Global Fashion Value Chains: Country of Brand Origin vs. Country of Manufacture
Journal: Journal of Globalization Studies. Volume 13, Number 1 / May 2022
DOI: https://doi.org/10.30884/jogs/2022.01.04
Global fashion value chains, today, are in process of redefining the meaning and significance of Country of Origin (COO) – one of the critical elements of consumer purchase behavior for apparels. COO, which once was synonymous with ‘Made in ...’ is now associated with at least two key dimensions – Country of Manufacture (COM) and Country of Brand (COB). While COM is mandated by law in most countries, and prominently displayed on labels, COB is widely used by marketers to amplify the brand appeal. Each of these may exemplify a different, and at times conflicting, perception in the minds of consumers. The purpose of this paper is to review the existing literature on COO images to understand the effect of (in)congruent and/or conflicting combinations of COB and COM images, as perceived by consumers. This paper proposes that (in)congruent COO information communicated to customer through COB and COM may generate contradictory cognitive emotions. The paper finds that the existing literature on COO does not give a consentaneous opinion on whether COB or COM is more important in consumer decision making. Hence, exploration of interaction between (in)congruent and/or conflicting COB and COM images and resulting behavior outcomes may represent a major theoretical advancement in systematic study of COO images.
Keywords: COO, COM, COB, country images, behavioral outcomes, apparel.
Aastha Garg, Footwear Design and Development Institute more
Sibichan K Mathew, National Institute of Fashion Technology more
Introduction
Globalization in apparel retail primarily due to global economic integration and internal desegregation within trade blocks has led to a noticeable growth of free trade. Apparel industry, primarily a labor intensive sector, has witnessed production oscillating across borders, either citing cost advantages through lower labor costs, lower tax rates, less stringent laws or proximities to resources and markets.
Today, it is a prevalent practice for apparel brands to have various production stages established in multiple countries. For example Nike, an American brand, is manufactured in 930 factories spanning across 50 countries (Gereffi and Lee 2016). Apparel retailers like Zara and H&M, cited in the top fifty global brands, source production via sub-contractor networks in Asia (Taplin 2014). Zara, a prominent Spanish fast fashion retailer, sources around 54 per cent of its merchandise locally and from Portugal and Turkey while the balance from newly industrialized nations like China, India, Bangladesh, Cambodia, Pakistan, and Vietnam.1 For Swedish giant H&M, 75 per cent of its clothing supplies are sourced mainly from China and Bangladesh .2 What is evident in prevalent market scenario is that very few brands are being manufactured in the same country from where the brand originates. There is an increasing number of apparels available on the shelf which are a result of multinational collaboration and multi-country efforts.
Apparel production has been completely disintegrated, where, the value addition happens in multiple countries, leading to an increase in trade in intermediate parts and components. The sewing and finishing of apparels may take place in a country where labor costs are cheap, rather than where it was designed (Parkvithee and Miranda 2012). All of these activities may take place in countries, which are not associated by consumers with the origin of the actual brand itself (Rashid et al. 2016).
Due to intensified globalization of the economy, defining the concept of country of origin has become difficult in the past years (Phau and Prendergast 2000). The concept of COO which was once used in synonym to the country where the products or services were produced, has transformed into a multidimensional concept that encompasses several components, such as country of parts, manufacture, brand, and design. Each of these may exemplify a different, and at times conflicting, perception in minds of consumers. Consumers tend to embrace definite ideas and stereotypes of countries as producers of goods and services and then use these ideas to evaluate the qualities of these products (Lee et al. 2019). From ‘Chinese silk’ to ‘Iranian Carpets’, ‘Italian Fashion’, ‘Egyptian Cotton’, ‘German Automobile’ or ‘Columbian Coffee’, origin has played a significant role throughout history in enabling people to identify, classify and think of, and act upon the phenomena.
