Foreign Goods Country-of-Origin Effect on the Russian Consumers

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ФЕДЕРАЛЬНОЕ ГОСУДАРСТВЕННОЕ АВТОНОМНОЕ ОБРАЗОВАТЕЛЬНОЕ УЧРЕЖДЕНИЕ

ВЫСШЕГО ПРОФЕССИОНАЛЬНОГО ОБРАЗОВАНИЯ

«НАЦИОНАЛЬНЫЙ ИССЛЕДОВАТЕЛЬСКИЙ УНИВЕРСИТЕТ

«ВЫСШАЯ ШКОЛА ЭКОНОМИКИ»

Факультет бизнеса и менеджмента

Выпускная квалификационная работа - БАКАЛАВРСКАЯ РАБОТА

по направлению подготовки Менеджмент

образовательная программа «Менеджмент»

Foreign Goods Country-of-Origin Effect on the Russian Consumers

Влияние эффекта страны происхождения иностранных товаров на российских потребителей

Шемякина Марина

Contents

• Introduction
• Chapter 1. Theoretical overview
• Section 1. Development of research on country of origin effect
• Section 2. Country of origin definition
• Section 3. Aspects of country of origin influence on consumers
• Section 4. Definition of related concepts
• Section 5. Subcategories of COE
• Section 6. Connection between brand image, COE and product image
• Section 7. Importance of COE and ways how to manage it
• Conclusions for chapter 11
• Chapter 2. Description of the case and survey analysis
• Section 1. About Yota devices company
• Section 2. Changes in the company
• Section 3. Generation of hypotheses
• Section 4. Survey
• Section 5. Discussion of the results of the survey
• Conclusions for chapter 2
• Conclusions and recommendations
• References
• Appendixes
• 
• Introduction
• In the context of the struggle for a consumer among companies it is important to study the factors that affect the preferences for the goods. It is needless to say that international world trade is developing and competition becomes harsh. Many factors such as brand image, country image, situational factors, opinions of other consumers influence any company's product perception. Globalization and penetration of foreign brands into different markets has created confusion and certain prejudice among consumers about quality, price and other attributes of the imported products.
• Nowadays Russian market is full of both local and international companies, but it is important for them to create, position brands and run their marketing campaigns in the way that impacts consumers' perceptions in a positive way. Moreover, it is important to remember that moving production to other country may influence consumers' attitude for their products. Therefore country of origin effect is an acute issue for companies, which are eager to win the loyalty of Russian consumers in a competitive environment and mitigate the risks that they may face while entering the market or launching a product. Concerning the current political situation, attitudes change, therefore it is important for companies to keep up with them and be able to change strategies and approaches when possible. That is why chosen topic is of a special interest to us and to international marketing and management scholars in general.
• Most of studies are focused on effects for fast moving consumer goods. However, this study is focused on durable goods, in particular consumer electronics market - smartphones. This group of products is known as affected by country-of-origin effect and presents a great potential for companies due to high demand, so it is important to investigate COE specifically for smartphones. Furthermore, foreign made product of Russian brand is chosen and survey is carried out and analysed in order to see how country of origin effect influence Russian customers. The case of Yota devices and its commonly known Russian origin, but production facilities abroad is going to be discussed.
• Consumers use COE as an intangible sources for product valuation. Companies often face resistance to purchase their products when they did not take into account COE. But certain common beliefs or personal perceptions influence customers' willingness to buy therefore companies should be aware of them and exploit them if they want to succeed.
• The general aim of the study is to identify how country of origin effect influences decision-making process of Russian consumers for a consumer electronics product with the emphasise on distinction between brand origin and country of production; suggest recommendations for the Yota company on how to deal with this effect based on the information gained.
• Object of the study - Russian consumers. Subject - Russian consumers' perceptions based on country of origin, which influence purchase decision.
• According to the above-mentioned purpose, the following tasks were formulated:

· To research country-of-origin effect and connected terms (product knowledge, country image, consumer ethnocentrism etc.) in scientific literature

· To create and conduct a survey using online questionnaire among Russian consumers

· To estimate the influence of country of origin information on general attitude, quality perception and purchase intention of Russian consumers and to test a number of hypotheses suggested with the help of the survey

· Based on the information gained and conclusions, make recommendations for the Yota Devices Company on the ways to take advantage of country of origin effect or mitigate the negative consequences.

Methods of the study include literature review, classification, generalisation, comparisons, analysis, and abstraction. One of the empirical methods central for the study, which is going to be used, is survey. Through Internet survey platform (Google forms), information about opinions of Russian customers is going to be collected. Main information sources that are used are research papers from management journals from the Scopus database, Research gate and similar Internet websites.

