Positioning Strategies Against Nations with Perceived Quality Advantages

Abstract

The literature, while shifting in outcome as the understanding of where a product has been produced becomes blurred, has shown that consumers may assign value/price quality relationships as a function of the country offering the good or service. As a result, a marketing strategy that takes into account the rather complex issues relating to country of origin preferences is essential in today's sophisticated competitive environment. It was the objective of the research to determine the extent that quality is perceived as the main competitive feature and explore the possibility of constructing a practical strategy that would take into account competing against nations with perceived advantages. A model with three scenarios is presented providing an overview of the problems involved and a positive means of marketing against such situations.

KEYWORDS:

• competitive advantages
• country of origin
• international
• international advantages
• international marketing
• perceived quality advantages
• positioning
• price
• quality

Consumers have long been exposed to products from abroad. Ancient Persian shipping, desert camel spice caravans, and early American trading with Japan and China all served to provide consumers with the quality goods at prices they were willing to pay. Buyers have readily accepted foreign commodities and have often developed preconceptions concerning the quality of foreign goods and the prices which should be paid for those goods. Through the 1960s consumers generally considered foreign goods to be of lesser quality than North American products except for those of specific categories. For example, dresses and perfumes from France, fine instruments from Germany, wools from Scotland and, of course, tulips from Holland have made their impressions on consumers. Even services appear to have had perceived regional differences. When Nickolas Alexander constructed Leningrad he sought Italian architects for the task. The Scots are world renowned for civil engineering and the French and Swiss are leaders in the hospitality industry. For these types of purchases quality had often been the central consumer concern with price a secondary consideration.

Prior to the past three decades, while demanding customers purchased unique items from particular countries they did not, however, appear to generalize the quality of one particular product to the vast number of products that the country offered. The quality of woolen products from Scotland did not mean that the vast array of Scotland's other products were perceived as equally high in quality.

Generally, the sought-after imported items were considered worthy of premium prices as a result of perceived high quality. Only since the 1960s have consumers been introduced to high-quality products at lower prices with the introduction of Japanese exports. Shoppers have seen items such as computers and stereos improve yearly while prices have declined. The buyer now has come to associate both lower prices and higher quality with many types of imports. The concept of globalization has been enhanced by corporations attempting to take their “made in country” image of quality as they expand manufacturing operations into nations with lesser quality distinctions. Toyota's manufacturing locations in Mexico and the United States serve as examples of attempts toward global branding. Successful branding brings with it a resistance to quality problems or failures in new product introductions (Kall, 2001) and competitive advantages based on brand equity are less sensitive to company crisis situations and have a strong ability to survive during difficult times (Farquhar, 1998; Keller, 2008).

PRICE/QUALITY RELATIONSHIPS AND STRATEGY

Throughout the past two decades American manufacturers have attempted to increase domestic sales through marketing efforts and attention to production standards. It is interesting to note, however, that despite intensive “Buy American” campaigns of the 1980s, studies charting the effectiveness of the efforts are inconclusive (Hughes, 1987; Kern, 1986). The 2000s' continual decline of the U. S. dollar, which caused foreign goods prices to rise, has been unable to deter some consumer preferences for foreign goods or perceived higher quality. One explanation might be that, due to prospering economic conditions, consumers appeared to redirect primary interest away from price concerns and toward a desire for products of higher perceived quality.

During the 1970s, a number of researchers (Bedeian, 1977; Gardner, 1970; Hagerty, 1978; Gabor & Granger, 1963; Monroe, 1973; Monroe & Bitta, 1978) commented that consumers expect price and quality to be positively correlated. Others state that price is the number one consumer issue (Dickinson, 1982; Advertising Age, 1977).

Leavett (1954) found that when individuals selected between two differently priced products they tended to choose the higher-priced brand when price was the only information provided. This study was replicated by Tull, Boring, & Gonsior (1964) with similar results. Lawson (2002) in a discussion of the “lemon effect” notes that the basic features of a transaction may themselves provide information about a price/quality relationship. Jacoby, Olson, & Haddock (1971) reported that price served as an indication of quality when it was the only cue available, but not when embedded in a multicue setting. Ulgado & Mcintyre (2000) have added an additional dimension to the country-of-origin discussion by noting that country of e-commerce infrastructure may affect consumer perception, for example, when the consumer believes a Web site origin can affect the company image. In support of a multicue concept, they list issues believed to be relevant to forming impressions of quality. These include price, packaging, manufacturing, past experience, and advertising. The research of both Johansson (1989) and Thorelli, Lim, & Jongsuk (1989) includes country-of-origin information with other multicues in the consumer decision-making process. Thorelli et al.'s research indicates that warranty and country-of-origin cues do have significant effects on the perceived product quality.

Considering current research, it seems appropriate to add country of origin to Jacoby, Olson, & Haddock's (1971) list of issues believed to be relevant to forming impressions of quality. This is important as it is rare that a purchaser has no information other than price upon which to base a selection. For most goods, some information concerning location of manufacture is available.