The literature suggests that in products with multiple COO cues, consumers tend to use the perceived COB as well as its COM as distinct quality cues (Lee et al. 2012; Arora et al. 2015) and may subject to multiple and sometimes contradictory association. Thus, if the COB and COM are imbalanced in terms of the general quality of products from those countries, consumers will perceive the difference as being incongruent (Carvalho et al. 2011). The impact can be more substantial when one of the countries is a developing country as the overall image of emerging countries is perceived to be lower than that of developed countries and this situation may create some concerns about the product quality and the potential risks.
In business, the survival of a brand is dependent on the consumer's acceptance and its purchase. It is imperative for marketing managers to accurately assess consumer product perceptions towards multicounty collaborated apparels, so as to develop some form of competitive advantage to help them sustain in the long run. Despite of extensive outsourcing practices, not much research has been done on the consumer's psychological aspect which studies how consumers react to (in)congruent country images and their expected behavioral outcomes. This paper reviews the existing literature on COO images and attempts to explain this phenomenon.
Literature Review
Country of origin labeling practice was first introduced in the USA, after the civil war era as a part of a prolonged and unrelenting hostility towards foreign made goods. The overall statutory purpose was to mark the goods so that, at the time of purchase, the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence their will (Chang 2009). Till the 1900s, the consumer's choice was primarily limited to the offers of local manufacturers. Since import and export were scarce in majority of the product categories, consumers expected that the products they purchased were local-made or, at least were manufactured within their native country (Zhang and Merunka 2014). Since then, the COO word has been synonymous with the COM [‘Made in…’] and has been defined as ‘the information about where a product is made’ (Wu et al. 2016).
Country of Origin (‘Made in’) and Legal Requirements
To inform the consumer on the true origin of the apparel, many counties (e.g., the USA, Australia, China, India, France, and Germany) mandate that the COO [‘Made in…] information to be published on apparels.3 In India, as per IS 15798:2007 standards, it is mandatory that the COO [‘Made in…’] be a part of labeling requirements for both fabrics and readymade garments and be conspicuously positioned underside of the garment (Bureau of Indian Standards 2007).
In the USA, the Federal Trade Commission (‘FTC’) requires that all clothing labels disclose the country where the clothing was created. The Tariff Act of 1930 (19 U.S.C. 1304) states that when an imported product involves elements or processes from more than one country, the COO be the last country in which a ‘substantial transformation’ took place. A ‘substantial transformation’ is defined as any ‘manufacturing process that results in a new and different product with a new name, character, and use that is different from that which existed before the change.’ For an apparel to bear a COO tag of ‘Made in USA’, all of its constituent parts must entirely originate, or substantially originate, in the USA.
The importance of COO has manifested in the recent times primarily because the advantage the retailers are able to reap when apparel originates from USMCA (earlier known as NAFTA) countries. The apparel is eligible for import free duty if each component starting from yarn (fiber excluded) used to make the apparel is formed within the USMCA members (Lu 2018).
Country of (Brand) Origin
The definition of COO has changed over time depending on how the consumers have been made to process the COO information. While Bilkey and Nes (1982) defined the COO as the country of manufacture or assembly that is defined by a ‘Made in [...]’ label, today due to globalization, when the products are not assembled, designed or made in the original country, another aspect of COO has emerged – the Country of (Brand) Origin. Abdulrahman Al-Aali and his coauthors (2015) refer it to the country with which a manufacturer's product or brand is associated.
Associating with the country of (brand) origin has become a frequently used marketing tool, to distinguish brand from the competitors. By exploiting the unique characteristics of a place, territory, province or a country, brands enhance the consumer's perception of product quality and authenticity (Zhang and Merunka 2014). The COB works as a simplification of the COO concept since it focuses on the perceived location instead of the actual one (Jin et al. 2006). The perceived association is created either through advertising or through the language associated with the brand name (Thakor and Lavack 2003).