For the further purposes of the study several important questions are studied, so the thesis is organised the following way. First, theoretical background of the topic is discussed and literature review is done. Main concepts connected with the topic, such as country image, consumer ethnocentrism, product knowledge etc. are defined and distinctions between different sides of country of origin effect are emphasized. The process of country of origin influence on consumers is described and crucial factors in this process are discussed. After, certain features of chosen product group are highlighted and certain relevant studies help previously are analysed. Chapter 2 begins with generation of hypotheses, description of survey and further analysis of results. Questions regarding Yota case, for instance whether Yota devices should consider relocating their production to Russia, and country-of origin effect for consumer electronics in general based on the consumers' opinions gained from survey are reviewed.

Chapter 1. Theoretical overview

As globalisation has started to seriously impact the world, marketing scholars revealed that in reality one of the reasons why certain products are bought better or worse was country of origin effect. Many scholars investigated different aspects of this topic and it has been one of the most discussed issues in marketing. First, the different flows of research on this and connected concepts will be described. After, the definition and detailed explanation of the country of origin effect will be provided, with an influence that may have on consumers. Also, the terminology and possible factors that matter for country of origin effect are discussed. Later on, bi-national products and country of origin effect subcategories, which are important for the study, will be emphasised. Potential implications and managerial solutions on how to cope with the effect are highlighted with the examples.

Section 1. Development of research on country of origin effect

After the global trade became widespread, the problem of foreignness of products and its meaning for consumers appeared for marketing scholars. Studies began to find that purchase decisions concerning any product were not always based on firm-specific advantages but on something else. In one study it was found that the Japanese automakers' strong penetration in the U.S. market in the 1970s was based more on country advantages than on characteristics of a producing company. American auto buyers bought “a Japanese car,” not necessarily a Nissan or Toyota specifically. People do not always make rational choice based on their needs and product objective characteristics like price and quality. Quality is sometimes hard to evaluate before the purchase, especially for durable goods, in particular consumer electronics sector. So there was found another factor that has an impact on consumers and serve as a signal - Country of origin effect (COE/COO effect) (Johansson, 2006).

First country of origin effect was discovered during 70s and first studies were single-cue studies, where country of origin effect was the only factor examined (Schooler, 1965). In his research all the features of products were the same except “made in” title, but respondents evaluated them differently. Later on scientists described the concept and started to notice the dynamic rather than static nature of country image and country of origin effect subsequently (Nagashima, 1977).

Some researchers claimed that significance of country of origin effect was overstated in these previous single-cue research. In their opinion, price and quality remain stronger in product evaluation process (Ettenson, 1988). Later, multi-attribute studies were conducted and were perceived as more accurate. Nevertheless, country of origin was found to be statistically significant among other factors for product perception of consumers (Yaprak, 1978). Furthermore, more attention was given to details, such as product type influence, economic development and reputation of country, consumer patriotism and ethnocentrism, brand familiarity etc. (Wang and Lamb 1983; Shimp and Sharma, 1987). These concepts will be discussed further in the study.

During 90s, when companies started to separate their main offices and production/design/assembly facilities, researchers started to examine how this influences consumers. Hybrid products (bi-national) were starting to become a widespread phenomenon in every country so they somehow changed the COE concept and made it more complex. Brands and their positioning in globalized markets were given special attention, due to multinational companies and high level of globalisation all over the world (Ettenson and Gaeth, 1991; Ahmed and d'Astous, 1993). Also, it was researched how COE works in relation to services, not only to tangible goods, because service sector was becoming more and more important for economy (Javalgi, Cutler and Winans, 2001). Geopolitical dimension of the country-of-origin effect were studied during to high complexity of modern relations between countries (Quelch, 2003).

Nowadays the concept is becoming complex since companies are usually located in different sites and consumers are aware of it and pay attention to country of origin and evaluate reliability of all stages of production of any product. The future of the concept is vague, since the Internet and modern innovations change the world so rapidly and globalisation and migrations of people may lead to unpredictable consequences for concepts as country image, country of origin effect, global and international trade etc. Nowadays, the studies are focused on country of brand, country of production, country of design etc. divisions of country of origin effect and attempt to investigate how they influence customers and which ones are the most significant. The new construct, which is called "brand origin recognition accuracy", is being tested in modern research and considered though not yet confirmed to predict consumer purchase intentions (Pharr, 2005).

