Country-Of-Origin Influence on Consumer Behavior of (British Airways)

Table of Contents

TOC o “1-3” h z u HYPERLINK l “_Toc342563772″CHAPTER ONE PAGEREF _Toc342563772 h 3

HYPERLINK l “_Toc342563773″1.0 INTRODUCTION PAGEREF _Toc342563773 h 3

HYPERLINK l “_Toc342563774″1.0 Introduction PAGEREF _Toc342563774 h 3

HYPERLINK l “_Toc342563775″1.2 The problem statement PAGEREF _Toc342563775 h 3

HYPERLINK l “_Toc342563776″1.3 Significance of the Study PAGEREF _Toc342563776 h 6

HYPERLINK l “_Toc342563777″1.4 Aims and Objectives of the Study PAGEREF _Toc342563777 h 7

HYPERLINK l “_Toc342563778″1.5 Research Questions PAGEREF _Toc342563778 h 7

HYPERLINK l “_Toc342563779″1.6 Theoretical Framework PAGEREF _Toc342563779 h 8

HYPERLINK l “_Toc342563780″CHAPTER TWO PAGEREF _Toc342563780 h 12

HYPERLINK l “_Toc342563781″2.0 LITERATURE REVIEW PAGEREF _Toc342563781 h 12

HYPERLINK l “_Toc342563782″2.0 Introduction PAGEREF _Toc342563782 h 12

HYPERLINK l “_Toc342563783″2.1 Consumer Behaviour and the Buying Process PAGEREF _Toc342563783 h 12

HYPERLINK l “_Toc342563784″2.2 Country-of-origin effect PAGEREF _Toc342563784 h 18

HYPERLINK l “_Toc342563785″2.3 Regional in comparison to national labelling PAGEREF _Toc342563785 h 19

HYPERLINK l “_Toc342563786″2.4 Consumer behaviour toward imports PAGEREF _Toc342563786 h 20

HYPERLINK l “_Toc342563787″2.5 Impact of Marketing Mix on Consumer Decision Making PAGEREF _Toc342563787 h 21

HYPERLINK l “_Toc342563788″2.5.1 Pricing and Consumer Buying Behaviour PAGEREF _Toc342563788 h 22

HYPERLINK l “_Toc342563789″2.5.2 Promotion and Consumer Purchase Decisions PAGEREF _Toc342563789 h 23

HYPERLINK l “_Toc342563790″2.5.3 Effect of Branding on Consumer Purchase Decision PAGEREF _Toc342563790 h 24

HYPERLINK l “_Toc342563791″2.5.4 Culture Influence on Customer Behaviour PAGEREF _Toc342563791 h 27

HYPERLINK l “_Toc342563792″CHAPTER THREE PAGEREF _Toc342563792 h 29

HYPERLINK l “_Toc342563793″3.0 RESEARCH METHODOLOGY PAGEREF _Toc342563793 h 29

HYPERLINK l “_Toc342563796″3.0 Introduction PAGEREF _Toc342563796 h 29

HYPERLINK l “_Toc342563797″3.1 Research Strategy PAGEREF _Toc342563797 h 29

HYPERLINK l “_Toc342563798″3.2 Data Collection Methods PAGEREF _Toc342563798 h 33

HYPERLINK l “_Toc342563799″3.2.1 Questionnaires PAGEREF _Toc342563799 h 33

HYPERLINK l “_Toc342563800″3.2.2 Interviews PAGEREF _Toc342563800 h 34

HYPERLINK l “_Toc342563801″3.3 Research Procedure PAGEREF _Toc342563801 h 34

HYPERLINK l “_Toc342563802″3.4 Sample and Sampling Procedure PAGEREF _Toc342563802 h 35

HYPERLINK l “_Toc342563803″3.5 Data Analysis PAGEREF _Toc342563803 h 36

HYPERLINK l “_Toc342563804″3.6 Informed Consent and Privacy Measures PAGEREF _Toc342563804 h 37

