin (Kaynak et al 2000). Important factors that affect consumers’ purchasing intention on the basis of COO include “consumer ethnocentrism”, a term coined by Shimp and Sharma (1987), and “knowledge of foreign products”. Although, assessments concerning the intention to purchase, using COO, become easier with easier access to information, the impact of ethnocentrism (Shimp and Sharma, 1987) remains.

Therefore, this paper investigates the important inter-relationships between COO, purchase intention, ethnocentrism and product knowledge to identify a pattern in the Indian context. In particular, a study of this nature is justifiable in the Indian context as it is the second fastest growing economy in the world, after China. Since economic reforms began in 1991, India’s GDP has grown around 9 per cent per annum (The Economic Times, 2008) and, together with a population of 1 billion people (National Commission on Population, 2000), India is arguably the second largest consumer market in the world. Hence, India was chosen for this study as it has been designated as a “big emerging market” (Pal, 2000), and its rapid economic reforms have led to an increase in consumption (Paswan et al, 2001a, b).

Over the last few decades, the growth in international trade and the development of global markets has been accompanied by a significant inc re a s e in int e re s t in the na ture o f competitiveness. Among the many factors, which are believed to impact upon international competitiveness, COO effects have attracted attention (Al-Sulait and Backer, 1998). Consumers often use the “source” of the country of a product or brand as an extrinsic information cue when making product evaluations. This is generally described as the country-of-origin (COO) effect. In the West, a vast body of literature has examined COO effect whilst research findings on COO dynamic process remain scarce in the Indian context.

For foreign multinationals, the Indian market constitutes one of the largest markets in the world. Indian consumers can choose from amongst brand sets, which include both domestic and foreign manufactured or licensed products. Thus, international marketers face a tremendous challenge in understanding the Indian market, which requires discovering why and how Indian consumers buy foreign made products. Given the growing importance of this market and the limited findings from previous studies, there is a need to update our understanding of the COO effect in India.

In the Indian market, Bangalore has a specific advantage being a better known city globally than many other cities of India. Aptly called the “Silicon Valley” of India, Bangalore is a home to many leading Information Technology (IT) firms. Therefore, we had a specific interest in understanding the COO factors among the Bangalore consumers who are assumed to be aware of products of different origin.

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