Tài liệu The impact of consumer ethnocentrism, perceived quality and perceived price on willingness to buy local household products evidence from ho chi minh city, vietnam

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business --------------------------- Vu Dai Duong THE IMPACT OF CONSUMER ETHNOCENTRISM, PERCEIVED QUALITY AND PERCEIVED PRICE ON WILLINGNESS TO BUY LOCAL HOUSEHOLD PRODUCTS Evidence from Ho Chi Minh City, Vietnam ID: 22140066 MASTER OF BUSINESS (Honours) SUPERVISOR: Dr. Nguyen Thi Nguyet Que Assoc. Prof. Tran Ha Minh Quan ACKNOWLEDGEMENT First, I would like to express my gratitude and deepest appreciation to my two research supervisors, Dr. Nguyen Thi Nguyet Que and Assoc. Prof. Tran Ha Minh Quan for their professional guidance, valuable advice, continuous encouragement, and motivated support that made this thesis possible. Second, I would like to extend deep senses of gratitude to all lecturers who have taught and transferred me valuable knowledge and experience during the period of Master of Business Administration course at International School of Business. Third, I would like to thank all the participants as well as my colleagues, my friends who did contribute to this research. Personally, I wish to express my deep gratitude to my parents, my wife, my son and my younger sister for their spiritual support and encouragement during the time of study. Ho Chi Minh City, June 30th, 2017 Vu Dai Duong The impact of consumer ethnocentrism, perceived quality and perceived price on willingness to buy local household products: Evidence from Ho Chi Minh City, Vietnam Abstract This paper examines the impact of consumer ethnocentrism, consumer’s perceived price and consumer’s perceived quality on willingness to buy local household products in Ho Chi Minh city, the biggest city in Vietnam. It also investigates the influence of consumer ethnocentrism on perceived price and perceived quality of Vietnamese customer. Structural equation modeling was used to test the impact, utilizing a sample of 302 consumers. The result indicates that willingness to buy local household products of Vietnamese customers is affected positively by consumer ethnocentrism, consumer’s perceived price and consumer’s perceived quality. In addition, consumer ethnocentrism has a positive relationship with consumer’s perceived price and consumer’s perceived quality. Furthermore, the result also shows that the impact of consumer ethnocentrism on consumer’s perceived price, on consumer’s perceived quality, and on willingness to buy domestically household products are not different in term of product categories, gender, age and income. Keywords: Consumer ethnocentrism, perceived price, perceived quality, willingness to buy, local household products. TABLE OF CONTENTS CHAPTER 1. INTRODUCTION ................................................................................... 1 1.1. RESEARCH BACKGROUND ............................................................................ 1 1.2. PROBLEM STATEMENT AND RESEARCH OBJECTIVE ............................ 1 1.3. BENIFIT OF RESEARCH .................................................................................. 5 1.4. RESEARCH METHOD AND STRUCTURE ..................................................... 5 CHAPTER 2. THEORETICAL BACKGROUND AND HYPOTHESES ................. 7 2.1. THEORETICAL BACKGROUND ..................................................................... 7 2.1.1. Willingness to buy ........................................................................................ 7 2.1.2. Consumer Ethnocentrism (CES)................................................................... 7 2.1.3. Consumer Ethnocentrism Tendency Scale (CETSCALE) ........................... 9 2.1.4. Perceived Price ........................................................................................... 10 2.1.5. Perceived Quality........................................................................................ 11 2.2. HYPOTHESES .................................................................................................. 12 2.2.1. Consumer Ethnocentrism and Perceived Price ........................................... 12 2.2.2. Consumer Ethnocentrism and Perceived Quality ....................................... 13 2.2.3. Consumer Ethnocentrism and Willingness to Buy ..................................... 13 2.2.4. Perceived Price and Willingness to Buy ..................................................... 14 2.2.5. Perceived Quality and Willingness to Buy ................................................. 15 2.2.6. 2.3. Moderating effects of product categories and demographics ..................... 15 RESEARCH MODEL ........................................................................................ 18 CHAPTER 3. RESEARCH METHODS ..................................................................... 19 3.1. PROCEDURE AND SAMPLE.......................................................................... 