The Impact of Globalization on the Portuguese Industry: Analytical Essay
For this reason, there is a need for continuous research in this field, across different cultures, industries and situations. COO needs to be examined on a product-by-product basis, once an overall generalizable theory for all products and all countries may not be feasible. Furthermore, it is critical to acknowledge that COO image is volatile, and a newly liberalized society might exert different results compared to past research. (Insch & McBride, 2002). All these motives unleashed the need to address the Portuguese consumers purchase intentions regarding their preferences only, for national food products.
The impact that globalization has had on the Portuguese industry is undeniable, opening doors for greater imports of foreign products. According to INE (The Portuguese Statistics National Institute) from the 1990s to the present day, the volume of imports of foreign products has increased at a compound annual growth rate of 5.4%, registering only three periods of time when imports decreased (from 2001 to 2003, from 2008 to 2009 and from 2011 to 2012). The trend in the food industry is similar to that of the whole industry, considering that the compound annual growth rate was 5.6%, and the weight of food imports on the total was always in-between 11% to 16% during the above years.
From a study on the Portuguese consumption habits of Portuguese-origin products, elaborated in 2018, important conclusions can be drawn about the importance that Portuguese consumers place on products of Portuguese origin, the importance of engaging in such a behavior and the categories of such products that the Portuguese buy most. According to the study, there is a significant importance placed by Portuguese consumers on Portuguese products, given that 72.2% either always try to buy Portuguese products or just for some type of products (36.9% and 35.3% respectively). Reportedly, 68.8% of participants consider it important or very important the consumption of Portuguese products and 85.1% are satisfied or very satisfied with the Portuguese products they buy. When asked about the categories of Portuguese-origin products that the Portuguese buy the most, the five top results are within the food industry – fruits and vegetables (89.8%), bread and pastries (85.4%), olive oil (83.6%), dairy products (71.4%), and fish, meat and meat products ( 67.8%) – showcasing the preponderance that the Portuguese food industry has over the preference of Portuguese consumers (Moreira & Vale, 2018).
In line with the previous findings, a big question is raised: Do Portuguese people prefer to buy domestic food over international options? Furtherly, how far do their purchase intentions go? And, under what circumstances? And, finally, what is causing their preference?
Aiming to answer these previous questions, this study settles to better understand what is driving Portuguese consumers to have a preference for domestic products. Is this related to the fact that they are patriotic in general? Does it have to do with ethnocentrism? Or it is just because they perceive the country’s image is seen highly by Portuguese people?
The current investigation also approaches the fact that consumers are exposed to an abundance of cognitively demanding situations in every daily life. People talk when driving, think while watching TV, go shopping with nagging children. Because product evaluations are likely to be formed when participants are under different time constraint, it is important to explore how variations in levels of time constraint affect purchase decisions (Chang, 2004), particularly the COO effect.
As it is further analyzed, limited time or capacity for processing information that is relevant to the decision problem (e.g. time pressure) often leads to overweighting some relevant variables at the expense of others (Kosh et al., 2011), for instance COO as a product attribute.
In Portugal there is an old popular saying: “O que é Nacional é bom!”, meaning “What is national is good!”. This research aims to explore to what extent Portuguese people prefer to buy domestic food items and what are the main reasons leveraging this choice.
This chapter intends to do a critical review on previous research that is relevant to this field of study. The following theoretical exposure will showcase the importance of this topic and lead towards the understanding of the research questions undertaken.
There has been a growing importance about the importance of COO issues. With the rise of globalization and international business, people are having ongoing access and exposure to international products from all over the world (Bilkey, 1993). Thus, the COO phenomenon has been emerging alongside the international markets’ complexity and dynamics.
“COO means the country that a manufacturer’s product or brand is associated with”, also known as “the home country” (Saeed, 1994). Subsequently, the study of COO effects seeks to understand how consumers perceive and evaluate products originated from a certain country (Romeo & Ross, 1992; Chang, 2004). Previous studies have shown that COO affects consumers’ perceptions of quality and purchase intent (Baugh & Yaprak, 1993), others have also demonstrated a difference in product-specific effects (Japanese cars vs. Japanese designer dresses), which will be addressed later.
