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COUNTRY

OF

ORIGIN

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Executive Summary

NWP is a New Zealand based company that sells differentiated focused (skin care and health

care) products targeted mainly at women, formulated using truly natural herbal ingredients by

predominantly focusing on Country of Origin. This report is further describing how Country

of Origin plays a vital role in affecting consumers purchase decisions. Furthermore, the report

is highlighting the perks and pitfalls of pursing growth strategies focused mainly on Country

of Origin, along with some recommendations in order increase sales, increase market share

and gain competitive edge.

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Table of Contents

S.no Topic Pg no

1. Introduction:

Research purpose……………………………………………………………….

Objectives of Research………………………………………………………….

Scope of investigation…………………………………………………………..

Limitations of the study………………………………………………………...

Assumptions…………………………………………………………………….

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2. Literature Review:

Country of Origin concept……………………………………………………...

The Influence of Country-of-Origin Image on a Consumer Purchase

Decision…………………………………………………………………………

Pursuing growth strategy predominantly focused on COO to gain competitive

advantage………………………………………………………………………..

Pitfalls of pursuing growth strategy for its products to be focused

predominantly on COO…………………………………………………………

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3. Conclusion 10

4. Recommendations for NWP 11

5. References 12

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Introduction

Country of Origin (COO) is a concept that explains how consumers consider a product

coming from a particular country, relating to the general perception about the quality of

products made in a particular country and the nature of people from that country.

Research Purpose:

To have a clear understanding about how COO will impact purchasing decisions for NWF's

natural skincare and health care products in both domestic and international markets.

Objectives of the Research:

To find out how COO affects consumers purchasing decisions when evaluating products

and brands

To find out how NWF will have competitive advantage by implementing growth

strategies linked to COO in both domestic and international market

To find out about the advantages and disadvantages NWF can have by implementing

growth strategies focused mainly on COO in both domestic and international market.

To determine whether COO will impact NWF consumers purchasing decisions positively

or negatively

To derive effective actions in order to improve NWF consumers purchasing decisions

Scope of investigation:

This is an investigation about how 'Country of Origin' affects natural skin care products/brand

including, consumers purchasing decisions, implementation of growth strategies to gain

competitive edge and increase market share domestically and internationally, and

recommendations for improvements.

Limitations of the Study:

The investigation was limited to secondary sources (online, books) only. No direct sources or

interviews were available, with no further forensic investigation conducted.

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Assumptions:

Expanding to Asian markets for overseas growth as products from western countries

have a positive COO effect on Asian people.

Updating the current online channel (website) to nationwide and worldwide to expand

geographically, alongside other distribution channels to increase local and global

market share.

Charging premium price for products by creating a niche market.

Other cues like intrinsic and extrinsic, alongside COO are considered as equally

important when evaluating brands/ products by consumers.

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Literature Review

Country of Origin concept

According to Ozretić Došen and Previšić (2001), Country of Origin is a concept which

reflects and describes consumers’ perceptions about the quality of products coming from a

particular country and its people. It can also be defined as a picture, reputation, and stereotype

that businessmen and consumers attach to products from a certain country (Johansson, 2000).

It was found that products from countries with positive image were being considered of

higher quality, whereas, products from negative image countries were being underrated. This

image is usually created by variables such as, representative products, national characteristics,

technological advancement, economic and political background, history and traditions of a

country. A negative country image affects products coming from those countries, setting a

barrier for them to enter and position themselves in an international market, while a positive

one facilitates business internationalization (Ozretić Došen and Previšić, 2001).

The Influence of Country-of-Origin Image on a Consumer Purchase Decision

Consumers make purchase decisions based on brand/product image, which is created by a

systematic process of acquisition, evaluation and integration of product information or cues.

A cue can be defined as an informational stimulus available to the consumer before

consumption (Ahmed et al., 2004), and can either be intrinsic or extrinsic. Intrinsic cues are

the product traits that are intrinsic to the product (i.e. they cannot be changed/ manipulated)

without changing the physical characteristics of the product. Some intrinsic cues can be,

design, taste, sound, fit, shape, etc. Extrinsic cues are those traits that are not physical (Olson

and Jacoby, 1983). Some extrinsic cues may include brand name, packaging concept, store

image, price, country of origin, etc. Country-of-origin is classified as an extrinsic cue as the

‘made in’ label can be removed from a product without altering its physical characteristics

(Eroglu and Machleit, 1988) and plays a part in forming a whole brand/product image.