19 3.1.1. Pilot Study .................................................................................................. 19 3.1.2. Main Study.................................................................................................. 20 3.2. DEFINING MEASUREMENT SCALES.......................................................... 23 3.2.1. Measurement scale for consumer ethnocentrism ........................................ 23 3.2.2. Measurement scale for perceived price and perceived quality ................... 23 3.2.3. Measurement scale for Willingness to Buy ................................................ 24 3.2.4. Measurement scale for consumer’s gender, age and income level ............. 24 CHAPTER 4. DATA ANALYSIS AND RESULT ..................................................... 25 4.1. DESCRIPTIVE STATISTICS ........................................................................... 25 4.2. RELIABILITY TEST ........................................................................................ 26 4.3. EXPLORATORY FACTOR ANALYSIS (EFA).............................................. 28 4.4. CONFIRMATORY FACTOR ANALYSIS (CFA) ........................................... 31 4.5. STRUCTURAL EQUATION MODELING (SEM).......................................... 33 4.6. MULTI-GROUP STRUCTURAL EQUATION MODELING (MGSEM) ....... 36 CHAPTER 5. DISCUSSION, RECOMMENDATION, LIMITATION AND DIRECTION……………………………………………………………………………41 5.1. DISCUSSION AND CONCLUSIONS.............................................................. 41 5.2. MANAGERIAL IMPLICATIONS .................................................................... 43 5.3. LIMITATION .................................................................................................... 44 5.4. DIRECTIONS FOR FUTURE RESEARCH ..................................................... 45 REFERENCE……………………………………….……….………………….………47 APPENDIX 1: SOURCE OF MEASUREMENT ITEMS .......................................... 55 APPENDIX 2: SURVEY QUESTIONNAIRE (ENGLISH VERSION) .................... 56 APPENDIX 3: SURVEY QUESTIONNAIRE (VIETNAMESE VERSION) ........... 64 APPENDIX 4: DATA CODING .................................................................................... 72 APPENDIX 5: RELIABILITY TEST ‘S RESULT OF THE FULL-SCALE STUDY…………………………………………………………………………………..73 APPENDIX 6: RESULT OF EFA ................................................................................. 75 APPENDIX 7: RESULT OF CFA ................................................................................. 77 APPENDIX 8: RESULT OF SEM ................................................................................ 79 APPENDIX 9: RESULT OF MGSEM ......................................................................... 80 LIST OF FIGURES Figure 2.1. Research model ............................................................................................. 18 Figure 4.1. Confirmatory Factor Analysis (CFA) Model ............................................. 31 Figure 4.2. Structural Equation Model (SEM) results ................................................. 34 LIST OF TABLES Table 3.1. Distribution of the sample ............................................................................. 22 Table 4.1. Descriptive Statistics – Results ..................................................................... 25 Table 4.2. Fit indices for the test model result (CFA) .................................................. 32 Table 4.3. Thresholds for the condition of validity and reliability ............................. 33 Table 4.4. Fit indices for the condition of validity and reliability ............................... 33 Table 4.5. Fit indices for the test model result (SEM) .................................................. 35 Table 4.6. Hypotheses Test – Results (Standardized)................................................... 35 Table 4.7. MGSEM Product Results – P-VALUE ........................................................ 37 Table 4.8. MGSEM Gender Results – P-VALUE ......................................................... 38 Table 4.9. MGSEM Age Results – P-VALUE ............................................................... 38 Table 4.10. MGSEM Income Results – P-VALUE ....................................................... 39 CHAPTER 1. 1.1. INTRODUCTION RESEARCH BACKGROUND Household goods industry currently has big growth potential in Vietnam. According to Vietstock (2015), consumption in household goods accounts 9% of total private consumption, and among 11 Vietnam major industries, household goods industry stands at 4th in scale of consumption. A report showed that the household products market in Vietnam is valued at $13 billion. But due to the globalization of world market, a lot of foreign companies can easily join in Vietnam household product market and try to occupy market share. Vietnamese household-appliance companies are concerned that ASEAN-imported products will dominate the local market, especially in traditional markets and supermarkets, in the near future (Vietnamnet, 2015). Local companies in developing countries like Vietnam need to be able to compete effectively against imported products if they don’t want to loss of household product market to foreigners. Therefore, demand for research about consumption in household goods is very necessary, but little research has been done in Vietnam. 