The Chinese are coming!

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The Chinese are coming!

“Co-branding effects for Chinese car manufacturers”

Erik van Raalten

S1632183

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Master Thesis:

The Chinese are coming!

“Co-branding effects for Chinese car manufacturers”

Author:

Erik van Raalten

H.J. van Heekplein 80-26

7511HN Enschede

e.j.van.raalten@student.rug.nl

+31 613964171

University of Groningen:

Faculty of Economics and Business

MSc Business Administration, Marketing Management

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Management Summary

This study investigates the effect of co-branding for a Chinese car manufacturer: the Chinese brand Geely (low-equity brand) and the Swedish brand Volvo (high-equity brand). The main question for the research is: Do Chinese car manufacturers suffer from a negative country of origin effect, and

what are the possible benefits of a co-branding strategy?

First a literature study is conducted about co-branding in general and country of origin effects. After that the effects are investigated in an experimental design, by use of online questionnaires. 150 respondents have completed the questionnaire. The respondents were randomly divided in 3 groups: group 1 was asked about a Chinese car, groups 2 and 3 were asked about a cobranded car. The only difference between the groups was a manipulated advertisement that was showing if Volvo was involved (group 1: not involved; group 2 and 3 differed in the way the involvement was shown). The respondents were asked about country image, brand image, product perception and their behavioural intentions.

The main conclusions of the research are:

1. Low-equity brands will benefit from a co-branding strategy with high-equity brands with improved product perceptions.

2. A co-branding strategy between a high-equity brand and a low-equity brand will not damage the brand-image of the high-equity brand

3. A co-branding strategy between a high-equity brand and a low-equity brand will lead to increased brand image of the low-equity brand

4. Car brands from highly developed countries are perceived better than car brands from less developed countries.

5. Behavioural intentions towards co-branded products increase.

So the answer to the mentioned main question is: co-branding strategy can be useful for Chinese car manufacturers, because the negative country of origin effects decreased and behavioural intentions increased .

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Preface

This thesis is the final part of the Master program Business Administration, specialization Marketing Management at the University of Groningen.

Because I enjoyed the Consumer Behaviour course, the decision was made to write my thesis in the area of business-to-consumer marketing, with focus on the automotive industry. I have always been interested in the automotive industry, therefore the choice of this subject was a logical consequence. Combining co-branding, the acquisition of Volvo by Geely and the future arrival of Chinese cars in The Netherlands in one research was a fun challenge and is giving interesting insights.

Writing this preface is a special moment for me, therefore I want to use this moment to thank a few people.

First, I would like to thank my first supervisor Dr. J.E.M. Van Nierop for supervising, reading and grading my thesis.

Second, I also would like to thank my second supervisor MSc J.H. Wiebenga for reading and grading my thesis.

Finally, I want to thank everybody for their patience throughout the process of writing my thesis. In particular my family and especially Floor, Paul and Lotte for their tremendous support.

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CHAPTER 1: INTRODUCTION

1.1 Introduction

“Made in China” is something that is seen much in the everyday world. One thing often heard is that China is the factory of the world, producing products for the well-known brands and retailers. The role of original-equipment manufacturer (OEM) is something that kept many Chinese companies satisfied for years. The Chinese economy is growing year after year and most Chinese companies did not felt the need to create their own brands. The basis for this domination as original-equipment manufacturer of the World is mainly cheap labour costs. The Chinese government is now trying to challenge Chinese companies to invest abroad and try to sell products under their own brand outside their home market. The Chinese domestic market is more competitive than ever before and therefor the Chinese government stimulates companies to innovate and improve their products to create more sustainable businesses instead of remaining producers of inferior, cheap and non-branded products (Gao et al, 2003). In other words, China wants their own global brands and an improvement of their country image.

