The impact of consumer ethnocentrism, perceived quality and perceived price on willingness to buy local household products evidence from ho chi minh city, vietnam

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 ex

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

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 1 INTRODUCTION 1

1.1 RESEARCH BACKGROUND 1

1.2 PROBLEM STATEMENT AND RESEARCH OBJECTIVE 1

1.3 BENIFIT OF RESEARCH 5

1.4 RESEARCH METHOD AND STRUCTURE 5

CHAPTER 2 THEORETICAL BACKGROUND AND HYPOTHESES 7

2.1 THEORETICAL BACKGROUND 7

2.1.1 Willingness to buy 7

2.1.2 Consumer Ethnocentrism (CES) 7

2.1.3 Consumer Ethnocentrism Tendency Scale (CETSCALE) 9

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 Moderating effects of product categories and demographics 15

2.3 RESEARCH MODEL 18

CHAPTER 3 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 4 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 5 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 INTRODUCTION

1.1 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

goods in spite of higher prices than the same type and quality goods from domestic About 20% of Vietnam's population have high and quite high incomes, accounting for 80% of country's spending, but they prefer foreign goods and say no with local products (Tran Thuy, 2015) Therefore, ethnocentric tendencies of consumers could be expected to vary depending on how the product is perceived A number of researcher (Sharma, Shimp

& Shin, 1995; Tho, Trang & Nigel, 2008; Josiassen et al., 2011; Aziz, Bahadur, Sarwar, Farooq & Arshad, 2014) point out that the degree of consumer ethnocentric tendencies varies according to demographic characteristics such as age, gender, income and product categories And these factors not only predict levels of consumer ethnocentrism, but also moderate the impacts of such tendencies on willingness to buy However, in Vietnam market, there are limited research that study about those changes

According to the reviews above, this study tries to address three issues First, it attempts

to find the impact of consumer ethnocentrism on consumer’s perceived price, on consumer’s perceived quality in Vietnam household products Second, it examines the impact of consumer ethnocentrism, consumer’s perceived price and consumer’s perceived quality on the willingness to buy local household product of Vietnam Third, it tries to extend the literature on consumer ethnocentrism by investigating not only the influence of demographic variables and product categories on predicting consumer ethnocentrism, but also whether these demographic variables and product categories moderate the impacts of consumer ethnocentrism on consumer’s perceived price, on consumer’s perceived quality, and on willingness to buy domestically household products

1.3 BENIFIT OF RESEARCH

This research is expected to contribute to the literature in different ways First, it provides empirical evidence from Vietnam market on the impact of consumer ethnocentrism, consumer’s perceived price, consumer’s perceived quality on willingness to buy domestic household product Second, it is the first study about the mix effect of consumer’s perceived price, consumer’s perceived quality, consumer ethnocentrism on the willingness to buy of household products in Vietnam market Thirdly, this study demonstrates that consumer ethnocentrism affects on willingness to buy local household product even in developing country Fourth, this study maybe suggests that the impacts of consumer ethnocentrism on consumer’s perceived price, on consumer’s perceived quality, and on willingness to buy domestically household products may vary depending

on product category and demographic characteristic Finally, result of this study will help Vietnam household companies build the appropriate marketing activities with products and content in each segmentation, from that they will gain leverage and bring their products to more and more consumers

1.4 RESEARCH METHOD AND STRUCTURE

This research is conducted in Ho Chi Minh City (HCMC) – the biggest city located in the South of Vietnam Currently, HCMC is the economic, technology and financial hub of Vietnam, which attracts migrants from other provinces As a result of this, the city’s official population was 8,146,300 in 2015 (General Statistics Office, 2015) Therefore, this place has more household product users than other places or areas

The rest of this research is organized around the five key points: literature reviews and research hypotheses; method; data analysis and results; discussion and implications; limitations and directions for future research.


