UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------ Vo Thi Thu Trang ANTECEDENTS AND CONSEQUENCES OF STATUS CONSUMPTION: EVIDENCE FROM VIETNAM MASTER OF BUSINESS (Honours) Ho Chi Minh City - Year 2014 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------ Vo Thi Thu Trang ANTECEDENTS AND CONSEQUENCES OF STATUS CONSUMPTION: EVIDENCE FROM VIETNAM ID: 22120078 MASTER OF BUSINESS (Honours) SUPERVISOR: Dr. NGUYEN THI MAI TRANG Ho Chi Minh City - Year 2014 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CONTENTS ABBREVIATION .1 Background to the research. 14 CHAPTER 2 - LITERATURE REVIEW AND HYPOTHESES.1 Collectivism and Individualism. 26 Page | 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.3 The quantitative study.1 Sampling and data collection.
30 CHAPTER 4 - DATA ANALYSIS AND RESULTS .4 Confirmatory factor analysis (CFA) .1 CFA for the first-order constructs .2 CFA for second-order construct .3 CFA for the final measurement model .5 Structural equation modeling (SEM). 53 CHAPTER 5 CONCLUSION, IMPLICATIONS, AND LIMITATION .1 Conclusions about hypotheses and research problem .2 Implications for theory and managerial implications .3 Limitations and further research. 69 Page | 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF FIGURES Figure 1.1 Population Pyramid of Vietnam .1 CFA model of collectivism .2 CFA model of individualism .3 CFA model of life satisfaction.4 CFA model of status consumption .5 CFA model of materialism .6 Final measurement model. 45 LIST OF TABLES Table 4.1 Source of data collection .3 Descriptive statistic: Eliminated items.4 Summarized of pvc and pc (first order constructs) .5 Summarized of pvc and pc (second order construct) .7 Summary of pvc and pc (final measurement model).9 CFA Summary of eliminated item .10 Unstandardized structural paths.
53 Page | 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF APPENDICES Appendix A List of in-depth interviews’ participants. 69 Appendix B In-depth Interview’ refinement measurement scale. 78 Appendix E Descriptive statistics. 83 Appendix F Summarized results of Confirmatory factor analysis.
84 Appendix G Standardized Regression Weights (Final measurement model). 89 Appendix H Final measurement scales. 90 Page | 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABBREVIATION CIEM Central Institute for Economic Management CFA Confirmatory Factor Analysis GDP Gross Domestic Product GSO General statistics Office of Vietnam LS Life satisfaction MAT Materialism Ministry of industry and trade of the socialist republic of MOIT Vietnam MVS Material values scale RS Gross retail sales of goods and services SC Status consumption SEM Structural equation modeling SPSS Statistical Package for the Social Sciences TE Transitional economy VAMA Vietnam Automobile Manufacturers' Association Page | 5 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACKNOWLEDGEMENT At first, I would like to express my deep gratitude to my supervisor Dr. Nguyen Thi Mai Trang for her professional guidance, dedicated support, valuable suggestions, instructions, and encouragements during the time of doing my research.
Secondly, I would like to express my appreciation to Prof. Nguyen Dong Phong, Prof. Nguyen Dinh Tho, Dr. Tran Ha Minh Quan, Dr.
Nguyen Phong Nguyen, and Dr. Tran Phuong Thao for their valuable time as the members of the ISB research committee. Their comments and meaningful suggestions are significantly contributed to this research completion. Finally yet importantly, my sincere thanks are given to all of my teachers at International Business School – University of Economics Ho Chi Minh City for their teaching and guidance during my Master course.
Page | 6 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT In the Vietnam context after Doimoi, Vietnam was one of the TEs nations strongly affected by culture transitions, young population, economic and population growth. The author uses research methods in marketing with an expectation of at first, investigating the influence of following factors: collectivism, individualism, and materialism on the consumption behavior – status consumption and the life satisfaction; secondly, strengthening evidence in Vietnam; thirdly, pointing out useful practical and managerial implications, which support the nation and enterprises to understand consumers’ needs. Using the data collection of 427 respondents, the author found that life satisfaction is motivated by status consumption, which is motivated by collectivism, individualism, and materialism. Furthermore, the results indicated that collectivism and individualism have a positive influence on materialism and coexist in Vietnamese consumers.
These findings suggest that the companies should carefully consider the culture elements of their products or services, in order to segment the customers and to plan an adequate strategy. Besides, the policy markers should state out the policies, which based on the real demand of status consumption in Vietnam market, in order to increase the life satisfaction of their citizens. Key words: status consumption, collectivism, individualism, materialism, life satisfaction Page | 7 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 1 - INTRODUCTION 1.1 Background to the research From Doimoi (Economic Renovation) policy of government in 1986, the new components of economy have formed. Hence, the role of organizations and individuals in providing goods and service is continuously developing.
The open-door policy attracts huge amount of investment from another developed country (Central Institute for Economic Management, 2012). The new economic reformation in Vietnam has dramatically changed the retailing industry. A retail sale of goods and services is an important indicator of GDP and is the motivation of Vietnam economy. This indicator also reflects the consumption capability of domestic customers.