COO can also exert different effects, such as perceptions, cross-culturally (different nationalities meaning sometimes, different opinions), (Incsh & Mac bride, 2002). Overall, it’s pivotal to acknowledge that beliefs germane to evaluation of product quality, a product’s individual attributes and behavioral intention diverge significantly by country of origin. (Agrawaal & Kamakura, 1999).
COO image was, firstly, approached by Nagashima in 1970 who defines it as a picture, reputation or stereotype that a consumer has towards a product from a specific country. This image has multidimensional factors. Simplifying, it represents the conscience for product quality from a specific country (Bilkey & Nes, 1982; Han, 1989).
Consumers have a perception about a product from a particular country based on their previous perceptions about a country’s production and marketing strengths or weaknesses. Hence, COO image plays a major role when assessing certain products. (Romeo & Ross, 1993).
As stated by Listiana (2015), COO image can be divided into two levels, General and Specific COO image. General COO Image illustrates a macro context, encompassing several variables like economy, politics, historical events, relation with other countries, tradition, industrialization level and technology advancement (Zeugner at al., 2008). Likewise, Specific COO image represents a micro context, where one’s judgement is based on the capability of a country producing a certain product category (Pecothich & Rosenthal 2001).
This last statement is in accordance with Roth and Romeo’s (1992), Product-Country Image approach. This concept focuses on the general perception of product’s quality from a certain country. For example, consumers tend to think highly about Columbian coffee, Swiss watches, US appliances, Japanese electronics and German cars. Consequently, in many product categories, the COO image is the main actor in decision-making (Kotabe & Helson, 2011).
COO image is also a powerful tool that can be used to gain competitive advantage and enhance brand equity (Parameswaran & Pisharodi, 2013; Listiana, 2015). For instance, when a COO image is negative, marketers may want to downplay this information whereas if positive they may highlight it (Incsh & Mac Bride, 2002). Pricing may also change according to COO image, firms originating in countries with better product–country image should be able to charge premium prices and discount prices should be applied in the opposite situation.
Besides, country of origin image is not static, in fact it’s quite volatile (Nagashima, 1970; Papadopoulos et al., 1987). To illustrate, in the 1950s Japan was associated with cheap and fake products, yet from the 90s onwards the country’s image has changed into a country of high-quality products (Pappu et al., 2007; Yassin et al., 2007).
In brief, COO affects the judgement of perceived quality and has significant influence on a consumer’s preference level. Moreover, it affects their information search intention, purchase intention and post-purchase behavior (loyalty), (Lin & Chen, 2006).
After addressing COO image it’s critical to determine whether “these perceptions” are valid or if they’re merely a stereotype and bias on consumers’ minds.
According to several authors such as Chao (1993), COO can be a stereotypical bias that affects perceived quality ratings. Agrawaal and Kamakura (1999) took it a step further inferring that assessment of quality for products originating from different countries might be based on factual information, such as their own experiences or information obtained through consumers’ own knowledge. Despite this, it can’t be also disregarded that COO can be also a perceptual bias.
The central question is whether observed perceptual differences in product quality associated with COO are due to some halo effect indicating cognitive bias or due to actual differences in objective quality. The answer is both! The halo effect is the possibility that the evaluation of a product, under some bias, interferes with the judgment on other important factors, creating a sound impact on the final result. More specifically, suggests that consumers use COO image to make conclusions about product attributes, affecting the attitude towards the product in general. As Shapiro (1982) noted, consumers feel the need to use COO image in product evaluation because they’re usually unable to detect the true quality of a country’s products before purchase. Awareness of the halo effect, however, does not make it easy to avoid its influence on consumers’ decisions (Rasmussen, 2008).
Deshpandé, (2010) calls the COO bias “the Provenance Paradox” explaining that countries that are not perceived to be good in one product struggle to make their way and rise up in the market. For instance, chocolate El Rey is a Venezuelan company that produces some of the best cacao beans in the world bought by prestigious chocolate houses in Switzerland and Belgium. Consumers have been accustomed to believing that great chocolate comes from Europe, not South America, although Venezuela produces the world’s best cacao. Thus, it’s not considered a legitimate source of great chocolate and consumers perceive it to lacking authenticity.