1.2. PROBLEM STATEMENT AND RESEARCH OBJECTIVE In an effort to help local products, the campaign "Vietnamese people use Vietnamese goods" was launched the first time in 2009 by the Party’s Political Bureau (Vietnam Fatherland Front, 2009) in the expectation that the willingness to buy of Vietnamese consumers will increase in domestic products and decrease in foreign products. Going along with this campaign, many Vietnam household companies have been successful in 1 attracting Vietnamese customers. For example, in the Vietnam household plastic sector, according to Ministry of industry and trade of the socialist republic of Vietnam (2013), the household plastic products that manufactured in Vietnam dominant than the imported other from China, Indonesia, Thailand. More specific, Vietnam household plastic goods has occupied most of the domestic market share, with 90%, including highlights of major brands like Dai Dong Tien, Duy Tan, Long Thanh, Song Long ... So how did this campaign help Vietnam household companies? At the simplest level, to operate purchase behavior, consumers will estimate perceived value based on perceived quality and perceived price of his own for such goods (Alhabeeb, 2002). According to Dodds, Monroe, and Grewal (1991), perceived price and perceived quality hold a key effect on buyer’s product evaluation, and lead to willingness to buy that product. Therefore, the balance between quality and price is a good predictor of a preference for purchasing domestic products. However, in some cases, consumers prefer local products whose quality and price is not good as that of imported products, and Shimp and Sharma (1987) named this social psychological factor is ethnocentrism. The campaign " Vietnamese people use Vietnamese goods" of Vietnam government is also based on this phenomenon. Ethnocentrism is defined as self-consciousness of evaluating your community have a higher value, better than other communities. In the field of marketing, special kind of ethnocentric is Consumer Ethnocentrism. Consumer Ethnocentrism has been researched and confirmed the impact of it on willingness to buy domestic product through a lot of researches in the developed countries (Shimp & Sharm, 1987; Watson & Wright, 2000; Josiassen, Assaf & Karpen, 2011; Chryssochoidis, Krystallis & Perreas, 2 2007). However, the majority of these studies have been undertaken in advanced economies. Little research has been done in developing countries such as Vietnam. In addition, because of the domestic bias of consumer ethnocentrism, the customer perception about price and quality of local product also seem to be affected. The result from Hau, Quynh and Anh (2011) found the effect of consumer ethnocentrism on customer’s perceived price when buying product made in Vietnam. Tong and Li (2013) also found the effect of consumer ethnocentrism on customer's perceived quality when did a study in China, a developing country like Vietnam. Although consumer ethnocentrism seems to help local household companies a lot in attracting Vietnamese people, but in some household products that require more technique or high-costing, that impact doesn’t seem to work. For example, according to Khanh Chi (2015), electronics and refrigeration products imported from Thailand accounted for 70% market share. The local household plastics products occupy most of the domestic market share, but in high price segment, the share of them is very small, most of market share is hold by Lock & Lock and other foreign companies (Hoang Lam, 2012). This phenomenon shows that local products can satisfy demand for cheap costs, but if the economy develops well and people's living conditions improve, some consumers will possibly shift their options to use imported luxury products. According to Thanh Tu (2015), reports at the seminar "Purchasing Behavior of Vietnamese people with local and foreign products in the era of globalization" held by National Economic University in collaboration with the Domestic Market Department - Ministry of Industry and Trade said that Vietnamese people still have psychology in preference for foreign 3 goods in spite of higher prices than the same type and quality goods from domestic. About 20% of Vietnam's population have high and quite high incomes, accounting for 80% of country's spending, but they prefer foreign goods and say no with local products (Tran Thuy, 2015). Therefore, ethnocentric tendencies of consumers could be expected to vary depending on how the product is perceived. A number of researcher (Sharma, Shimp & Shin, 1995; Tho, Trang & Nigel, 