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 Prof Tran Ha Minh Quan ACKNOWLEDGEMENT First, I would like to express my gratitude and deepest appreciation to my two research supervisors, Dr Nguyen Thi Nguyet Que and Assoc Prof 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 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 TABLE OF CONTENTS CHAPTER INTRODUCTION 1.1 RESEARCH BACKGROUND 1.2 PROBLEM STATEMENT AND RESEARCH OBJECTIVE 1.3 BENIFIT OF RESEARCH 1.4 RESEARCH METHOD AND STRUCTURE CHAPTER THEORETICAL BACKGROUND AND HYPOTHESES 2.1 THEORETICAL BACKGROUND 2.1.1 Willingness to buy 2.1.2 Consumer Ethnocentrism (CES) 2.1.3 Consumer Ethnocentrism Tendency Scale (CETSCALE) 2.1.4 Perceived Price 10 2.1.5 Perceived Quality 11 2.2 HYPOTHESES 12 2.2.1 Consumer Ethnocentrism and Perceived Price 12 2.2.2 Consumer Ethnocentrism and Perceived Quality 13 2.2.3 Consumer Ethnocentrism and Willingness to Buy 13 2.2.4 Perceived Price and Willingness to Buy 14 2.2.5 Perceived Quality and Willingness to Buy 15 2.2.6 2.3 Moderating effects of product categories and demographics 15 RESEARCH MODEL 18 CHAPTER RESEARCH METHODS 19 3.1 PROCEDURE AND SAMPLE 19 3.1.1 Pilot Study 19 3.1.2 Main Study 20 3.2 DEFINING MEASUREMENT SCALES 23 3.2.1 Measurement scale for consumer ethnocentrism 23 3.2.2 Measurement scale for perceived price and perceived quality 23 3.2.3 Measurement scale for Willingness to Buy 24 3.2.4 Measurement scale for consumer’s gender, age and income level 24 CHAPTER DATA ANALYSIS AND RESULT 25 4.1 DESCRIPTIVE STATISTICS 25 4.2 RELIABILITY TEST 26 4.3 EXPLORATORY FACTOR ANALYSIS (EFA) 28 4.4 CONFIRMATORY FACTOR ANALYSIS (CFA) 31 4.5 STRUCTURAL EQUATION MODELING (SEM) 33 4.6 MULTI-GROUP STRUCTURAL EQUATION MODELING (MGSEM) 36 CHAPTER DISCUSSION, RECOMMENDATION, LIMITATION AND DIRECTION……………………………………………………………………………41 5.1 DISCUSSION AND CONCLUSIONS 41 5.2 MANAGERIAL IMPLICATIONS 43 5.3 LIMITATION 44 5.4 DIRECTIONS FOR FUTURE RESEARCH 45 REFERENCE……………………………………….……….………………….………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 LIST OF FIGURES Figure 2.1 Research model 18 Figure 4.1 Confirmatory Factor Analysis (CFA) Model 31 Figure 4.2 Structural Equation Model (SEM) results 34 LIST OF TABLES Table 3.1 Distribution of the sample 22 Table 4.1 Descriptive Statistics – Results 25 Table 4.2 Fit indices for the test model result (CFA) 32 Table 4.3 Thresholds for the condition of validity and reliability 33 Table 4.4 Fit indices for the condition of validity and reliability 33 Table 4.5 Fit indices for the test model result (SEM) 35 Table 4.6 Hypotheses Test – Results (Standardized) 35 Table 4.7 MGSEM Product Results – P-VALUE 37 Table 4.8 MGSEM Gender Results – P-VALUE 38 Table 4.9 MGSEM Age Results – P-VALUE 38 Table 4.10 MGSEM Income Results – P-VALUE 39 CHAPTER 1.1 INTRODUCTION 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 1.2 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 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, 2007) 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 ... 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