CHAPTER 2 THEORETICAL BACKGROUND AND HYPOTHESES

2.1.1 Willingness to buy

Willingness is defined as the quality or state of being prepared to do something (Oxforddictionaries, n.d) Therefore, willingness to buy means the state that a consumer will being prepared to do a purchase behavior for a given quantity of goods or services The possibility that a consumer will do purchase behavior on a particular product resulting from the interaction of his or her need for it, attitude towards it and perceptions

of it and of the company which produces it According to Theory of Planned Behavior (TPB) of Ajzen (2005), behavior can predict base on previous intentions Base on this theory, intention or tendency is the core factor that affects behavior So purchase intention is a measure of the willingness to buy a product and it is the probability that a consumer will buy a product or service Dodds et al (1991) and Grewal, Monroe, and Krishnan (1998) said that purchase intention is the willingness of a consumer to buy a particular product According to Hau, Minh, and Tuan (2013), willingness to buy represents the extent to which a consumer has positive attitude towards purchasing a product Therefore, in this research, the willingness to buy consists the customer ‘s positive attitude of buying Vietnam household products, the intention to buy them and the recommendation for them to another customer

2.1.2 Consumer Ethnocentrism (CES)

Ethnocentrism is a word composed of two terms “ethnic” (which means group) and

“centrism” (which means focused) Shimp and Sharma (1987) defined ethnocentrism as a

“the universal proclivity for people to view their own group as the center of the universe,

to interpret other social units from the perspective of their own group, and to reject persons who are culturally dissimilar while blindly accepting those who are culturally like themselves” In other words, a person with a high ethnocentrism often is proud of his group, often enhances value, culture and people that belong to his group and tend to underestimate values and standards of other groups (Chryssochoidis et al., 2007) Tho et

al (2008) showed that ethnocentrism is an evaluative perspective, which means ethnocentric person will evaluate all other cultures by the standards of one’s own culture The term consumer ethnocentrism is adapted from general concept of ethnocentrism which was first introduced by Sumner in 1906 (Shimp & Sharma, 1987) They defined consumer ethnocentrism as a unique form of ethnocentric in marketing, it is “the beliefs held by consumers about the appropriateness, indeed morality of purchasing foreign-made product and the loyalty of consumers to the products manufactured in their home country.” Consumer ethnocentrism has a direct and negative impact on consumers' purchase intention towards foreign products These imply that the high ethnocentric tendencies lead to unfavorable attitude towards lower purchase intentions for foreign products According to Shimp and Sharma (1987), Klein and Ettenson (1999) ethnocentric consumers will refuse to buy foreign products because to do so is damaging

to the national economy, lead to unemployment, and is unpatriotic Even when foreign products are superior in quality or price to domestic products, some consumers still desire

to purchase domestically Non-ethnocentric consumers, however, evaluate products based

on their objective attributes, without considerations of country of origin of product

(Shimp & Sharma, 1987) Therefore, the consequences of consumer ethnocentrism include (1) an overestimation of the quality and value of domestic products or underestimation of imports, (2) a moral obligation to buy domestic products, and (3) an intense preference for domestic products Hence consumer ethnocentrism can be considered an antecedent to “willingness to buy” domestic products in general

Shimp and Sharma (1987) also stated that the ethnocentrism of each customer is different because of the influence of socioeconomic, demographic, geographic, and regional economic factors, which play a role in accentuating ethnocentric tendencies during adulthood Sharma et al (1995) confirmed that product categories and consumer demographic characteristics (such as gender, income and age) influence consumer ethnocentric tendencies in Korea Josiassen et al (2011) found that consumer tendencies for ethnocentrism are directly influenced by characteristics of the customer Therefore, when researching about ethnocentrism, we can’t ignore the impact of demographic factors to identify ethnocentric differences of each customer segment

2.1.3 Consumer Ethnocentrism Tendency Scale (CETSCALE)

The measurement of consumer ethnocentrism was first developed by Shimp and Sharma

in 1987 with the development of the Consumer Ethnocentrism Tendency Scale (CETSCALE) at USA In their study, they proved that consumer ethnocentrism can measure, explain and provide answers to why and to what extent consumers prefer domestic products instead of foreign They used the term “tendency” instead of “attitude” because this scale can explain the consumer decision to buy the most appropriate product for them This scale has been widely used to measure consumer ethnocentrism tendencies

in many studies within developed and in the developing countries (Balabanis & Diamantopoulos, 2004; Chryssochoidis et al., 2007; Josiassen et al., 2011; Hau et al., 2011; Qing, Lobo & Chongguang, 2012; Maina, Kibera & Munyoki, 2015)

Follow Shimp and Sharma (1987), CETSCALE is a unidirectional measure scale with 17 variables, a lot of researches also convinced this express (Kucukemiroglu, 1999; Watson

