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Country of Origin (COO), a complex relationship in the Supply Chain

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Country of Origin (COO), a complex relationship in the Supply Chain

 

CONTENTS

Page

Abstract                                                                                                                                  2

Acknowledgements                                                                                                             3

1. INTRODUCTION.................................................................................................................. 4

1.1 Background Information

1.2 Rational

1.3 Aims

1.4 Objectives

2. LITERATURE REVIEW....................................................................................................... 6

 

3. RESEARCH METHODOLOGY........................................................................................ 13

 

4. ANALYSES OF FINDINGS............................................................................................... 14

4.1Primary Data Analysis

 

5. DISCUSSIONS …………………………….17

                                          

5.1Secondary Data Analysis

 

6. LIMITATIONS, SUMMARY AND CONCLUSION......................................................... 20

6.1 Limitations

6.2 Summary and Conclusion

 

7. APPENDICES..................................................................................................................... 22

 

8. REFERENCES................................................................................................................... 27

 

 

 

Abstract

Purpose - The purpose of this paper is to conduct an in depth review of how country of origin(COO) is slowly impacting on Supply Chain decision making.

 

Research Methodology - The author uses a systematic Interpretivist methodology. This study’s validity is further enhanced by the secondary data acquired on the subject.

 

FINDINGS – The Supply Chain Management field has done little to address the COO concept, data will tend to drift to marketing, but Supply chain lacks the research and with all the scheduled regulations becoming law by July 2016, it will be a privilege if the understanding from this literature, primary and secondary data can theoretically enrich the zeal for further studies. If it is possible to research further and find a relationship between COO, buyers, and Supply chain impacts of COO, and not forgetting the part emotions play when it comes to choices.

 

CONTRIBUTIONS – Although made in, labelled in and country of manufacture and assembled in seems to have been widely studied in all the sciences but Supply chain. As consumers become aware of country of brand and country of origin, it is not being sufficiently studied. Certain managers are of the view this will never become a consumer driver. Unknown to a few it is soon becoming a law and when it passed is sure to impact on Supply chain management.

 

LIMITATIONS -  From the onset, this paper sort to ascertain the choices of machinery. How customers will react when armed with the knowledge of their entire COO labelling. If that was to put some buyers off when making decisive choices as to what to purchase. Since literature also depicted a change in emotions with regards to consumers and how they decide to buy. In all that, this paper could not get a manager to admit to being racially biased when their firm had to do business with a foreign company.

 

 

 

 

 

 

 

Acknowledgement

I would firstly like to thank God for giving me the strength, grace, love, abundant peace and the wisdom to make it through this journey.

 

A huge ‘Thank You’ to the Business faculty for giving me the opportunity to study at the University of South Wales UK.

 

My sincere thanks to Mrs Vera Ndrecaj for all the help, patience and support you gave me through the time of writing this paper.

 

I would like to say a huge ‘Thank You’ to my Senior Lecturer Scott Parfitt BA (Hons`) MSc. FHEA MCIPS, you know without your moral support and guidance I probably wouldn’t have been able to get this far.

 

Not forgetting Dr Gareth White for your consistent push in getting my aims and objectives on the ball.

 

Thanking all who took their valuable time to respond to my questionnaire and your bravery in answering that hard question about race.

Daniel Hartland Direct buyers’ manager at Continental Teves UK

Frederick Obeng Purchasing manager at the British Bible Society.

 

A special ‘Thank You’ to the one person who believed in me through our times of struggle and stress, a good woman and a wonderful mother to our kids Gemma Lee Menqui I couldn’t thank you enough.

 

To my pride and joy I did all this for you lot

  • Gabriella Maria Menqui
  • Jessica Abena-Pokua Asamoah
  • Nathan-Kingsley Oteng Asamoah
  • Keenan-Arthur Thomas Oteng Asamoah

A special ‘Thank You’ to my sister Judith Osei Sarpong

Not forgetting Nigel Needs and Tegwyn Dixon for your support behind the scenes God bless you two.

To my Mum and Dad Joyce Agyeman Duah and Kingsley Oteng Asamoah God bless you.

I would like to thank my siblings

  • Natasha Asamoah
  • Daniella Asamoah
  • Kingsley Asamoah Jr
  • Samuel Asamoah
  • David Asamoah
  • Nana Osei-Tutu Budu   

 

To God Be the Glory.

 

 

 

CHAPTER 1 – INTRODUCTION

1.1 Background information

According to a FutureBrand Consultancy report (2014/15), with regards to Country Brand Index (2014/15) (CBI), when COO was mentioned, most people had other ideas of what it really meant. For example, although many people associate BMW with Germany, do we really know where all the components of the car were manufactured? A customer might decide not to buy a Korean assembled GM Motors Chevrolet, because it said Made in Korea and not the United States of America(USA). Definitions of COO however will dispute this and conflict with the Made in labelling as well.

 

As a Supply Chain professional, the author of this study believes COO will soon be very important to customers. And if so, wouldn’t Supply chain professionals want to have the answers to pressing issues such as consumers wanting to know where their products originate from? According to the Consumer voice in Europe, The European Consumer Organisation(BEUC) (08 April 2016), from July 2016 the product labels will have to show the exact origin of each component that makes up a whole product. As such if consumers decide to purchase on brand knowledge but also on their understanding of product origin as a whole then COO will eventually become part and parcel of a consumer’s thought process.

