This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
This chapter begins with a discussion of the background of this study; it is followed by the problem statement this research dealt with, the objectives, and the questions that this study will answer. The chapter then covers the research significance, the underpinning theories adopted and scope of the study. It ends with a presentation of the structure of this research in order to attain the objectives.
1.2 BACKGROUND OF THE STUDY
Over the half fifty years, international exchange-trade has grown at a faster rate than in any previous period in history (Jordan Times, 2008). The reduction of tariffs and other trade barricades have also contributed to the explosion on international trade. Governments have actively worked to bring down trade barricades through international agreements such as the General Agreement on Tariffs and Trade (GATT) and at the World Trade Organization (WTO).
Despite the fast rate of growth in global trade, many hosting (importing) countries such as Jordan are hugely challenged in having to deal with the high cash flow toward imported products and disastrous import-substitution economic policies.
Since Independence, Jordan has exported far less than it has imported (CIA World Fact book, 2009), but in the last 10 years, massive deregulations and free trade have created a new environment for the Jordan economy (Jordan country profile, 2007). Globalization has removed the boundaries between Jordan and other industrial countries. To encourage investments and improve its domestic economy, Jordan has signed many agreements with other countries while participating in bilateral and multilateral trade agreements (Jordan country profile, 2006).
In May 2002, Jordan signed negotiated bilateral trade agreements with the United States and the European Union (EU), and joined the multilateral WTO. Today, Jordan has Free Trade Agreements (FTAs) with many countries, the last of which is Canada with whom Jordan concluded FTA negotiations on August 25, 2008 (Government of Jordan online information, 2008).
The FTAs with these countries have helped to eliminate duties and commercial barricades to bilateral trade on goods and services that manufactured in Kingdom of Jordan. In light of these, Jordan has sought to remove high tariff walls, and has brought about new policies that have facilitated the operation of importing products (Al Rai, 2008). Over time, the Jordanian consumer purchasing behaviour towards imported goods has raised more than ever before (Al Rai, 2008).
Despite these agreements and new polices, still unfortunately Jordan did not seek to achieve a trade balance with any major trading partner (Al Rair, 2008). In mid-2006, the United States and Western Europe accounted for almost 50 percent of Jordan's imports, while Arab nations purchased nearly half of the country's exports (Jordan country profile, 2007).
According to a Petra news agency report of 2008, the increase in the deficit still remains. On June 10, 2007, Jordan's trade balance deficit increased by 6.7% up to JD1594.2 million during the first third of 2007, compared to JD1494.1 million during the same period of 2006. Furthermore, according to the Department of Statistics (2006), Jordan’s imports had increased by five per cent during the year 2006.
Table 1-1 shows the Jordanian trade balance with the world. The department’s records for the year 2008 indicated that the deficit in the trade balance (see Table 1-1) increased by 22.3 percent as the deficit amounted to USD 7,427.0 billion compared to USD 9,086.0 billion during the year 2008.
Table 1-1: Jordan Trade with the World, 2003-2008
In USD Billion
Source: (Jordan Country profile, 2009)
The figures shown in Table 1.1 are expected to worsen in 2009. More specifically, as the foreign product flows have expanded dramatically, the consumers purchasing behaviour towards foreign products in Jordan has become easier and has increased more than before.
The Jordan Times, an English-language daily paper based in Amman discussed on April 17, 2007 that many consumers prefer global or foreign products and view them as symbols of status; very few exhibit strong preferences for Jordanian-made products and have attitude which expresses denial or refusal attitudes towards local product or manufactured in Kingdom of Jordan.
Douglas et al. (1999) related this phenomenon, more preferences towards foreign products; due to “satellite television and international travel have made consumers more aware of other cultures' life-styles and products, and has increased the power of global brands”.
With a storm "border-thinning global economy", many globe consumers have been more and more exposed to foreign goods made, producing to them more buying options (D’Silva, Stephen, Modi, & Bulsara, 2008). Vision of a borderless world has bared buyer throughout the world to open and extend range of foreign brands than ever before.
The new government’s polices have brought a flood of foreign goods to consumers; there is also an increased exposure to western ideas (Yim, Garrma & Polonsky, 2008); and many Jordanians are increasingly likely to purchase foreign products (Government of Jordan online information, 2008; Al Rai, 2009).