& Wright, 2000; Wong, Polonsky & Garma, 2008) But, when Douglas and Nijssen (2003) did a study about using the borrowed scale in cross-national research, more specific in applying the CETSCALE in The Netherlands, they came to an important result: the CETSCALE must be considered to compatible with each country, some variables in the CETSCALE must be adjusted base on economic, culture and characteristic of each country

2.1.4 Perceived Price

Price is an indicator of the amount of financial sacrifice required to purchase a product (Dodds et al., 1991; Zeithaml, 1988) According to Zeithaml (1988) consumers do not always know or remember actual price of product price, instead they encode prices in a way that is meaningful to them There are two types of price most commonly used in the literature, objective price and perceived price (Zeithaml, 1988; Jacoby & Olson, 1977) According to Beneke and Zimmerman (2014), objective price is the actual price of product, in other side the perceived price is the process that each customer encodes the price and makes it meaningful to him or her This encoding process is the comparison between objective price (the actual price of product or service) and reference price (the

price is the customer’s perceptual representation or subjective perception of the objective price of product or service) (Zeithaml 1988; Jacoby & Olson 1977) In consequence, the perceived price is the evaluation of customer about the valuable of between what they were, are or will be sacrificed to exchange and what they were, are or will be received Perceived price will be different with each consumer, product, purchase situation and time (Dodds et al., 1991).

2.1.5 Perceived Quality

Quality in ISO 9000:2000 is defined as “the degree to which a set of inherent characteristics fulfils a need or expectation that is stated, generally implied or obligatory” (Hoyle, 2011) Zeithaml (1988) defined the term “objective quality” refers to measurable and verifiable superiority on some predetermined ideal standard or standards Therefore, according to Zeithaml (1988) and Alhabeeb (2002), the perceived quality is “the consumer’s judgment or his global assessment about the superiority or excellent of that product” Base on Business Dictionary (2016), perceived quality is defined as

“Consumer's opinion of a product's (or a brand's) ability to fulfill his or her expectations

It may have little or nothing to do with the actual excellence of the product, and is based

on the firm's (or brand's) current public image (see corporate image), consumer's experience with the firm's other products, and the influence of the opinion leaders, consumer's peer group, and others.” Although perceived quality has a lot of definitions from many scholars, each of them has a shared common meaning; that is, perceived quality is the consumer’s judgment of quality of overall components of product relative

to the expectation of quality, in both tangible and intangible characteristics It may also

include performance, features, reliability, conformance, durability, serviceability, and aesthetics of product Hence in this sense, perceived quality seems to be a highly subjective and relativistic concept (Alhabeeb, 2002), the value and scope of which would different depending on the subject and the type of product

2.2 HYPOTHESES

2.2.1 Consumer Ethnocentrism and Perceived Price

As we defined above, perceived price of each customer is different because it depends largely on each customer ‘s feeling, perceptual representation and evaluation about product or service that he or she want to buy (Dodds et al., 1991) With the same product with the same price, a customer with a good feeling in it will feel its price cheaper than the one who has a bad feeling in it Meanwhile, consumer ethnocentrism affects strongly

on feeling of customer on product According to Tho et al (2008) ethnocentric consumers are likely to value highly products belonging to their own group and to de-value products which do not belong to their group Consequently, we must consider the effect of consumer ethnocentrism on customer’s perceived price in this research The result from Hau et al (2011) also found that effect when buying product made in Vietnam So, we can conclude the first hypothesis we must do is:

H1 Consumer ethnocentrism positively affects customer’s perceived price for local

household products in Vietnam

2.2.2 Consumer Ethnocentrism and Perceived Quality

Because the consequence of consumer ethnocentrism as we analyzed above is an overestimation of the quality of local products, therefore the effect of consumer ethnocentrism on perceived quality of the local household products in Vietnam must be considered as one hypothesis in this study Consumer ethnocentrism was found to influence assessment of the perceived quality of both domestic and foreign products in emerging economies such as Greece (Chryssochoidis et al., 2007) Tong and Li (2013) also confirm this effect of consumer ethnocentrism when did a study in China, a developing country like Vietnam So, the second hypothesis is:

H2 Consumer ethnocentrism positively affects customer’s perceived quality for domestic

household products in Vietnam

2.2.3 Consumer Ethnocentrism and Willingness to Buy

By making clearly about definition and consequences of consumer ethnocentrism above,

we can easily see the relationship between consumer ethnocentrism and willingness to buy According to Wang and Chen (2004), there is an impact of consumer ethnocentrism

on willingness to buy in the context of a developing country, namely the People’s Republic of China Tho et al (2008) found that in Vietnam, consumer ethnocentrism plays an important role in the likelihood of purchasing local products Many other studies also demonstrated that consumer ethnocentrism has a negative impact to willingness to buy foreign products, in other word it has a positive impact on willingness

to buy domestic product, even in developing countries (Klein, Ettenson & Morris, 1998; Balabanis & Diamantopoulos, 2004; Hau et al., 2011) Because this study mainly focuses

on local product, so we hypothesize that the willingness to buy local products is positively affected by consumer ethnocentrism The more consumer ethnocentrism in customer, the more likely they will increase their willingness to buy for Vietnam products So, our third hypothesis is defined as following:

H3 Consumer ethnocentrism positively affects customer’s willingness to buy local

household products in Vietnam.

2.2.4 Perceived Price and Willingness to Buy

As we mentioned above, the perceived price is the evaluation of customer about the valuable of between what they were, are or will be sacrificed to exchange and what they were, are or will be received Therefore, the change in price will strongly impact on this evaluation, from that will impact on the willingness to buy of consumer Dodds and Monroe (1985) found that price negatively influences willingness to buy, and the results from Dodds et al (1991) also confirm this a negative relationship These studies found that if the price goes over the sacrifice that consumer willing to exchange, they will code that product as “expensive” and consider to stop buying that product with that price, or if the price goes below the sacrifice, consumer will code that product as “cheap” and increase the willingness to buy for it Hence, when the consumers feel that the price of Vietnam household product is in the acceptable threshold, worthy of what they must to be sacrificed, they will have a high promotion to buy that product And the study from Hau

et al (2011) also found that if a Vietnamese customer has a higher perceived price about product, he or she will also have a higher willingness to buy for that product Therefore, the next hypothesis is:

H4 Perceived price of local household products in Vietnam positively affects customer’s

willingness to buy these products

2.2.5 Perceived Quality and Willingness to Buy

Dodds et al (1991) stated that perceived quality has a positive impact to willingness to

buy The good perception of product quality will encourage customers to buy the product, and perceived quality of product has a correlation with the intention to buy a product

Although ethnocentrism does a great help for domestic product, but from the study of Qing et al (2012), in developing countries, consumer often highly assess the quality of imported product, especially product from a country with a better image (e.g it is highly industrialized or economically developed) Therefore, to deeply understanding the willingness to buy for Vietnam household products, we must consider the impact of perceived quality on willingness to buy So the next hypothesis is:

H5 Perceived quality of local household products in Vietnam positively affects

customer’s willingness to these products

2.2.6 Moderating effects of product categories and demographics

This study investigates the moderating effects of product category (low-price and price) and demographic characteristic on the impacts of consumer ethnocentrism on consumer’s perceived price, on consumer’s perceived quality, and on willingness to buy domestically household products Previous research in other countries shows that the degree of consumer ethnocentric tendencies varies according to demographic characteristics such as age, gender, and income, as well as product category (Shimp & Sharma, 1987; Aziz et al., 2014; Sharma et al., 1995; Josiassen et al., 2011; Pentz,

high-Terblanche & Boshoff, 2014; Balabanis & Diamantopoulos, 2004) For examples, Shimp and Sharma (1987) found that ethnocentric consumers are not uniform for all members of the community, because it formed a close relationship to knowledge, experience and economic conditions of each individual Aziz et al (2014) concluded that male consumers, older, low income consumers seem to have higher ethnocentric tendencies Sharma et al (1995) also found that consumers with higher income exhibit significantly less ethnocentric tendencies than consumers with lower income, and they also found that there is a significant difference between male and female consumers Josiassen et al (2011) stated that the degree of consumer ethnocentric tendencies varies according to demographic characteristics such as age, gender For example, older consumers have a tendency to be more ethnocentric than younger consumers and ethnocentric tendencies are more prevalent among female consumers than among male consumers (Josiassen et al., 2011) Pentz et al (2014) suggest that consumers with higher incomes seem to be less ethnocentric than consumers with lower incomes In terms of product categories, Balabanis and Diamantopoulos (2004) found that the impact of ethnocentric tendencies

on product judgment and purchase intention may vary depending on how the product is perceived, i.e., high-involvement or low-involvement In Vietnam, Tho et al (2008) found the impacts of consumer ethnocentrism on intention to purchase local products are not different in terms of product categories, gender, income, and education levels However, differences exist between younger and older consumers Overall, it appears that product categories and consumer demographic characteristics have an impact on the degree of consumer ethnocentric tendencies Therefore, the last hypothesis is:

H6a The impact of consumer ethnocentrism on consumer’s perceived price, on

consumer’s perceived quality, and on willingness to buy domestically household products are weaker for the high involvement product category than for the low involvement product category

H6b The impact of consumer ethnocentrism on consumer’s perceived price, on

consumer’s perceived quality, and on willingness to buy domestically household products are weaker for female consumers than male consumers

H6c The impact of consumer ethnocentrism on consumer’s perceived price, on

consumer’s perceived quality, and on willingness to buy domestically household products are weaker for young consumers than for older consumer

H6d The impact of consumer ethnocentrism on consumer’s perceived price, on

consumer’s perceived quality, and on willingness to buy domestically household products are weaker for higher income consumers than for lower income consumers

2.3 RESEARCH MODEL

From 6 above hypotheses, we can draw a research model as figure 1

Figure 2.1 Research model

CHAPTER 3 RESEARCH METHODS

3.1 PROCEDURE AND SAMPLE

This research consisted of two phases, a pilot study and a main study, and was conducted

in Ho Chi Minh City The pilot study aimed to explore certain issues before undertaking the main study There were two product categories: local household plastic products and local household electric products Local household plastic products are low-cost and low-involvement products whilst local household electric products are high-cost and high involvement products These categories were chosen because they represent a variety of local household products, and the statistic of them is easy to collect In addition, the markets for these two product categories are very different

The pilot study in this research was undertaken by qualitative method while the main study used quantitative method This research focused on the factors affecting on the willingness to buy towards Vietnam household product, especially the role of consumer ethnocentrism, perceived quality and perceived price of individual customer So, the unit

of analysis was an individual customer The research site was Ho Chi Minh City, the most important economic center in Vietnam

3.1.1 Pilot Study

In-depth interviews were used in the qualitative phase Since the measurement scales are originally in English and translated to Vietnamese so the purpose of this qualitative research is to ensure the meaning of the measurement scales This qualitative research is

to evaluate the use of terminology in questionnaire as well as to adjust the terminology to

be suitable, to keep the meaning of measurement scales unchanged when being translated from English to Vietnamese before the official quantitative research is conducted There were 12 groups of consumers (3 demographics 2 categories 2 products) under investigation Therefore, the study first, conducted a series of in-depth interviews with 12 consumers had much shopping experiences in HCM City Each participant would be investigated separately All participants are living in Ho Chi Minh City Base on the result of interviewing with 12 consumers, the measurement scales as well as the questionnaire were modified a little in wording before implementing quantitative research After modifying the questionnaire in Vietnamese, we again interviewed 2 more consumers to consider again if any pending issue with the measurement scales and their meaning These 2 consumers were asked the same questions as we did in previous interviews with 12 consumers The result showed that their understanding for measurement scales was matched with what we expected The questionnaire was concluded as being clear; consumers understood the content and the meaning of measurement scales’ questions Therefore, these measurement scales in Vietnamese were then used in quantitative research

3.1.2 Main Study

The primary data was collected via direct handout survey or indirect through email or online survey A link of online survey was established in Google Forms and sent out to participants (colleagues and friends who are buying domestic products) via mail Participants clicked on the link that led them to the electronic questionnaire and filled in their answers In the meantime, handout survey was also distributed to consumers in

super markets, traditional markets, and convenience store Consumers filled in their answers to the questionnaire form and returned to surveyors This study had 2 questionnaire forms, 1 form about local household plastic products and 1 form about local household electric products Each participant only answered 1 questionnaire form Each questionnaire went out with instructions of how to complete it In order to minimize possible response bias, instructions also emphasized that the study only focused on the respondents’ personal opinions There were no right or wrong answers The purpose of the main study was to assess the scales and test the models The control characteristics were age and income With age characteristics, because Tho et al (2008) found that the impacts of consumer ethnocentrism on intention to purchase local products is different between younger (age: 21-30) and older (age: 31-45) consumers in Vietnam, therefore this study would also be targeted only respondent aged from 21 to 45 (younger: 21–30; older: 31–45) With income characteristics, Vietnam Government (2013) issued Decree