In a study conducted by Allison and Uhl (1973) the perceived quality, rather than the actual quality, of a product was of considerable importance in consumer preferences. Numerous studies (Anderson & Cunningham, 1972; Bilkey & Ness, 1982; Rasky, 1986; Schooler, 1965) have explored the “made in” implications to consumers as they relate to country of origin and its effect on the consumer's perception of quality. These findings would appear to reinforce the concept that purchasing is not a simple two-axis function of price and quality but the relationship may be confounded by knowledge of the product's origin. Understanding the importance of country of origin is paramount when attempting to market against foreign competition whose goods are perceived by the consumer to be of superior quality. Holt, Quelch, & Taylor (2004) stress the importance of the global brand, which is a form of broadcasting both quality level and national origin. One interesting aspect of the global brand as a signal of quality is that, as several authors have pointed out (e.g., Chao, 2001; Cheung, 2004), globalization has led to international outsourcing as a means of competitiveness. Jaffe and Nebenzahl (2001) illustrate this through noting that a GM auto could be designed in Italy, have engine and transmission components from Japan, and be assembled in Mexico. International supply chain management has led to considerable misunderstandings about where products, or the parts of a product, actually come from. In many cases, individuals do not correctly identify the country related to a brand. Weiss (2007) found, for example, that only 4.4% of a survey knew that Nokia was made in Finland or that only 9% identified LG cell phones as a product of Korea. Since these products were perceived as coming from a valued brand nation it appears that product value is not only a function of price and actual quality but also the quality that is perceived. This is important as perceived value can be affected by marketing, additional information, and country-of-origin knowledge. The concept can be expressed as:

Nakra (2006) notes that consumers' biases for goods exist for both products in general as well as categories of goods and for both end users and industrial buyers alike. These biases are affected by product category, product stimulus employed in the research, demographics, consumer knowledge and experience with the class of goods, and the consumer's information processing style. Perceived value is becoming an increasingly pressing issue in the international marketplace as firms seek factors other than price with which to compete. In a study (White, 1979) of the perception of the quality of industrial goods, West Germany and East Germany were rated higher than the United States. England, Japan, and the United States shared second place. The same study revealed that Japan was rated closely behind the United States when considering service, delivery, and performance. The participants in this study further ranked Japan as providing superior goods at the lowest price.

Consumers have discovered that it may be possible to obtain higher quality goods at competitive or even lower prices through international competition. In addition, it appears that consumers may be willing to classify all, or most of goods, from a nation as being superior. This general belief has been referred to as a halo effect and has extremely important implications for the concept of price as a consumer cue for quality. Johansson and Thorelli (1985) state that the country of origin cues will often be an important factor in the buyer evaluation process. They state, “The effect of country stereotype will be to shift the position of the product in the perceptual space and alter the overall evaluation of its merits” (p. 57). Chuiyim, Garma, & Polonsky (2007) results indicated that this effect is true for developing nations as well as the more studied postindustrials. They note that experience does affect purchase likelihood for home versus foreign products among Chinese and that Chinese prefer the rather complicated origin of parts as the most significant cue in determining product quality.

Some authors have suggested that discount pricing strategies could be effective counter measures against imports. Only limited research demonstrates the effectiveness of this. The work of Schooler and Wildt (1968) indicates that often the halo effect can be offset by price concessions. They report that consumers switched to a previously negatively rated country's product when the price of the domestic product rose relative to the foreign good. Johansson and Thorelli's (1985) research on international product positioning has demonstrated that the value of certain products can be greatly overstated or understated when a consumer considers the country of origin. Relating this issue to its effect on product positioning, Johansson and Torelli also focus on product price. They suggest that manufacturers should determine the perceived position (in contrast to the actual) of their products in relationship to their competitors. They state, “… differences can be related indirectly to the required price premiums or discounts necessary to make two alternative products of equal value to the buyer” (p. 72).

Price reductions based on perceived value are certainly important considerations. Price reductions are not, however, always possible or even advisable. Often U. S. domestic goods have higher breakevens or are affected by differing currency values in the international marketplace. Attempting to compete with goods manufactured in nations with lower costs may result in negative profit margins or inconsistent returns. Another important consideration is how deep those reductions must be to be effective. White and Cundiff (1978) discovered that no effect on perceived quality was found by manipulating price within 10%. It is possible that to counteract variances caused by perceived quality discounts, exceeding profit margins might be incurred. It is also important to note that if the perceived quality of the product is based on a halo effect, and not on actual construction differences, it does not necessarily make sense to reduce price to compete. In this case, promoting product quality or even demarketing the competitor might be a more appropriate approach. Based on price/quality research it would seem that price reductions could reinforce a consumer's belief that the product's quality is inferior to the competition.

CONSUMER PREFERENCES FOR FOREIGN GOODS

It is important to note that the attitude toward Japanese products in 1967 was quite different from the current belief. As such, it is clear that a country's image is flexible and subject to change. In a 1970 study, (Nagashima, 1970) 93% of U. S. businessmen awarded the “made in U. S.” label first place. Less than a decade later Narayana (1981) reported in a replication study that the U. S. image had lost significant ground to the Japanese. The early negative attitudes toward Japanese products have certainly been affected by product improvements as well as the country's intensive marketing campaigns. Rierson (1967) concluded that advertising may be effective in changing consumer attitudes if prejudice is not too strong. His work demonstrated that promotions and communications improved attitudes toward Italian products, but not Japanese products.