Section 2. Country of origin definition

As was already mentioned, country of origin has become more complicated concept than it used to be before, but general definition is provided to understand the basic meaning. Previously, country of origin effect referred to country where the product is simply manufactured, and later the other stages of product development were added to the concept (Zhang, 1996). Bilkey (1993) understands this term as the opinion of the buyers about the relative quality of products and services from different countries. Some researchers often use the word `stereotype' to express the meaning of the effect. It is indeed connected with stereotypes, but the most appropriate word would be perception. Therefore, the clearest definition is the following.

Country-of-origin effect (COE) - is the overall perception that consumers form of goods from a particular country, based on their perception of the country's production and marketing strengths and weaknesses (Roth and Romeo, 1992).

Roth and Romeo (1992) presented a model, which can help in understanding country of origin evaluations. They summarized attributes used in various studies and combined them in 4 groups:

1. Innovativeness - use of new technology and advanced engineering.

2. Design - appearance, style, colours, variety.

3. Prestige - exclusivity, status, brand name reputation.

4. Workmanship - reliability, durability, craftsmanship, manufacturing quality.

According to these groups, the countries are compared easier, but more importantly, it was found that the most often if the evaluation of products and services in a particular country was low in one dimension, they were also perceived negatively in other dimensions (Roth and Romeo, 1992).

Country of origin was found to be widely used by consumers as feature of a product, when some of the information about other product features is missing or just hard to know before the consumption. From a consumers' point of view, it can be a certain way to simplify the decision-making process. The obvious example is how buyers usually look for French perfumes, Swiss watches and Italian clothes, because these countries are believed to have great competence in creation of mentioned products. However, the factors that influence consumers are not that simple and require special attention. The difficulty, which makes country of origin hard to describe and make universal model of how country of origin influences consumers, is that COE exists only on an individual level (Zhang, 1996).

Consumers usually evaluate a product based on 2 types of features illustrated in picture 1: intrinsic cues (taste, capacity, design and other product features) and extrinsic cues (price, country of origin, brand and warranty) (Ahmed and d'Astous, 2008). Extrinsic cues are not physical attributes and if one of them is gone the physical appearance of a product will remain the same, they are externally attributed. Consumers usually rely on these when data about intrinsic cues is difficult to evaluate. Based on all the information they make decision whether to purchase a product. On the contrary, intrinsic are those, which are inherent in the product itself and which are fundamental for the product to be viewed the same. But sometimes these are harder to test before the purchase. Nevertheless, studies also show that consumers may not be able to accurately evaluate both extrinsic and intrinsic cues before and sometimes even after the purchase. (Alba, 2000; Kardes et al., 2001).

Picture 1. Factors (cues), which influence consumers' perception of a product.

Undoubtedly, the characteristics of target consumers (demographic, stereotypes etc.) and environment (economic conditions, market development) also affect the perception of a product. The factors that may have an influence on evaluation for consumers are schematically depicted on the picture 1 and are discussed in details further.

Section 3. Aspects of country of origin influence on consumers

In order to summarize the ways of how country of origin can change perceptions and product evaluations, Obermiller and Spangenberg (1989) suggested that perceptions of country of origin of a product include 3 components. There are no strict borders and these components are always act together and influence each other in the minds of consumers.

· Cognitive

Country of origin serves as one of the extrinsic cues (signals) of product quality. This was commonly accepted as a country of origin valid usage by consumers and was discussed above. In this case, country of origin helped to infer beliefs regarding product attributes (usually quality) (Bilkey and Nes, 1982; Steenkamp, 1990) However, it was noticed that consumers judge and evaluate products not only using COE as an informational stimulus, but also relate it to emotions and preferred norms. Therefore the framework also includes following two components - affective and normative.

· Affective

Country of origin may hold emotional and symbolic meaning for consumers. Through communication with people and visits, art and news consumers form a general emotional feeling for a country. Also, in this aspect consumers may link country of origin with status and self-esteem. By possessing a product, they may associate themselves with social group so the product gains some kind of a symbolic function for consumers. This is especially vivid when using a product is visible for other people. Therefore some research state that country of origin effect is stronger for conspicuously consumed goods (Tan, 2007).

Some people have strong emotional attachment to products from a chosen country because of personal preferences. And vice versa, some people may have strong negative attitude for a country and would not buy its products regardless of price, quality and other features.

· Normative

Opinions about government actions may be a determinant in decision-making process. Consumers may consider buying product from a particular country as morally unacceptable. The example can be resistance of people from Australia resisting to buy products from France due to nuclear tests in Pacific region. They consider the purchase of the products as economical support for a country and subsequently for the government. Furthermore, many governments are trying to establish a norm of purchasing domestic products and such concepts as consumer patriotism and ethnocentrism are related to this aspect of country of origin effect.

