Local vs. Imported Products Analytical Report I will post my report with its requirement and classmates’ comments. Please do some edition for my report (I

Local vs. Imported Products Analytical Report I will post my report with its requirement and classmates’ comments. Please do some edition for my report (I also need a transmittal (cover) memo- the memo (like all the others) should be to me explaining what you did, why you did it and how you did it.This report need more content, because it should have 6-8 pages not including the front and back matter (title page, executive summary, table of contents, list of illustrations, appendices, exhibits of data, bibliography/works cited pages, etc.).During the report, executive summary is also required. Running head: ANALYTICAL REPORT
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2019
Analytical Report
DRINKMAX BUSINESS REPORT
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ANALYTICAL REPORT
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Analytical Report
Table of Contents
Introduction ………………………………………………………………………………………………………………….. 2
Alternatives …………………………………………………………………………………………………………………… 3
Marketing Research………………………………………………………………………………………………………. 3
Conceptual Impact ………………………………………………………………………………………………………… 3
Demographic ………………………………………………………………………………………………………………… 4
Price/Cost ……………………………………………………………………………………………………………………… 4
Quality………………………………………………………………………………………………………………………….. 5
Brand Image …………………………………………………………………………………………………………………. 5
Business Decision ………………………………………………………………………………………………………….. 5
Cost …………………………………………………………………………………………………………………………… 6
Quantity ……………………………………………………………………………………………………………………. 6
Lead Time …………………………………………………………………………………………………………………. 6
Import Process ………………………………………………………………………………………………………….. 6
Quality Assurance ……………………………………………………………………………………………………… 6
Conclusion ……………………………………………………………………………………………………………………. 6
References …………………………………………………………………………………………………………………….. 7
Figures ………………………………………………………………………………………………………………………….. 8
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Introduction
The country of origin is an influential factor when determining the perception of
customers, and the perception they have regarding the quality of a product. The image of the
country a product comes from has a direct impact on the decisions that customers make on
whether to purchase it. For this reason, a company should understand the relation of the
product’s country of origin and the consumer’s purchase decision. A lot of research has been
conducted on the perception of western consumers towards products that have a different country
of origin (Legros, & Stahl, 2002). Country of origin, the knowledge about a product, and product
involvement all influence the purchase decision of consumers. Results show that products that
have a higher perceived country of origin is preferable if the product in question is standard. The
implication is that products that have minimal consumer involvement will call for promotion
association with a country that has a higher image which would translate to a higher quality for
that product. Moreover, consumers prefer well-known brands compared to less known ones
(Legros, & Stahl, 2002). So, as a marketer, one has an opportunity to benefit from well-known
brand names where the consumer is motivated by the brand name rather than their knowledge of
the product.
The perception that consumers have on price also price a crucial role in their purchasing
decision, which is ultimately based on their income level. Price perception is a strong influencing
factor for a consumer’s decision to purchase a product and their purchase satisfaction (Legros, &
Stahl, 2002). Moreover, price directly impacts on the perception consumers have regarding the
fairness of the price charged on a product, considering consumers tend to make a comparison
between what they buy and what is available in the market.
The income level that consumers have is another factor which is a predictor of their purchasing
behavior in terms of changes in prices. A business should always try to ensure that the price level
will result in low price sensitivity (Legros, & Stahl, 2002). Although the consumer’s level of
income represents the most crucial predictor of price sensitivity, research shows that there are
other variables ranging from social, individual, and cultural which have a strong role to play in
consumer’s price sensitivity. A study was conducted that showed that there are four dimensions
which represent the participation of consumers ranging from intervention, preparation,
information exchange, and relationship building.
Another study was conducted which identified that there are two principal profiles of consumers,
the first group are the consumers who are interested in price and the other wants to see the place
of origin of a product (Legros, & Stahl, 2002). It is imperative that for a business, there is need to
understand the nature of a product, the preference of consumers for either imported or locally
sources goods, and their connection to demographic features.
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Alternatives
Drinkmax can either can import two beverage brands from foreign countries or sell domestic
ones. The two local products include Cola and Diet Coke, while the imported beverage brands
include Beck’s and Hamoud.
Marketing Research
The consumption pattern of consumer is changing. When given an option between imported and
local products or services, the perception of quality, brand value, promotion are crucial. The
decision that consumers will make, as Ayob, & Hussain, (2016) shows, is influenced by factors
that are both individual and national. The national influence has been studied extensively to
promote the notion that consumers should purchase products made in their home country and
reduce the dependence they have on imported products. The move to purchase locally made
products is beneficial to the country in various ways, for instance, Ayob, & Hussain, (2016)
shows that it creates business for local industries, cuts unemployment, stimulates growth of the
economy and is ultimately important to national gross domestic product. As Ayob, & Hussain,
(2016) shows flow of products from around the world into a country is harmful for a country’s
economy, jobs, and erodes local expertise.