HYPERLINK l “_Toc342563805″3.7 Chapter Summary PAGEREF _Toc342563805 h 38

HYPERLINK l “_Toc342563806″CHAPTER FOUR: PAGEREF _Toc342563806 h 39

HYPERLINK l “_Toc342563807″RESULTS AND ANALYSIS PAGEREF _Toc342563807 h 39

HYPERLINK l “_Toc342563808″4.0 Empirical Investigation: Results and Analysis PAGEREF _Toc342563808 h 39

HYPERLINK l “_Toc342563809″4.1 Restatement of Aims and Objectives of the Study PAGEREF _Toc342563809 h 39

HYPERLINK l “_Toc342563810″4.2 Descriptive Statistics PAGEREF _Toc342563810 h 40

HYPERLINK l “_Toc342563811″4.2.1 General Response Rate PAGEREF _Toc342563811 h 40

HYPERLINK l “_Toc342563812″4.2.2 Demographic Profile and Attributes of the Sample PAGEREF _Toc342563812 h 40

HYPERLINK l “_Toc342563813″4.2.3 Knowledge about the Country: PAGEREF _Toc342563813 h 46

HYPERLINK l “_Toc342563814″4.3 Inferential Statistics PAGEREF _Toc342563814 h 47

HYPERLINK l “_Toc342563815″CHAPTER FIVE: PAGEREF _Toc342563815 h 50

HYPERLINK l “_Toc342563816″5.0 CONCLUSION AND RECOMMENDATIONS PAGEREF _Toc342563816 h 50

HYPERLINK l “_Toc342563817″5.1 Conclusion PAGEREF _Toc342563817 h 50

HYPERLINK l “_Toc342563818″5.2 Recommendations PAGEREF _Toc342563818 h 52

HYPERLINK l “_Toc342563819″5.0 Bibliography PAGEREF _Toc342563819 h 54

CHAPTER ONE1.0 INTRODUCTION1.0 IntroductionCountry of origin of a product or a company is important in the decision making of consumers (Shirin, 2011). Products from different countries in most cases have labels showing the countries where they are manufactured. Consumers will therefore, judge the products based on the country of origin of the products (Moore, Fernie, & Burt, 2000). The country of origin in has a significant impact on the success or failure of a company in market (Fan, 2002). British Airways has gained significant access to the Chinese market mainly because of the Influence of the country of origin of the airline (Johny, & Ilkka, 2005). The research study is aimed at determining how the country of origin has influenced the consumer behaviour towards British Airways in China.

1.2 The problem statementConsumer behaviour is a subject that has been studied over the years with an objective of developing a better and profounder understanding of how consumers behave given different circumstances. Generally, studies that have been conducted to explore consumer behaviour have established that consumer behaviour and impacted by a number of factors within the customer-business relationship and some of which go beyond this relationship. While there are many factors that consumer behaviour responds to including branding, positioning, customer care among other aspects, placed of origin has recently come to be one of the factors that research studies are turning to in the bid to bring out an even deeper understanding of the consumer behaviour subject. For instance a recent study by Shirin (2011), observed that Country of origin of a product or a company is important in the decision making of consumers. In fact, it is not uncommon to see that products from different countries in most cases have labels showing the countries where they are manufactured.

Consequently, according to Moore et al (2000), consumers will therefore, judge the products based on the country of origin of the products. These observations provide considerable evidence indicating that the country of origin is a key factor that can provide information on whether a business will be successful or not. As supported by the view of a study conducted by Fan (2002), as a significant impact on the success or failure of a company in market, country of origin therefore becomes an important factor that deserves to be studied (Fan 2002). British Airways has gained significant access to the Chinese market mainly because of the Influence of the country of origin of the airline (Johny & Ilkka 2005). The research study is aimed at determining how the country of origin has influenced the consumer behaviour towards British Airways in China. Globalization of business operations since the turn of the last few decades has made business competition to be a complex affair and business organisations must do all it takes to ensure they understand how the target customers feel about the product presented in the make to them and how they feel the level of satisfaction they get when they use the products. In the airlines industry, it is even more complex with the industry currently facing technical financial problems.