 

As more and more people around grew weary of the need to know where their foods and non-foods supplies originated from, it prompted numerous researches, inquiries and reports. A report published by the Department of Industry Innovation and Science commissioned by the Australian Government, could not be any closer to home when it addressed the changes towards consumer’s attitudes to products labelling. The report however establishes a fact, which is once they deliver this mandate of product origin labelling, it will create unnecessary increase regulations and production cost to businesses, not that the printing presses will be bothered, nor the 3D printing companies, but the Australian government wants to ensure that their consumers get the best information they need to make purchasing decisions in line with their personal preferences.

 

Therefore, as the European Union(EU) and Commonwealth nations seek to roll out the COO labelling regulations by July 2016, according to the Library of the European Parliament (Indication of origin markings on products 06/05/2013), the stage is set and the media will seek to educate consumers on this regulation. As such, Supply Chain professionals must be ready for this transition because they will need to adjust and adapt to overcome that risk.

 

Although customers are seeing labels on products telling them that an item was made in a particular country, few or none of them will know that the machinery or technology used to manufacture that item was in fact designed and developed by another country.

Numerous surveys, reports and articles, have shown that consumers want to know where the product they purchase come from and not just where they were packaged. The president of the European Commission(EC) Mr. Jean-Claude Junker received a published letter from the presidents of BEUC Monique Goyens, CLVC Reine-Claude Mader and UFC-QUE Choisir Alain Bazot, in which they all agreed that there “are sample evidence to support that French (and European) consumers want to know where their meat and milk come from”. This is an example of how Country of origin is slowly becoming a Supply chain challenge.

 

If there has been close to 25,000 signatures on a French petition calling on the EC to table legislative proposals for mandatory origin labelling in products, then like wild fire this move will soon be a drive that will spread. It is with this idea that the author of this paper would be looking to gain more insight into the perception of consumers in regards to Country of Origin (COO) and race.

In the updated 15 April 2013 article by Henriette Jacobsen, “when manufacturers do declare the origin on a voluntary basis, writing “made in” or “product of” is often also impossible to figure out if a product was only processed, transformed or manufactured in the given country”.

 

Whilst this paper will be looking at the professional’s perspective and choices when making certain purchasing decisions with regards to COO, it is limited to what it can prove due to the nature of the methodology. Bearing in mind that the chosen professionals are themselves consumers, COO can be and will be a consumer driver, and with it will be countries that will be deemed as stronger than their peers.

 

 

1.2 Rational

This topic was chosen due to the author’s experience at an executive meeting with former Head Quarters purchasing heads of departments. A question about the efficiency and durability of a then newly purchased Indian technological designed machinery to that of the used and established German design. The question was put as “how will this Indian machinery cope in the next five years”? And straight away the tension and biases’ going on could be measured if it had a temperature reading.

 

1.3 Research Aim

Country of Origin, revisiting a complex relationship in the Supply chain

  • To assess why, Supply Chain buyers, procure from certain manufacturers within the COO context.

 

1.4 Objectives

  • To understand how a buyer will make a decision to purchase a foreign brand.
  • To ascertain if emotions affected consumer choices, then such an emotion can be deemed to have a racial sentiment to it.

 

Research Questions

The questions that this study will seek to answer will be:

  1. Will the managers be perceived to understand the COO concept and if they do what will be their reasons for making the choices they make?

 

It is hoped that the findings uncovered by this study will also help to answer

 

  1. If they are moved by race when making these decisions in any shape or form.

 

 

CHAPTER 2 - LITERATURE REVIEW

The diagrams included below illustrates the Future Brand Consultancy CBI (2014/15) report. Looking at the first diagram you will see that consumers have a perception on which countries to purchase certain commodities from. In overall country ranking you will find that as illustrated in the second diagram. However, when you take a luxury brand purchase, you will find a country such as Germany at 7th place on the rankings.

 

 

Figure 1http://www.mbl.is/media/84/8384.pdf

 Sourced from FutreBrands Consultancy

 

Figure 2http://www.mbl.is/media/84/8384.pdf

 

Automotive on the other hand has Germany in the forefront, that is to show how consumers are driven with the country knowledge of who makes what and where it is best made in. In this literature review, a lot of scholars will have findings that somehow contradicts the made in and packaged in labelling. Let’s look at how literature and research have brought us to what maybe one of the upcoming consumer drivers that is set to cause turbulences in the Supply chain networks. 

Country of Origin (COO) can be defined as “information pertaining to where a product is made,” (Zhang 1996, p.51). Amine et al (2005) states that “usually, COO is operationalized and conveyed with the phrases “Made in” and the country name”. In contrast to these views and definitions, Wang and Lamb (1983) defines country of origin as “intangible effects barriers to enter new markets in the form of negative consumer bias toward imported products” but Johansson et al (1985) and Ozsomer and Cavusgil (1991) defines country of origin “as the country where corporate headquarters of the company marketing the product or brand is located”. Papadopoulos (1993) and White (1979), defines country of origin which is also sometimes known as product’s country of origin as “the country of manufacture or assembly”, and so meaning that it is the roll out point of the products life cycle as it rolls out of the manufacturing doors. However, according to (Samiee 1994 p.581) “country of manufacture pertains to firms that maintains a relatively large network of operations or business with a variety of suppliers, e.g., contract manufacturing”. While, the term “made in” has been used by Bannister and Saunders (1978), Chasin and Jaffe (1979) and Nagashima (1970, 1977) all of them in defining the country of origin.