2008; Josiassen et al., 2011; Aziz, Bahadur, Sarwar, Farooq & Arshad, 2014) point out that the degree of consumer ethnocentric tendencies varies according to demographic characteristics such as age, gender, income and product categories. And these factors not only predict levels of consumer ethnocentrism, but also moderate the impacts of such tendencies on willingness to buy. However, in Vietnam market, there are limited research that study about those changes. According to the reviews above, this study tries to address three issues. First, it attempts to find the impact of consumer ethnocentrism on consumer’s perceived price, on consumer’s perceived quality in Vietnam household products. Second, it examines the impact of consumer ethnocentrism, consumer’s perceived price and consumer’s perceived quality on the willingness to buy local household product of Vietnam. Third, it tries to extend the literature on consumer ethnocentrism by investigating not only the influence of demographic variables and product categories on predicting consumer ethnocentrism, but also whether these demographic variables and product categories moderate the impacts of consumer ethnocentrism on consumer’s perceived price, on consumer’s perceived quality, and on willingness to buy domestically household products. 4 1.3. BENIFIT OF RESEARCH This research is expected to contribute to the literature in different ways. First, it provides empirical evidence from Vietnam market on the impact of consumer ethnocentrism, consumer’s perceived price, consumer’s perceived quality on willingness to buy domestic household product. Second, it is the first study about the mix effect of consumer’s perceived price, consumer’s perceived quality, consumer ethnocentrism on the willingness to buy of household products in Vietnam market. Thirdly, this study demonstrates that consumer ethnocentrism affects on willingness to buy local household product even in developing country. Fourth, this study maybe suggests that the impacts of consumer ethnocentrism on consumer’s perceived price, on consumer’s perceived quality, and on willingness to buy domestically household products may vary depending on product category and demographic characteristic. Finally, result of this study will help Vietnam household companies build the appropriate marketing activities with products and content in each segmentation, from that they will gain leverage and bring their products to more and more consumers. 1.4. RESEARCH METHOD AND STRUCTURE This research is conducted in Ho Chi Minh City (HCMC) – the biggest city located in the South of Vietnam. Currently, HCMC is the economic, technology and financial hub of Vietnam, which attracts migrants from other provinces. As a result of this, the city’s official population was 8,146,300 in 2015 (General Statistics Office, 2015). Therefore, this place has more household product users than other places or areas. 5 The rest of this research is organized around the five key points: literature reviews and research hypotheses; method; data analysis and results; discussion and implications; limitations and directions for future research.
 6 CHAPTER 2. 2.1. 2.1.1. THEORETICAL BACKGROUND AND HYPOTHESES THEORETICAL BACKGROUND Willingness to buy Willingness is defined as the quality or state of being prepared to do something (Oxforddictionaries, n.d). Therefore, willingness to buy means the state that a consumer will being prepared to do a purchase behavior for a given quantity of goods or services. The possibility that a consumer will do purchase behavior on a particular product resulting from the interaction of his or her need for it, attitude towards it and perceptions of it and of the company which produces it. According to Theory of Planned Behavior (TPB) of Ajzen (2005), behavior can predict base on previous intentions. Base on this theory, intention or tendency is the core factor that affects behavior. So purchase intention is a measure of the willingness to buy a product and it is the probability that a consumer will buy a product or service. Dodds et al. (1991) and Grewal, Monroe, and Krishnan (1998) said that purchase intention is the willingness of a consumer to buy a particular product. According to Hau, Minh, and Tuan (2013), willingness to buy represents the extent to which a consumer has positive attitude towards purchasing a product. Therefore, in this research, the willingness to buy consists the customer ‘s positive attitude of buying Vietnam household products, the intention to buy them and the recommendation for them to another customer. 