The results of a major study (Money, 1987) surveying 2,555 Americans indicates that preference for domestic or foreign goods appears to be demographically divided. Older and poorer respondents were more likely to favor U. S. products. Young wealthy respondents favored foreign purchases. This would indicate that as older buyers are replaced by younger ones there is a likelihood that a preference for foreign goods will increase. The fact that nations during the 1990s, such as Korea, that had replaced Japan as the lower end provider have moved up in quality should increase consumer demands for higher quality and lower prices.

Consumer preferences for domestic or foreign goods appear to involve a complicated set of variables. Holt et al. (2004) have even pointed to the location of the company headquarters as being a prime issue in brand selection. Pricing appears less important than quality in the selection of foreign versus domestic products. There is an increasing sentiment that blaming losses of U. S. sales to foreign competition based upon price differences is narrow and often inaccurate. This would be consistent with the findings of Jacoby (1971) that price served as an indicator of product quality when it was the only cue available but not when embedded in a multicue setting. In addition, international marketing studies have suggested that issues other than simple price/demand relationships affect purchasing behavior (Cateora, 1983).

Narayana (1981) has noted that although the flow of international trade is, indeed, restricted by tariff and nontariff barriers, it may be also quite dependent on consumers' perceptions of national versus foreign product offerings. Rierson (1966, 1967) has demonstrated that significant variations exist in attitudes toward the products of different countries and that often stereotyping exists.

The volume of imported goods has continued to increase over the past two decades in Europe and North America. Considering demographics favoring imports, a desire for quality goods, and an unknown price elasticity it is naive to assume that currency rate shifts will have sweeping changes on consumer preferences. Buying shifts have been responsible for major market declines in numerous North American and European industries. This decline has resulted in an increase of government programs designed to increase domestic sales. One early political strategy was to seek protective import quotas and raise tariffs. This strategy resulted in only limited success due to a lack of unified political support and an unwillingness of the consumer to absorb price increases due to import tariffs. A second approach was the development of joint ventures with the competition. While offering attractive short-term benefits, the long-term success of U. S. industry cannot be based on the formation of joint ventures in lieu of research and the development of competitive products. Furthermore, this approach adds little to a nation's understanding of global competitive strategies. What appears to be required is the development of a comprehensive strategy that includes the complicated issue of quality and price and how that relationship is affected by country-of-origin information.

RESEARCH PURPOSE

This project intended to examine the perceptions of products from two competing postindustrial nations (United States and Japan). Questions asked related to why specific products were selected and what changes would have to be made so that domestic products would be chosen over imports. It was believed that this information would provide valuable input for the development of a strategy designed to market domestic goods against those from countries with more favorable product perceptions. Two experiments were conducted. Each investigated the issue of country-of-origin “halo effect” on the consumer. In the first experiment, 1,800 individuals were questioned concerning actual ownership of goods (foreign or domestic) and what factors influenced their purchase. They were also asked what would be necessary to change foreign purchases to domestic.

The second experiment requested 700 individuals to respond to pictures of two stereo components. Experimental conditions were altered so that the relationships between country of origin and pricing changed. Individuals were requested to supply information concerning what conditions would be necessary to purchase the domestic good.

METHODS

Methods Experiment 1

SUBJECTS

Eighteen hundred individuals participated by completing an initial questionnaire. The subjects were drawn from those passing a table in the Quincy Marketplace. A second questionnaire was administered to a limited subset of the 1,800. This group was determined by the toss of a coin after each participant completed the initial phase. Subjects with a “Heads” were asked to complete a second questionnaire. The actual number participating was 501 of 532 asked.

The Quincy Market area is located in a major pedestrian traffic and tourist area in downtown Boston. Participants would be expected to represent a cross-section of middle-class Americans from clerical, nonprofessional, professional, and support staff vocations. Because Boston has a high percentage of foreign tourists and their responses would confuse results, only residents were included in the data. All subjects were asked the initial question “How long have you lived in the United States?” If individuals stated they had lived in the United States fewer than 20 years, they were asked one “dummy” question, so as not to offend a foreign respondent by exclusion; their answers were no longer considered in the data pool. This question was also used to reject individuals who were less than 20 years old. It was felt that these subjects had not developed sufficient buying patterns with earned income.

Subjects were selected from all those passing the table from 10 a.m. through 6 p.m. over a four-day period. Individuals, with three exceptions, were selected for questioning through the use of a random numbers table. Those administering the questionnaire were requested not to question individuals who (1) appeared to be under 18 years of age; (2) individuals who the questioner believed would be bothered if stopped (romantics, those involved in business conversations, etc.); and (3) those appearing intoxicated or disruptive. The first related to the subject pool requirement that respondents be more than 20 years old; the second was a request of the marketplace management, and the third was a personal safety consideration for the questioners.