There have been some doubt about the country of origin importance and some research have shown that consumers are often low informed about the country of origin. That was why they thought that COE is overestimated in the scientific literature and that it actually does not play a significant role for consumers (Balabanis and Diamantopoulos, 2008). Nevertheless, further studies concluded that it is important for many people to know country of origin before considering the choice options, because they want to avoid risks and country of origin is a signal of quality of product and reliability of producer, therefore especially looked upon during the first purchase. They attach specific features immediately when obtaining information about country of origin of a product, even if it is not a true indicator of reliability of a product (Han, 1989). Country of origin bias appears among consumers, when they tend to overstate the characteristics of a product. Roth and Romeo (1992) found that the match between a product and its geographical origin plays a crucial role in purchasing behaviour. And purchasing behaviour is what interests marketers the most.

Furthermore, country of origin effect was found both valid as regards to the behaviour of individual consumers and that of organizational buyers (Ahmed and d'Astous, 2008).

Section 4. Definition of related concepts

One concept that is directly influencing country of origin effect and relates to all the products made in a country is country image.

Country image is the total of all descriptive, inferential and informational beliefs one has about a particular country (Martin and Eroglu, 1993).

A number of research revealed that consumers associated products made in a certain country with consistently negative or positive feelings. This was found to be relevant for end-users and industrial buyers, products in general and specific ones (Bilkey and Nes, 1982).

Many studies brought the idea that the “made in” label stereotype reflects in perception of products made in developing countries less favourable than the ones produced in developed countries, and that people are ready to pay extra for products made in the most developed countries (Wang and Lamb, 1983; Kinra, 2006). There is indeed a positive correlation between the level of economic development of a particular country and the quality evaluations of its products (Wang and Lamb, 1983). Just like German-made products are commonly perceived as being better and more expensive than those made in China (and consumers are usually expecting lower prices for Chinese products in comparison to German). What is also interesting, foreign products are usually more preferred in the developing countries rather than in the developed ones. On the contrary, in developed countries consumers tend to prefer domestic goods (Usunier, 1999). However, it was also found that some products might be preferred because of the “indigenousness” factor, such as warm-weather products from tropical countries, regardless of the level of development of these countries (Tan, 2007).

But what is also important is that consumer evaluations of, or preferences for, foreign products can be product-, origin-, or product/origin-specific. (Balabanis K., Diamantopoulos A., 2004). In other words, perception of country of origin depends on the product category, not only on general country image. For instance, COE for dairy products produced in one country may be positive, while for household appliance absolutely opposite and for another product category have no significant influence.

Lampert and Jaffe (1998) investigated in their study that the more homogeneous the goods are, the smaller the effect of the country of origin is on the image of the products. They provided an example of gas and electricity. Conversely, if taking the example of goods with a higher differentiation level, country of origin plays a crucial role for their image building and perception of consumers. Similarly, country of origin effect was found to be stronger for luxury goods than for necessities (Tan, 2007).

The impact of geographic origin is found to be stronger in the case of categories of goods whose production is associated with countries that are renowned for their production tradition in a given sector. The image of products from this category associated with this country is what extremely important for the COE. So overall the features and peculiarities of product category is what determines how COE will influence our product. Undoubtedly, country image in general and reputation of products in general from a particular country are also factors that matter.

Stereotypes, which are defined as `fixed, over generalized beliefs about a particular group or class of people' (Cardwell, 1996), are very common in all societies. Stereotypes can be very strong and not easy to overcome or refute. It was found that country-specific stereotypes might spontaneously influence consumers' evaluations without their deliberate intention to use them in the evaluation process. Liu and Johnson (2005) found that just by mentioning country of origin information certain associations and judgments emerge without prior reflections.

Despite the large amount of research on the topic of COE, it is very difficult for scholars to create theoretical generalisations, because country of origin varies according to difficult product categories. In some product categories, the value of country of origin is greater than in the other, for instance for luxury products is will be in general larger than for the essential goods. Some studies tried to focus on the product-specific perspective. However, it may be very problematic and impractical to create product maps for all the countries on the basis of their country images, as any country usually possesses numerous products belonging to many categories. And it would be necessary to measure every image of every country for every product in a given country. So typicality of the products is used to overcome this problem.