The two most frequently cited models can be used to explain the influence of country-of-

origin image on brand/product’s quality evaluation, the ‘Halo Model’ (Johansson et al., 1985)

and the ‘Summary Construct Model’ (Min Han, 1990). The halo effect may cause consumers

to rely on country-of-origin image mainly when unfamiliar with products of a particular

country. On the other hand, a summary construct model operates when consumers are

familiar with a country’s products, and infer a country’s image from its product information,

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using COO to eliminate brands and develop an evoked set rather than make inferences about

the quality, saving consumers from extensive evaluation of intrinsic attributes.

Moreover, as Papadopoulos and Heslop (1993) points out, a country’s image does influence a

consumer’s purchase decision, as described earlier that products from countries with positive

image were being considered of higher quality, and vice versa. Also, the consumers may

consider the product pricing with regards to the COO, i.e. for brand/product from a country

with positive image, they may be willing to pay premium and low for brands/products from

countries with negative image. Therefore, the country-of-origin image does play a vital role

when a consumer makes a purchase decision.

Although there is no question to the fact that COO influences consumers' perceptions of a

product, and impacts purchase decision for the use of a product/service. However, still no

reliable method actually exists. Reasons for such a situation should be looked for in the multi-

dimensionality and complexity of the concept of COO image and into different number of

influences regarding its formation, like: country-of-origin and countries of production

stereotypes, ethnocentrism, interrelationship between country-of-origin image and other

product’s attributes, demographic, social and economic factors changing influence in the

course of time. Consumers may often also tend to link COO to personal memories, national

identities and to feelings of “pride” associated with the possession of products from certain

countries (Hirschman, 1985). Ethnocentrism and patriotism also tend to have an emotional

trigger on some consumers who may prefer to buy their own country’s products to imported

products (Baumgartner and Jolibert, 1977; Wall and Heslop, 1986; Darling and Kraft, 1977).

It was recently found out by Archarya and Elliot (2001) that the type of product

(expendable/durable) can influence intensity of COO image, they may reflect more on COO

when deciding to acquire durable/luxury goods. In addition to that, even consumer bias

towards imported products may impact consumer purchasing decisions greatly.

A Country's image may be referred as “the sum of information in the consumers’ mind about

a country”, according to Sullivan Mort and Han (2000), the less information consumers have

about a given country the more will the sales of its products suffer (country-of-origin image

effect is inversely proportional to available information). It was noted by Usunier (1996) that

younger consumers rather than an average consumers, show lesser country-of-origin effects

due to their higher level of education.

Therefore, it may be quite reasonable to expect a consumer to be willing to allocate more

processing effort in a real life purchasing decision than a hypothetical one, as COO on actual

choice behavior competes head to head with other extrinsic and intrinsic cues.

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Pursuing growth strategy predominantly focused on COO to gain competitive

advantage

Marketing is a process of gaining a competitive advantage and sustaining it. Competitive

advantage may refer as an advantage that a firm has over its competitors, allowing it to

generate more sales or margins and/or retain more customers than its competition.

Various firms around the world like NWP may get to a point in domestic market, deciding to

start their business in other international markets, this process is known as internationalization

and with proper strategy and market entry it can lead to gain a competitive advantage in a

new geographical market.

Every business needs growth strategies to increase its value, examining generic growth

strategies can prove to be a good start as they apply to all types of businesses, and focusing on

one aspect of your operations such as COO and specifying the actions you must take to

achieve your goals i.e. to be able to gain competitive advantage.

Since NWP is a business focusing on the niche market and offering differentiated products

from its competitors, it's possible for NWP to gain competitive advantage even by

predominantly focusing on COO.

According to Markgaraf (2013), Ansoff's approach Market development (entering new

market) is one of the effective growth strategies, which NWP can implement as it allows

having access to more customers, resulting in greater products sales. This further allows NWP

to target new market by adding alternative channels of distribution like opening additional

retail outlets domestically and internationally, updating current website which is currently

only focusing on lower and central North Island of New Zealand to global, introducing

catalogue sales, etc.

Though the strategy may be focusing predominantly on COO but if NWP focuses on

targeting market of less developed (Asian) countries rather than developed (Western)

countries, they will have a positive COO effect on products from western countries, which

will help to impact consumer's quality perceptions positively along with the perceived value

as well. Also, since NWP produces differentiated focused products (which concentrates on

a narrow segment and attempts to achieve a cost advantage or differentiation within that

segment) as they are formulated using truly natural herbal ingredients that are valued by

consumers (target market being women only), they may be perceived to be unique and better

from competitor's products as exact substitute products may not exist, creating a niche market

and allowing NWP to charge premium price for their products, enjoy economies of scale and

simultaneously gaining cost and competitive advantage in an international market.