INSTRUMENTS

Eighteen hundred individuals were administered a consumer preference survey (Appendix A), which requested that individuals state a country-of-origin preference (foreign or American) for specific products and indicate whether “quality,” “style,” “price,” or “other” were reasons for the selection. If a foreign product was selected, subjects were requested to indicate what factor would have to change to cause a shift in product choice toward domestic. Five hundred and one of the original 1,800 respondents completed a second questionnaire (Appendix B). This questionnaire sought to determine if individuals actually purchased the products from the nations stated to be favored.

Methods Experiment 2

SUBJECTS

Seven hundred individuals were selected by the use of a random numbers table from those attending a major stereo and video exhibit in the Boston convention center. It was believed that individuals attending the exhibition had an above-average interest in the products shown in the questionnaires, which was supported by interest in purchasing surveys conducted by the exhibit management. Exhibiter literature stated that 80% would buy some form of stereo component within a year and 10% would actually make that purchase at the show. Individuals whose entry corresponded to the number from a random numbers table were requested to “participate in a very brief survey that would take less than two minutes.” All subjects according to the numbers table were approached and no provisions for exclusions were made. Any individual who declined to participate was replaced by the next individual entering the area until a response was obtained.

Each subject answered only one of four possible questionnaires. One hundred subjects were administered question 1 and 200 completed questionnaires number 2, 3, and 4. Questionnaire numbers were drawn from a bin containing 700 scrambled small pieces of paper labeled 1, 2, 3, or 4. Each subject then received the version of the questionnaire that corresponded to the number drawn. Rather than approaching a specified number of individuals and accepting the resulting number of “good” responses, questioners were instructed to continue to obtain responses until the prepared 700 questionnaires had been completed. The total number of individuals approached to obtain the required 700 responses was 983.

If subjects asked who was conducting the survey they were told “A major local university.” The city in which the study was conducted has numerous colleges and universities so this sort of activity would not be considered out of the ordinary. As such it was felt that few, if any, deleterious interactive effects would result as a consequence of the method of subject questioning.

INSTRUMENTS

Four different questionnaires were administered. Each individual answered only one question. The first question was a control to ensure that differing responses were not a function of the pictures presented. Questionnaires two, three, and four provided actual data.

Each subject was given a piece of paper that had pictures of two different VCRs at the top. Below each picture was price information and (except questionnaire 1) information concerning country of origin. These pictures and their actual prices had been copied from a local newspaper advertisement supplement. As such, individuals were presented with pictures of real products with name brands removed. The actual price of the American product was 319 and the price of the Japanese product was 399. As noted below, only in questionnaire four was the true price and country of origin of the products presented. Each subject was asked one of the following questions:

Questionnaire 1

Below the two stereo pictures were prices that had been altered so that each item was of equal price ($399). One stereo was labeled L and the other C.

Questionnaire 2

Below the two stereo pictures were prices that had been altered so that the two items were displayed with equal prices ($399). This time, however, the items were labeled Japanese and American.

Questionnaire 3

Below the two stereo pictures were two unequally priced items. The item on the left ($399) was labeled American and the item on the right ($319) was labeled Japanese.

Questionnaire 4

Below the two stereo pictures were the same two unequally priced items depicted in question 3. This time, however, the item on the left ($399) was labeled Japanese and the right ($319) item labeled American.

RESULTS

Results: Experiment 1

Responses to questions from experiment 1 are provided in Tables 1 through 4. The hypothesis in each case represents the formal statement that no significant difference exists between the preference selection among respondents for each specific response set designated in the table. The probability level of .01 was used as the rejection level for all tests and the test used was the chi-square.

TABLE 1 Reason That Product was Preferred

Item	Preference	%	Level H0 rejected∗
Preferred Product Origin is Foreign
Car	Quality	68	.01
Stereo	Quality	54	.01
Apparel	Style/price	41/46	.01
Cameras	Quality	74	.01
Watch	Quality	52	.01
Overall choice of foreign products 64%
Preferred Product Origin is USA
Wines	Quality	57	.01
Beer	Quality	58	.01
Overall choice of US products 18%

TABLE 2 What Would Have To Be Changed to Cause a Shift in Product Choice?

Item	Must be changed	H0
Cars	Quality	Reject
Electronic	Quality	Reject
Camera	Quality	Reject
Watch	Quality	Reject
Overall foreign preference vs. Domestic		Reject

TABLE 3 Current Ownership and Stated Preference

Item	Prefer foreign domestic		Own foreign domestic		H0
Car	86	09	77	23	Reject
Stereo	68	09	59	32	Fail
Apparel	43	41	46	36	Fail
Wines	23	54	51	27	Fail
Beer	18	68	23	64	Reject
Watches	68	17	82	11	Reject
Cameras	64	36	86	13	Reject

TABLE 4 Current Ownership and Preference if Purchasing Item Now

Item	Would buy now foreign domestic		Current ownership foreign domestic		H0
Car	77	14	77	23	Fail
Stereo	59	9	59	32	Fail
Apparel	37	32	46	36	Fail
Wines	42	51	51	27	Fail
Beer	16	77	23	64	Fail
Watches	69	12	82	11	Fail
Cameras	93	2	86	13	Fail

Table 1 provides the responses to the consumer preference survey and presents information concerning reasons for that selection as well as the national origin of the preferred good.