“Typicality” is defined as the degree to which an item is perceived to represent a category (Loken and Ward, 1990). There are 2 dimensions of typicality for COE: ethnic typicality and country typicality. Ethnic is the typicality of a country's product in the global market of its product category (i.e. how typical is a Russian smartphone among all smartphones). Ethnically typical products are the products that are associated with a certain country as a producer. Country typicality is the commonness of a product category among all country's products (i.e. how typical are smartphones as a Russian product). Country typical products is simply products that are evoked in memory when a certain country is mentioned. It was revealed that typical products both country and ethnically will receive more positive consumer evaluations than country and ethnically non-typical products respectively (Tseng and Balabanis, 2011).

It is also worth mentioning the concept called “consumer ethnocentrism” (sometimes also called “domestic country bias”), which specifically refers to ethnocentric views held by consumers in one country, the in-group, towards products from another country, the out-group.

Ethnocentrism - is viewing other groups from the perspective of their own; rejecting those that are different and accepting those that are similar (Shimp and Sharma, 1987).

In other words, people can be resistant to buy products from different countries so will rather buy domestic products or at least from similar countries (concept similar to consumer patriotism). Ethnocentric people often compare other countries with their home country. The point that is central is that consumers consider their domestic products better and of a higher quality, superior to foreign-made ones (Klein, 2002).

Modic (1990) suggested a bias in the consumers' evaluations of products from various countries in favour of home country products. Also, Shimp and Sharma made a conclusion that if consumers think that competition from foreign brands is likely to threaten the economic situation in their home country, and then they have a higher degree of ethnocentrism. According to Kucukemiroglu's study (1999), the purchase intentions, as well as attitudes and opinion of non-ethnocentric consumers towards imported products are significantly more favourable than those of ethnocentric ones. Possible connection between product category and level of consumer ethnocentrism was also noticed. In other words, consumers with the same level of ethnocentrism may have different attitude to different product categories (Jaffe and Nebenzahl, 2001).

CETSCALE (Consumer Ethnocentrism Tendencies Scale) is the specially designed scale, which measures level of consumer ethnocentrism first introduced by Shimp and Sharma. It includes 17 core questions of attitude of a person to domestic goods. This scale was admitted to be convenient and reliable (under the proper conditions of the study) tool to reflect one of the most important factors in explaining consumer behavior (Herche, 1994).

Consumer patriotism, mentioned above, differs from consumer ethnocentrism in the way that this concept is more about loyalty to the home country and desire to help local producers, interestingly it was found to be more important for older citizens than for younger ones (Han, 1989). These two concepts (consumer patriotism and ethnocentrism) may explain possible irrational behaviour of consumers, when they know that domestic product has less advantages and is known for lower quality than foreign ones, but they still buy it. Such consumers usually connect their own welfare directly to the home country's economy and perceive foreign goods as competitors to domestic ones and as potential threat for their home country producers (Shimp and Sharma, 1987). National identification and may be especially present nowadays among Russians as the feeling of belonging to the own social group and preference of domestic products may benefit their overall perception of these products, however, the objective advantages may outweigh this benefit and may result in preference for foreign products.

Because of increasing number of multinational corporations with global brands, sold in different markets all around the world under the same or very similar name, though produced locally, it has become difficult to associate a brand with one country of origin (Papadopoulos, 1993). As a result, consumers' ethnocentric sentiments can be decreased as it is not that obvious for consumers which country of origin to attatch to a product (Batra et al., 2000). Also, these companies and brands may be viewed in a positive way by ethnocentric consumers due to their contribution in local economy, society, envoronment etc.

The concept of reference groups from social psycology explains how certain people acknowledge shortcomings of their own country, include another countries in their own reference group and sometimes prefer foreign products to domestic ones. Reference group - people whose attitudes, behaviour, beliefs, opinions, preferences, and values are used by an individual as the basis for his or her judgment. This person does not have to be (or even aspire to be) a member of a reference group to be negatively or positively influenced by its characteristics. It is a certain standard for a person (Business Dictionary, 2018). This phenomenon might be applied to consumer behavior and evaluation of products of different countries - preferences for foreign products may vary depending on country of origin.

Product knowledge - an understanding of a good or service that might include having acquired information about its application, functions, features, use and support requirements (Business Dictionary, 2018).

This is what consumers get after considering some alternatives. And country of origin for this product category, impacted by other factors mentioned in this study, influence product knowledge and consequently decision on whether to buy or not to buy a certain product.

It is believed that unfamiliarity with brand or product by itself increases the impact of COE. When acquiring additional information after, the impact of COE decreases. Therefore, COE is more influential and is viewed as an additional product attribute before the detailed information about product is given. And most of the time it is hard to get information about product's quality fast and easy so COE was found to be widely used as one of the common indicators of it (Bilkey and Nes, 1982; Cordell, 1992; Elliott and Camoron, 1994). Since in the modern world the timing is becoming crucial for consumers, country of origin can become a sign for a consumer, from which one can derive information and make a quick decision. Nevertheless, some researches, for example Johansson et al. (1985) findings did not support this argument. He argued that “people with more prior knowledge will have more relevant information on a country and will feel more comfortable about using it that others.” Insch and McBride (2004) concluded from their research that product familiarity increases the salience of COE, but for complex products bought less frequently it might have a positive influence, but for simpler products negative.