Although, Nagashima defines country of origin COO as “the picture, the reputation, and the stereotype that businessmen and consumers attach to products of a specific country. This image is created by such variables as representative products, national characteristics, economic and political background, history and tradition” Nagashima (1970). In addition to that, Roth and Romeo defines country of origin similarly as; “the overall perception consumers form of the products from a particular country, based on their prior perceptions of the country’s production and marketing strengths and weaknesses”. Roth and Romeo (1992).  

In the current study of Global business one cannot omit the fact that when these companies endeavour to go global they have a few barriers and one of them is the perception of attitudes, cultures and most of the political status of the countries they are looking to enter, Baker and Al-Sulaiti (1998) agrees that;

“in the modern marketplace defining the country of origin can be a very complicated task, the growth of multinational companies and the evaluation of hybrid products with components from many source countries, have in many cases blurred the accuracy or validity of “made in” labels. Baker and Michie (1995); Baughn and Yaprak (1993); Chao (1993); Yaprak and Baughn (1991) an example is what Porter (1990) proposed,

“That supporting industry and domestic competition could make a region or country strong in producing certain products”.

There is evidence in that statement, because there are developing countries in Africa which are well known for their crop exports, such as cocoa pods for chocolates and cream, and a few natural mineral resources. They can be identified with the amount of products and quantities that are seen to be exported hence giving them an edge and reputation for that particular produce.

Baker and Al-Sulaiti (1998) uses this illustration below to explain the country of origin concept as to how they see it and how it affects the Supply Chain channels;

 

 

 

Fig. 3. Adopted from the author.

There are a vast range of research surrounding the country of origin. This can be hypothesised according to the effects they have on the current Supply chain networks, because buyers, purchasers and marketers within the Supply chain will all have to have an understanding of the markets and the global awareness pertaining to certain consumers and countries.

 

One can say that supply chain managers are supposed to be aware of risks and what is happening globally in their market place. In order to understand consumers in the ever growing markets, so as to be able to match demand with supply. When one studies the literature around country of origin you come across a vast variety of names such as Schooler, Verlegh, Steenkamp, Nagashima, Johansson and etc. Their pioneering work has been studied all around the world and with that vast of literature, it has become apparent that certain hard questions such as race, haven’t been addressed although various theories have been used widely to test the findings of those previous genius studies and results.

 

That is the gap this research will be looking to explore, why there hasn’t been a question of race, and why they haven’t sort to educate the consumers on the issue of COO according to the Press release External/international trade (29-09-2010) What will happen? As supply chain professionals when asked by our customer the reasons for using Indian technologies in productions and labelling the end product Made in the country it rolled out? Are we ready to face that fact and witness the reactions of our customers, whether they remain loyal to our brands or lost due to lack of transparency and education? These are all hard questions that will be needing answers, and clearly much research into what if? The what if?  The studies and research dates as far back as 1965, the book modelling the Supply Chain by Jeremy F. Shapiro, in this book he makes mention of the Cohen and Cyert (1965) which acknowledges the important early contribution to the use of mathematical models in studying theory of the firm. What else was happening in 1965? Schooler’s published his findings in the COO research where he agreed with the effects consumers have over product evaluation, and it was supported by Nagashima’s findings in 1970.

Narayana (981) published that COO effects on evaluations varies across consuming countries and cultural orientation, it was later on supported by the findings of Heslop and Papadopoulos (1993) and then by Gurhan-Cali and Maheswarm in 2000. However, in 1983 Kaynak and Cavusgil suggested that

“COO effects on evaluation vary by product type”, especially products with French association are perceived to be more hedonic than products that does not have this association, and to support that was Roth and Romeo in (1992) and LeClerc et al. (1994).

In addition, Johansson et al (1985) believed that;

“in the simultaneous presence of multiple cues i.e. brand, price and etc., the COO effect is lowered”.

They were also supported by Wall et al (1991) and Agrawal and Kamakura (1999). In contrast to these views, saw Shimp and Sharma (1987) argue that “consumer ethnocentrism increases the COO effect on evaluations as well as purchase intentions” and that was supported by Balabanis et al (2001). Then Han and Terpstra (1989) demonstrated that;

when simultaneously presented, the country of manufacturing cue has a larger effect on evaluations than country of brand origin cue”, and Tse and Gorn (1993) agreed. 

Han (1989) claimed that, “COO operates as a “halo” OR “summary” construct, depending on familiarity”, but then Obermiller and Spangenberg (1989) disagrees stating that;

“the cognitive, effective and normative factors of national stereotypes affect the COO effect on product evaluations”

 and that was supported by Heslop and Papadopoulos (1993) and Martin and Eroglu (1993) and later by Verlegh and Steenkamp (1999) agreeing that;

“the political, economic and technological factors of country stereotype affect the COO effect on product evaluation”. 