Aichner (2014) while differentiating the COO markers from regulated to unregulated stated that while the regulated COO markers can used only when companies adhere to legal requirements, which is relevant for the use of ‘Made in…’ labels, the unregulated strategies to mark the COO is through use of a famous person (e.g., Dr. Oatker), county flags (e.g., Victorinox Swiss knifes), cultural symbols, use of the COO in brand names (e.g., Burberry – London, Hermes – Paris, American Eagle, Maybelline NY, FCUK, Pepe London) or through the use of foreign language (e.g., Superdry using Japanese characters that read kyokudo kanso). Hornikx et al. (2020) identified that ‘COO embedded in company name’ was the most frequently used category in the use of COB origin for marketing followed by ‘use of COO language.’ Italian and French apparel bands like Louis Vuitton and Gucci conventionally use the argument of the COB in their international communication strategies (Cakici and Shukla 2017).
When consumers recognize that a product comes from a particular brand, they tend to emphasize the brand's COO (Kim et al. 2017). For instance, Nike shoes are produced in many countries but are still considered an American product (Hamzaoui et al. 2011). Haefner et al. (2011) reported that consumers in Central and Eastern Europe only needed to think that a product came from the United States, Western Europe, or Japan to motivate purchase.
Cue Utilization and COO
Theory of Categorization states that a country name serves as a categorical cue for consumer information processing (Agarwal and Sikri 1996). According to this approach, COO cues are a cognitive category where consumers organize information related to product categories conceived and/or manufactured in a particular country, along with their associated characteristics; for example, perfumes – France, automobiles – Germany, coffee – Columbia, and cotton – Egypt. When a consumer confronts a COO stimulus, it automatically activates an internally stored complex, which enables consumers to infer product quality and also stimulate affective reactions (Helgeson et al. 2017). A person (unconsciously) reacts to a product according to how that product's source country relates to his or her inner norms and values (Jimenez and Martin 2014). These reactions are either expressions of attraction to or avoidance of the product (Kim et al. 2017).
Studies suggested that consumers are often willing to pay more for products manufactured in countries that are economically developed and democratic (Rashid et al. 2016). It is perceived that the products produced in developing countries are less technology-intensive and less sophisticated and lower quality in comparison to products produced in developed countries like the USA or Germany which have a higher perception of quality, luxury, premium and technology (Dursun et al. 2019).
If the environment has a strong regulatory component, then product quality is enhanced which translated to a better standard of product for the consumer (Majid 2017) and in turn enhances a higher image for the country of origin. According to Shen and Wang (2017) when consumers see equivalent products – one is ‘Made in China’ and one ‘Made in America’, – they may develop a different level of perceived quality of the products.
Made-in labels are gaining importance because of the reported problems with certain products made overseas. Incidents related to product recalls (e.g., lead found in the toys) and labor rights related accidents (e.g., Bangladeshi workers die due to collapse of improper building and labor regulations) have made consumers sensitive towards ‘country of manufacture’. Therefore, in order to give a favorable ‘Made in..’, the workers from Africa were brought to Italy and made to work for very little money and under extreme bad conditions so that the companies, employing them, could put a label ‘Made in Italy’ on the product (Bliadze 2018). When the consumer is made aware of where the product is made and if it is deemed to be manufactured in a third world country, where there are no correct structures in place or negligent working ethics (such as long working hours, wages, and safety standards) the consumers tend to elude the situation (Rashid et al. 2016).
Country of (brand) origin and Automatic Information processing
Studies have found the COB is an important deciding criterion for consumers and accounts for the highest impact (Srinivasan et al. 2004). However, some studies have reported that consumer's knowledge of a brand's COO (i.e., their brand origin recognition accuracy) is very limited (Balabanis and Diamantopoulos 2008) and claiming that consumers often do not care about COB and thus deny the cue usage in their brand evaluation (Liefeld 2004). The recent stream of literature, however, reveals that the COO effect can be automatic, whereby mere exposure to a COO cue can affect consumers' perception and behavior even in the absence of intention (Herz and Diamontopoulos 2013). The concept of automatic information processing (Schneider and Shiffrin 1977) suggests that the processing of the COO cue does not have to be exclusively conscious and controlled but can also occur unconsciously and without awareness. Even the mere presence of an information cue in the environment can activate specific associations and thus trigger intentionally stored stereotypes (country stereotype).