There has been also some controversy about connection between COE and consumers' involvement.

Product involvement - the level of a consumer's interest in purchasing a certain product type and how committed they are to purchasing a given brand.

The classic examples of high involvement products are cars or real estate, because they usually cost a lot and considerable research and evaluation of available choices is done before the purchase decision (Business Dictionary, 2018).

On the one hand, prior detailed evaluation and extensive search for information increase the chance of using country of origin in product evaluation process. If consumer is willing to know some other features of product except for price, he is more likely to be interested in country of origin of a product and willing to know more about it and therefore this consumer's decision is more likely to be influenced by COE (Ahmed and d' Astous, 2008).

On the other hand, product involvement decreases the power of COE. It is connected with elaboration likelihood model, which is based on the assumption that a person, while evaluating any information, uses either central or peripheral path. Central path is associated with high involvement and cognitive effort and peripheral with low involvement and usage of easier ways to evaluate information. So if a person is taking the peripheral path he or she is using salient and available cues, which do not require additional effort or processing and COE is considered to be one of these in that case. By finding it out, consumer can quickly evaluate product without much thought, and in this case country of origin is a sign, which simplifies decision-making process (Han, 1989). Moreover, highly motivated and involved consumers view country of origin more as one of product attribute and do not pay so much attention to it, because base their judgments on other, more objective criteria.

Apart from the factors and concepts mentioned above, the cultural (norms, values, symbols) and psycho and sociographic characteristics (patriotism, ethnocentrism etc.), demographic characteristics and needs of consumers are the factors that can have huge influence on COE. They can be united in one group as consumers' characteristics. For instance age, income, education and even gender were found to have certain connection with the COE impact. Some scientists concluded that females are tend to prefer foreign products more than males, Mittal and Tsiros (1995). It was also found that there is positive relation between the level of income and attitude to foreign goods. The same correlation was demonstrated concerning the level of education (people with university education preferred foreign goods to domestic ones) (Mittal and Tsiros, 1995).

Picture 2. Factors that determine COE for a product

All these factors cannot be fully controlled by a company, but marketing activities and marketing mix for the product change the product knowledge and in the end willingness to purchase a product and final decision.

The factors that determine the extent to which COE influences product perception are shown schematically on the picture 1.

Kleppe, Iversen and Stedslaker (2002) concluded that country of origin effect occurs when marketing mix, product-category image and target market characteristics align together and they call this “image creating” moment.

Though the main factors that influence the direction and salience of COE, the model of impact of COE on purchase decision is what interests us the most. Pharr (2005) in the review of studies on current topic divided the determinants (and called them antecedents) of country of origin effect into 2 groups: endogenous and exogenous. The former one are the factors, which exist within consumers, based on their traits, values, psychological features etc. The latter are outside consumers and exist in structure of target country. Among these, level of economical development, as was shown before, impacts product evaluations. Endogenous determinants were also mentioned before, such as consumer ethnocentrism, country-specific animosity or emotional attachment, stereotypes.

Also, Hofstede's cultural dimensions are suggested to be valuable for country of origin researches (however among all the cultural dimensions individualism/collectivism dimension was only empirically confirmed to have an influence). For people and cultures, who are more collectivistic, in case of conflict between collective and individual goals, sacrifice will be usually for the collective. In contrast, individualism is guided by self-interest and ties to social groups are flexible. Gurhan-Canli and Durairaj Maheswaran in their study suggested that `country of origin is a group-level concept and the extent tot which group membership is beneficial to the individual may determine whether country of origin will be used in product evaluations' (Gurhan-Canli and Durairaj Maheswaran, 2000). Collectivists preferred home country product to foreign ones regardless of its superiority or any distinctive features. By contrast, individualists evaluated products more favorably only when they thought it was the best option among competitors. But only vertical dimension was found to matter for cultural differences in terms of country of origin effect. The difference between vertical and horizontal dimensions is that horizontal assumes that there is equality among people in the social group and vertical that group members differ from each other in terms of some sort of hierarchy in particular society. They made a conclusion that in collectivistic countries like Japan it is worth featuring country of origin if the product is domestic.