Having said these, it is good to understand that various studies beyond the millennium has shaped the COO ideology up until now, and in the year 2000 Gurhan-Canli and Maheswaran believed that;

higher consumer involvement decreases the COO effect”, whereas 2003 and 2004 saw Hui (2003) and Zhou (2004) argue that “the country of brand origin has a larger effect on evaluations than the country of manufacturing”, whilst Srinivasan et al (2004) supported that with their findings. 

Having said that, there’s been decades of studies and research which have examined the effect of COO when studies done on customers and consumers as a single cue and resulted in finding significant impact on evaluations of products (Schooler,195; Nagashima 1970). Although COO research has mainly been studied around the use of sampling people from same cultures or different cultures, COO from an information processing perspective when COO can be seen as one cue among many such as price, and firm’s societal standings, its effect on consumers is somehow inconclusive as suggested by Johansson (1985) and Agrawal and Kamakura (1999).

On the other side of the fence, according to Baker and Al-Sulaiti (1998), our ever flatter world has forced companies to engage in the outsourcing of their services, and products, typically training their foreign employees in projecting a uniform image that reflects the country of brand origin, and this is where I intend to focus my research on, because through all of the available literature and studies, not one has made mention of a racial perception towards COO in making decisions. This is somehow evidenced in company CTUK as they are perceived around the world as having mechanical capabilities second to none and mostly revered by consumers for quality and price matching the value of their products in association with that country brand origin. In hind sight, most consumers will choose German engineered automobiles over Korean types.

Diamantopoulos, Palihawadana and Schlegemilch (2011), did acknowledge “that in recent years’ country of origin construct and by extension, research on COO has been attacked from at least three angles”, firstly they argued that Usunier (2006, p. 61) and Samiee (2010) emphasized effects of COO are no longer a major issue for international operations, multinational production, global branding and the decline of origin labelling in World Trade Organisation(WTO) rules tend to blur the COO issue and lessen its relevance, but amidst those rules there are still collective ethnocentrisms within consumers which has been tested and studied with findings to agree of its existence.   

They go on to further emphasize that several empirical studies have hypothesised that for the most part, consumers do not know the correct country of origin of many often well-known brands citing Balabanis and Diamantopoulos (2008) and Samiee et al., (2005). So does this mean there may be a limited recognition of brands and labels? Or its just because a built up perception and reputation stays with consumers through and through? If that is the case, then there is more to understand from the study of consumers and hard questions asked about COO. 

 

Fetscherin and Toncar (2008) agrees that there is ever increasing competition between the more recent developing automobile manufacturing companies, and soon attitudes and cultures will change and that will somehow cause an effect in COO as well. There is evidence of this as the business world has evidenced the United States of America(USA) General Motors(GMC) companies now introducing American branded vehicles in Europe, designed in Europe most of them but assembled and manufactured in Asian industries.

 Prendergast, Tsang and Chan (2010) acknowledges the good and pioneering work that has been undertaken extensively by Schooler (1965) and that of Johansson et al (1985), since these pair of names conducted their studies and hypothesised that COO can have an effect on consumer’s opinion of a product, however Prendergast, Tsang and Chan think otherwise and disagrees by saying that

“research findings on how COO affects product evaluation are rather inconclusive”

citing Bilkey and Nes (1982); Ozsomer and Cavusgil (1991). They emphasise on the attempts taken to explain those findings, however they argue one of the most plausible hypothesis is the multi-country affiliation where there has been separate definition for country of brand to country of manufacture and that of country of origin citing Samiee (1994) and Johansson (1989).

As much as researching into these theories and consistently having to be reading around the subject, there has been studies done almost in product brands, consumers, automotive, culture, countries, food, attitudes and even into the virtual world of online business all with references to COO. Li and Wyer concedes that;

“the low or high quality merchandise’s reputation is likely to be used as an independent product attribute when it is either conveyed first (before more specific attribute information) or the decision to be made is important (regardless of when it is conveyed), and a country of origin’s reputation is likely to function as a signal primarily when the product is familiar and little attribute information is available”.

Fischer and Reuber argues quite differently from Li and Wyer’s hypothesis, because according to Fischer and Reuber if you are not known, your product will not go through a reputational evaluation of the country of origin, because your product will be virtual and online, which will give some consumer’s very little time to take into consideration where the item has been manufactured or assembled from. That then will however make the product either non conformant or counterfeit in the COO regulations. 

So, what about the machinery that is used in production of these products, because it seems so many studies are done on where, which consumers, what countries and why it is, but non on the actual machinery being used in the production and manufacturing, this is where I find my gap, because around the world now especially in the automotive and engineering world, let us not forget that when we look at the engineering world alone we have so many manufacturing machines which are doing the processes but have different “made in” labels on them.

A typical example is the machinery forging and producing auto parts in the

United Kingdom where as those machineries have been manufactured in the Asian diaspora from growing economic powers the likes of China and India, what will we say? That the item is manufactured in the United Kingdom whereas it’s real ingenuity and architecture is from an Indian designed and manufactured machinery? Can we argue that it will be possible for the consumers to have an understanding of what really creates their so called Western Piston, Brake pads or front and rear bumpers on their vehicles? Wouldn’t it be confusing? Because if the customers were to be told that although their refrigerators brandishing a made in France label, but are actually manufactured with a machine from Mongolia, will that make the customer rather think twice about getting that fridge or will they be moved to enquire more about a fridge that has a made in Germany label manufactured with German engineering and machinery COO labelling on it?