Table 2 depicts the area (quality, price, style, other) that must be changed for consumers to state they would shift in product choice. The H₀ “there is no difference among consumer preferences” was tested at the P = .01 level of significance using the chi-square. Table 3 depicts the percent of responses to the national origin of respondent's purchases questionnaire comparing current ownership (Appendix B) and stated preference (Appendix A). Table 4 presents information relating to the comparison of current ownership (Appendix B) and stated product origin preference if the item was purchased now (Appendix A). Tables 3 and 4 have an N = 501.

Results: Experiment 2

Information concerning the four stereo questionnaires and the selection of either the Japanese or American product at differing prices is presented in Table 5. Table 6 presents information relating to what would be necessary for individuals to consider the American product if they had selected the Japanese or no preference (Appendix C). The hypothesis was that there is no difference between the selection of Japanese, American, or no preference choices. This was tested at the P = .01 level.

TABLE 5 Under Different Pricing Conditions Which National Origin's Product Was Considered the Best?

Price condition	H0	Favored origin
Control	Fail	No Preference
A = J	Reject	Japanese
A > J	Reject	Japanese
A < J	Reject	Japanese

TABLE 6 What Would Be Necessary for Consumer to Purchase the American Product?

Price Relationship	H0	Price	Reduce quality	Increase quality (perception of)
A = J	Reject			X
A > J	Reject	X		X
A < J	Reject	X		X

DISCUSSION

It would appear that there is merit to Narayana's (1981) comment that international trade is highly dependent on consumers' perceptions of national versus foreign offerings. It was observed in the majority of cases that respondents in both the first and the second experiment preferred foreign goods over domestic. In the first experiment there was an overall preference for imported products (64%) over domestic (36%) and the Japanese stereo was selected when its price was less, equal, and more than the American product. There was a tendency to select foreign products (experiment 1) even when a specific country of origin was not identified and individuals' only understanding was that the alternative products were not made in America. It is possible, however, that some products have become so identified with a particular country that the two have become synonymous. That is to say that VCRs or TVs are to the Japanese as XEROX is to copiers and KLEENEX is to facial tissues. This could serve as a source of error but might also demonstrate the power of a country “halo.”

Earlier discussions concerning the complexity of the buying decision appear to be supported by the first experiment as most choices were based on attributes other than price. The most important basis for a purchase decision, as supported by both experiments, was quality.

It is interesting that for the higher-priced items (cars and electronic equipment) quality was more important than price. Price did seem to be more important with higher volume consumables (beer) than with the durables (cars, stereos, watches). It may be that higher-priced items were considered to be investments as well as purchases. As such, buyers may be looking for an item such as a car or stereo that will last longer and thus, while of higher initial cost, be a better investment over time. It was interesting that when questioned concerning ownership, survey participants actually owned foreign cars and electronic equipment. In spite of rigorous efforts during the past decade to reverse the trend toward foreign goods, individuals reported for a repurchase that a foreign product would, again, be selected. This may demonstrate the perseverance of the “halo effect” once established and the difficulty in undermining it.

Survey formats are open to the criticism that there can be a distinct possibility of a difference between self-reporting and actual behavior or between what one reports as “the best” and what is actually purchased. By requesting the status of current ownership some consideration of actual preference was provided as was information concerning the relationship between belief and action.

No preference was demonstrated for foreign versus domestic apparel but there was a strong preference for domestic beer. U. S. apparel makers have focused a great deal of media attention toward their industry's difficulties that they claim are a result of foreign competition. In addition to this visibility there may have been confusion due to the difference between types of apparel imports. It is possible that European designer imports from Italy and France are not viewed equally as clothing imports from Mexico, Taiwan, or Korea. Consumers may view apparel imports as much less of a class than perhaps telecommunications or stereo equipment. It is clear that in the case of apparel much of what is perceived to be made in a specific nation, such as Italy, is actually manufactured elsewhere and shipped to the final “nation of origin” for distribution, thus clouding the actual national relationships.

The preference for domestic beer may be a result of a rather limited importing effort combined with small advertising budgets compared to the massive promotional campaigns of the major U. S. producers. It is interesting to note that with the foreign purchase of the American brand Budweiser the advertisements immediately began to appear in 2009 providing assurance to the domestic consumer by inserting in the byline “an American beer.” It was also interesting that price was stated as the major consideration required for a change in purchase. This may provide some further indication that some items are more price competitive than others. Imported beer is often twice the price of domestic beer, making the consumer much more aware of the difference in consumption price. In addition, it is often noted that prepared food is one of the most difficult items to export due to local taste preferences. What could be considered quality might be, in reality, domestic taste differences. One would imagine the difficulty that German or United Kingdom beer producers would have with the finding that U. S. respondents had selected American beer for “Quality” over theirs. It could be that even if a majority of a country's products could be encompassed by a “halo,” that certain products with high domestic influence might well be excluded. While experiencing some shift during the 2000s in specific U. S. regions, American consumers, for example, do not appear to seek out Japanese restaurants or beers with the same passion that they do their high-technology products.