Moreover, it was found that for hedonic products (sensational products, with a certain emotional satisfaction attached to the purchase of them, opposite term to utilitarian products) foreign brand would influence attitudes towards a product more than the actual place of production (Leclerc, Schmitt and Dube, 1994).

Pharr has developed a holistic model of country origin influence based on proposed concepts of antecedents, moderators and outcomes (Pharr, 2005). Antecedents determine country of origin beliefs an evaluation in all the aspects (country of brand, production, design, assembly, parts, corporate ownership). According to this model, then moderators involve into a process, or other factors that influence consumers while making decision upon purchasing a product. Their presence was confirmed though comparison of single- and multi-cue studies of country of origin effect. In the former studies, COE was usually stronger and more frequent then in studies that included other variables except country of origin. In real life we always consider more than one variable as consumers, therefore moderators were found to be important.

Moderators are other attributes of a chosen product, such as price, brand name, product type (luxury/necessary) and individual parameters such as product involvement and product familiarity. Therefore it was confirmed that country of origin effect for a product could be corrected by the brand identity. Subsequently, outcomes, for instance brand image, product evaluation and perceived value, arise in minds of consumers with the help of previously processed country of origin evaluation information with moderators and then influence purchase intentions.

Picture 3. Summarized scheme of Pharr's model (Pharr, 2005).

Section 5. Subcategories of COE

The point that is crucial in general and for this specific study is several components of country of origin effect. It is not only about place of production anymore due to internationalisation of product creation process. Country of manufacturing (COM), countries of assembly (COA), country of design (COD) and country of brand (COB) all seem to matter nowadays and illustrated on picture 4 (Wu, 2007). Also country of company ownership can be separated and country of parts for some products (if it may seem important for the particular case). For our specific study, difference between brand origin and country of production, country of design is crucial. Country of brand is usually the state in which corporate headquarter is situated and from which the company manages a product, while country of manufacturing is the country where the production is taken place and it is the country which is written on the package of a product as a `made in' country.

There was a common belief that brand origin is more important for consumers, they associate the country of brand with the product. Nevertheless, studies also show that consumers pay attention to product origin, regardless of information provided about brand origin and other relevant product attributes (Min Han, Qualls, 1985). This is mostly due to high prevalence of hybrid products nowadays, of which people are aware, especially on the markets of durable goods like consumer electronics.

Nevertheless, consumers pay attention to country of brand and assign certain characteristics of quality and status to products, according to their brand origin. The same appeals to country of design, although COB is more obvious and often not so conspicuous by consumers. With the growth of multinational production, the original emphasis on “made-in” labels has been weakened. Nowadays country of brand origin for majority of population is more likely to be used in product evaluation (Wu, 2007). It is more often stronger and has become a kind of insurance for buyers that regardless of place of production this product is going to perform according to the quality level associated with this brand origin. For instance, some people purchase cars of German brands just because cars of German brands are known and are expected to perform with a certain level of quality, as it is not of a great significance to buyers which one of the brands (e.g. BMW or Audi) it is and what is the country of manufacturing. The main point that matters - the brand origin - Germany (Johansson, 2006).

In UIgado's (2002) study, country of brand component was found to be more salient in industrial purchasing (B2B market) than country of production.

The extent to which country of assembly, country of parts and country of design influences product evaluations depends on technical complexity of product (Insch and McBride, 1998). Performance of smartphones is directly determined by the technical advancement therefore it can be derived that these components of country of origin effect will matter for consumers.

Picture 4. Sub-categories of Country-of-origin effect.

Some researchers relate to the term hybrid products or as bi-national products (Ettenson and Gaeth, 1991; Ahmed and d'Astous, 1993), which means that the country, where the brand comes from is not the same with the manufacturing place. Obviously, lowering the costs (cheaper workforce, lower taxes, special conditions of governments etc.) is usually the main reason for relocation to other countries, but in our case, as will be further explained, the option is to think of relocation back to the country of the brand origin, however partially also due to need of lower costs. It can be assumed that nowadays consumers are so used to hybrid products and that they specifically pay attention to country of manufacturing. However, if a product becomes very “international” this may lead to lower significance of country of origin effect for consumers. Therefore it cannot be claimed with confidence that the influence of country of origin effect for hybrid products is greater or lower.

It was suggested that the congruence (or consistency) between a brand name origin and a product's country of origin (production) has positive effects on quality perceptions regarding that product. It was also concluded from the studies that the congruence between brand name and country of origin is in fact preferable for consumers and usually has a positive effect on their purchase intention (Aurier and Fort, 2007).

