Inquire Inspire And Innovate

Published Date: 02 Nov 2017

TRIMESTER 2, 2012/2013

Lecturer: RUDAINI SHAM BIN ABDULLAH JUMAIN

Group: BM 201

Student’s Name

Student’s ID

Wang Chun Jin

1102700241

Roger Yong Chow Soon

1102701771 

Chuah Lee Chern

1102702056

Toong Boon Keat

1092700618 

Wong Yat Ming

Chapter 1

Introduction & Literature Review

1.1 Background of the study

Brand awareness is not something new to us. Every time, when we need to purchase something, we definitely will think of several big names in the particular area. For instance, when we are going to buy a television, we will think of some foreign electronic appliances brands like Panasonic, Samsung, and Sony. Meanwhile, in automobile industry, we are familiar with the big name like Toyota, Honda, Ford and Volkswagen. Those products are well-known for producing the high quality products for their customers all the times. On the other hands, in Malaysia, we have Proton and Perodua in the market to compete with the foreign car brands. Although the brand image of local car company is not as strong as the foreign company, there are still having people to purchase the Proton and Perodua car. Therefore, our research main purpose is to find out the real reasons behind that affect the purchasing decision of a consumer.

1.2 Problem statement/ research question:

Why Malaysian tends to buy made in foreign products rather than local products?

We set the research question in this way because we wish to find out what is the real reasons behind that encourage consumers to purchase the foreign brand products.

1.3 Research objectives:

Investigate impact on consumers buying foreign products.

Investigate consumer perception on foreign and local products.

The research will start with conduct a survey of 50 university students who are from different faculty like Engineering, Law, Business and IT. They are required to fill in all the questions in the survey form that we distribute to them. The questionnaires are divided into several parts like respondent’s information, brand awareness, pricing, quality, ethnocentrism, and social influence. This will help us to analyze our data more easily and in a faster way.

1.4 Significance of study

The study of the factors of customers purchasing decision whether to buy the foreign or local products can be very useful to enhance the local brand names and to help them to improve their current products and services. Next, it will help the local company to identify the external threat of the company which is the foreign company. In addition, it will create brand awareness to the customers so that they can compare and contrast the difference between both products.

1.5 Scope of the study

Our scope of study involved several parts like brand awareness, pricing, quality, ethnocentrism and social influence. For the brand awareness session, we may ask them about their perception about foreign brands and local brands. Next, we will determine whether consumers feel that pricing is important for them to make a decision. Besides, we will investigate their perception about the quality of the both products. Moreover, we will also wish to know do they feel unpatriotic if they do not support local products. Lastly, we will test on the consumers whether they will influence or influenced by others when come to the purchasing decision.

1.6 Operational Definition

A consumer with low level in ethnocentricity tends to buy foreign-made product, whereas a consumer with high level in ethnocentricity tends to buy local-made product.

1.7 Literature Review

According to Cheng Lu Wang and Zhen Xiong Chen, the studies on the country-of-origin effect (COE) in most developing countries have found that consumers have a general preference for domestic over foreign merchandise when they lack of information about the foreign product. The relationship between country-of-origin and the quality image of imported products is especially strong when consumer ethnocentrism (CE) is involved (Agbonifoh and Elimimian, 1999; Shimp and Sharma, 1987).

The tendency of consumers to be ethnocentric represents their beliefs about the appropriateness and moral legitimacy of purchasing foreign products (Shimp and Sharma, 1987). Ethnocentric consumers prefer domestic goods because they believe that products from their own country are the best (Klein et al., 1998). Moreover, a concern for morality leads consumers to purchase domestic products even though the quality is poorer than that of imports (Wall and Heslop, 1986). CE may play a significant role when people believe that their personal or national well-being is under threat from imports (Sharma et al., 1995; Shimp and Sharma, 1987). The more importance a consumer places on whether or not a product is made in his/her home country, the higher his/her ethnocentric tendency (Huddleston et al., 2001).

Given that consumers’ evaluation of the quality of domestic/imported products will influence their purchase preferences, the impact of ethnocentrism on willingness to buy will be different between developing and developed countries. In a developed country, consumers in general tend to have a higher quality perception of domestic than foreign products (Ahmed and d’Astous, 2001; Bilkey and Nes, 1982; Dickerson, 1982; Morganosky and Lazarde, 1987; Samiee, 1994). This favorable perception would tend to enhance the influence of ethnocentrism on both the purchase of domestic and the rejection of foreign products. However, in developing countries such as Nigeria, China and India, consumers typically perceive foreign products, particular those made in higher origin countries, as being of higher quality than domestic products. Even ethnocentric consumers may positively evaluate the quality of imports to some extent if they are perceived as being associated with a country with a better image (Yagci, 2001). In other words, in a developing country, a consumer with strong ethnocentric tendencies may not necessarily perceive domestic products as being of higher quality than imports, even though she/he rejects foreign products on moral grounds. Consequently, the negative perception of domestic-made products coupled with an admiration of imported products would mitigate the effect of ethnocentrism on intention to purchase the former.