Two important considerations of the first experiment seem to be that: (1) There is clearly a strong personal desire to purchase foreign-produced goods and (2) Perceived quality seems to be a more important decision factor than price. This is at least true for higher-priced items. These findings indicate that strategies that focus on pricing or increased tariffs and dollar devaluations to drastically improve domestic sales will likely meet with long-term disappointment.

Hamel and Prahalad (1985) have stressed the old ways of pricing competition are not working in the international market and must be replaced by a more complex global strategy. The concept of a modern marketing strategy, designed for competition in today's sophisticated environment, is truly important. It would seem that such a strategy must have provisions for competition against nations with favored perceptions toward their goods. Insights from such researchers as Rierson (1967) and Narayana (1981) have pointed to possible considerations for the development of an effective global marketing strategy devised to compete against goods from positively perceived countries. A significant number of researchers have discussed the merits of pricing strategy. Often North American and European corporations, due to higher breakevens, are not in a position to use pricing to their competitive advantage. In addition, it is strongly suggested from experiment 2 that numerous situations exist that preclude competition based on price reduction.

In most cases (in experiments 1 and 2) individuals stated that if the foreign good was of greater price the American firm would have to increase quality, not simply decrease price, in order to compete. It is interesting to note that if the foreign good was of lesser price, rather than reporting that the domestic good was of superior quality, it was reported as costing too much. This truly indicates that previous buyer conceptions that related quality as a function of price have been disrupted. When consumers have pre-formed concepts of a nation's quality, competing with price may have disastrous results. It is possible that the message to the consumer when a more expensive American good is reduced in price is that it was initially overpriced. This seems to be particularly true if the item is being compared to a similar, but less expensive, item from a country of perceived higher quality. When both countries' products were of equal price (experiment 2) individuals considered the Japanese product to be of greater quality. To compete, individuals stated that the domestic product had to increase quality (at least increase perceived quality). If price reductions serve to support consumer beliefs that the product is of inferior quality, marketing strategies other than price must be considered.

The objective of this research was to further explore the possibility of constructing a marketing strategy that could be effective in competing against more favorably perceived countries. Such a strategy would have to include not only actual quality and price relationships but also the perceptions of consumers to fully understand the output of buyer actions.

Several options are available to a firm which is interested in using information concerning country-of-origin preferences in the marketing strategy. These may include forming joint ventures, seeking import restrictions, relocating manufacturing to a more desirably perceived country, “masking” the actual manufacturing location and repositioning perception.

In experiments 1 and 2 individuals were asked what changes would be necessary in domestic products to induce their purchase. The purpose of information was to develop a model for repositioning domestic products against those originating from countries with higher perceived quality. Three marketing situations were presented in experiment 2, which offered individuals different price and country-of-origin combinations. The control situation (question 1) indicated that differences attributed to the stereos were not a result of the photos themselves. Respondents failed to demonstrate a preference for either of the pictures when presented in generic form without additional information. It was therefore assumed that differences reported in questions 2, 3, and 4 were a function of the additional country–of-origin and price information provided. It is important to note that only pictures of the stereos were presented. Because no technical cues were available, statements concerning quality had to relate to perceived quality as actual quality was impossible to assess. The three scenarios presented in experiment 2 were:

1. Two products appearing equal in quality and equal in price with origin information available.

2. Two products with origin information available. The Japanese price was less than the American price.

3. Two products with origin information available. The American price was less than the Japanese price.

In each case those individuals selecting the Japanese product were requested to state whether an increase in quality or a decrease in price would prompt them to purchase the American product instead of the Japanese product.

Scenario I

It was interesting in question 2 that when price was held constant ($399) there was an overwhelming response (141 to 37) supporting the belief that the Japanese product was better. It should be noted that a definition of “better” was intentionally not offered or sought throughout the research. As such, better can only be taken at face value and problems with this are acknowledged. Those who selected the Japanese product stated that it would require an increase in quality as opposed to a decrease in price (suggested strategy by Johasson and Thorelli, 1985) for them to consider the U. S. product (Figure 1).

FIGURE 1 Strategy when purchase prices are equal.

Scenario II

When the Japanese product was presented as less expensive (question 3) there was again an overwhelming preference for the Japanese product (182 vs. 11). The price difference between the American-and Japanese-labeled products was 20%, representing a clear price difference. White and Cundiff (1978) had noted that differences of less than 10% do not appear significant to consumers. Those selecting the Japanese product stated that a decrease in price would be necessary for them to consider the American product.

Competitors from countries with highly perceived products often use price as a competitive strategy to penetrate or gain market share. In these situations countries with goods of lesser perceived quality could be forced into price reductions to maintain market share. This presents a particularly awkward situation. Scenario I indicates that when price is reduced to equal competition, consumers will still select the foreign good if it has originated from a country with higher perceived quality. It appears that any strategy must include an increase in quality even after (or during) price reductions. It seems appropriate to strongly consider “halo”-based strategies in these situations as opposed to competition based on price (Figure 2).