Consumers associate brands with their countries from which they perceive the brand to originate by making inferences from the cues that are either implied through the brand name, store design, logo, packing or even styling of the products or explicitly in the brand communications (Carvalho et al. 2011). When the brands' COO sends out a positive signal, they benefit in the short term from increased international attention and favorable evaluation of their products (Jimenez and Martin 2014). However, when the brands' COO gets labeled with emerging countries, these products are generally seen having average, if not bad, quality, using old fashioned technologies and as randomly imitated products (Kim et al. 2017).
COB, COM and their (in)congruent images
A state of congruity is said to be in occurrence when the objects have equal valence evaluations while incongruity occurs when the valences of the evaluations of the two objects differ from each other (Fishbein and Ajzen 1975). Congruency in country of origin refers to the extent to which consumers perceive that a given product's origin of manufacture, design, parts, and association is the same (Josiassen, Pandit and Karpen 2008). Consumers nowadays increasingly face the products that carry various combinations of COB and COM. Both foreign branding and Made in [...] information can elicit different associations towards a country and a country's image. If in addition to brand name suggesting specific COO, incongruent COO information is given (i.e. the COB ≠ COM), this may lead to the state of incongruence.
The congruency effect postulates that as incongruent information creates dissonance, congruent information will be preferred and relied on to a greater extent (Josiassen, Pandit and Karpen 2008). In the case of binational apparel products, there may be a possible dissonance faced by the consumers especially in scenarios where companies/brands today claim the products to be from developed countries with favorable brand images while manufacturing their products (or significant parts of these products) in developing countries with less favorable brand images. The ambivalence between the two types of country origin cues will influence the extent to which each of them affects the consumer's predisposition. This may lead to a complex situation where the consumer will try to reconcile conflicting views about the different parameters of the country of origin available on the product.
It is expected that consumer responses to congruent conditions will be more positive than those to incongruent conditions (Chao 2001) as a state of congruity will represent low arousal and a lower cognitive effort to resolve it (Carvalho et al. 2011). Cognitive simplicity improves consumer's ability to process and categorize information, and increase positive responses (Lee and Aaker 2004). By contrast, a lack of consistency in product information will require heightened arousal and significant cognitive effort to be resolved, leading to intensified affective responses (Carvalho et al. 2011).
When an incongruent condition exists, Osgood and Tannenbuam (1955) posit that ‘whenever two objects of judgment are paired, there is a tendency for each to shift towards congruence with the evaluation of the other, the magnitude of the shift being inversely proportional to the relative intensities of the interacting evaluations.’ Therefore, consumer's attitudes towards a negatively valued object can be expected to be adjusted to become less negative when associated with a more positive valued object. At the same time, consumers' attitude towards the more positively valued object may be adjusted to become less positive due to its association with a negatively valued object (Chao 2001).
In line with the consistency theories of mind (Festinger 1957), the impact of the COB and COM cue on outcomes should be stronger if the two cues are consistent or congruent. Researchers have demonstrated that if a brand with a reputation is described as manufacturing its products in a developing country with a less favorable image, consumers' product evaluations are rated lower than if the brand manufactures its products in its own country of brand origin (Ulgado et al. 2011). Johnson et al. (2016) found that when two countries having equally favorable capabilities (Japan and Germany), the consumers' evaluations of a product still decreased when there was a mismatch between a product's brand origin and country of manufacture.
Research on ambivalent attitudes by Wang et al. (2016) reveals that when both positive and negative information about the product is accessible this may result in attitudinal ambivalence towards that product. This attitudinal ambivalence in turn creates discomfort and affects consumers' predisposition towards the ambivalent product (Pang et al. 2017).