When companies want to develop their competitive advantage, they can create Firm-specific advantages (FSA), which others cannot copy and which belong only to the chosen one. FSA is crucial for any company operating on any market. However, firms may employ Country-specific advantage. Producing in other country, which allows to have a cost advantage - is a classic example of it. Furthermore, producing in the particular country because of its country image for this product category can be viewed as using country-specific advantage. The shortcoming of this method is that any other company can do the same. It is not exclusive. It can help products to be sold better like one of the tools, but it does not necessarily mean that they will be leaders on the market (Johansson, 2006).

Section 6. Connection between brand image, COE and product image

According to the Ahmed, 2002 research, country of origin is more important as an indicator of quality than brand image. Certain stereotypes and the conclusions that consumers make at a moment of evaluation of a product are crucial for COE. However, consumers often use the brand name as a proxy of country of origin itself and consider well-known brand to be more influential on their purchasing intentions (Astous and Ahmed, 1999). Also, it was found that country of manufacture has a greater influence than a brand on consumers' product quality evaluation. So it is quite visible that the connection between different types of COE, brand image and product image is sometimes challenging.

Brand image sometimes can be a sort of a substitute for COE. This is mostly applicable to well-known brands from countries with high reputation for this product category. The clearest example would be Apple brand - consumers perceive its devices as high-quality products, regardless of the place of manufacture - China. They automatically associate products of famous brands with country of brand origin and do not even think about place of production. They may link the quality perceptions with the brand and base their decision on that. Sometimes the term `brand equity' is mentioned in studies, but it is just a broader concept, which can be calculated for every company (how much money the brand actually helps to make for the company) unlike brand image (it exists in minds of consumers). Brand equity is everything that is connected to the brand, which can add or subtract from the value given by a particular product to company or its customers (Aaker, 1991).

Loyalty to product origin among consumers also exists (Loureiro and Umberger, 2007; Shimp and Sharma, 1987). Indeed, some consumers purchase products originated from particular country more favourably and regardless of brand features and reputation. So country image can prevail for a consumer in this case.

It is worth to mention that a particular product and its reputation among consumers itself influences the country image, the brand image of a company, and therefore the country of origin effect for the respective product category. So there is mutual impact of all of these components. Therefore country of origin effect is not a static concept and can change in time and usually it does. “For example, while American products enjoyed a reputation for high quality after World War II, they slipped badly in the 70s and 80s as superior foreign products raised customer expectations. British quality perceptions largely followed the same path only earlier and quicker, while Japanese products showed the opposite trend and the German quality image remained strong” (Johansson, 2006). The attempts of countries to enhance the country image on general level and marketing activities abroad can also have an effect and change consumers' opinions of brands and products.

Some studies also suggest that strong brand is less sensitive to country of origin effect, because its accepted advantages among consumers outweigh the possible influence of country of origin effect (Han and Terpstra, 1988).

Picture 5. The interconnection of the country, product and brand image

Consumer electronics products, as well as automobiles, wines, luxury clothes, accessories, software are considered to be often evaluated by consumers on the basis of country of origin. (Ahmed, S. A., d' Astous, A., 2008). Also the level of differentiation among consumer electronics products, and in particular smartphones is relatively high, so as was mentioned above, this leads to a greater influence of COE on consumers. Certain country specific stereotypes exist. We all heard about them and it is useful for companies to estimate risks connected to country of origin effect and know how to lower them or use the opportunity of positive effect. That is why it is of a great importance to understand the influence of COE on Yota phone image in minds of Russian consumers.

It was found in one research that for Russian consumers, CO was the most important attribute of a product (among product technical characteristics, brand name, price etc.). The research was held for the consumer electronics products (television). For consumer electronics, Russians preferred western brands on the first place and then others. Regarding of the brand origin, place of production played slightly more important role (for example, if the TV is made in US it doesn't matter which brand is that - American or Russian). So place of production was informative for consumers, even if the brand is well known. Consumers in Russia may respond more favourably to promotions based on extrinsic attributes, in particular, country of origin. It was found that Russian consumers in general are sensitive to country of origin effect, but it is important to remember that the country of origin preferences and attitudes of consumers change with time (Ettenson, 1993).

Studies on Russian market in general claim that COE exists in any case and has a significant power for majority of Russian consumers. Purchase decisions are usually influenced by country of origin information and it has been also found that recently this impact has increased. It was also concluded that specific marketing strategies have lower influence of Russian consumers than perceptions of moral and ethical acceptability of purchase of an imported products from a certain country. It is also anticipated that tensions in international political relations and sanctions increased the level of consumer patriotism, with the help of widespread promotion of local producers and brands in Russia (Marimov, 2017).