Previous research has found that in less developed countries (LDCs) there is little priority and fondness for products manufactured domestically when equated with to imported products as the products manufactured in their home countries disposed to be of lower quality than those from developed countries (Yim, Garrma & Polonsky 2008; Jin & Chansarkar, 2006; Bailey and Pineres, 1997; Ghadir, 1990; Hussein, 1997).
As such, it is expected that adaptation "positive attitude towards to foreign products" would also press against consumers’ appraisal and estimation of products manufactured from home country in contrast to foreign “imported” ones with respect to design and assembly location, as well as components supply country, and thus change and adjust purchase behaviour (Yim, Garrma & Polonsky, 2008; Xu et al., 2004).
Such effects would possibly have a bearing on attitudes towards home and host countries in general, similar to ethnocentrism (Vida, Dmitrovic & Obadia, 2008; Yagci, 2001). Several studies found consumer ethnocentrism an important factor could help domestic economy; Kotabe and Helsen (1998) said that "CET can be institutionalized in the form of an informal government procurement policy that unduly favors domestic companies”.
Regardless of the product attribute, it is wrong to buy imported-made goods, as this would effect negatively the domestic economy, causes loss of jobs, or, it would be plainly unpatriotic in consumer ethnocentric believe (Shimp and Sharma, 1987). The fact that ethnocentrism increases the rejection of foreign products and intensify the purchase intentions towards domestic products (Granzin and Painter, 2001; Suh, 2002).
Thus, investigating attitudes and ethnocentrism could help in understanding the predictor of purchasing behaviour toward foreign products in Kingdome of Jordan which will give insight both to the marketer, and the government to understand the Jordanian consumer purchase behavior.
In the face of the importance of this topic, “very few studies on this area in less developed countries” (Hammin & Eliot, 2006), and “most studies of purchasing behavior towards foreign products have been conducted in large industrialized countries where a range of domestic alternatives or brands are available” (Douglas et al. 1999).
Also notably, Hammin & Eliot (2006) found not only the previous studies done in more developed country, even theories explaining and predicting behaviour have been created in more developed countries, and not tested rigorously in less developed country, that increased our instigation that both of the theories predicting consumer behaviour and topic toward foreign product purchase behaviour, need to be investigated in situation such less developed country namely Kingdome of Jordan..
Based on the above, the problem statement for this study can be as shown in next step.
1.3 PROBLEM STATEMENT
Jordan has imported far more than it has exported (CIA World Fact book, 2009). Evidently, this has led to a trade deficit in Jordan, and has also had a negative effect on local companies (Jordan Times, 2008). This is evidenced by the negative trade balance in Jordan (See Table 1-1).
As for the marketing and government sectors, it was believed that the abundance of foreign products in Jordan, and adaptation to ‘foreign’ products would also impact consumers’ evaluation of products sourced from home country versus foreign ones, and there would be less preference ‘negatively’ for domestic products manufactured in Jordan.
Once more, this can be seen by the negative trade balance in Jordan. Shimp and Sharma (1987) found that some “consumers believe it is wrong to purchase foreign-made products, as this would hurt the domestic economy, cause loss of jobs, or, because it would be plainly unpatriotic”, which has been referred to as “Consumer Ethnocentrism”.
The situation nevertheless has been found to be inconsistent with the companies dealing with domestic goods in Jordan in time level of Jordanian consumer ethnocentrism is not known (Jordan Times, 2008). Knowing the intensity of consumer ethnocentrism in Jordan will give insight both to the marketer and the government to understand the Jordanian consumer purchase behaviour and develop appropriate strategies that can improve the situation for both.
Several studies and paper written justified the need of knowing CET level, “finding level of consumer ethnocentrism has important implications for both government policy makers and local owned business” (Hamin & Elliott, 2006), “different marketing strategies could apply depending on the level of consumer ethnocentrism of the target-group selected” (Chryssochoidis et al., 2008), “due to the abundance of imported products in Jordan, the local merchants felt the pinch and this was evident in Jordan balance sheets: Are Jordanian consumer concern of ethnocentrism, how strong?” (Jordan Times News, 2006), “there is growing evidence for the view that it is necessary for LDC’s to be more aware of the issues of the concept of CET” (Hamin & Elliott, 2006).