No 65/2013/ND-CP detailing a number of Articles of the Law on PIT and the amending Law, supplementing a number of Articles of the Law on PIT This Decree stated clearly that labors who have do not pay personal income tax (income is lower than VND 9 million per month) are low income earners So, this study also used VND 9 million per month to divide participants into lower income group and higher income group

Total 400 surveys were sent to participants (200 surveys about local household plastic products and 200 surveys about local household electric products) Among 400 surveys, there were 302 valid responses over 310 responses Consequently, the final sample size was 302

Table 3.1 presents the sample characteristics:

Table 3.1 Distribution of the sample

• Data was coding and entering to SPSS and AMOS softwares

• Provide the summary of those factors in measurements by descriptive statistics

• Test the reliability of the sample data by using the Cronbach’s alpha value to determine the consistency or stability of all scales

• Test convergent and discriminant of factors by using exploratory factor analysis (EFA)

• Assess the validity and reliability of measures by using confirmatory factor analysis (CFA)

• Analyze and test research model by using structural equation model (SEM)

• Examine the moderating effects of product categories and demographic characteristics by using multi-group structural equation model (MGSEM)

3.2 DEFINING MEASUREMENT SCALES

There are five research concepts in this research that we must measure, which are: consumer ethnocentrism, perceive price, perceive quality, willingness to buy, consumer’s gender, age and income level

Based on the literature review, this study designed the measurement scales from previous researches (See Appendix 1) for the model’s constructs and rephrased them to adapt the context of the current research All of measurement items used a 5-point Likert-type scale, anchored from 1 (completely disagree) to 5 (completely agree)

3.2.1 Measurement scale for consumer ethnocentrism

Consumer ethnocentrism was measured by CETSCALE, was first developed by Shimp and Sharma in 1987 This scale include 17 variables, were show in Table 1 But as I mentioned above, some variables in the CETSCALE must be adjusted base on economic, culture and characteristic of each country Klein, Ettenson, and Krishnan (2006) founded that CETSCALE can be used effectively in the transition economies of China and Russia, and they found a consistent pattern of support is found for the six-item CETSCALE Because Vietnam also has a transition economy, like China, so in this research, consumer ethnocentrism was measured by six items based upon Klein et al (2006), were show in Appendix 1

3.2.2 Measurement scale for perceived price and perceived quality

Customer’s perceived price of Vietnam household products measures the evaluation of customer about these products Customer’s perceived quality of Vietnam household products measures the consumer’s judgment of quality of overall components of product

relative to the expectation of quality Perceived price and perceived quality were measured by six items borrowing from Hau et al (2013), were show in Appendix 1

3.2.3 Measurement scale for Willingness to Buy

The scale for willingness to buy local household products in Vietnam adopted also from

Hau et al (2013) It includes 3 variables, were show in Appendix 1

3.2.4 Measurement scale for consumer’s gender, age and income level

Consumers’ gender, age and income level are directly measured by asking consumers on their gender, age and income

CHAPTER 4 DATA ANALYSIS AND RESULT

4.1 DESCRIPTIVE STATISTICS

Some basic statistic numbers of collected data are presented in following table All dependent factor (willingness to buy) and independent factors (perceived price, perceived quality and consumer ethnocentrism) were measured based on Likert‘s scale which has minimum value is 1 (strongly disagree) to maximum value is 5 (strongly agree)

Table 4.1 Descriptive Statistics – Results

PQ3 Local product has an acceptable standard

PP3 Local product is a good product for the

CE1 Only those products that are unavailable

CE2 Vietnamese products, first, last, and

CE3 A real Vietnamese should always buy

CE4 Vietnamese should not buy foreign

products, because this hurts Vietnamese

business and causes unemployment

CE5 It may cost me in the long-run but I prefer

CE6 Vietnamese consumers who purchase

products made in other countries are

responsible for putting their fellow

Vietnamese out of work

WB1 I would be willing to buy local product if

WB2 I would recommend local product to

WB3 I would buy local product even if there is

another brand at the same quality and

Perceived quality (PQ)

