What is Consumer Ethnocentrism?
Some consumers prefer global or foreign products and see them as status symbol, while others strongly support domestic products and have negative attitudes towards foreign or imported products as part of consumer ethnocentrism behaviour. So, Consumer ethnocentrism is a concept on psychology that describes how consumers purchase products based on country of origin.
The negative attitudes towards foreign products can be because of many reasons. Consumers may think products from certain countries are of inferior quality, hold feelings of animosity toward a country, or consider it wrong, almost immoral, to buy foreign products. While on the other side, international products are preferred by some consumers because of their quality or low process and moreover even local governments sometime seems to welcome international companies and their products because they sometime become the source of income or support for their economy esp. when they bring FDI (Foreign Direct Investments) to their countries. Both ways, ethnocentrism highly affects international business activities positively and negatively respectively.
Individual Consumer Ethnocentrism
As per Ted Levitt’s research, an increasing number of consumer markets are characterized by global competition. A large amount of companies in many industries including U.S., European and Asian firms are becoming global. The trend towards the globalization of markets is fuelled by changes in consumer knowledge and behaviour. Consumers are more aware of international lifestyle and their products due to things like Satellite television and international travel, and hence increased the power of global brands such as Sony, Coca-Cola and Nike. But at the same time many consumers still have a negative attitude towards foreign products. However, the influences on foreign product evaluations may be considerably more complex, resulting from the interaction of various different factors.
Consumer ethnocentrism specifically refers to ethnocentric views held by consumers in one country, the in-group, towards products from another country, the out-group. Some consumers believe that it is not appropriate, and even immoral, to buy products from other countries. Purchasing foreign products may be viewed as improper because it costs domestic jobs and hurts the economy. The purchase of foreign products may even be seen as simply unpatriotic.
Consumer Ethnocentrism Examples
For example, in Australia some people prefer only Telstra products over Optus regardless to the fact that Optus or other smaller players’ products might be cheaper than Telstra because they believe that Telstra is local company and buying local products would support their country. There might be other factors that might be in consumers mind like saving local jobs, local company pay tax to the country rather than some foreign country who will take all the profits back to their country. Though, most of the time this ethnocentric behaviour is seen among old age who are aged around 50 years old or more while on the other side some young generation people might just look for quality or compare the price and go with the cheaper product rather than looking at the source of the company or product.
Showing love to the country, I believe is fair enough sometimes as buying local products only or buying their shares and hence supporting local company definitely keeps the money in the country. However, there is another aspect of the ethnocentrism. People often forget that when these companies mostly MNCs (Multi national Companies) come from other country, set up their production units in their country they also bring a lot of money which is called as FDI (Foreign Direct Investment) and many countries esp. Developing nations need FDI to support their economy.
Another prospect of outsourcing is the amount of employment created by this industry around the world. To support the argument, let us take example of global automotive companies. Because of outsourcing, jobs are created all around the world especially for the developing countries where most of the automotive companies are setting up their manufacturing plant.
According to a survey conducted by OICA, it was shown that in the business of manufacturing 60 million vehicles it needs the employment of about 9 million people directly in making the vehicles and the parts that are used in automotives. This is over 5 percent of the world’s total manufacturing employment. This gives an idea of enormous amount of employment created by global companies and international products all over the world as part of globalisation.
Moreover, Autos are built using the goods of many industries, including steel, iron, aluminum, glass, plastics, glass, carpeting, textiles, computer chips, rubber and more. Every single thing used in an automotive has its own industry and automotive industry is indirectly creating jobs in all these industries as well. In fact indirect jobs created are approximately 5 times more than jobs created directly, resulting in more than 50 million jobs dedicated to the auto industry. Also, high level inventory management process is required to manage such supply chain. All these people are employed indirectly in auto related manufacturing and services. Companies like general Motors have their studios all over the world with the expert local designers as they can best decide which design is best suited to their market condition.
So in such cases ethnocentric people are actually not aware of the benefits created by the products of an outsider company. Though it is true that they might take away all the actual profit to their own country, it is also true that even countries do look for such MNCs and try to attract their interest as they might either earn from the taxes to the import of such international products or get FDIs. It is interesting to see that in the fear of losing foreign investors, the government of developing countries compete with each other and deregulate their policies accordingly to attract foreign Direct Investments (FDI’s). According to UNCTAD, 1995 Nissan, Japan made an investment of $745m- $848m in Smyman, TN, USA in year of 1983 which is a big example of seducing FDI’s that is actually very attractive.
But then even such global companies look for their own interest and ensure their benefits by making sure that wages and taxes remain low before opening the manufacturing plant in that country. If the government of developing countries try to regulate companies by increasing minimum wage, labour safety standards, etc. they might risk that companies take their business to other developing countries.
Consumer ethnocentrism gives individuals an understanding of what purchases are acceptable to the in-group, as well as feelings of identity and belonging. For consumers who are not ethnocentric, or polycentric consumers, products are evaluated on their merits exclusive of national origin, or may be even viewed more positively because they are foreign (Vida & Dmitrovic, 2001).
Balabanis et al. found that the determinants of consumer ethnocentrism may vary from country to country and culture to culture. For instance, in Turkey, patriotism was found to be the most important motive for consumer ethnocentrism. The reason was Turkey’s collectivist culture, with patriotism being an important expression of loyalty to the group.
There might be another aspect which might be missed by many. The ethical issues which lead to ethnocentric behaviour towards the products of outsider companies esp. the ones who open their production unit in other countries. In this regard, Braibant (2002) believes that this process of globalisation includes opening up of world trade, development of advanced ways of communication, Internationalisation of the financial markets, growing importance of MNC’s, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also brings infections, diseases and Pollution. I agree to this statement to some extent because we definitely have above mentioned benefits but we have some ethical issues as well, associated with the global industries or products. Continuing with our automotive companies examples, according to a survey by OCIA, 2007 globally, Road transport is responsible for about 16% of man-made CO2 emissions.
Though, not all companies are responsible for going against moral ethics. Ethnocentric consumers might want to consider that there are international products who not just consider environment during their operations but also create products which are really good for the environment and hence can be really good for their country. Such international automotive companies are making the fuel-efficient cars. At the end of the 1990’s manufacturers came with new technology to produce internal combustion engine with an electric motor which is basically an electric car. Toyota and Honda were both selling the hybrid vehicles at retail value in 2001. These were the steps taken to protect the environment. So we can say that some multinational companies are taking initiatives to make environment friendly products and this act is definitely worth appreciating. Hence, such international products are good for the local markets.
Another ethical issue is export of jobs when the company setup their production plant overseas. This has been a major issue for developed countries who are losing the job to other country people. I believe that it is true that job opportunities are shifted more to developing countries when the company move there. On the other side in developing countries the investment of lot of money is spreading inequality among richer and lower class which has become an ethical issue as well. The reason is unequal distribution of money and unequal earnings at different levels of employees working in companies. Another concern is labour exploitation mainly in developing countries. Low wages, unfavourable working environment and discrimination are some of the issues and concerns related to transnational companies.
Finally, Ethnocentrism might be genuine in many ways but it may stop the nation from the global growth and might make it isolated from other nations in the world of globalisation where every country is trying to adapt global behaviours.
The Essay concludes that Ethnocentrism is a behaviour which results from various factors like patriotism, hatred towards a nation, fear of loss of local jobs and much more as mentioned in the essay. The Essay argued that though following ethnocentric behaviour is in favour of locals in a way that foreign products or companies might take all profit to their own country, however international business also opens a range of opportunities both for people and even for country.