2.1.2. Consumer Ethnocentrism (CES) Ethnocentrism is a word composed of two terms “ethnic” (which means group) and “centrism” (which means focused). Shimp and Sharma (1987) defined ethnocentrism as a 7 “the universal proclivity for people to view their own group as the center of the universe, to interpret other social units from the perspective of their own group, and to reject persons who are culturally dissimilar while blindly accepting those who are culturally like themselves”. In other words, a person with a high ethnocentrism often is proud of his group, often enhances value, culture and people that belong to his group and tend to underestimate values and standards of other groups (Chryssochoidis et al., 2007). Tho et al. (2008) showed that ethnocentrism is an evaluative perspective, which means ethnocentric person will evaluate all other cultures by the standards of one’s own culture. The term consumer ethnocentrism is adapted from general concept of ethnocentrism which was first introduced by Sumner in 1906 (Shimp & Sharma, 1987). They defined consumer ethnocentrism as a unique form of ethnocentric in marketing, it is “the beliefs held by consumers about the appropriateness, indeed morality of purchasing foreignmade product and the loyalty of consumers to the products manufactured in their home country.” Consumer ethnocentrism has a direct and negative impact on consumers' purchase intention towards foreign products. These imply that the high ethnocentric tendencies lead to unfavorable attitude towards lower purchase intentions for foreign products. According to Shimp and Sharma (1987), Klein and Ettenson (1999) ethnocentric consumers will refuse to buy foreign products because to do so is damaging to the national economy, lead to unemployment, and is unpatriotic. Even when foreign products are superior in quality or price to domestic products, some consumers still desire to purchase domestically. Non-ethnocentric consumers, however, evaluate products based on their objective attributes, without considerations of country of origin of product 8 (Shimp & Sharma, 1987). Therefore, the consequences of consumer ethnocentrism include (1) an overestimation of the quality and value of domestic products or underestimation of imports, (2) a moral obligation to buy domestic products, and (3) an intense preference for domestic products. Hence consumer ethnocentrism can be considered an antecedent to “willingness to buy” domestic products in general. Shimp and Sharma (1987) also stated that the ethnocentrism of each customer is different because of the influence of socioeconomic, demographic, geographic, and regional economic factors, which play a role in accentuating ethnocentric tendencies during adulthood. Sharma et al. (1995) confirmed that product categories and consumer demographic characteristics (such as gender, income and age) influence consumer ethnocentric tendencies in Korea. Josiassen et al. (2011) found that consumer tendencies for ethnocentrism are directly influenced by characteristics of the customer. Therefore, when researching about ethnocentrism, we can’t ignore the impact of demographic factors to identify ethnocentric differences of each customer segment. 2.1.3. Consumer Ethnocentrism Tendency Scale (CETSCALE) The measurement of consumer ethnocentrism was first developed by Shimp and Sharma in 1987 with the development of the Consumer Ethnocentrism Tendency Scale (CETSCALE) at USA. In their study, they proved that consumer ethnocentrism can measure, explain and provide answers to why and to what extent consumers prefer domestic products instead of foreign. They used the term “tendency” instead of “attitude” because this scale can explain the consumer decision to buy the most appropriate product for them. This scale has been widely used to measure consumer ethnocentrism tendencies 9 in many studies within developed and in the developing countries (Balabanis & Diamantopoulos, 2004; Chryssochoidis et al., 2007; Josiassen et al., 2011; Hau et al., 2011; Qing, Lobo & Chongguang, 2012; Maina, Kibera & Munyoki, 2015). Follow Shimp and Sharma (1987), CETSCALE is a unidirectional measure scale with 17 variables, a lot of researches also convinced this express (Kucukemiroglu, 1999; Watson & Wright, 2000; Wong, Polonsky & Garma, 2008). But, when Douglas and Nijssen (2003) did a study about using the borrowed scale in cross-national research, more specific in applying the CETSCALE in The Netherlands, they came to an important result: the CETSCALE must be considered to compatible with each country, some variables in the CETSCALE must be adjusted base on economic, culture and characteristic of each country. 2.1.4. Perceived Price Price is an indicator of the amount of financial sacrifice required to purchase a product (Dodds et al., 1991; Zeithaml, 1988). According to Zeithaml (1988) consumers do not always know or remember actual price of product price, instead they encode prices in a way that is meaningful to them. There are two types of price most commonly used in the literature, objective price and perceived price (Zeithaml, 1988; Jacoby & Olson, 1977). According to Beneke and Zimmerman (2014), objective price is the actual price of product, in other side the perceived price is the process that each customer encodes the price and makes it meaningful to him or her. This encoding process is the comparison between objective price (the actual price of product or service) and reference price (the 10 price is the customer’s perceptual representation or subjective perception of the objective price of product or service) (Zeithaml 1988; Jacoby & Olson 1977). In consequence, the perceived price is the evaluation of customer about the valuable of between what they were, are or will be sacrificed to exchange and what they were, are or will be received. Perceived price will be different with each consumer, product, purchase situation and time (Dodds et al., 1991). 