Country of Origin Effect on Global Brands

Brands are used as external cues to taste, design, performance, quality, value, prestige, and so on. In other words, the consumer associates the value of the product with the brand. The brand can convey either a positive or a negative message about the product to the consumer and is affected by past advertising and promotion, product reputation, and product evaluation and experience. In short, many factors affect brand image. One factor that is of great concern to multinational companies that manufacture worldwide is the country of origin effect on the market’s perception of the product.

Country-of-origin effect (COE) can be defined as any influence that the country of manufacture, assembly, or design has on a consumer’s positive or negative perception of a product. A company competing in global markets today manufactures products worldwide, when the customer becomes aware of the country of origin there is the possibility that the place of manufacture will affect product or brand image.

The country the type of product, and the image of the company and its brands all influence whether the country of origin will engender a positive or negative reaction. A variety of generalization can be made about country of origin effects on products and brands. Consumers tend to have stereotypes about products and countries that have been formed by experience, hearsay, and myth.

Consumers have broad but somewhat vague ideas about specific countries and specific product categories that they judge “best”: English tea, French perfume, Chinese silk, Italian leather, Japanese electronics, Jamaican rum and so on. Stereotyping of this nature is typically product specific and may not extend to other categories of products from these countries.

Designer labels such as Ferragamo, Gucci, and Versace are affected in that they now must include on the label “Made in China” because the silk comes from China. The lure to pay $195 and up for scarves “Made in Italy” by Ferragamo loses some of its appeal when accompanied with a “Made in China” label. The irony is that 95 per cent of all silk comes from China   which has the reputation for the finest silk but also a reputation of producing cheap scarves. The ‘best’ scarves are made in France or Italy by one of the haute couture designers.

Honda, which manufactures one of its models almost entirely in the US, recognizes this phenomenon and points out how many component parts are made in America in some of its advertisements. On the other hand, others have a stereotype of Japan as producing the “best” automobiles. A recent study found that US automobile producers may suffer comparatively tarnished images regardless of whether they actually produce superior products.

Countries are also stereotyped on the basis of whether they are industrialized, in the process of industrializing, or developing. These stereotypes are less product specific; they are more a perception of the quality of goods and services in general produced within the country. Industrialized countries have the highest quality image, and products from developing countries generally encounter bias.

In Russia, for example the world is divided into two kinds of products: own and imported. Russians prefer fresh, home grown food products but imported clothing and manufactured items. Companies hoping to win loyalty by producing in Russia have been unhappily surprised. Consumers remain cool towards locally produced Polaroid cameras and Philips irons. On the other hand, computers produced across the border in Finland are considered high quality. For Russians, country of origin is more important than brand name as an indicator of quality. South Korean electronics manufacturers have difficulty convincing Russians that their products are as good as Japanese ones. Goods produced in Malaysia, Hong Kong, or Thailand are more suspect still. Eastern Europe is considered adequate for clothing but poor for food or durables. Turkey and China are at the bottom of the heap.

There is also the tendency to favour foreign made products even from industrialized countries. A survey of consumers in the Czech Republic found that 72 per cent of Japanese products were considered to be of the highest quality, German goods followed with 51 per cent, Swiss goods with 48 per cent, Czech goods with 32 per cent and, last the United States with 29 per cent.

European consumers affection for American products  is quite fickle. The affinity for Jeep Cherokees, Budweiser beer, and Bose sound systems of the 1990s had faded to outright animosity towards top American brands as a protest of American political policies. In China, anything Western seems to be the fad. If it is western, it is in demand even at prices three and four times higher than those of domestic products. In most cases such fads wane after a few years as some new fad takes over.