U.S. Consumer Perceptions of Imported Automobiles: Challenges for Emerging Market Country Manufacturers

1. U.S. Consumer Perceptions of Imported Automobiles:Challenges for Emerging Market Country Manufacturers Mark F. Toncar Associate Professor of Marketing Youngstown State University

2. U.S.A. Canada * Mexico * Japan France Germany Sweden Italy S. Korea China…. Brazil…. Country of Origin of Automobiles Sold in the United States

3. Chinese Automobiles are Coming • Shanghai Automotive Industry Corporation (SAIC), a global Fortune 500 company has partnered with both Volkswagen and General Motors • Nanjing Automobile Group bought bankrupt MG Rover, the last independent car company in Britain. • Chery Automobile Company has announced a joint effort with entrepreneur Malcomb Bricklin to sell sport utilities, sedans and sport coupes in the U.S. beginning in 2007 • Geely Automobile Holdings, LTD will offer a compact sedan and a sports car for sale in the U.S. market in the fall of 2008 • Both plan to export up to 250,000 vehicles to the U.S.A

4. Brazilian Automobiles Are Coming • Obvio! is poised to enter the U.S. automobile through an exclusive distribution agreement with ZAP to distribute two models in the North American market • ZAP hopes to begin marketing the OBVIO automobiles in the United States in 2007

5. Will U.S. Consumers Accept Automobiles from Emerging Market Countries? • Country of origin effects are strong with automobiles • High profile outsourcing of U.S. jobs to China • Prevalence of organized labor in the U.S. automobile industry

6. Constructs of Interest: Country of Origin, Consumer Ethnocentrism, Country Image, andBrand Personality

7. Country of Origin Effects • Consumers infer beliefs about products based on beliefs about the country from which the product originates • Verlegh and Steenkamp 1999 • Ex. Perception of Mexico having a poorly skilled work force will lead to a less favorable impression of products from Mexico that require skilled labor

8. Country of Origin Effects • In general: • Developed country consumers prefer domestic to imported products (Wang and Chen 2004) • Products from LDC are subject to a greater COO effect and are evaluated less favorably than domestic products (Bilkey and Ness 1982; Verlegh and Steenkamp 1999)

9. But: • China is perceived as neither LDC nor developed country • China is an aggressively industrializing nation possessing high quality, efficient and often world-class manufacturing • It is unclear how COO will influence the perception of Chinese automobiles

10. Consumer Ethnocentrism • Peoples’ beliefs about the appropriateness or morality of purchasing foreign-made products (Shimp and Sharma 1987) • May moderate or intensify Country of Origin effects of Chinese automobiles

11. The Shortened CETSCALE • Only those products that are unavailable in the U.S. should be imported from other countries. • American products first, last and foremost. • Purchasing foreign-made products in un-American. • It is not right to purchase foreign products. • A real American should always by American-made products. • We should purchase products manufactured in America instead of letting other countries get rich off us. • Americans should not buy foreign-made products, because this hurts American businesses and causes unemployment. • It may cost me in the long run but I prefer to support American products. • We should buy from foreign countries only those products that we cannot obtain within our own country. • American consumers who purchase products made in other countries are responsible for putting their fellow Americans out of work.

12. The Country Image Scale (Martin and Eroglu 1993) • Economically developed / Economically underdeveloped • Democratic system / Dictatorial system • Mass-produced products / Handcrafted products • Civilian government / Military government • Predominantly industrialized / predominantly non-industrialized • High labor costs / Low labor costs • High literacy rates / Low literacy rates • Free market system / Centrally planned system • Existence of welfare system / Lack of a welfare system • Stable economic environment / Unstable economic environment • Exporter of agricultural products / Importer of agricultural products • Production of high quality products / Production of low quality products • High standard of living / Low standard of living • High level of technological research / Low level of technological research

13. Brand Personality • Consumers view brands as having human characteristics (Aaker 1997) • Sincerity • Excitement • Competence • Sophistication • Ruggedness • Differences in brand personality may reflect more or less favorable overall consumer perceptions