The intricate mode of behaviour of the consumer during the buying process shows that understanding consumer behaviour and “knowing customers” is never simple (Kotler 2004). Customers may say one thing but do another. They may not be in touch with their deeper motivations. They may respond to influences that change their minds at the last minute. Large multinational companies like British Airways stand to profit from understanding how and why their customers buy.

Focus on country of origin as an important determinant of consumer behaviour began to take foothold in 1965 with the first study conducted by Schooler (in Klein 2003), which established that the effect of country of origin actually exists. However, this study did not point out or investigate the strength of the factor and its directional relationship with consumer perceptions about products (Klein 2003). During this time, it had become accepted that most consumers found some non-US made products to be good alternatives to the US-produced goods. Schooler therefore followed the 1965 study with another study in 1969, which took a slightly different approach in a longitudinal approach study that investigated consumer perception about products with national labels versus those that bore regional label. The numbers of studies that have specifically focused on country of origin as a factor in consumer decision making have been building up though very slowly. Nevertheless, so far the studies that have been conducted clearly show that the image of the country of origin of a product is instrumental in helping consumers to make their purchase decisions since the consumers may attach a negative or positive image to the country hence the products from the country as well. However, while a number of studies have attempted to investigate the incorporation of country of origin as a factor in the consumer behaviour model of branded and imported products as well as other general products, especially within the American internal market settings, no study attempted to focus on incorporation of this concept into British Airways or any airlines company and focus on China given that China is an emerging economy that has the brunt of both positive and negative attributes.. The study therefore, endeavours to establish the specific effects that country of origin of British Airways as an air travel brand has on the consumers in the Chinese airline industry.

1.3 Significance of the StudyBehavioural scientists the world over have in the past mainly concentrated their efforts to studies of consumer behaviour by concentrating on the effects of price, cultural factors, gender of buyers, advertising, branding and positioning on the perception of consumers about the products and their intentions to purchase. Most studies have been on the effect of these factors on the consumer purchasing decisions and how businesses can use this information to better their interaction with the customers and survive in the competitive business world. However, a few decades ago, businesses started going global with the advent of globalisation and the global business environment and this has made the concept of country-of-origin effect even more important. Therefore, by the turn of the 1980’s scholars were getting more interested in focusing on the country-of-origin as an important area that requires scholarly attention in the field of behavioural science, and more specifically the area of consumer behaviour.

The findings of this study may provide resource material to be considered for inclusion by the airline companies in their arrangements and appropriations of consumer perceptions and needs as part of their business decision making to be used in bettering the business-customer interactions. Besides providing a contribution to the existing body of knowledge by expanding and renewing the understanding of consumer perceptions about the country of origin, this study may also provide a scientific understanding on how country of origin impacts on consumer choices of air travellers in the modern highly competitive air travel business world. The findings of this study may be useful in tracing the historical growth and development of the understanding of the country-of-origin effect from the early studies carried out in the early days of the birth and development of the idea in 1970’s to this modern world where most business aspects are highly complex.

1.4 Aims and Objectives of the StudyThe main objective of the dissertation is to explore the influence of country of origin on the consumer behaviour and focus on British Airways in China as the focus case for the study. The following are the aims and objectives of the research study.

To explore and examine consumer behaviour of British Airways customers with respect to its country of origin effect.

To examine the perception and attitudes of consumers in China towards the United Kingdom where British Airways originates.

Identify how consumer’s perception and attitudes of the United Kingdom are related to their behaviour towards British Airlines in China.

Identify the impact of the country of origin of British Airways to its growth in China.

1.5 Research QuestionsThe study attempts to investigate the topic and achieve the objectives by answering the research questions below:

How does country of Origin affect consumer behaviour of British Airways customers?