It is however inevitable to hypothesise that there are gaps in what consumers really understand with reference to COO, and it would great to find out if the perception on the manufacturing machinery will have an impact on the choice of machinery a company will be tempted to go for, should they know or have an understanding of what their customers think about the idea, and it will be interesting to know if the customers share a view about what they think about the machines and robots that are moulding, shaping, designing and even part testing their products. Supposing we go back to the definition of Ozsomer and Cavusgil (1991) where they define

“country of origin as the country where corporate headquarters of the company marketing the product or brand is located”.

If that is so, then wouldn’t we say that a product with a made in Japan for example a Sony DVD Player that is made in Japan, designed and manufactured in Japan and compared also with the other brands assembled in Singapore, if that is the case, what prevents their customers acknowledging and perceiving the Singaporean assembly as a made in Japan as well? 

It wasn’t so though, according to Baker and Ali-Sulaiti, Sony would rather their customers see what is made in Japan for what it is and what is assembled in Singapore for what it is and they expect the same with their customers.

In contrast to these views, it is right to proposed revisiting a complex relationship for country of origin in relation to supply chain, where the aim will be; 

  • To assess why, Supply Chain buyers, procure from certain manufacturers within the COO context 

My objectives to assist in achieving that aim are finding out about; 

  •  To understand how a buyer will make a decision to purchase a foreign brand.
  • To ascertain if emotions affected consumer choices, then such an emotion can be deemed to have a racial sentiment to it.

 

How will this be undertaken? Previous research has shown that most of the scholars have used qualitative analysis, quantitative analysis, questionnaires and sampling methods. Others have also used collectivism and individualism data collection by sampling a group of people. I would be looking at using the following;

 

The questions that this study will seek to answer will be:

1.Will the managers be perceived to understand the COO concept and if they do what will be their reasons for making the choices they make?

 

It is hoped that the findings uncovered by this study will also help to answer

 

2.If they are moved by race when making these decisions in any shape or form.

 

In summary, the author will be looking to find out what managers think about their buyer’s choices in respect to the products and machinery that they purchase, will be also hoping to get an honest perception of the individual buyers and with that ascertain whether some of the studies previously done have been precise due to their stated hypothesis. As much as there is an understanding of the various point of views in the literatures studied, it will be a privilege to be able to establish if there are any racial attributes to choices and attitudes towards country of origin.

 

 

 

 

CHAPTER 3 – METHODOLOGY

This research has a been undertaken with an Interpretivists’ philosophy in mind to arrive at the authors thoughts and data gathered. As much as it kept along the lines of being inductive, it has been an action research due to the questionnaires introduced. (Saunders et al 2012)

In dealing with which method to best get the required results for this research paper. It is important to acknowledge that when considering people’s perceptions, you are most definitely faced with errors. Spector (1992) after reviewing the validity of self-report measures. He hypothesised that 10 to 20 percent of these variables are mostly attributed to the intended trait or the objective environment. According to Spector (1994) this assumption is calculated as 1 minus reliability. Griffin (1991) can be seen as good example for a similar research method. In which his report findings established employees perceived changes that had taken place in their jobs with regards to conditions.

Although Spector (1994) concluded his research by showing the flaws and weaknesses in self-report methodologies, he agrees that it is useful to illustrate a vivid picture of how people feel about their jobs.

The data in this research paper has been gathered using a questionnaire supplied to the purchasing manager and buyer of Company (CTUK). This is to ascertain their perceptions on COO in regards to Supply chain and also to enable certain hard questions such as the issue of race in their decision making. To comp0licate matters, it is evidenced by Saunders et. Al (2012) that extracting such information through the use of structured interview questions, he does not support the idea that one can derive quality qualitative data especially for the purpose of this research.

In the attempt to achieve this aim, the interview questionnaire will seek to acquire this vital information with which to establish their perceptions and the answers to the hard questions such as race.  This is because according to Saunders et. Al (2012), the collection of perceptive data, which can be classified as personal opinions, this information when gathered will help the interviewer to find out about how the respondent which is the Purchasing manager and his buyers, truly feel and their perceptions on the subject to be addressed. Dillman (2000) agrees to that idea.     

Since this methodology is deemed as exploring self-reports, the personal traits and possessions of the respondents will not be important as this research paper will not seek to find if the respondents are male or female as cited by Saunders et al (2012). It is clear by now that there’s been no face-to-face contact with the respondents as this methodology has been a self-completion questionnaire (Bryman and Bell, 2011).                                                                                                                                                                                      

 

 

 

 

 

 

 

 

 

CHAPTER 4 - FINDINGS

4.1Primary Data Analysis

 

In the earlier methodology chapter, the questionnaire was put together to invite answers such as opinions and perceptions of company buyers and managers. It was intended to capture their behaviours in relation to the COO questions.

Looking at the responses initially, it is easy to think that there are similarities just by glancing through the responses. Although they appear to be the similar there are certain differences that are evidenced in the answers to the questions. Although manager Hartland (Questionnaire 2016) said,

“Both goods and services are purchased from a foreign company on a daily basis. From a service perspective however I don’t think the COO has any bearing. As it is not a product then I don’t think it would be under the “made in” category”

Having said that there is that perception where both managers procure from foreign countries. As often as they do it is the core competency of the focal company they both serve in. That implies that the global supply chain networks are extremely large and hence the purchasing from foreign companies.