Next, consumers’ intention to purchase domestic/foreign products will be influenced by perceived quality. Quality perception is treated as a multi-dimensional concept including appearance, color and design, durability, fashion, functionality, prestige, reliability, technical advancement, value for money, and workmanship (Darling and Arnold, 1988; Darling and Wood, 1990; Klein et al., 1998; Scott et al., 1997; Watson and Wright, 2000). As a product comprises many different physical and symbolic attributes, the country-of-origin is regarded as an extrinsic cue often used by consumers in the process of evaluation (Bilkey and Nes, 1982; Cordell, 1992; Elliott and Camoron, 1994). Research also suggests that a significant proportion of consumers will be interested in country-of-origin information before making a purchase (Hugstad and Duur, 1986). The country-of-origin cue helps consumers to make inferences about quality, and affects their beliefs about product attributes (Han, 1989).

Previous studies have suggested a positive correlation between the evaluations of domestic products and a country’s level of economic development (Gaedeke, 1973; Toyne and Walters, 1989; Wang and Lamb, 1983). A consumer will tend to purchase a product made in a technologically-advanced country if he or she judges its quality as better than that of merchandise produced in a less-developed country. Moreover, a product’s country-of-origin often serves as a cue activating a consumer’s ethnocentric tendency (Huddleston et al., 2001).

As such, willingness to buy domestic/foreign products is influenced by both ethnocentrism and quality judgment.

Conspicuous consumption (CC) refers to consumers’ desire to provide prominent visible evidence of their ability to afford luxury goods (Piron, 2000). Motivated by a desire to impress others with their ability to pay particularly high prices for prestige products, conspicuous consumers may be inspired by the social rather than the economic or physiological utility of merchandise (Mason, 1981). CC is not confined to the leisure class but can be found in all social and income groups from richest to poorest. By advertising their wealth, people who engage in CC thereby achieve greater social status (Bagwell and Bernheim, 1996; Basmann et al., 1988; Mason, 1981).

In a developed country, CE and CC are positively correlated in most situations since domestic products, compared to imports from developing countries, are associated with positive brand image and status. Ethnocentric consumers with CC values will, therefore, be more likely to buy domestic products. However, in a developing country, where imports generally carry symbolic meanings of high fashion and social status, CC may counteract the influence of ethnocentrism on the purchase of domestic products. On one side, ethnocentric consumers tend to believe that purchasing imports is unacceptable and are proud of their decision to buy domestic products, so are more willing to do so. On the other hand, conspicuous consumers tend to show off their wealth by purchasing imports (Ger et al., 1993).

In short, in the choice between domestic and imported, a consumer may be in a situation of conflict between two consumption values, which are ethnocentrism against conspicuous consumption (CC).

Part 2

Research Methodology

Brand awareness2.1 Development of Research Framework and Hypotheses

Level of Ethnocentrism

Quality

Purchase Decision on Foreign Product or Local Product

Pricing

Social influence

Figure 2.1 Research Frameworks

According to the figure 2.1, there have 5 independent variables which are pricing, social influence, quality of product, level of ethnocentrism and brand awareness. And the dependent variable is purchase decision on foreign product or local product. Which the independent variable will affect the dependent variable.

Hypothesis 1: There is a significant relationship between quality of product and purchase decision on foreign product or local product

The quality of product is perceived by the country of origin (COO). If a country has a positive image on specific product category dimensions, which are very critic to product classification. Consumers would perceive these products are having a high quality of this category from that country. Consumers are tending to purchase the product from that country when purchasing that product category.

Hypothesis 2: There is a significant relationship between brand awareness and purchase decision on foreign product or local product.

If brand of the products is more familiar to the consumer, they will extremely enjoy the product because those famous brands in the markets have more benefit compare to those less familiar brands of products brands. Many consumers tends to depend on brand name when making a purchase decision because brand names provide consumers some additional information about the product and a product recognized cue.

Hypothesis 3: There is a significant relationship between pricing of product and purchase decision on foreign product or local product.