When consumers face ambiguity and are unable to successfully categorize new information with a brand, they may become frustrated and evaluate products unfavorably (Johnson et al. 2016). What can be derived from the above is that the behavioral pattern is expected to be the same for all the products with incongruent images. For example, an Italian fashion brand manufactured in Mexico will have the same behavioral effect with a Mexican fashion brand manufactured in France.
The above can be stated to be true only when COB and COM have equal impact. But since there is no common consensus on which parameter has more/equal impact on the consumer behavioral aspects, such results cannot be generalized. There is a lot of abstruseness concerning the effect of positive COM and weak COB in comparison to negative COM and a strong COB. This paper systematically reviews the existing literature and puts forth the need to address the potential interaction between COB and COM images with consumer behavioral outcomes as in Figure 1.
Methodology
This paper is based on a conceptual research methodology approach. This paper undertook a systematic review of the COO literature that has appeared in recent decades. These studies have primarily examined the correlation of COO's facets with various marketing factors and purchase behavior. Although available literature on the COO effect explored how a product's country alliance, specially economic development of that country, affects consumer evaluations, very few studies investigate the complexities that may arise out of associating the product with multiple countries where each country may exemplify a different perception in the minds of the consumer.
Discussion
While some apparel brands with headquarters in developed countries may benefit from a strong COB image, they may still have apprehensions in moving their production to emerging countries due to their associated COM images. In order to negate the unfavorable COM, some firms try to preserve their image by adding the COB to the label, or Country of design (COD) to direct consumer's attention away from the country in which they are produced. For example, Lacoste puts a ‘designed in France’ label in addition to COM information on its well-known polo T-shirts (Genc and Wang 2017).
When the brands manufacture in favourable COM image locations (example: Champagne for wines, Suzhou for silk, Egypt for cotton, Peru for wool) they exploit the associations the consumers may have with a particular territory by highlighting its origin. By this, the marketers are able to provide the apparel products with a specific image that not only enables them to differentiate but also command a premium price (Zhang and Merunka 2014). Armor-Lux (a clothing brand from France's Brittany region) increased its sales by more than 30 per cent after labeling its products ‘100 per cent Made in Bretagne’ (Jaxel-Truer 2012).
Although it has been well accepted in the literature on the COO that independently COB and COM influence the product evaluations, insufficient light has been shed on the applicability of (in)congruent COO images in a consumer context. The discrepancy created in the minds consumers has not been well addressed in the literature on country image and fashion studies. With the growing complexities of associating a product with multiple countries (through COB and COM) where each country may exemplify a different perception in the minds of consumers, there is no consensus on which facet of COO is important and how do they collectively affect the consumer behavioral outcomes.
Theoretical Implication
The first important implication of this study is that in the globalized world there is not one ‘COO image’ that can be associated with a product. The product is automatically associated with minimum two countries, one being the COB and the other the COM. We assume that the ambivalence between the two types of country origin cues will influence the extent to which each of them affects the consumer's predisposition. Focusing on either COB or COM cues will provide an incomplete picture at best, and both researchers and managers need to be aware of the potential reciprocal effects between the two images.
We presume that for a positive COB being manufactured in a developing country, these brands may get associated with the country of production with negative COO perceptions, thereby diminishing the brand value of such products since these products may be perceived lower in quality with higher potential risk. Consumer's negative perceptions about the COM are assumed to influence trust in these brands and hence impacting their attitude towards these brands.
Consumers may encounter risks involving threats to their self/social identity when using inappropriate brands (Berger and Heath 2008). Therefore, it can be assumed that consumers may attach high social desirability and trust for a product originating from a positive country of brand origin when the product also comprehends a positive country of manufacture image and vice versa. But when consumers carry a positive brand country image with a negative country of manufacture image or contrary, would the consumer's attitude towards these products in comparison to products with congruent images change is still not answered. As pointed out by Kock et al. (2019), inconsistency between a favorable COB combined with an unfavorable COM or vice versa, will limit the favorable behavioral effects.