Some of the respondents however said that they were a global entity and that they sort after ethical reasons above country image. Mr Obeng (Questionnaire 2016) said;

“Yes, this will only become relevant when there are restrictions on the importation from that country”.

The other answer from Mr Hartland (Questionnaire 2016) read that;

 “As a global organisation we have the scope to purchase products from all corners of the world, however, it is part of our T&C’s to only buy from ethnically sounds countries. Also as we supply safety critical parts it’s important that the supplier has all of the required quality certificates”. 

When analysing the answers from Mr Obeng and Mr Hartland it is evidential that COO has been encountered within their day to day activities and also it is always at play, because when they have to import parts and spares, being in the UK they will have to have the EU standard COO labelling and records in order to comply with the UK HMRC regulations.

When this rolls out in July 2016 it will probably be the beginning of the COO era which will see these managers encountering and dealing with the regulation from the time an order is placed until it has been received and processed ready to be delivered to the customer.

However, on the choice of which countries they will readily go into business with they both made choices of what they were familiar with. It was apparent that the manager with the global entity was choosing Germany, UK and India as his choices, with the reason being that they do not have current suppliers from Russia, Iceland and Singapore.

One has to look at the diagrams in the literature review to ascertain the correlations on why they will do business with the chosen countries. Singapore, Russia and Iceland do not make the top 20 list of country brand index (CBI). However, Germany is ranked 3rd in overall and India 14th and UK the 6th. Whereas the other manager chose India as one of the countries, it was only because they were in the automotive business and therefore had both spares and technology from a country such as India.

The other manager on the other hand, had just the UK and Germany chosen and gave a reason as; Mr Obeng (Questionnaire 2016)

     “This is because I can be assured of the quality of the product being purchased and also reduction of cost of transportation”

So, it is a fact that the literature review states, as most supply chain managers are driven by cost savings, a number of them also are driven by brand image, quality and transportation within their networks. This only combines the idea that, with COO also being made-in and manufacturing labels, one cannot help but foresee COO being something that will be largely talked about. It will become the force that drives these multimillion industries and their passionate zeal to match their demand with supply.

This report will have suffered a malnutrition if none of these managers ever pointed out COO to become a relevant hurdle to get over when it comes. According to Mr Hartland (Questionnaire 2016) he makes mention of having the correct COO measure in place already, due to the EU non mandatory but obligatory Directive 2001/95/EC on general product safety which allows companies to keep and make ready when prompted the documentation necessary for tracing the origin of products. He went on to say;

  “This is something that is already in place. Many of our customers require COO certificates with the majority of products. This is also a legal request from HMRC”  

But the other manager Mr Obeng (Questionnaire 2016) said that;

“This should not be a surprise as all the invoices being shipped along the goods contain the country of origin of the product.”

It does however bring home the scope of this research exploring the complex relationship between the supply chain professional and the COO of which there has been enough studies in the field of marketing and less in the field of supply chain. For something as trivial as COO, one day becoming a headache it will be advisable to find solutions for an accident waiting to happen.

A lot more were deduced when the respondent managers were asked if they believed COO was going to be a consumer driver and why? Both Mr Hartland and Mr Obeng both answered respectively as follows;

“Again, I think that ethics plays a big part in this. ...Because of conflict and other factors in certain countries the need for the COO clarification is becoming increasingly relevant”.

“I do not believe that because what consumers want are a competitive price, high quality and speed of delivery. If you are able to meet your customers with these three factors surely they will not bother about which country the products are coming from”.

There is a clear division of who is up to the speeds in the supply chain networks. The above quote does have a clear understanding of what is about to come or perhaps what is perceived to happen in the near future. Although literature states that the COO regulations will curb frauds and counterfeits, one cannot help but realise that the EP have only sort ideas and advice to pass this legislation through without thinking outside the box.

Yes, it will curb a lot, but will it benefit the supply chain professional? This is because this research sees the point where an item being sourced from a particular country and supplier, with or without wars and conflicts might get shut down. Simply because that small medium enterprise(SME) that operates y hand making their components, will now have to print a label and have all their products COO certified worldwide.

So, how does it affect the supply chain? When that SME turns around and increase prices after production due to the fact that they have to comply with the World Trade Organisations(WTO), EP and EU derivatives, the ripples will be felt across the chain, and hence will cause some supply chain managers to start looking for other alternatives and suppliers. When that happens, the second answer by the manager will seem to be a hard one to manage. Not only will they not be able to meet supply with demand but they will have to probably cut back on a lot of things and manage that risk perfectly to achieve what their customers want.    

Race as a matter in business will be very difficult to admit. There are however certain things to consider when a company goes global and most of the time it is to do with the parent country and the cultures of the people living in that country. How can a global company say they do not consider race as an issue? Surely something does prompt a person to pick an apple that is red from the other which is green.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHAPTER 5 - DISCUSSION

5.1Secondary Data Analysis

Continuing from where the choice of the green apple is made, Antonio Damasio, Professor of neuroscience at the University of Southern California, argues that emotion is a necessary tool to almost every decision. (Descartes Error no date).