FIGURE 2 Strategy when foreign price is less.

Scenario III

There was more mixed response when the American product was 20% less expensive than the Japanese product (question 4). A significant difference, however, continued to exist with a preference for the Japanese product. This situation should serve as a caveat for those who consider price reductions alone as a sufficient means to market against foreign goods of perceived greater quality.

Those selecting the Japanese product stated that an increase in product quality, not further price reductions, would be required for them to select the American product. It appears that strategies based upon price reductions would not induce significant additional sales volume to avoid a possible decrease in revenue. In this case it seems that the firm must improve the quality image of the product while slowly increasing price (Figure 3). Holt et al. (2004) present the example of the use of these types of strategies when the South Korean firm Samsung launched a global advertising campaign depicting their great international engineering and design feats. The campaign was able to reposition Samsung against Sony and Nokia as a global provider of leading-edge technologies.

FIGURE 3 Strategy when domestic price is less.

SUMMARY

It appears that the effect of country-of-origin information can greatly influence consumer decisions. The two studies highlight the importance of an adequate assessment of one's competition to include consumer perceptions of the country of origin. Strategies based on pricing appear questionable when firms are in competition against nations with perceived higher-quality goods. Although U. S. companies have reintroduced the “Made in USA” label as fashionable and associated such purchases with “American pride” they must not neglect or fail to fully understand the difficulties involved in selling to sophisticated consumers with established beliefs. It is essential that the pervasiveness of consumer perceptions be acknowledged. In some instances only specific products from a country will be considered special, whereas it appears, in other cases, most products will be so considered. Companies must clearly determine if all products from a specific country are included in the “halo” or if perceptions only relate to particular product classes? While increasing efforts to enhance product quality they must concomitantly position their products to be of equal high quality through genuine production and marketing efforts.

To increase sales domestically and perhaps in most postindustrial countries abroad, it will be essential for companies to recognize that consumers expect quality goods and have developed well-formulated perceptions concerning the ability of some nations to produce them. Nakra (2006) notes that country-of-origin biases have been found for both developed and less-developed countries and that goods from developed nations area awarded greater prestige. A model for marketing against nations with perceived greater quality was presented. Three scenarios involving different price and perceived quality relationships were discussed. It was the objective to provide not only an overview of the problems involved but also a positive means of marketing against such situations. These models are, of course, confounded by the discussions relating to where a product's parts come from, location of home office, and even location of e-commerce infrastructure.

Historically, hope has been an insufficient business strategy. Prior attempts to focus blame for lower domestic sales on competitor's lower wage structures and unique governmental-business relationships has accomplished little. American business may also find that faith in external solutions such as dollar devaluation or national pride campaigns, which fail to consider the complexity of the buying situation, will be even more inadequate during the next decade. Increased pressure from Eastern European and developing third world nations will soon join an even stronger Asian community in the production of quality goods. Hamel and Prahalad (1985) have stated that the old ways of competition are not working in the international market and must be replaced by a more complex global strategy. This research supports and the work of others in demonstrating how complex that strategy may need to be.

This article received an International Management Development Association (IMDA) Best Paper Award, Suriname 2008.

Notes

∗H₀: There is no significant difference between the preference selections among respondents.

H₀: There is no significant difference between the preference selections among respondents.

H₀: There is no difference in preference between domestic & foreign goods (P=.01).

H₀: There is no difference between current ownership and what would be purchased now.

H₀: There is no difference between the choice for American or Japanese products (P = .01).

H₀: There is no difference between the choice for American or Japanese products (P = .01).

APPENDIX A: CONSUMER PREFERENCE SURVEY

Table

1. Which cars do you prefer?	American (9%)	Foreign (86%)
Why?
For Quality?	68%	1229
Style?	15%	273
Price?	10%	183
Other	6%	111	N = 1796
2. Which stereo equipment do you prefer?	American (9%)	Foreign (68%)
Why?
For Style?	8%	148
Price?	14%	256
Quality?	54%	976
Other?	23%	418	N = 1998
3. Which apparel do you prefer?	American (41%)	Foreign (43%)
Why?
For Price?	46%	838
Style?	41%	745
Other?	3%	54
Quality?	9%	162	N = 1999
4. Which wines do you prefer?	American (54%)	Foreign (23%)
Why?
For Other?	26%	468
Quality?	50%	1008
Price?	13%	289
Style?	1%	18	N = 1782
5. Which beer do you prefer?	American (68%)	Foreign (18%)
Why? if foreign
For Quality?	58%	1049
For Price?	9%	160
For Style?	7%	124
For Other?	26%	465	N = 1798
6. Which camera do you prefer?	American (18%)	Foreign (68%)
Why?
For Quality?	74%	1334
For Price?	15%	268
For Style?	11%	196
For Other	0%	0	N = 1798
7. Which watch do you prefer?	American (13%)	Foreign (87%)
Why?
For Quality	52%	937
For Price?	19%	340
For Style?	25%	450
For Other?	4%	70	N = 1798
8. Overall, If you had a choice between two products, which would you select?	Foreign (64%)	American (36%)
Chi-square: Reject H0 in favor of Foreign

If individual selected foreign ask, “What would be the most important item (1) Quality, (2) Price, (3) Style, (4) Other?” What would need to be changed to cause individual to shift to domestic product? Response noted in Table 1.