At an individual level, the purchasing behavior of consumers is influenced by their intrinsic and
extrinsic values. Intrinsic values refer to physical attributes that the product has like
performance, quality, and durability, and extrinsic values refer to the non-physical features of the
product like price.
From a strategic and marketing management perspective, there are two directions that influence
the decision that consumers will make to buy either imported or locally made products. First, in a
developed country like the United States, there is a perception of superiority in the products they
make, while in developing countries, manufacturers have the advantage in that they can make
low cost goods. This is a global understanding which has influenced the perceptions that are held
by consumers. As Ayob, & Hussain, (2016) shows consumers have the tendency to look for
products that come from advanced countries when their interest is in innovative features and
quality, while consumers perceive goods from developing countries as being less expensive
alternatives. The products that consumers will purchase is influenced by macro-economic aspects
like the degree of economic development while micro attributes refer to the attributes the
products have and the perception consumers have of quality, price of goods, and the country of
origin as Ayob, & Hussain, (2016) shows.
Conceptual Impact
The decisions the consumers make to buy either locally sourced or imported products can be
influenced by demand and supply aspects. Supply deals with how heterogeneous the products
features are, especially if the country of origin is taken into consideration, while the demand
perspective refers to the personal evaluation of intrinsic and extrinsic values consumers have
regarding a certain product (Ayob, & Hussain, 2016). The aggregate of these factors influences
the actual purchase of a product depending on the country of origin.
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In the literature, the comparative advantage of a country is derived from its capacity to
manufacture its products from its resource surplus factors of production (Ayob, & Hussain,
2016). The comparative advantage from a developed country differs from that of a developing
nation. For instance, developed countries have the capacity to make high quality and innovative
products with their cutting edge technology. There are several factors which will influence the
capacity of a developed country to offer high quality products. Moreover, such countries have a
large supply of white collar labor and expertise in skills like managerial and entrepreneurial
skills. The implication is that high value products which come from developed countries have a
strong international reputation, even though such products have a premium pricing (Ayob, &
Hussain, 2016).
On the other hand, if the business sources the products from a developing country, which is
reliant on natural resources, cheap labor, and the reduced cost of raw materials, there are
implications for consumers’ purchasing power. Therefore, consumers believe that products from
developed countries are more unique and high value, while their counterparts from developing
countries are of low quality and are cheaper.
When demand is taken into perspective, the argument is that the purchasing behavior that
consumers will have is influenced by their evaluations. Discussions revolving around country of
origin shows that consumers have a unique judgment of two identical products depending on
their “made in…” label (Ayob, & Hussain, 2016). Country of origin is therefore a significant
factor which influences the acceptance of a product by consumers and their eventual purchasing
behavior. In other words. The country of origin influences the equity of a country since
consumers are either favorable or unfavorable towards products that come from that country.
Demographic
Since the business is depending on the younger demographic as their primary customer, it is
imperative to ascertain whether demographic features have either a direct or moderating impact
on the purchase behavior of consumers. Often, there are gender stereotypes when consumers are
making a purchase, with men being hypothesized to behave differently from women when
making purchasing decisions (Ayob, & Hussain, 2016). The general opinion is that men make
are aggressive, rational, and independent, while women are caring, considerate, and sensitive.
Women have also been found to be more brand conscious, more focused on the price and design,
while men are less aware of what something costs and are willing to pay more.
Price/Cost
Most studies conducted on the subject have hypothesized that consumers who are conscious of
the high price of a product, in essence, consumers who are price sensitive, are more likely to
purchase the locally sources products rather than the imported ones, as they perceive the former
to be of cheap price (Ayob, & Hussain, 2016). First, moving goods from international producers
explains that local products have a cost advantage when compared to their imported counterparts
because there is no cross-border expense such as tariffs and logistics, which subsequently
reduces the products of the local product, in this case Cola and Pepsi. Second, since studies have
shown that consumers perceive Coca-Cola and Pepsi as superior brand since they are affiliated
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with developed nations, they are willing to pay the premium price associated with such brands,
hence the implication is that if the demographic is price conscious, they are more likely to
purchase the local alternative.
Quality
When analyzed from a business perspective, maximizing price and quality are on opposite sides.
Although in some products such concepts are complementary, that is not always the case. The
implication is that consumers are willing to pay premium price if the quality of the product is
high while lower quality products are sold at a cheaper price (Ayob, & Hussain, 2016). From a
global perspective, products which are sourced from developed countries are perceived to be
high in quality since such products are created with advanced technology. In contrast, if the
business sources from developing countries, in the case of Hamoud, the consumer has associated
such a product with low quality and performance, and will cause dissatisfaction
Brand Image
Not only does the country of origin affect the perception of quality that consumers have, it also
affects the status of a product, its prestige, and exclusivity. Brand image is the consumer product
evaluation which is connected with a brand with certain features that are either physical or
intangible (Ayob, & Hussain, 2016). Research in marketing shows that perceptions of the brand
image impacts the purchasing behavior that consumers have because consumers have generated
trust and there is no risk when buying the product (Ayob, & Hussain, 2016). In the same
argument, the preference that consumers have on one product over another reflects on their status
and hence impacts their social needs. The country of origin of a product is often linked with its
status, exotic value, and authenticity. Empirical evidence illustrates that consumer assign a
positive evaluation on a product depending on its country of origin and the reputation it carries.