Yet, very few studies have been done to predict the determinants that influence consumer purchase behaviour towards foreign products in less developed countries (LDCs) (Lee & Bory, 2008; Hamin & Elliott, 2006), and more specifically in Kingdom of Jordan (Hussein, 1997). There seems to be very limited empirical evidence and lack of researches on predictors of consumer purchase behavior towards foreign products in Jordan as a less developed country (LDC).
Researchers ponder the question, in small industrialized countries or less developed country (LDC), where a range of domestic alternatives or brands are not available, how consumers' behaviour will react toward foreign product?
In fact, a plethora studies have been done on consumer purchase behaviour toward foreign products, however, the concentrate of the majority of previous work particularly has been from the perspective of more developed countries (MDCs) (Hammin & Elliott, 2006). Czech (Orth & Firbasove, 2002); France (Javalgi et al., 2003); Poland (Huddleston et al., 2001); Turkey (Kaynak & Kara, 2000); The United States, Germany and France (Netemeyer, Durvasula and Lichtenstein 1991); Japan and Sweden (Hult and Keillor 1999); Spain (Luque-Martı nez, Ibanez-Zapata & Barrio-Garcia 2000).
An evidence proved the need of this research in less developed countries such as Nijssen et al. (1999) “much research relating to consumer attitudes toward foreign products has been conducted in large industrialized countries, with big internal markets and a range of domestic brands, the generalizability of findings to small countries, where there are no domestic brands or products in many product categories, is somewhat questionable”.
Furthermore, recently Al Rai (2009) mentioned “Jordan has suffers from the poor quality of consumer behavior databases that are available, still there are scary researches on Jordanian consumers behaviour which need more investigation in understanding the Jordanian consumers, all the facts information of Jordanians is not more than statistical issues running under the statistical government department and corporate with other countries such as USA”, Nijssen et al. (1999) “the generalizability of findings to small countries is somewhat problematic”.
In this study, the focus is on understanding purchase behaviour towards foreign products from the point of view of consumers living in a LDC namely kingdom of Jordan.
Previous research examining purchase behaviour towards foreign or imported goods has typically concentrated and focused on the influence of a single construct as an example consumer ethnocentric attitudes or "made in…country of origin COO" cues, not on holistic approach (Nijssen et al., 1999).
It is noted that most previous study used to select several domestic and foreign products then, make a comparison between these products based on country of origin "COO" concept. At the same time eliminate that when select certain product many other factors "confounding" could effect on these product choices behaviour such as marketing campaign, brand name, and many other elements extrinsic or intrinsic related this certain products, or even the product availability.
In a study on Jordanian behaviour towards foreign products, Hussein (1997) used only a one way ANOVA and t-test to distinguish between certain foreign products and local products. From an empirical perspective, it was found that the study by Hussein (1997) on Jordanian consumer behaviour towards foreign products has focused only on a single construct such as COO, or quality or price.
However other studies have found that irrespective of the effect of these constructs on consumer behaviour, the dominating factor was consumer ethnocentrism which could still be a barrier on consumer behaviour towards foreign products, Shimp and Sharma (1987).
Notwithstanding, the generalised preference for products manufactured in MDCs, there is evidence that patriotism and loyalty towards the home country play an important role in persuading some consumers to purchase products that have been made in their home country. This pattern of behaviour has been referred to as “Consumer Ethnocentrism”, a term coined by Shimp and Sharma (1987). They found that some consumers generally believe that buying products that are locally manufactured is morally appropriate in a normative sense.
Thus, there is justification of lack of research which would integrate consumer ethnocentrism theory with consumer actual purchasing behaviour theories such as TRA (Hamin and Elliott, 2006; Kinra, 2006), “the influences on foreign product evaluations may be considerably more complex than effect COO, further research is clearly needed to explore attitude toward foreign products within a theory” (Klein et al 1998), “in Jordan, additional studies need to be carried out investigate consumer belief rather than product attributes or select certain product to compare” (Hussein, 1997).
As explained in (3) above, the lack of studies exploring attitude towards foreign products within a theory. In fact, it is believed that many theories regarding purchase behaviour have been developed mostly in the USA. Ticehurst and Veal (2000) found, up to 80 percent of business & management studies published to-date has been conducted by North American researchers on Americans and in American organizations.