14. Method • Experimental Design • Three treatment groups of student subjects, 50 in each group • Each group received information about a new automobile • The Chinese HF Lobo • The Brazilian Puma • The newly redesigned Ford Focus

15. Chinese HF Lobo/Brazilian Puma/ Ford Focus • FEATURED SPECIFICATIONS • 2.4L 5-Speed Manual or 4-Speed Automatic Transmission • Stainless Steel Single Exhaust • Front and Rear Disc Brakes with ABS • Front and Rear Seats with Anti-Submarining Cross Beam • Energy Absorbing and Collapsible Steering Wheel • Dual-drive Electric Power Steering • Powered Windows, Locks, and Child Proof Anti-burst Locks • Front Airbags with SMART/OCS System • Side Airbags • Remote Keyless Entry with Alarm System • Air Conditioning • AM/FM Single CD Audio System • 16" Alloy Wheels • Leather or Sport Cloth Upholstery • EP A Est. MPG: 28 City/ 36 Highway • MSRP $13,900.00

16. Method • Subjects viewed automobile information, then completed: • Several short attitude measures • Brand personality scale • CETSCALE • Country Image scale

17. Results: Attitude Measures • U.S. manufacturer was significantly more trusted than Chinese or Brazilian • Brazilian car scored significantly higher on “I’d like to be seen driving that car” than both U.S. and Chinese • Brazilian car scored significantly higher on “I like the appearance of the car” than both U.S. and Chinese • Interpretation: Trust is an important issue; products from Brazil are unusual and novel

18. Results: Brand Personality • Significant differences among the three groups on four of the five brand personality dimensions • Brand excitement • Brand sincerity • Brand sophistication • Brand ruggedness

19. Brand Excitement • Brazilian and Chinese cars were both more exciting than the U.S. car

20. Brand Sincerity • Brazilian car was more sincere than U.S. car and the Chinese car • No difference between U.S. car and the Chinese car

21. Brand Sophistication • Brazilian car was more sophisticated than the U.S. car • Brazilian car was marginally more sophisticated than the Chinese car (p=.078) • No difference between the American car and the Chinese car

22. Brand Ruggedness • Brazilian car was more rugged than the U.S. car • Brazilian car was more rugged than the Chinese car • No difference between the U.S. and Chinese car

23. Brand Competence • N o differences between the three cars

24. Interpretation of Brand Personality Results • Cars from Brazil may seem more exotic and new, and this may account for observed differences • Implies a strong country of origin effect • Cars from China are not perceived as very different than U.S. cars • No differences in 4 of the 5 brand personality measures between U.S. car and Chinese car • Implies a weak country of origin effect

25. Consumer Ethnocentrism • Consumer Ethnocentrism of subjects who viewed the U.S. car was significantly lower than for the Brazilian and Chinese car • This is unusual since the treatments were randomly assigned to subjects, consumer ethnocentrism should also have been randomly distributed

26. Consumer EthnocentrismInterpretation • CETSCALE was administered after exposure to the car. • CETSCALE results may have been “primed” by exposure to the car. • May actually have measured some kind of country-specific consumer ethnocentrism

27. Results: Country Image: • Not surprisingly, the U.S., as the only developed country in the study, was the source of most statistically significant differences • However, When comparing Brazil and China, Brazil was perceived as: • Less economically developed • Less industrialized • Less stable economic environment • Lower standard of living

28. Interpretation: Country Image • Brazil is generally perceived the least favorably • Cars from Brazil may be fascinating, exciting, new…because they are from Brazil • China is perceived to be far more similar to the U.S. on many of the country image measures

29. Conclusion • Trust is a major hurdle to overcome for emerging market country automobile manufacturers • Cars from Brazil and cars from China are perceived very differently, with cars from Brazil generally being viewed more favorably • Chinese automobile manufacturers may have an easier time exporting to the U.S. because of the overall perceived similarity of the U.S. and the Chinese car.