Made in China

In order to provide the Chinese home appliance manufacturers consortium with assistance in achieving their goal of improving the "Made in China" image, our first objective was to accurately define the perception of products that are "Made in China." In particular, to determine whether or not "Made in China" has a negative connotation in the U.S. marketplace and if so, to better understand the contributing factors to this perception. First, we conducted secondary research consisting of a review of literature and statistical studies. The focus was on the broader topic of a product's country-of-origin and its effect on the consumer purchase decision process. Second, we focused on the specific impact of "Made in China" on purchase behavior. Third, to gain further insight into the consumer perception of "Made in China" in the home appliances category, we conducted primary research in the form of consumer surveys, retailer interviews and secret shopper studies. Finally, we conducted secondary research on the actions that can be taken to overcome or change a negative country-of-origin image.

Secondary Research

Our secondary research identified several key themes, all of which support the hypothesis that a product's country-of-origin plays a significant role in the purchase decision process. These findings are summarized below:

Impact of Country-of-Origin (COO) On Consumer Perceptions and Purchase Decision-Making Process:

A number of statistical studies have explored the effect of country-of-origin on consumers' perceptions of products and how it influences the decision-making process. Studies by Heslop and Papadopoulous (1993, 2000) concluded that COO image is one of the most important influences on decision making for foreign-made products. These studies revealed that buyers evaluate COO using multiple criteria including the country's level of advancement, the buyer's feelings about the people of the country and the buyer's desire to be more closely aligned with the country. In addition, a study by Liefeld and Wall (1987, 1991, 1993) found a positive relationship between product evaluation and the degree of economic development of the COO. Support of these finding was found in a study by Wang and Lamb (1983) in which it was determined that U.S. consumers evaluate products according to the country in which they are produced. Culture, political situation and economic development of the source country were contributing factors to this evaluation criterion.

Further support that COO plays an important role in shaping consumers' attitudes towards products was found in studies by Hong and Wyer & Nooh, Sa'ari, and Powers (1989, 1999). These studies determined that COO has a symbolic and emotional meaning to consumers. Both the direct influence of COO on product evaluation and the influence of COO on other product attribute information were statistically significant. A halo effect seems to exist in which a belief about one product trait produces a belief structure about unknown traits that are congruent with the known trait. Therefore, if a consumer knows nothing more about a product than the country-of-origin, and they have a negative perception of that country, they will adapt a negative perception towards the product as a whole. A separate study by Erickson, Johansson and Chao (1984) identified this "halo effect" in which the country image affects consumers' beliefs about tangible product attributes, and in turn affects their overall evaluation of the product.

Studies by Nooh, Sa'ari and Powers, (1999) also found that in combination with other marketing characteristics, COO can positively or negatively influence the consumers' perception toward a product. A positive correlation exists between a favorable COO perception and the consumer's product preference. Compared to the other marketing influences such as quality, technology sophistication, product features, brand recognition, advertising image, and distribution/retailer perception, COO had a less important influence on product choice. However, the study by Erickson, Johansson and Chao (1984) determined that COO serves as a signal for product quality and performance. Therefore, a negative perception of COO translates into a perception of poor product quality. This finding is supported by a study conducted by Dzever and Quester in which it was observed that COO and its perceived quality can impact future purchasing decisions.

In regards to the COO effect on the purchase decision-making process, a study by Gurhan-Canli and Maheswaran (2000) found that consumers were more likely to focus on the COO when their motivation to buy the product was low or if their decision-making process directed them away from the COO information. A study by Ulgado and Lee (1998) found that electronic appliance consumers consider COO information to be as important as other specific product attributes and a study by Okechuku and Onyemah (1999) determined that COO is significantly more important than price and other product attributes when considering what products to purchase.

These studies demonstrate that country image influences consumers' perception of foreign made products. The next step in our secondary research was to determine the current state of consumer perceptions of products made in China, particularly as it relates to product quality.

Impact of "Made in China" On U.S. Consumer Perceptions:

A statistical study by Schniederjans, Cao and Olson (2004) identified several key findings in regards to U.S. consumers' perceptions of quality for products made in China. China's questionable quality practices in the past have influenced consumers to varying degrees, ultimately resulting in the perception that products made in China are poor in quality. Based on survey results from 500 U.S. consumers, the average quality rating on Chinese products was "poor value" indicating that consumers have a poor perception of Chinese made products. Product durability was also low when compared to non-Chinese manufactured products. The results of this study conclude that when compared to non-Chinese manufactured products, Chinese manufactured products are perceived as having less quality and less value.

To further investigate the perception of made in China on U.S. consumers' product preferences and purchase decision-making process for home appliances, primary research was conducted at both the consumer and retailer level.

Primary Consumer Research

Primary research was conducted among