Traditionally, the image of a brand comes from information consumers gather from
advertisements, articles on the media, and word-of-mouth. The implication is that the power of
advertisement is significant in influencing the purchasing power consumers will have. For
instance, Cola and Diet Coke are predominantly considered the biggest spenders with
advertisements for brands as compared to Hamoud. Aggressive publicity associated with these
locally sourced products compared to the other brands will attract consumers who are conscious
about advertisements.
Business Decision
Prior to concluding whether to source domestically or internationally, it is imperative that
Drinkmax fully understand the objective of the business, whether the business is looking to
create long term business, and whether the supply chain is scalable. The base of the decision is
guided by:
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Cost
Quantity
Lead time
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Import process
Quality assurance
Cost
As Ghemawat, & Hall, (2002) illustrates, price is a crucial component of competitive
advantage of the business’ sales strategy. Without customs and shipping, orders sourced
locally can turn around faster and sooner, and in case of issues, manufacturers are easy to
reach. Moreover, the made in the US stamp makes for a valuable marketing tool.
Quantity
The order quantity for the business will influence the price of the products. If the business
has to invest a lot of cash flow in the expansion, the local alternative is more plausible.
Lead Time
It is a crucial component to consider. The amount of time the foreign products will take to be
shipped is more likely to cause delays, and it is imperative that the lead time is short.
Import Process
The process of sourcing products overseas into America is characterized by a lot of
challenges.
Quality Assurance
Quality control is at the forefront of the business and domestic products offer more assurance
when it comes to quality.
Conclusion
Comparative advantage and literature on country of origin offers insight into the impact these
concepts have on consumers and business. The basic understanding is that products like Cola and
Diet Coke are of superior quality, while their counterparts are of minimum quality. The buying
decisions of consumers are largely influenced by the heterogeneity of the products features
depending on where they come from. Although globalization has closed the business gap
between countries, the buying decisions of consumers is something the business will need to
consider. The performance of the new business will be largely affected by the reception
consumers have towards the imported options. There is extensive research which shows that
local products are referred to international products.
The country of origin Drinkmax will source its drinks from is an extrinsic feature, which will
mean that consumer will make an inference on the product’s quality. In making the decision
between Diet Coke and Hamoud, the consumer will tend to differentiate between the countries of
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origin. Consumers tend to be ethnocentric, and they attach negative connotations to foreign
products compared to their domestic counterparts.
References
Ayob, A. H., & Hussain, W. M. H. W. (2016). Buying Local or Imported Goods? Profiling Nonincome Consumers in Developing Countries. International Review of Management and
Marketing, 6(4), 688-695.
This source offers a comparative analysis of the factors which influence the purchasing behavior
of consumers. The source is useful for the current research as it focuses on whether local
or global brands are more preferred. I used this source because it addressed most of the
concepts like quality, brand image, and price/cost which influence the decision that
Drinkmax need to make
Ghemawat, P., & Hall, M. (2002). Global vs. Local Products: A Case Study and a Model.
Division of Research, Harvard Business School.
The source offers a case study of whether local products or global ones are preferred by
consumers. I used this source because it addressed the business perspective of the
decision. As much as Drinkmax needed to make the decision based on consumer
preferences, the business also needs to maximize profits and aspects like quality, lead
time, quantity, are all crucial in the decision.
Legros, P., & Stahl, K. (2002). Global vs. local competition. Centre for Economic Policy
Research.
The competition of local vs. global products for businesses is highlighted in this text, making it
useful for the research. The research used information from this source because it
provided a lot of insight into how local and international brands interact in the minds of
consumers. Since Drinkmax will be selling to a younger demographic, the source showed
how consumer preferences are influenced by extrinsic and intrinsic values of a product,
which is something Drinkmax needs to consider.
ANALYTICAL REPORT
Figures
Figure 1: source Ayob, & Hussain, (2016)
Figure 2: source https://brandongaille.com/24-great-coca-cola-sales-statistics/
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General Report Requirements
The general report requirements are as follows:
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Length: The body of the report should be approximately 6-8 pages, not
including the front and back matter (title page, executive summary, table of
contents, list of illustrations, appendices, exhibits of data,
bibliography/works cited pages, etc.).
single-spaced,
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otherwise with your instructor.
Format: Format your report as a professional document.
Use single-spaced paragraphs with double spaces between paragraphs.
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