Murray (2013) agrees with Damasio stating that knowing of consumer purchase behaviour must be based on knowledge of human emotion and include the paramount influence that emotions have on decision making. This is because when a manager said they do not attach any sort of racial thinking when purchasing from a country other than their own, research shows that inward emotion which can be affected by internal and external forces will have the last say on the choice that is made.

Although a hard question to attempt answering, it was well answered by both respondents and that is duly noted.

It is very difficult to understand through the literature how the COO debate and legislation itself caused a split in the EP, with the one side being the British MEPs and German MEPs arguing that any such law on labelling would and could be deemed as protectionism and restraint of competition which will then be in violation of the United States’ unrestricted use of the Chablis designation for wine. Barjolle and Sylvander (2002).

So some facts and figures from the FutureBrand report in 2014/15. The online co-creation brought about 2,400 customers and 500 plus employees. Although I don’t suppose the respondents have seen this report, it builds a strong case with its findings:

  • Origin is driver of consumer choice
  • The definition of country of origin is getting sharper
  • The strongest countries of origins are clear in consumers’ minds
  • A country of origin’s reputation is stronger when it excels in multiple categories
  • Country brand strength does not equal made in strength
  • Successful brands contribute to made in strength

 

Having said these, one can clearly see the linkages with the above points to that of what the literature review offers. It is evidenced that country of origin is slowly but surely becoming a consumer driver, and that the most important thing to highlight here is the way the COO definition is getting sharper.

However, let’s not forget that these attributes do not stand when you omit the following;

  • Political Freedom
  • Tolerance
  • Environmental Standards

All these attributes tend to aid in the decisions of a consumer, why they will purchase from an unethical country and help the oppression of the unsafe people or rather make purchases with a country that is sound and socially moral. A country’s environmental standards can encourage or put people off from visiting as well.

It is however clear to see that the globalisation does play a major roll here. According to Phau and Prendergast (2000), a lot of products will themselves be called bi-national doe to their disposition, because with the globalised companies, a lot of production is undertaken from different parts of the world before the product bearing the label and brand name is put to together. This is where it becomes tricky and as such whilst it may not seem as a problem at the moment and not much details in the supply chain research, it will be in the near future.

This report has gone out of its way to highlight a major turbulent storm that is approaching supply chain management, as the skill seeks to match supply with demand, the time will come when it maybe rather difficult to understand the customers we are seeking to please. According to Lee and Schaninger (1996), these two argue that, irrespective of brand prestige held by a company, there will be that time where it will not be quality and brand name that will drive their customers to buy, but by the fact that they would have manufactured or assembled the product in a particular country.

Now, it will be near impossible to actually say when, but with the introduction of the law by the EC and Commonwealth countries, it is inevitably close, there is evidence in research to back this, because Pappu et al (2006) and Lee (1993); Iyer and Kalita (1997) have all conceded that the manufacturing location of a product does have an effect on the customer’s perceptions in regards to product quality. How this conclusion does not have a racial relationship linked to it, is what this report will hope extensive work is done on that gap to actually establish why?

It is very easy to point fingers at people to say they are racist because they made a comment about colour or language or birth place, but if one perceives against a product for the fact that it has been manufactured in a particular country, how can that not be deemed as racism towards a brand, assemblies or the COO of the product.

Fetscherin and Toncar (2009) agree that, a strong understanding of the COO concept will help marketing managers in staying ahead of the competition especially when they are competing against internationally recognised brands, now this one area where supply chain because it runs alongside marketing will benefit as well, and so far there seems to be no added interest or research by supply chain academia to establish a correlation of this hypotheses.

A lot of consumers will recall the horse meat scandal that almost crashed most of the major retail industries in the UK. The 2013 scandal did not only rattle cages and caused consumers panic, what it really did was show how supply chains were increasingly becoming vulnerable to risks. One will ask, why the risk?

There is evidence that visibility within the supply chain either diminishes as a company stays as an SME with a turnover slightly below £25m million pounds, and although they say money talks, it is true in this aspect. This is because you find global entities with turn overs above £1bn billion pounds do have mechanisms in place that can sometimes eradicate the risk before they occur. It was not so with the UK retailers, because although Tesco had a larger market share, it was still not able to prevent the embarrassment that meat scandal caused.

Not very long ago ALDI also recalled some of its butter ranges because they had some contamination from their suppliers which were causing their customers to develop meningitis. Clearly could this not have been avoided if the COO labelling of the products their suppliers supplied them showed a risk? Someone could have said, hung on, why don’t we check that particular name on the label before we put these products on our shelves? Because either the name of the place was not clear, or there could be some history associated with the company.

Many researchers have uncovered that, almost one in five businesses hold no data on their suppliers’ suppliers as quoted by Claire Jones (2013) in her Businesses unaware of supply chain risk publication. These factors have led not just the EU but also countries like the commonwealth and Australia are all pushing to have their products labelled accordingly. This will be in place eventually in July 2016 and it will become a legal requirement.

According to Marcin Szczepanski the COO labelling has been criticised by a majority of member states at the European Parliament (EP) but as much as it has been fought out, there are member states who are willing to have COO labelling legislated and rolled out in 2016. They argue their case as that it will curb out fraudulent and imitated products.

There are Non-preferential origin and Preferential origin. The Non-preferential does not have any other use other than being a tax and duty quoting title. Whereas the preferential allows a zero rate of duty due to the agreement of the member state. However, the qualifying product must be produced from ore or grown in the country of the beneficiary.