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resources e companies agree to pool their is an approach in which two or mor Joint venture

This way the companies .)2009 ,Roll( together to form a combined force in the marketplace

risks of their venture. Since NWP is focusing share become capable of doing things and

with (joint venture) predominantly on COO, it is recommended for NWP to pool its resources

loyal that are e influence on consumers have a positivder to in or ,local companywell known a

for having ready consumers purchasing NWP products to purchasing domestic products, and

into marketing communications /resources/moneyefforttime/in much having to putwithout

degree is the IntegrationSimilarly, ntured company. s loyal to the vebecause of the consumer

Vertical Forward .to which the firm owns its upstream suppliers and its downstream buyers

the control of includefirm are expanded to ies of thewhen the activit occur may integration

ct distribution of its products, and since NWP focuses predominantly on COO, it is dire

buy the component companies that are part of the distribution chain, i.e. torecommended

t the integrating with beauty products retail stores as a means to pushing your product a

gaining (by eliminating them from the current market) and by expense of your competition

to charge high price for products able consumers of the integrated company and being

market.international entrant in an foreign newlike a without feeling

Pitfalls of pursuing growth strategy for its products to be focused predominantly on

COO

Due to the growing competition from international firms, consumers’ sensitivity to COO has

become a relevant issue for brand managers. Although the issue of COO effects remains

relevant, it has turned out to be an elusive phenomenon to accurately measure. Not only is the

very concept of “country” or “origin” expanding, now including not only countries, but also

being applicable to regions as well as cities or even neighborhoods (Lentz et al, 2007). Also

the very concept of origin may seem to be problematic when pursuing a growth strategy for

NWP's products focused predominantly on COO.

Patriotism may be the main influencing factor when implementing growth strategies in an

international market and consumers are more heavily affected by COO when in competition

with local brands/products. Consumers may prefer buying products from their home country

more, and may only buy a product with foreign COO if they have a particular liking for that

country or if a strong prestigious value is attached to a certain product.

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Country of Origin's political (e.g. War) and economical (e.g. Inflation) condition may affect

consumers directly; any change in one of the conditions can affect consumer's view and

perceptions of that particular country, further affecting consumers purchase decisions along

with price, quality and value perception, resulting in low sales and profit.

Product differentiation may not be of any value to the consumers anymore (i.e. not wanting to

buy natural beauty products anymore) because of better marketing communications done by

other beauty and cosmetics companies due to the changing consumers perceptions, taste and

psychologically effective advertisements of other companies.

As the industry of a country matures (e.g. that of an Asian country) imitation may occur,

which may reduce the perceived differentiation of products, as market may not remain niche

anymore, but start saturating due to existence of many local companies producing herbal

beauty products as NWP.

Technological advancements in an international market of less developed countries may make

them one step closer to becoming developed; as a result COO effect on foreign

products/brands will decrease, due to better quality of local products existing in the market.

When production of products is being done in different countries (new market), it may give

birth to hybrid products, they are the products with different countries-of-manufacturing -

design or –parts and are often regarded as enjoying origin effects from different countries at

the same time. These de-constructed conceptualizations leave consumers confused about the

product/brand's COO (Samiee et al, 2005).

Conclusion:

It can be concluded that Country of Origin plays a vital role in affecting consumer purchase

intentions, along with numerous other factors. Further research indicates that consumers

evaluates products by intrinsic cues (experiencing the product), and extrinsic cues (Country of

Origin being one of them) were found to have a greater influence on consumer product

evaluation and purchase decisions. Furthermore, the implementation of growth strategies by

NWP, predominantly focusing on COO was noticed to have their own set of numerous perks

and pitfalls.

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Recommendations for NWP:

1. Implement new product development (growth strategy) both domestically and

internationally, by targeting new market (men, babies) and introducing an extended line

of related products like, natural cosmetics, hair products and perfumes, in order to

increase market share.

2. While planning to expand business, it is recommended to employ technology to

implement flow production, instead of producing in batches to maintain standard quality

of products and to meet demand constantly.

3. Start by expanding sales in Asian (international) market rather than western market, due

to their positive Country of Origin perception about Western countries (such as, New

Zealand).

4. Increase geographical reach by using international online retail shopping websites such as

ebay, wallmart, etc, along with updated NWP (global) website.

5. Using effective marketing communications to promote product through social media

marketing, health care campaigns, flyers/magazine advertisements. Also, using promotion

methods to educate the consumers about the company's origin, differentiated products

offering and increasing health awareness.

6. Focus and prioritize other intrinsic and extrinsic cues as well, alongside COO, in order to

be able to function without limitations.

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References:

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