What are the consumer behaviour trends of British Airways customers with respect to country of origin effect?

What are the implications of country of origin on consumers of British Airways products?

How does country of origin lead to growth of British Airways in China?

What are the important factors that consumers consider when choosing British Airways?

1.6 Theoretical FrameworkThis research study employs the conceptual framework developed and used by Niels and Harzing (2003), which provided a clear view of the connection between the consumer and the product where they intersect at a point that is characterized by the country-of-origin effect. The model can be illustrated by the figure below, which takes a triangular shape with the consumer and the product being at the base of the triangle while the country of origin as a determinant of the perception the consumer would have about the product being at the top of the triangle as shown below.

Based on the above illustrations, this study hence uses the developed frameworks to achieve the set objectives founded on the evidence that products communicate meanings that are decoded by the consumers by information, not intrinsic in the products alone, but extrinsic and generated by other attributes, which the consumer associates with the product image as an understandable sign. These image attributes of the products are used by the consumers to create particular perceptions that relate to quality, emotional feelings, symbolic affiliations and hence influence the consumer to make purchase decisions. It is this relationship that creates a three-way correlation among the consumer, the product and the country of origin sign. As observed by Niels and Harzing (2003), some scholars extended this model and adopted it to create the product perception process where the product plays the function of being seen as an object translated from the Morris’ sign theory (Niels and Harzing 2003). Similarly, the country-of-origin effect operates as a cue that reminds the individual of the product attributes. The product attributes could thus have an attachment with specific utility measure to the consumer or could just have a social or psychological attachment with the consumer (Niels & Harzing 2003). The consumer is the equivalent of the interpretant from the Morris’ sign theory model. In the opinion of the researcher in this study, the model is best suit for this dissertation because it offers a better methodological approach to the study of how consumers derive meanings from country of origin as a coo-label on foreign products and specifically British Airways in the Chinese airlines market. Therefore, the model provides a better approach to understanding how consumers in the Chinese air travel industry signify British Airways as a product made in Europe or Britain.

CHAPTER TWO2.0 LITERATURE REVIEW2.0 IntroductionThis chapter presents an extensive review of literature as it traces the conceptual advancement of the of the country-of-origin construct as an important aspect that determines consumer behaviour. Generally, the value of literature review depends on its ability to provide a critical appraisal of the available research on a topic. Through the demarcation and evaluation of the existing knowledge base of a specific area, a review of the body of literature not only marks out the most important themes and concerns in the subject area but also points out and builds avenues for follow up studies.

In the specific perspective of the country-of-origin field, there has been an increased level of interests from the scholars who are interested in exploring the effects and impact of the aspect as an important cue thereby making the literature review timely and helpful for this study and future studies. This study may not have an extensive review of the literature based on the level of the study relevant and the expansive nature of the topic. However, all attempts are made to make sure that every relevant detail that can aid in achieving the objective of the study is included.

2.1 Consumer Behaviour and the Buying ProcessKotler (2010) undertook an extensive research and concluded that it is an important aspect of the business interaction, which is not only complex and diverse due its connection with the subject of human behaviour is also very important for businesses to understand how customers respond to the various mechanisms and marketing attempts so that they can make proper decisions in the marketing exercises. The study by Dada (2007) argues that the consumer buying process in the global airlines industry can be described in a five-stage process. At the first stage, consumers recognize a problem; for which a solution is needed to solve it via a perceived need. Continued or incessant marketing and advertisements efforts can arouse curiosity in target consumers and trigger decision making process (Dada, 2007). The second stage in the buying process involves information search. Here, the consumer seeks value through a number of ways; which include: scanning one’s memory to recall previous experiences with the particular airlines company, products or brands and inquiry from other sources such as other consumers. The risk of making wrong purchases is increased if the knowledge acquired during this stage is insufficient or if the past experience with the product is not sufficient. There are three basic sources of external information for consumers at this stage: public sources like exhibitions, personal sources like friends, and marketer-dominated sources, such as advertising, company websites, and salespeople or the airline ticketing agencies. With the advent of the internet technology, the sources of information have expanded to include the World Wide Web.