One of the well-known theories is that of Theory of Reasoned Action (TRA) which was established by Ajzen & Fishbein in1980. This theory has been found to be very useful in the study of predicting behaviour (Sheppard, B., Hartwick, J. & Warshaw, P.R., 1988), but notably not tested rigorously in less developed country or even in non-western culture such as Jordan (Malhotra & McCort, 2001).
It is clear that great care needs to be taken when extending the findings of these studies conducted in other countries such as in the US to countries or cultures such as Jordan. The findings of these researches done in more developed countries are not necessarily applicable to organizations in other countries such as Jordan. According to Ticehurst and Veal (2000), culture can also influence the outcomes of the research.
Despite its popularity and usefulness, many researchers are of the opinion that the Theory of Reasoned Action should be revised, extended or modified to take into account the rapid changes that have taken place in the environment, “recent criticisms have questioned the TRA application among non-Western subjects, emic measures of etic latent constructs are required” (Malhotra & McCort, 2001),“the TRA model contains Western cultural biases” (Bang et al., 2000; Tuten and Urban, 1999), “TRA should be revised, extended or modified to take into account the rapid changes that have taken place in other environment” (Javalgi et al., 2005), “yet, TRA must be operationalzed with the distinctive thought processes of each culture in mind” (Malhotra & McCort, 2001), “consumers express their attitudes towards products from different countries unequally” (Cordell, 1992),“culture can also influence the outcomes of the research” (Ticehurst and Veal, 2000), "the validity of the TRA theory challenge exists" (Hui, 1982).
This study tries to validate and generate a research model that can demonstrate consumer purchase behaviour towards foreign products in Jordan using TRA theory.
In line with the theory “TRA”, the most important determinant is behaviour intention (BI). The individual intention to perform is a combination of attitude toward the behaviour (Ab), and subjective norm (SN) Ajzen & Fishbein (1980).
Earlier studies used TRA focused on constructs' of (Ab) and (SN) without adding external variables to the full model (Bagozzi, 1981; Warburton & Terry, 2000). Based on Summers and Belleau (2006) found most researchers related to TRA “focused only on the central variables of attitude toward the behavior and subjective norm, though some researchers did also include the influence of external variables but not in all as one model”.
Some researchers have also added the effects of external constructs such as quality, price, warranty, and advertising to their studies, but, these studies have used t-tests or analysis of variance (ANOVA). From a statistical standpoint, one-at-a-time tests, like t-test, may not be as valid when other variables, in this case, the central variables, have an effect on the dependent variables, these is weak instrument robust statistics (Summers et al., 2006).
At the same time, “others included subjective norms in their study as a general subjective norms’ explanatory power was relatively weak, even though significant” (Tarkiainen & Sundqvist, 2006). Thus, researchers seek to add an external variables “external variables to TRA model could provide insight into the factors to help predict behavior” (Bagozzi et al., 2000) “strongly suggested external variables to improve the power of the TRA theory” (Candan et al., 2008).
This study uses multivariate analysis statistical methods "SEM" including the external constructs (conservatism and interest in foreign travel), which have not been researched in the original TRA model. Both these concepts could strongly influence the Ab and SN of consumer purchase behaviour in situations similar to Jordan.
1.4 RESEARCH OBJECTIVES
The objectives of this study are to study consumer purchase behaviour toward foreign products in an less developed country. Specifically, the research objectives are as follows:
To measure the level of the consumer ethnocentrism in an "LDC" (Jordanian consumer in Amman) that can help in suggestion for new strategies for both marketers and government.
Investigate the determinants that influence consumer behaviour towards foreign products in an "LDC" (Jordanian consumer in Amman).
To explain the structural interrelationships between the external variables "conservatism and interest in travel abroad" within TRA theory.
To validate and generate a research model that will be able to demonstrate actual purchase behaviour towards foreign products in an "LDC" (Jordanian consumer in Amman), using TRA theory and structural equation modelling "SEM".
1.5 RESEARCH QUESTIONS
The results of this research will help to arrive at reasonable conclusions and answer the following questions:
How strong is the consumers’ ethnocentrism towards foreign products in an "LDC" the capital of Jordan "Amman"?
What are the determinants that influence consumer behaviour towards foreign products in an "LDC" the capital of Jordan "Amman"?
What is the interrelationship between the external variables "conservatism and interest in travel abroad" within TRA theory?