“Made in Brazil”, also, implies high-quality coffee but not high-quality aircraft. It’s a hurdle for companies to overcome this, sometimes, taking decades to change consumers judgements. This bias engraved in consumers’ minds is a true Marketing and Branding challenge.
Information processing time and ability are lim¬ited, therefore humans often use mental shortcuts or rules of thumb. This is the reason why simplifying heuristics are so appealing, (Arkes, 1991). According to Gigerenzer and Gaissmaier (2011) “A heuristic is a strategy that ignores part of the information, with the goal of making decisions more quickly, frugally, and/or accurately than more complex methods.” Subsequently, extra effort required to use a more sophisticated strategy is seen as a burden by individuals.
The heuristic–systematic model assumes that people are cognitive misers (Maheswaran & Chaiken, 1991). People avoid elaborative processing unless they are motivated and have the cognitive ability to engage in it. In situations in which individuals are not motivated to elaborate on messages methodically, they rely on heuristic cues to develop their attitudes, whereas, under conditions in which individuals are motivated to develop accurate judgments, systematic processing will prevail (Chaiken & Eagly, 1983). When a heuristic mode of processing is adopted, message perceivers exert relatively less cognitive effort whereas, if a systematic mode of processing is adopted, message perceivers exert a considerable amount of cognitive effort.
This model proposes that heuristic and systematic processing can co-occur and generate interactive effects on judgments (Eagly & Chaiken, 1993). In a real-life context there are several situations in which people are more prone to using simplifying strategies. Those occasions in which product information is ambiguous and uncertainty is high, prevailing cues lead consumers to make inferences about the quality of the product, resulting in an overall biased evaluation of the advertised product, when product information is clearer, thus unambiguous the opposite effect takes place.
Despite prominent claims stating the contrary, the human mind is not worse than rational, may often be better than rational (Cosmides & Tooby 1994). In fact, heuristics can be beneficial for the decision-maker. Psychologists have identified decision rules that produce “less-is- more” effects (Lee, 2010; Smithson, 2010). That is, heuristics that save effort and promote efficiency can also improve predictive accuracy (Brighton & Gigerenzer, 2012). Nevertheless, heuristics can also bias the decision-making process by decreasing accuracy, but they are able to yield reductions in time and effort that justify their use.
In their attempt to conserve cognitive capacity, consumers are known to adopt simplifying heuristic cues as the decision-making environment becomes more complex (Bettman, 1979). As reported by Liefeld (1993), there are two types of product cues: intrinsic, part of the physical composition of the product; and extrinsic, in other way related to the product, such as price or COO. COO has been found to be an important extrinsic cue (Klein et al., 1998), especially when buyers have less familiarity with the products (Han & Terpstra, 1988). Thus, consumers might use COO as a summary construct representing their knowledge about a product’s quality from different countries (Han, 1989).
COO is used to eliminate brands and develop an evoked set, saving consumers from extensive evaluation of intrinsic attributes (Agrawal & Kamakura, 1999). When experience or knowledge about a product is limited, consumers will call upon COO cues in order to evaluate products (Maheswaran, 1994). Greater product knowledge usually means additional and stronger cues into the decision process, which reduces the strength of COO cues. Heslop et al., (1987), also noted that as purchase frequency increases, the consumer’s ability to form judgments is enhanced, hence the consumer will not rely as much on COO cues.
The COO effect on product evaluation is smaller for multi-cue studies than for single cue studies, since the COO cue becomes less salient (Verlegh & Steenkamp, 1999). In a real consumer decision-making environment, consumers are likely to be exposed to additional information and access to multiple cues such as the product by itself, brand name, price, nutritional facts etc. In these situations, the impact of one single cue such as COO may diminish significantly (Peterson & Jolibert,1995).
Recalling the heuristic–systematic model framework, COO beliefs learned through past experiences can serve as heuristic decision rules when individuals are not motivated to process product information, but not when individuals are motivated to do so.
Heuristic cues become more salient or vivid in certain message contexts and, therefore, are more likely to exert significant effects. For example, when messages are ambiguous, heuristic cues may become relatively more salient and vivid, encouraging individuals to engage in heuristic processing, as opposed to unambiguous messages (Chang, 2004).
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