Conclusion
There exists plethora of literature on COO image, its antecedents and how COO cues are used by consumers for evaluating product quality, and thus, influence their willingness to pay more and even purchase. While literature focuses on the impact of various facets of COO individually, there has been limited research on the combined effect of the COM and COB. Also the literature does not give common consensus as to which COO dimension (COB / COM) is more pivotal in evaluating products and consumers' decision-making.
In today's globalized economy, it is impossible to associate a product with just one country primarily due to off shore sourcing practices. Many manufacturers are actively seeking to reduce costs and increase profits by moving operations to emerging nations. Researchers in the past have highlighted the bias in favor of products from developed countries and against those sourced from less developed economies primarily citing safety issues / labor regulations or animosity towards those countries. It is evident from the literature that the consumers prefer products which are encapsulated with favorable COB and COM images in comparison to products emerging from unfavorable countries. Also consumers prefer congruent product information (where COB = COM) against incongruent information which results in a decreased evaluations of a product due to a mismatch between a product's COB and COM.
This paper highlights the impending need to study the combined effect of COB and COM images on consumer's decision making when both of these images are conflicting and thereby leading to attitudinal ambivalence. Such may lead to generation of conflicts in minds of consumer, which still remains unanswered. Arora et al. (2017) points out that there has been limited research on the interaction of COB and COM and the effect of incongruence on the consumer's decision which needs further examination.
The exploration of interaction between (in)congruent and/or conflicting COB and COM images and resulting behaviour outcomes may represent a major theoretical advancement in systematic study of COO images. The decomposed facets of COO (COB and COM) also serve as contradictory cognitive elements and can provoke cognitive dissonance. There have been limited attempts to apply cognitive dissonance theory to examine the consumer's reaction to the incongruent country images. Connecting cognitive dissonance theory to the effect of discrepancies in the country image would provide a theoretical explanation of whether and why consumers modify their behaviors when they are exposed to inconsistent country image information. This study would be of immense interest to international marketers primarily apparel companies in formulating their brand and manufacturing strategies to amplify their brand appeal in various global markets in consonance with respective population behaviours.
Limitations
The theoretical justifications presented in this paper offer a comprehensive set of research propositions for empirical validations. The lack of empirical validations, limit our paper and can be addressed in future papers. Experimental designs could test the proposed interactions of various combinations of COB and COM and consumer's behavioral outcome towards the binational apparel products.
Once the above propositions are empirically tested, there would be a number of implications for future research. Firstly, a conceptual model can be developed to include (in)congruent COO images effect on product evaluations in terms of quality which might occur due to association of (un)favorable COB/COM images with the product. Secondly, it would be interesting to study the effects of multiple COO facets like Country of brand, country of design, country of parts, country of manufacture and even country of shipment.
Thirdly, this study is concerned with the effects of COM and COB on product (cognitive) beliefs. Including the consumer's psychological attachment to apparel brand and countries of COB or COM may add another dimension to the study. The combined cognitive and symbolic effects of COM and COB on apparel purchase calls for future research attention.
NOTES
1 Inditex. 2021. Accessed on 3 Jan 2021. URL: https://www.inditex.com/en/about-us/inditex-around-the-world#continent.
2 Hmgroup. n.d.. Accessed on 10 Jan 2021. URL: https://hmgroup.com/sustainability/leading-the-change/responsible-purchasing-practices/.
3 Office of Textiles and Apparels. n.d. (Department of Commerce, USA) Retrieved Jan 2021, from Otexa.trade.gov. URL: https://otexa.trade.gov/.
4 Bureau of Indian Standards. 2007. Accessed on 1 Nov 2020. URL: https://archive.org/details/ gov.in.is.15798.2007.
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