APPENDIX B: RESPONSES TO CONSUMER OWNERSHIP QUESTIONNAIRE

N = 501

1. What kind of car do you own?

    Foreign: 77%

    Domestic: 23%

    Chi-square result: Reject H₀ in favor of foreign

2. If you were buying a car now, which would you buy?

    Foreign: 77%

    Domestic: 14%

    Don't Know: 9%

    Chi-square result: Reject H₀ in favor of foreign

3. What kind of stereo do you own?

    Foreign: 59%

    Domestic: 32%

    None: 9%

    Chi-square result: Reject H₀ in favor of foreign

4. If you were buying a stereo now, which would you buy?

    Foreign: 59%

    Domestic: 9%

    Don't Know 32%

    Chi-square result: Reject H₀ in favor of foreign

5. What kind of TV do you own?

    Foreign: 27%

    Domestic: 59%

    None: 14%

    Chi-square result: Reject H₀ in favor of foreign

6. If you were buying a TV now, which would you buy?

    Foreign: 36%

    Domestic: 32%

    Don't know 32%

    Chi-square result: Fail to reject H₀

7. What kind of VCR do you own?

    Foreign: 41%

    Domestic: 9%

    None: 50%

    Chi-square result: Reject H₀ in favor of foreign

8. If you were buying a VCR now, which you buy?

    Foreign: 56%

    Domestic: 9%

    Don't know: 36%

    Chi-square result: Reject H₀ in favor of foreign

9. What is the origin of the majority of your apparel?

    Foreign: 46%

    Domestic: 36%

    Don't know: 18%

    Chi-square result: Fail to reject H₀

10. What is the majority of your kitchen appliances?

     Foreign: 9%

     Domestic: 82%

     Don't know: 9%

     Chi-square result: Reject H₀ in favor of domestic

11. What kind of beer do you drink?

     Foreign: 23%

     Domestic: 64%

     None: 13%

     Chi-square result: Reject H₀ in favor of domestic

12. What kind of wine do you drink?

     Foreign: 51%

     Domestic: 27%

     None: 22%

     Chi-square result: reject H₀ in favor of foreign

13. What kind of watch do you own?

     Foreign: 82%

     Domestic: 11%

     Chi-square result: reject H₀ in favor of foreign

14. What kind of camera do you own?

     Foreign: 86%

     Domestic: 13%

     Chi-square result: reject H₀ in favor of foreign

APPENDIX C: RESULTS OF FOUR QUESTIONNAIRES

• QUESTION 1: Which would you consider the better product?

•  Question Response pattern N = 100

• 1. L 12

• 2. C 8

• 3. No preference 80

•  Chi-Square = 98.3

• Hypothesis: There is no difference among respondents' selection of answers 1, 2, or 3.

• Conclusion: Reject H₀ at p = .001

• Greatest response = no preference

• QUESTION 2: Which would you consider to be the better product?

•  Question Response pattern N = 200

• 1. American 37

• 2. Japanese 141

• 3. No preference 22

• Chi-Square = 126

• Hypothesis: There is no difference among respondents' selection of answers 1, 2, or 3.

• Conclusion: Reject H₀ at P = .001

• QUESTION 2a: What would it take for you to consider buying the American product?

•  Question Response pattern N = 199

• 1. Increase quality 137

• 2. Decrease product price 40

• 3. Uncertain 22

• Chi-Square = 69

• Hypothesis: There is no difference between the respondents' selection of answers 1 or 2.

• Conclusion: Reject H₀ at P = .001

• QUESTION 3: What would consider the better product?

•  Question Response pattern N = 200

• 1. American 11

• 2. Japanese 182

• 3. No preference 7

• Chi-Square = 297

• Hypothesis: There is no difference among the respondents' selection of answers 1, 2, or 3.

• Conclusion: Reject H₀ at P = .001

• QUESTION 3A: What would it take for you to consider buying the American product?

•  Question Response pattern N = 193

• 1. Increase quality 53

• 2. Decrease product price 126

• 3. Uncertain 14

• Chi-Square = 79

• Hypothesis: There is no difference between the respondents' selection of answers 1 or 2.

• Conclusion: Reject H₀ at P = .001

• QUESTION 4: What would you consider the better product?

•  Question Response pattern N = 200

• 1. American 50

• 2. Japanese 93

• 3. No preference 57

• Chi-Square = 56

• Hypothesis: There is no difference among the respondents' selection of answers 1, 2, or 3.

• Conclusion: Reject H₀ at P = .001

• QUESTION 4A: What would it take for you to consider buying the American product?

•  Question Response pattern N = 197

• 1. Increase quality 117

• 2. Decrease product price 66

• 3. Uncertain 14

• Chi-Square = 80

• Hypothesis: There is no difference between the respondents' selection of answers 1 or 2.

• Conclusion: Reject H₀ at P = .001