The customer's perception of you products' prices is the basis of psychological pricing. Higher pricing products give a perception to the consumers it is a good quality product. If the consumers have no any knowledge toward the product, they will make their make purchase decision on a higher price product. Foreign product may charge higher price compare to the local product because of the transportation fees and taxes.

Hypothesis 4: There is a significant relationship between social influence and purchase decision on foreign product or local product.

If the foreign product is available in local market, there have more advertisements about the foreign product compare to the local product. Advertisements are a critic tools for marketing to promote themselves to the consumer. Besides, friend and family also will influence the consumer purchase decision. The consumer tends use same brand of product with their friend or family. The consumer social environment is a factor that influence their purchase decision.

Hypothesis 5: There is a significant relationship between level of ethnocentrism and purchase decision on foreign product or local product

Ethnocentric consumers will have a greater predilection for local products in decision situations in which a local alternative is available. If the consumers were highly ethnocentric, they feel wrong to purchase foreign goods and when consumers have low ethnocentric they tend to buy foreign good rather than local good. Therefore, it was to be said that the consumer purchase decision will be affected by the consumer ethnocentrism level.

2.2 Research design

Research design of our research is to know how of make use of information can be collected for procedure to accurately assessment of cause and outcome of the relationships between independent variables and dependent variable. The purpose of research design is to target and identify the participants’ populations, set a samples size beyond the targeted participants, and ways to record the data which collected through the survey. In order to complete the study, we had conducted quantitative research method. Quantitative research method is aiming at causal explanation. Basically, quantitative research method answers to "why questions". It includes independent variable and dependent variable. Based on our study, pricing, social influence, quality of product, level of ethnocentrism and brand awareness. On the other hand, dependent variable is purchase decision on foreign product or local product. Moreover, questionnaire survey had been carried out to collect information from the participants we target. The questionnaire form was distributed to the participants and they were given few minutes to complete the survey’s questions. After the participant finished, we will collect the survey form from them. Questionnaire is more common to establish in a research and it is cheap and less time consume to collect all the data. Moreover, we had design the questionnaire form in Likert-Scale so we can easily to analyzes and conclude the result.

2.3 Research Instruments

For our research, survey questionnaires were used as research instruments due to the flexibility and convenience for the targeted populations. Questionnaires that are related to our topic are distributed to those targeted population randomly without any restriction on gender, incomes and so on. We divided the questionnaire into two section sections. The first section is the respondent detail. Whereas the second section is the independent variable question and it has 5 sub-sections. The questionnaires are designed based on 5 point Likert-Scale which are scale with point 1= strongly disagree, 2= disagree, 3= neutral, 4=agree and point 5= strongly agree. Likert-Scale is likely to produce a highly reliable scale and easy to read and complete for the respondents. So we can have a more accurate result by using Likert-Scale in this research topic. The survey questionnaires were designed based on independent variables and dependent variable respectively. Besides, we will use nominal scale to obtain demographic information like gender, ethnicity and age.

2.3 Sampling Plan

The research was conducted among 50 students of Multimedia University Melaka Campus which is located at Jalan Ayer Keroh Lama 75450 Bukit Beruang Melaka, Malaysia. The students involved in this survey were selected based on simple random sampling method. Random sample is a type of sample in which the researcher uses a random number table or similar mathematical random process so that each sampling element in the population will have an equal probability of being selected. The data for the study was collected from a random sample of 50 students from Multimedia University Melaka Campus. 60 students from Multimedia University Melaka Campus were targeted for the purpose of this research since there was a time constrain. A total of 60 survey questionnaires were distributed among the targeted participants. The questionnaires were then collected back after the participants answer the questionnaire for data analysis purpose.

2.4 Data Collection Method

Data Collection is the procedure of measuring and gathering the information that we had collected and make a decision about important issues. First in our research, we collect the data and information from the respondents was through questionnaire survey. The way that we use to given the questionnaire survey to respondents is through face-to-face. This method can have a highest response rates in survey research. The pros of this method are less time consuming and also it is less costly. This method allows researcher collects the data from respondents in a very short period and if any doubts among the respondents, they can ask the researcher on the spot.