The third stage of the buying process is the alternative evaluation stage where the consumer assesses value in the particular product by using information gathered at stage two. The consumer’s evaluative criterion is governed by both subjective factors like prestige and objective attributes of a product. The consumer then moves to the decision making stage where the consumer chooses any of the three possibilities. The first possibility is choosing whom to buy from. Factors for the consumer to consider include; terms of sale, past buying experience with the seller or return policy. Another option that the consumer considers is when to buy the product under consideration. The last stage in the consumer buying process is the post-purchase stage where the consumer evaluates the value in consumption of the bought product or in use of a service.

Another study that extensively analyzed the consumer buying behaviour is the study conducted by Huang and Radder (2008), which observes that when a consumer wants to make decision, the consumer goes through the consumer buying process by first establishing the problem that needs to be solved. Previously, a study by Bryant and Zelman (1999) had also observed that the consumer may also develop a perception of his ideal situation and actual position which may consequently trigger a decision (Bryant and Zelman 1999).

Since the airline travel is generally a high involvement product, the process of scanning ones memory may not be adequately sufficient and hence the consumer must seek for sources of information to curb the risk of making the wrong purchase decision. He therefore moves to the external sources for more information concerning the hybrid car. In the external sources, the consumer may consult personal sources like friends and family (Huang and Radder’s 2008). Product-rating organizations may also be helpful as external public sources for the consumer. The consumer also seeks information from among marketer-dominated sources such as advertising, salespeople and company websites.

The next stage in the purchase decision process is for the consumer to evaluate the alternatives through value assessment (Huang and Radder 2008). At this point, the consumer finds the information search to be important when it suggests the criterion to be applied in making the purchase of the hybrid car, the information yields brand names that might meet the suggested criteria and then it helps in developing the consumer’s value perception.

The consumer now moves to determining or making the real purchase decision so that he buys the values he desires. At this point therefore, the consumer must decide where he gets to buy the hybrid car. The choice of whom to buy from is depended on such issues as terms of sale (for instance if one seller offers discounts while the other offers after sales services), past experience of the consumer buying from the seller and then return policy (McDuffie & Helper 2000). The consumer also decides when to buy the high involvement product depending on time pressure, how pleasant the travelling experience was and the general airline’s atmosphere; probably how customer friendly it is.

The consumer lastly carries out a post-purchase value in consumption evaluation where he makes a comparison of the product with the expectations he had before purchase. Consumers are likely to experience the post purchase cognitive dissonance. The decision to purchase a product is likely to be affected by the family influence, culture and sub-culture and the social class in which an individual consumer belongs.

Perceptions of airlines customers on the value of air travel have affected the performance of the industry. Advanced technology and the introduction of the internet and web-based ticketing have enabled consumers of airlines products to put a lot of emphasis on price rather than travel time. Customers are in position to book flights for themselves ends are able to find lowest fares. This forces most airlines companies to reduce fare which in turn leads to low profits in the organization. Moreover, airline industry has for long experienced retarded market growth due to low returns because of the very factors discussed above. The factors put forward by Porter are directly attributed to the retarded growth of airline industry. Overhead and labour costs in this industry are more than the revenue earned hence affecting the shareholders wealth hence many potential investors run away from investing in this sector. This also has a far reaching influence ion the expansion programs of the company. Any strategic move towards development in the airline industry has been limited by poor returns from the investments made (Greenbelt, 2000).