Will the TRA research model be able to demonstrate actual purchase behaviour towards foreign products among Jordanian consumers’ in Amman?
1.6 SIGNIFICANCE OF THE STUDY
The findings from this research will be beneficial not only to individuals at the academic level, but will also benefit the country as a whole at a practitioner level. In other words, this study will be very useful at two levels including the practitioner level and academic level in the following ways:
1.6.1 Practitioner level
The findings from this research will help the government of Jordan in planning its strategies to support and motivate consumers to purchase domestic products. This research seems to have been done at the right time and at the right place, the government ongoing many bilateral agreements which will increase the foreign product flows that need to be aware of any side effect of this dramatically flows.
Knowing the intensity of consumer ethnocentrism in Jordan will give insight both to the marketer, and the government to understand the Jordanian consumer purchase behavior and develop appropriate strategies that can improve the situation for both.
CET can be “institutionalized in the form of an informal government procurement policy that unduly favors domestic companies” (Kotabe and Helsen, 1998), "finding level of consumer ethnocentrism has important implications for both government policy makers and local owned business" (Hamin & Elliott, 2006), "different marketing strategies could be applied depending on the level of consumer ethnocentrism of the target-group selected" (Chryssochoidis et al., 2008), “one of the most enduring forms of non-tariff barriers is that of (CET)” (Shimp and Sharma, 1987).
It is expected that it will benefit construction of national policies, especially the policy to increase support for domestic products which in turn will have a positive effect on Jordan’s trade balance. Since the government wants to create more domestic products, it needs to develop its national industries. The model generated from this research will establish the level of Jordanian consumer ethnocentrism.
This will provide information to the government vis-a-vis what is the consumer purchase behaviour toward foreign product, what will reduce the Jordan trade deficit and improve the economy. This in turn will boost the GDP and lead to greater economic prosperity.
This study will benefit the marketing manager in providing him with a better understanding of the reasons why consumers buy imported products, and why there is less preference for domestic products. This knowledge will also help local companies to device appropriate marketing strategies which can assist in improving their financial situation.
1.6.2 Academic level
The study adds to the literature on Jordanian consumer purchase behaviour. Consumer purchase behaviour has been widely studied in developed countries. Nevertheless, there have not been many researches on this area in developing countries like Jordan that will provide clear description of consumer behavior toward foreign product from a LDC perspective.
Structural Equation Modelling (SEM) serves as a methodology which promotes better quality of research. There are no other widely and easily applied methods as compared to SEM; it has many useful features, particularly in modelling multivariate relations (Byrne, 2006).
Furthermore, these findings will address the void literature & support the cross-cultural validity of TRA in Jordan. Many of the models of consumer purchase behaviour that have been developed and tested in the United States such as TRA, have been found to be very useful in predicting a wide range of behaviour in western countries and USA, Lee & Bory (2008); Sheppard et al. (1988).
This study attempts to address the void in literature where the Theory of Reasoned Action developed in the USA has been applied in a nonwestern context (Jordan), and where the study outcome will be useful from an academic or scholarly standpoint and will enable other researchers to conduct similar studies in Jordan. It will also contribute to the existing body of literature on TRA and consumer ethnocentrism in Jordan.
Therefore, integrating the study of consumer ethnocentrism with behaviour theory and the development of the research model in a Jordan cultural context has contributed significantly to the global understanding and support the cross-cultural validity of the theory of reasoned action of TRA.
By including two external variables to the original variables in the full model of TRA, and using multivariate analysis statistical method, the study illustrates the effects of some cultural aspects (conservatism & interest in foreign travel) that may influence consumer purchase behavior. Both these concepts could strongly influence the attitude and subjective norm of consumer purchase behaviour in situations similar to Jordan.
The model generated from this research can be a useful tool for academicians to understand the determinants of consumer purchase behaviour toward foreign product. The model generated from this research can help the ongoing efforts of theory-building in this field & provide a useful tool for academicians to understand the determinants of actual purchase behaviour towards foreign product.
1.7 SCOPE OF THE STUDY
This study targeted only Jordanian consumers who were registered in Jordan Yellow Pages (Edition: 2006). The total population of this study comprised only households in Amman, the capital of Jordan. This study focuses on purchase behaviour of Jordanian consumer toward foreign products, and in order to find out the determinant factors, this study applies TRA theory in addition to, consumer ethnocentrism theory.