2.1.5. Perceived Quality Quality in ISO 9000:2000 is defined as “the degree to which a set of inherent characteristics fulfils a need or expectation that is stated, generally implied or obligatory” (Hoyle, 2011). Zeithaml (1988) defined the term “objective quality” refers to measurable and verifiable superiority on some predetermined ideal standard or standards. Therefore, according to Zeithaml (1988) and Alhabeeb (2002), the perceived quality is “the consumer’s judgment or his global assessment about the superiority or excellent of that product”. Base on Business Dictionary (2016), perceived quality is defined as “Consumer's opinion of a product's (or a brand's) ability to fulfill his or her expectations. It may have little or nothing to do with the actual excellence of the product, and is based on the firm's (or brand's) current public image (see corporate image), consumer's experience with the firm's other products, and the influence of the opinion leaders, consumer's peer group, and others.” Although perceived quality has a lot of definitions from many scholars, each of them has a shared common meaning; that is, perceived quality is the consumer’s judgment of quality of overall components of product relative to the expectation of quality, in both tangible and intangible characteristics. It may also 11 include performance, features, reliability, conformance, durability, serviceability, and aesthetics... of product. Hence in this sense, perceived quality seems to be a highly subjective and relativistic concept (Alhabeeb, 2002), the value and scope of which would different depending on the subject and the type of product. 2.2. 2.2.1. HYPOTHESES Consumer Ethnocentrism and Perceived Price As we defined above, perceived price of each customer is different because it depends largely on each customer ‘s feeling, perceptual representation and evaluation about product or service that he or she want to buy (Dodds et al., 1991). With the same product with the same price, a customer with a good feeling in it will feel its price cheaper than the one who has a bad feeling in it. Meanwhile, consumer ethnocentrism affects strongly on feeling of customer on product. According to Tho et al. (2008) ethnocentric consumers are likely to value highly products belonging to their own group and to devalue products which do not belong to their group. Consequently, we must consider the effect of consumer ethnocentrism on customer’s perceived price in this research. The result from Hau et al. (2011) also found that effect when buying product made in Vietnam. So, we can conclude the first hypothesis we must do is: H1. Consumer ethnocentrism positively affects customer’s perceived price for local household products in Vietnam. 12 2.2.2. Consumer Ethnocentrism and Perceived Quality Because the consequence of consumer ethnocentrism as we analyzed above is an overestimation of the quality of local products, therefore the effect of consumer ethnocentrism on perceived quality of the local household products in Vietnam must be considered as one hypothesis in this study. Consumer ethnocentrism was found to influence assessment of the perceived quality of both domestic and foreign products in emerging economies such as Greece (Chryssochoidis et al., 2007). Tong and Li (2013) also confirm this effect of consumer ethnocentrism when did a study in China, a developing country like Vietnam. So, the second hypothesis is: H2. Consumer ethnocentrism positively affects customer’s perceived quality for domestic household products in Vietnam. 2.2.3. Consumer Ethnocentrism and Willingness to Buy By making clearly about definition and consequences of consumer ethnocentrism above, we can easily see the relationship between consumer ethnocentrism and willingness to buy. According to Wang and Chen (2004), there is an impact of consumer ethnocentrism on willingness to buy in the context of a developing country, namely the People’s Republic of China. Tho et al. (2008) found that in Vietnam, consumer ethnocentrism plays an important role in the likelihood of purchasing local products. Many other studies also demonstrated that consumer ethnocentrism has a negative impact to willingness to buy foreign products, in other word it has a positive impact on willingness to buy domestic product, even in developing countries (Klein, Ettenson & Morris, 1998; Balabanis & Diamantopoulos, 2004; Hau et al., 2011). Because this study mainly focuses 13