When dealing with non-food products, there has been instances where a particular component maybe formed and fashioned by two different countries. In this case it does get tricky, because there will be times when a product will have substantial work done on it by a particular firm in a country, then the COO labelling will have the right of being labelled as originating from that country.

At other times, there are processing operations which do or do not cause any change in the product under manufacture. This is in the likes of the textile industries and because of that the origin labelling is mostly likely to have several countries. But on the legislation, it will be the last country of roll out that will have to put their label on the textile product.

Furthermore, if the production is through a value added nature because the increase of value due to the operations and assemblies being undertaken are to add value, then whilst the production continues in that country and the price of the overall product manufactured will make it bare the label of that country.

Studies in marketing have also shown that consumers’ behaviour are most often strongly decided on brands and that it always supersedes that of COO when it comes to purchase choice. There was a 2010 Euro barometer survey which demonstrated almost one third of EU-27 consumers check the origin of products and make their buying decisions on that basis.

On this note the COO regulations has come to curb wrong doings and also to set out anti-dumping measures and quantitative restrictions or tariff quotas. The only thing to carefully consider is not to impose unnecessary burdens on economic operators from other countries as according to Marcin Szczepanski (Library of the European Parliament 06/05/2013)

 

 

   

CHAPTER 6- LIMITATIONS, SUMMARY AND CONCLUSION

6.1 Limitations

As with a lot of research, there are always limitations. It is with regrets to state that part of the limitations in this research paper is the methodology used. According to Spector (1994) the methodology used should match the research question asked, and although the self-report questionnaire is not entirely capable to answer questions such as those that this paper sort to address, it could have therefore been better addressed by using other methods.

Another issue at hand was that, the respondents were a small category and homogeneous as it targeted specific buyers, it could have probably targeted the Global entity of professionals with at least over a hundred responses to the questionnaire and at most over a thousand. But based on the methodology used, it was going to be an attempt to analyse a self-report questionnaire, through which it would have been great to positively achieve all the necessary aims and objectives.

 

At the period of finishing this study the point of discussion which included the choice of machinery, was proving hard to ascertain, because it’s true that with time consumers will come to understand this COO labelling and when that time comes it will fall to someone else to conduct a research into that theory, but until then this report cannot be helpful in addressing the issues of the choice of machinery.

 

As much as this report would have been able to establish human behaviours and emotions to help analyse if buyers were somehow affected by race when making their decisions, it was however difficult as the pair of correspondents were adamant that race had no effect in what choices they made, and they are praised for the way they have comported themselves on the questionnaire.

 

The questionnaire though, could have been structured well also and not given room for closed questions which then gave them the choice to simply give an answer in one word of English.

 

6.2 Summary and Conclusion

A hard look at the responses received, it does seem that both managers had different ideas in regards to what COO really was. Although the definition was on the paper for them, there signs of prejudgments towards the COO context and many more.  Responses such as the following;

 

“Absolutely not, we are a global organisation sourcing from all over the globe. As an organisation we are also huge on diversity with 200,000 employees from approximately 60 countries”. (Hartland, Questionnaire 2016)

 

And “No, race should not be an issue to doing business”. (Obeng, Questionnaire 2016)

 

Such responses showed that, in today’s business environment no manager will openly admit to having to hold a racial prejudice. As chapter 6 annex 6.2 states that the emotions play a vital role in a purchasing decision, although it may not happen often, there is bound to be a close call one day when such a decision will be taken.

 

It would be a good idea at this juncture to highlight the need for more and extensive research into the various aspects that this research will not be addressing in this report. To say extensively that additional research is needed into the supply chain field, and although it might have been rendered irrelevant, one should not forget that even migration has affected supply chains, and that not taking anything for granted and asking ‘what if?’ At every corner of our whole supply networks is the only way to maintain and manage the challenges and risks when there occur.

 

There are extensive gaps in the ideas of machinery’s own COO and if the affect the products COO upon production, there is also the lack of education of consumers in regards to COO labelling and what to expect when they roll out. Reports, research and publications will mention the dates of roll out, but nothing is mentioned about informing the public on how to spot which label and how to even ascertain its genuinely used.

 

 The opinions of the respondents were as honest as they can be, and with the amount of information they offered, it gave a sense of relief as to establishing why COO will soon be a driving force within our consumers. However, educating the consumers to understand what this labelling will be an about will prove stressful enough, but once it is done they will be able to then sort they challenges thereafter.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

APPENDICES

 

APPENDIX A

Copy of interview questionnaire

The responses to this questionnaire will be treated as confidential and your participation will be anonymous, however with your consent I will be happy to acknowledge you in the acknowledgement section of the research paper. This questionnaire will take 25 minutes of your time.

 

NAME AND JOB TITLE OF RESPONDENT: ……………………………………………

 

NAME OF COMPANY: …………………………………………………...…………………

“In the modern marketplace defining the country of origin can be a very complicated task, the growth of multinational companies and the evaluation of hybrid products with components from many source countries, have in many cases blurred the accuracy or validity of “made in”


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  • Title: Country of Origin (COO), a complex relationship in the Supply Chain
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  • Post Date: 2018-11-05T11:41:48+00:00
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