Empirical data showed that the perceived quality of local product in consumers is not high All means of three score are lower than 2.5 and higher than 2.0 This finding indicates that Vietnam consumers don’t have high knowledge in quality of local products

Perceived priced (PP)

In contrast, empirical data showed that the perceived price of local product in consumers

is very high All means of three score are approximate 4.0 This finding indicates that Vietnam consumers believe that price of local products is very comfortable for them

Consumer ethnocentrism (CE)

Empirical data showed that the consumer ethnocentrism is high All means of three score are greater 3.0 This finding indicates that all participants in this research have high ethnocentrism This phenomenon is consistent with our national traditions, which comes from patriotism and the protection for national economic avoid the bad impacts from imported products

Willingness to Buy (WB)

Empirical data shows that the willingness to buy local products of consumers is high All means of three score are greater 3.6 This finding indicates that Vietnam consumers are willing to buy domestics goods

(Gliem & Gliem, 2003) The value of Cronbach’s alpha need to be accepted is over 0.7 and any variables which the Item-total correlation are smaller than 0.3 will be deleted

Perceived quality (PQ)

From table 5.1 and 5.2 in Appendix 5, the value of Cronbach’s alpha of perceived quality

is 0.883 > 0.7 and the values of Item-total correlation of all three items of perceived quality are over 0.3 This result demonstrates that the measurement scale of perceived quality is well designed and trustworthy, and all three items PQ1, PQ2, PQ3 of perceived quality should be kept in this research

Perceived price (PP)

From table 5.3 and 5.4 in Appendix 5, the value of Cronbach’s alpha of perceived price is 0.849 > 0.7 and the values of Item-total correlation of all three items of perceived price are over 0.3 This result demonstrates that the measurement scale of perceived price is well designed and trustworthy, and all three items PP1, PP2, PP3 of perceived price should be kept in this research

Consumer ethnocentrism (CES)

From table 5.5, 5.6, 5.7, 5.8, 5.9 and table 5.10 in Appendix 5, we must delete 2 items CE4 and CE6 of consumer ethnocentrism to get the trustworthy for measurement scale of consumer ethnocentrism After deleted CE4 and CE6, the value of Cronbach’s alpha of consumer ethnocentrism increases from 0.659 to 0.883 > 0.7 and the values of Item-total correlation of all four remain items of consumer ethnocentrism are over 0.3 This result demonstrates that after deleted CE4 and CE6, the measurement scale of consumer

ethnocentrism is well designed and trustworthy, and all four remain items CE1, CE2, CE3, CE5 of consumer ethnocentrism should be kept in this research

4.3 EXPLORATORY FACTOR ANALYSIS (EFA)

Exploratory Factor Analysis is a technique to evaluate interdependence It studies all interrelationships without defining variables to be dependent or independent In this research, Exploratory factor analysis (EFA) is applied to test the model with KMO and Barltlett’s combined with Promax rotation which are highly recommended for structural equation modeling (SEM)

• Measure for Factor Loading (Hair, Black, Babin & Anderson, 2010) :

o Factor Loading >= 0.3: sample size >= 350

o Factor Loading >= 0.5: 100 < sample size < 350

o Factor Loading >= 0.75: 50 < sample size < 100

• KMO (Kaiser -Meyer-Olkin) measure of sampling adequacy with KMO from 0.6

to 1 is a good factor analysis (Gerbing & Andension, 1998)

• Bartlett’s test of Sphericity should be significant (Sig < 0.05) for factor analysis to

be considered appropriate (Gerbing & Andension, 1998)

• Total Variance Explained needs to be over 50% (Gerbing & Andension, 1998)

• Eigen-value of each factor must above 1 to be accepted

• Item that less than 0.5 and item that distributes in 2 or more components/factors with difference less than 0.3 will be eliminated

• Convergent validity: all items comprising a scale must load highly (> 0.40 or 0.50)

on the factor representing the underlying construct

• Discriminant validity: No item load highly (> 0.40 or 0.50) on more than one factor

In this thesis, after run Cronbach alpha to test reliability, we deleted CE4 and CE6, we still have 13 observed variables of 4 measure scales All 13 variables would be given of the use of factor analysis

Test the appropriate of EFA Model (Kaiser-Meyer-Olkin)

From the table 6.1 in Appendix 6, KMO (Kaiser-Meyer-Olkin) has value = 0.827, it satisfies condition: 0.5 <= KMO <= 1