3.6 Data analysis

The questionnaires are collected from the respondents for future analysis. We used the Statistical Package for the Social Sciences (SPSS) program for future analysis. We will do frequency analysis, reliability analysis, mean analysis, and hypothesis testing

Part 3

Research Finding

3.0 Descriptive analysis

Descriptive analysis is used to describe and present the data of quantitative descriptions in a manageable form such as tables or charts. Besides that, the covers the descriptive analysis is for the general section in the questionnaire. The 50 survey forms are measured demographically. That are consists of population or personal background of the respondent such as Gender, Race, Age, Education Level and Monthly Income. Next, it also includes general information of the respondent on their recycling behaviour and also the respondents’ ranking on the factors. Highly significant question will be further analyse and elaborate to draw a comparison.

3.1 Frequency Analysis

Table 3.1 Frequency analysis for respondents demographic

Variable

Frequency

Percentages (%)

Gender

Male

29

58

Female

21

42

Race

Malay

8

16

Chinese

35

70

Indian

5

10

Non-Malaysian

1

2

Others

1

2

Age

Below 18 years old

2

4

18– 20 years old

17

34

21 – 23 years old

22

44

24 – 26 years old

0

0

Above 26 years old

1

2

Education Level

Primary

0

0

Secondary

4

8

Diploma

16

32

Degree

28

56

Postgraduate

2

4

Monthly Income

Below RM1000

35

70

RM1000 - RM2000

10

20

RM2000 - RM3000

3

6

More than RM3000

1

2

The table 3.0 above shown that 58% of the population were male and 42% were female. Most of Chinese people will tend to purchase foreign product instead of local product. Many of the respondents are range between 21 – 23 years old. We also notice that the respondents of age between 24 – 26 years old were not tends to purchase foreign product. Besides that, there are 56% of degree student will purchase foreign product and no of the primary school will purchase foreign product. For the comparison of the monthly income, most of the respondents who earn below RM1000 are 70% out of hundred. Next, the highest monthly income which is higher than RM3000 with 2% out of hundred will purchase the foreign products.

3.2 Reliability analysis

Table 3.1 Reliability analysis using Cronbach’s Alpha

Variable

Number of items

Cronbach’s Alpha

Brand Awareness

4

0.90

Pricing

4

0.64

Quality

4

0.67

Ethnocentrism

3

0.66

Social Influence

4

0.73

As we know that, Cronbach’s Alpha is one of the most famous reliability statistics. This is because it can calculated based on the average inter correlations among items to measure the concept. In the Cronbach’s Alpha measurement, the reliabilities coefficient of 0.8 and above is consider very good, those are around 0.7 are acceptable and those who less than 0.6 are considered poor.

3.4 Mean Analysis

Table 3.4 Mean Analysis

Variables

Mean

Standard Deviation

Brand Awareness

3.67

0.91

Pricing

3.56

0.71

Quality

3.62

0.70

Ethnocentrism

2.73

0.84

Social Influence

3.70

0.64

Purchase Decision

3.29

1.20

The table above shows the mean analysis of the variables which include brand awareness, pricing, quality, ethnocentrism, social influence and purchase decision.

It shows that social influence has the highest mean which is 3.70 following by the brand awareness (3.67), quality (3.62), pricing (3.56) and purchase decision (3.29). Meanwhile, ethnocentrism has the lowest mean which is 2.73.

On the other hand, Purchase decision has the highest standard deviation which is 1.20. It is following by brand awareness (0.91), ethnocentrism (0.84), pricing (0.71), quality (0.70) while the lowest is social influence which has standard deviation of 0.64.

3.5 Statistical Analysis (Hypothesis Testing)

Table 3.5.1: Correlations

 

 

Brand Awareness

Pricing

Quality

Ethnocentrism

Social Influence

Purchase Decision

 

Pearson Correlation

1.00

0.38

0.65

-0.32

0.20

0.25

Brand Awareness

Sig. (2-tailed)

0.01

0.00

0.03

0.18

0.00

 

N

50

50

50

43

49

50

 

Pearson Correlation

0.38

1.00

0.59

-0.09

0.33

0.75

Pricing

Sig. (2-tailed)

0.01

0.00

0.57

0.02

0.05

 

N

50

50

50

43

49

50

 

Pearson Correlation

0.65

0.59

1.00

-0.20

0.20

0.81

Quality

Sig. (2-tailed)

0.00

0.00

0.20

0.17

0.03

 

N

50

50

50

43

49

50

 

Pearson Correlation

-0.32

-0.09

-0.20

1.00

0.28

-0.45

Ethnocentrism

Sig. (2-tailed)

0.03

0.57

0.20

0.07

0.00

 

N

43

43

43

43

42

43

 

Pearson Correlation

0.20

0.33

0.20

0.28

1.00

0.36

Social Influence

Sig. (2-tailed)

0.18

0.02

0.17

0.07

0.03

 

N

49

49

49

42

49

49

Purchase

Pearson Correlation

0.25

0.05

0.03

-0.45

0.13

1.00

Decision

Sig. (2-tailed)

0.08

0.75

0.81

0.00

0.36

 

N

50

50

50

43

49

51

The table above shows the correlations among the independent variables which brand awareness, pricing, quality, ethnocentrism, social influence and also the dependent variable which is purchase decision. There is a positive correlation when the Pearson Correlation R is in positive sign and negative correlation occurs when the R is negative. The correlation is significant when the Sig. (2-tailed) value is less than or equal to 0.05.