Along with economic reformation, in 2008, Vietnam became a lower-middle-income economy and retail sales index rapidly grew up from 0.7 bill VND in 1985 to 2325 bill VND in 2012 (General Statistic Office of Vietnam, 2012). Total retailed sales of consumer goods and services in the first nine months of 2014 rose by 11.1% from the same period in 2013. If the factor of inflation was excluded, it would be 6. Totally, retailed sales of goods went up by 10.7%, accommodation and catering services by 11.9%, traveling service by 17.4% (General Statistic Office of Vietnam, 2014) and other services by 12.
This was resulted from many factors, such as the increase in population (up to 1% per year), the young population of "golden age", the growing proportion of middle class, government open-door policies, the increasing of foreign investments, and social exchange resulting in social-psychology shift on consumer values, attitudes and behaviors (Phương Dung, 2013). In depth, some of these change values are materialism, self-perception (individualistic self and collectivistic self), sense of life satisfaction, and status consumption. Many studies, which are related to materialism, have been investigated all over the world, essentially the relationship between materialism and consumption behavior; the differences of materialism either between collectivistic culture and individualistic culture; or between various demographic variables (age, gender, generation, etc.) (Flynn et al., 2013; Otero-Lopez et al., 2011; Olivia et al. Among consumption behaviors, previous studies explore the impact of materialism on compulsive consumption Page | 8 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com (Rasool et al., 2012; Xu, 2008); consumer involvement (Browne & Kaldenberg, 1997); consumer ethic (Olivia et al., 2012); addictive buying (Otero-Lopez et al., 2011); value consciousness (Sharma, 2011); brand engagement (Flynn et al.
As defined by Richins and Dawson (as cited in Richins, 2004), materialism is an over design for material goods and includes three components: success, centrality, and happiness. The cultural differences of materialism have been researched by various economists. Watchravesringkan (2012) points out the dissimilarity of materialism in many countries. The exploration of United State-individualistic culture displays higher degree of overall materialism than Thailand-collectivist culture does, he concludes that American participants tend to regard materialism as a sign of success and central to their lives more often than their Thai counterparts do while participants from both cultures tend to view materialism as the pursuit of happiness.
In like manner, Ogden and Cheng (2011) points out that a high individualism (low collectivism) score is associated with a high materialism level and the Chinese are likely more interested in acquiring possessions to display wealth (MAT-success dimension) and to find happiness (MAT-pursuit of happiness dimension) than the Canadians. In addition to this, many researches about the effects of MAT on children and adolescents are progressed due to an apparent shift in social value orientation in Asian countries such as Hong Kong, China, Singapore, and Thailand (Chan, 2003; Chang & Wang, 2006; Durvasula & Lysonski, 2010; Ferle & Chang, 2008). The same as MAT, many studies are interested in status consumption and life satisfaction especially in transitional economies (TEs), due to their potential markets.2 Research problem In the past, Vietnamese could have happy life without paying attention on material values. However, in 21st century, Vietnam is a country which undergoing rapid change.
The rate of population in urban and rural has significant changed from 19/81 in 1986 to 32/68 in 2013, which causes tangible and intangible shifts in economy. Likewise, average monthly earning of wageworkers has rapidly increased from 206 (000s VND) in 1995 to 4335 (000s VND) in 2014. Especially in urban area, the shifts of average monthly earning is from 452 (000s VND) in 1995 up to 5119 (000s VND) in 2014.5 percent of the Page | 9 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com population in Vietnam is younger than 30 years old and 29.3 percent in the group age from 30 to 50 years old (General Statistic Office of Vietnam, 2014). In 2014, according to the population pyramid in Figure 1.1, which illustrates the age and sex structure of a Vietnam's population in 2014, the rate of population younger than 30 years old is 50.7 percent and the rate of group age from 30 to 50 years old is 29.
These statistic numbers may provide deep insights about political, social stability, and economic development, as well as an evidence of high potential market. The younger tend to be more sensitive to status products or brand names, and they like to talk about their consumption experiences: what kind of status products they used, how these products look like, what its utilization is. Additionally, Vietnam has undergone the rapid economic development over recent years, which results in the different lifestyle of the young Vietnamese from those of their parents and grandparents. In consequence, it may lead to the more important role of material possessions to many people.
A study of Nguyen (2012) shows that Vietnamese consumers’ judgment of overall life satisfaction is significantly explained by “defining success”, “acquisition centrality” and gender. Perhaps, the same as what happened with China, under the effects of globalization of business and telecommunication and the shift of Vietnam to a more free-market economy, Vietnam’s values are beginning to change (Ogden & Cheng, 2011). Furthermore, according to market survey of Taylor Nelson (TNS) the typical group people, who afford to purchase luxury and expensive products, are in the group age of 35-54 years old (40%) and have income per month higher than 8. Thus, the researcher consider the group age below 30 years old and high-income group of people from 30 to 50 years old as potential customers of status consumption field.
As mentioned above, retail sales index grow up rapidly in 2012 and keep rising up to 2014 with the increasing rate of 11. In July 2014, quantity of less than 9-seats used car are imported into Vietnam’s market with an increment of about 45 percent compared with those from previous year (Ministry of Industry and Trade, 2014). All of well-known luxury car brand such as Lexus, Rolls-Royce, Bentley, and Lamborghini… or high-class sport cars like Mercedes-Benz, Porsche, and Audi… report a stable development in yearly financial Page | 10 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com statement with rate of increasing about 10-15 percent per month. Vietnam Automobile Manufacturers' Association predicts that the volume of car would be sold in 2014 is about 120,000; there is an increase of 9% compared with 2013 (2014 auto sales likely to rise 9% year on year, 2014).