2.2 Country-of-origin effectPrior to the 1965 study conducted by Schooler, there was no literature in the country of origin as a factor in the consumer purchase decision making process. In this pioneering study, Schooler found that the country of origin is a key factor that can have an impact on the consumer purchase decision making process and hence concluded that this significant aspect of the consumer behaviour should be put to more academic investigation (Frazier & Anta 2001). The studies that followed have cemented the observation that the country of origin is a key factor that modifies the opinion of the consumer about the product (for instance, Klein 2002). This implies that there are products that might be viewed as either positive or negative based on the country from which they originate. Nevertheless, most of the initial studies did not focus on exploring or establishing the direction of the relationship between the consumer perception and the country of origin of the products in question. The main objective of the studies was basically inclined on establishing whether the country-of-origin effect existed or not. Some scholars have argued that it is important to take into account the country stereotypes that exist before or when conducting a study that targets exploring the country-of-origin effect because this can significantly affect the ability of the study results to be generalised to other settings. For instance, in an extensive review of the literature carried out by Dinnie (2003) indicated that when country stereotypes and the nature of the stereotypes are not considered during the research study, then the results drawn from the entire study might be flawed.

In their model, Niels and Harzing (2003) argue that globalization cannot be ignored when developing the point of convergence between cultural, political and economic aspects of the life in the countries under consideration because these factors create a point of convergence that multinational companies such as British Airways sail in and therefore the multinational company is prone to be seen as a harbinger of the global customs and traditions. In addition, knowledge in the modern business environment moves extremely fast across organizational limitations and restrictions such that it is expected that a multinational organization can easily adapt to the new operating environments in the foreign country and know exactly how the consumers in the destination country perceive the organization and parent country of the multinational. However, organizational culture is an important factor in the day-to-day operation of the multinational and therefore it can’t just be assumed that given the complexity intermarried with internal differentiation of the multinational it would be a simple endeavour that has no difficulty at all.

Looking at the above model, it is imperative to note that country of origin is brought out and seen as a sign by the product consumer. This semiotic methodology is also used by Brijs (2003) to evaluate the country-of-origin effect as an important cue in determining the perceptions consumers have on the products produced from Europe and marketed kin Asian countries such as Japan and South Korea. This study is therefore well suit to use the semiotic model to develop a better and thorough understanding of the country-of-origin effect on the perceptions of consumers toward British Airways as a product from or “Made In” Europe and sold or marketed in China. This approach is even further supported by the fact that many researchers who have opted to study the effect of country of origin on consumer perceptions have demonstrated dissatisfaction with the standard traditional approaches that were previously developed and used since such models, as it is pointed out in the literature review below, had been based on many assumptions that could not stand vigorous scholarly scrutiny. Due to the biases that were identified by later studies, the previous models were found to be insufficient in establishing a conceptual framework that would be used to better understand the consumer’s product evaluation process (Brijs 2003). It is therefore not coincidental that the semiotic model is chosen to be used in this study as the most appropriate model for understanding the consumer perceptions of products based on the effects of the country of origin. It is not coincidental because even the research study carried out in the 1990’s by Denzin established that human beings attach meanings to specific signs and hence develop their own perception constructs of the objects based on how they perceive the objects (Denzin 1992). Similarly, another follow-up study by Holbrook and Hirschman (1993), reiterated the findings established by Denzin (1992) and further argued that products carry and transmit meaning to the consumers and potential customers hence marketers must be wary of this fact. Moreover, both studies by Brijs (2003) and Niels and Harzing (2003) use the sign theory developed by Charles Morris inn early 1940’s that has become an instrumental illustration of the use of semiotics in understanding human behaviour.

2.3 Regional in comparison to national labellingThe studies that were conducted prior to 1990’s were very instrumental in developing a profound conceptual framework for investigating and comprehending how the consumers perceive the international products by comparing regional and national labelling of the products (Klein 2003). According to Klein (2003), some of the breakthroughs in understanding the consumer perception of the international products made it more appealing for companies to give a general label to their products so that the goods would not be identified with a particular country but rather a general region such as the Latin America, Asia, Africa among other regionally appealing labels. This implied that based on this notion, a product made in Singap