The correlations result indicates that there is positive correlation between brand awareness and purchase decision as the R is +0.25. The correlation is significant as the Sig. value is 0.00 which is lower than 0.05.

Besides, there is also significant positively correlation between pricing with the purchase decision because the R is equal to +0.75 and the Sig. value is 0.05 which is equal to 0.05.

The correlations result also showed that the R for quality with purchase decision is +0.81 and its Sig. value is 0.03. Since the R is in positive sign and the Sig. value is lower than 0.05, there is a significant positively correlation between quality and purchase decision.

On the other hand, result does show that there is a significant correlation between ethnocentrism and purchase decision because the Sig. value is 0.00 which lower than 0.05. The correlation is negative because the R (-0.45) is in negative sign.

Lastly, there is also a significant positively correlation between social influence with the purchase decision as the R is +0.36 and the Sig. value of 0.03 is lower than 0.05.

Table 3.5.2: Multiple Regressions

Model Summary

Model

R

R Square

Adjusted R Square

Std. Error of the Estimate

1

0.63

0.39

0.35

0.95

ANOVA

Model

Sum of Squares

df

Mean Square

F

Sig

Regression

Residual

Total

21.66

33.33

54.99

4

37

41

5.42

0.90

6.01

0.00

Coefficients

Model

Unstandardized Coefficients

Standardized Coefficients

t

Sig.

B

Std. Error

Beta

(Constant)

Brand Awareness

Pricing

Quality

Ethnocentrism

Social influence

2.80

0.33

-0.42

-0.37

-0.69

0.70

1.13

0.21

0.25

0.31

0.20

0.26

0.00

0.24

-0.26

-0.23

-0.51

0.41

2.47

1.59

-1.71

-1.17

-3.47

2.72

0.02

0.02

0.10

0.25

0.00

0.01

From the table of model summary, we can see that R square is equal to 0.39. It indicates that 39% of variant in dependent variable is caused by the independent variables. On the other hand, from the ANOVA test, the Sig. value which is less than 0.05 reflects that there is a significant correlation between the dependent variable and independent variables. Hence, customer purchase decision is depends on the brand awareness, pricing, quality and ethnocentrism. Besides, it also shows that the model and data are well fit.

Meanwhile, the coefficients table show the relationship between the dependent variable and each of the independent variables. The following shows the hypothesis result explanations:

Hypothesis 1: There is significant relationship between brand awareness and customer purchase decision.

The beta value of brand awareness is 0.02 (t=1.59, p=0.12). Since the p-value value is lower than 0.05, the hypothesis is therefore supported. This means that there is a relationship between convenience and customer’s satisfaction.

Hypothesis 2: There is significant relationship between price and customer purchase decision.

The beta value of pricing is 0.10 (t=-1.71, p=0.10). Since the p-value value is more than 0.05, therefore the hypothesis is not supported.

Hypothesis 3: There is significant relationship between quality and customer purchase decision.

The beta value of privacy is -0.23 (t=-1.17, p=0.25). Since the p-value value is higher than 0.05, the hypothesis is therefore not supported. This means that there is not relationship between quality and purchase decision.

Hypothesis 4: There is significant relationship between ethnocentrism and customer purchase decision.

The beta value of content is -0.51 (t=-3.47, p=0.00). Since the p-value value is lower than 0.05, the hypothesis is therefore supported. This means that there is a relationship between ethnocentrism and purchase decision.

Hypothesis 5: There is significant relationship between social influence and customer purchase decision.

The beta value of privacy is 0.41 (t=2.72, p=0.01). Since the p-value value is lower than 0.05, the hypothesis is therefore supported. This means that there is a relationship between social influence and purchase decision.

In conclusion, independent variables such as brand awareness, ethnocentrism and social influence have strong impact on the customer purchase decision. Meanwhile, price and quality have no impact on the customer purchase decision.