Conclusion: EFA is appropriate for this research data

Test the correlation between the observed variables (Bartlett's Test of Sphericity)

H0: The correlation of variables is 0

From the table 6.1 in Appendix 6, the statistical significance sig = 0.000 < 0.05: H0 will

be rejected, indicating that the correlation matrix is significantly different from an

identity matrix, in which correlations between variables are all zero

Conclusion: The observed variables are correlated with each other in each factor

Test cumulative variance of elements (% Cumulative variance)

In total variance explained table, only factor that has total variance explained is greater than 50% is accepted

In table 6.2 in Appendix 6, the total variance explained at line Factor 4 and and column Cumulative % has the value is 68.533% > 50%: satisfy condition

In table 6.2 in Appendix 6, the Eigenvalues of Factor 1, Factor 2, Factor 3, Factor 4 are: 5.142, 2.021, 1.569, 1.396 All of them are greater than 1: Four factors are accepted Conclusion: 68.533% of the variance is accounted for by the first fours factors

Test the value of Factor loading

According to table 6.3 in Appendix 6, table Pattern Matrix, the factor analysis has pulled out 4 major factors from 13 variables whereas the number of factors in the initial research model is also 4 All observed variables in each factor have the values of factor loading > 0.55, all items comprising a scale load highly on the factor representing the underlying construct of research model No item load highly on more than one factor

Conclusion: All 4 factors in initial research model are convergent and discriminant and they are suitable for research model

4.4 CONFIRMATORY FACTOR ANALYSIS (CFA)

Figure 4.1 Confirmatory Factor Analysis (CFA) Model

Confirmatory Factory Analysis is a better method to assess the validity and reliability of measures (Bagozzi & Foxall, 1996) The goodness-of-fit of CFA is used to further assess the unidimensionality and convergent validity among the constructs

The measurement model with all four constructs was assessed using Confirmatory Factor Analysis (CFA) was drawn by AMOS Software Diagram of latent variables was draws

as Figure 2 above

CFA is applied with following indexes: Chi-square, Chi-square/df, Comparative Fit Index (CFI), Goodness of Fit Index (GFI), Tucker & Lewis Index (TLI), Root Mean Square Error Approximation(RMSEA)

Evaluating model fit

All indices of the model are reliability for the next analyzing steps if GFI, TLI and CFI are equal or above 0.9 (Bentler & Bonett, 1980); Chi-square/df is equal or lower 2 (Chi- square/df ≤3 can be accepted in some cases) (Carmines & McIver, 1981); and RMSEA is equal or lower 0.08 (RMSEA ≤ 0.05 is excellent) (Steiger, 1990)

CFA Model has 59 degrees of freedom as shown in Figure above Result of CFA showed that saturated model was fitted with data market

Table 4.2 Fit indices for the test model result (CFA)

result Result

Root Mean Square Error of Approximation (RMSEA) < 0.08 055 Fitted

Unidimesionality

Firgure 2 above demonstrates the unidimensionality among the constructs According to Steenkamp and Van Triijp (1991), as the goodness-of-fit are good, then the constructs are unidimensional except for the correlation between variable errors

Validity and Reliability

There are a few measures that are useful for establishing validity and reliability: Composite Reliability (CR), Average Variance Extracted (AVE), Maximum Shared Variance (MSV), and Average Shared Variance (ASV) Follow Hair et al (2010), validity and reliability can be tested base on these thresholds as follows:

Table 4.3 Thresholds for the condition of validity and reliability

Reliability CR > 0.7

Convergent Validity AVE > 0.5

Discriminant Validity MSV < AVE

ASV < AVE Square root of AVE greater than inter-construct correlations

From result of table 7.2 and 7.3 in Appendix 7, this below table can be calculated

Table 4.4 Fit indices for the condition of validity and reliability

Constructs

CR (Composite Reliability)

AVE (Average Variance Extraced)

MSV (Maximum Shared Variance)

ASV (Average Shared Variance)

Value (validity and reliability)

4.5 STRUCTURAL EQUATION MODELING (SEM)

Data analysis in this study was performed using structural equation modeling to validate the research model This approach was chosen because of its ability to test relationships between constructs with multiple measurement items (Joreskog and Sornbom, 1996, as cited in Lin, 2007)