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. Tran Ha Minh Quan TIEU LUAN MOI download : skknchat@gmail.com ACKNOWLEDGEMENT First, I would like to express my gratitude and deepest appreciation to my two research supervisors, Dr. Nguyen Thi Nguyet Que and Assoc.
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 TIEU LUAN MOI download : skknchat@gmail.com 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. TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENTS CHAPTER 1.
PROBLEM STATEMENT AND RESEARCH OBJECTIVE. BENIFIT OF RESEARCH. RESEARCH METHOD AND STRUCTURE. THEORETICAL BACKGROUND AND HYPOTHESES.
Willingness to buy. Consumer Ethnocentrism Tendency Scale (CETSCALE). Consumer Ethnocentrism and Perceived Price. Consumer Ethnocentrism and Perceived Quality.
Consumer Ethnocentrism and Willingness to Buy. Perceived Price and Willingness to Buy. Perceived Quality and Willingness to Buy. 15 TIEU LUAN MOI download : skknchat@gmail.
Moderating effects of product categories and demographics. PROCEDURE AND SAMPLE. DEFINING MEASUREMENT SCALES. Measurement scale for consumer ethnocentrism.
Measurement scale for perceived price and perceived quality. Measurement scale for Willingness to Buy. Measurement scale for consumer’s gender, age and income level. DATA ANALYSIS AND RESULT.
EXPLORATORY FACTOR ANALYSIS (EFA). CONFIRMATORY FACTOR ANALYSIS (CFA). STRUCTURAL EQUATION MODELING (SEM). MULTI-GROUP STRUCTURAL EQUATION MODELING (MGSEM).
DISCUSSION, RECOMMENDATION, LIMITATION AND DIRECTION……………………………………………………………………………41 5. DISCUSSION AND CONCLUSIONS. 41 TIEU LUAN MOI download : skknchat@gmail. DIRECTIONS FOR FUTURE RESEARCH .………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 TIEU LUAN MOI download : skknchat@gmail.com LIST OF FIGURES Figure 2.
Confirmatory Factor Analysis (CFA) Model. Structural Equation Model (SEM) results. 34 LIST OF TABLES Table 3. Distribution of the sample.
Descriptive Statistics – Results. Fit indices for the test model result (CFA). Thresholds for the condition of validity and reliability. Fit indices for the condition of validity and reliability.
Fit indices for the test model result (SEM). Hypotheses Test – Results (Standardized). MGSEM Product Results – P-VALUE. MGSEM Gender Results – P-VALUE.
MGSEM Age Results – P-VALUE. MGSEM Income Results – P-VALUE. 39 TIEU LUAN MOI download : skknchat@gmail. 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. 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 TIEU LUAN MOI download : skknchat@gmail.com 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 TIEU LUAN MOI download : skknchat@gmail. 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 TIEU LUAN MOI download : skknchat@gmail.com 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 TIEU LUAN MOI download : skknchat@gmail. 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.