Developing successful brands and penetrating highly developed markets are very difficult tasks that are not easy to realize from one day to another. Apple, Microsoft and Coca-Cola are the three most valuable brands in the world (Forbes, 2013). Remarkably, there are no Chinese brands represented in this list. Something that might be expected from such a large economy. The step from OEM to well-known brand is a process that Chinese companies are trying to undertake. However, there are Chinese companies that have been able to penetrate developed countries and markets with their own branded products. For example in markets such as the appliance and consumer electronics markets, there are already signs of success. For example Huawei, a Chinese manufacturer of telecommunication equipment. Since Huawei acquired Ericsson in 2012 they are the largest manufacturer of telecommunication equipment in the world (The Economist, 2012).

Another example is Lenovo. Lenovo is a Chinese PC manufacturer that has grown to be the third largest personal computing company in the world, and number one in highly developed countries like Japan and Germany. Lenovo is producing not only PC’s but also smartphones and tablets. Since its acquisition of the IBM Personal Computing Division in 2005, Lenovo became a global player on the PC market. Nowadays Lenovo has operations in more than 60 countries and sells its products in around 160 countries (Lenovo.com, 2013).

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- 7 - Creating and sustaining brands in highly developed markets is complex, expensive and uncertain. For example, for Japanese and South Korean electronics companies and car manufacturers like Toyota, Samsung and Hyundai it took decades and large investments to get where they are today.

Ambitious Asian companies have long been interested in penetrating the global market and have done so using several methods, but were in the beginning not as successful as they are now. It took a lot of effort to achieve their current position. In the 80s Japanese companies became famous with their efficient production planning systems and management techniques. Chinese companies can also follow the example of companies from other Asian countries that emerged to western economies in the 90s. Taiwan and South-Korea are examples of countries that also brought brands like LG and Asus overseas and are successful since then. In these cases production costs and low production costs can be seen as success factors and are therefore competitive advantages.

Chinese companies have shown that they can produce low priced, high quality products for other companies, as original equipment manufacturers. This can be the basis for successful Chinese brands overseas. What are those Chinese companies missing in order to be truly successful?

The lack of their own distribution networks, production facilities and management teams overseas is the main problem for Chinese companies to succeed. In their own domestic market they have built such networks, but building setting up these activities in other countries and markets is very time consuming and will lead to high costs and risks (Gao et al, 2003).

In brief, globally aspiring Chinese companies certainly do have competitive advantages but to be successful overseas they need to build a better network to respond to consumer demands and improve their “made in China” image.

1.2 Unsuccessful attempts to enter Western Market

Companies like Huawei, Lenovo and Haier overcame the negative associations associated with their company country of origin. Chinese car manufacturers have not until now.

Leading German automobile expert Ferdinand Dudenhoffer from the University of Duisburg-Essen, has said Chinese cars would soon have an important role to play in the European marketplace. "In five years, the Chinese car manufacturers can become what the Koreans are today” (China Daily, 2009).

Chinese car manufacturers do not have a long history to build on. From the late 70s until now Chinese car manufacturers made a tremendous development in the field of car manufacturing. In the beginning only the political elite could afford a car but nowadays the Chinese middleclass can afford a car.

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- 8 - export their cars overseas. However, still in growing but less developed economies. In 2011 China exported almost 900,000 cars (The Economist, 2012). Export statistics show that China is still almost exclusively exporting cars to less developed economies. For example, the top three export destinations in 2012 are Algeria (149,800), Iraq (90,000) and Russia (89,700). According to these figures China is still years away from large-scale exports to developed economies (RVO, 2013). A survey conducted by J.D. Power, a market researcher from the United States of America, is showing that Chinese car manufacturers are closing the reliability gap (J.D. Power, 2013). Earlier attempts to export Chinese-branded cars to Europe, a few years ago, were a complete disaster. But recently Geely introduced the Emgrand EC7, and it scored a reasonable four out of five stars in the EuroNCAP crash test (EuroNCAP, 2011).

Chinese car manufacturers do not give up, but as mentioned before, earlier attempts ended in a disaster. For example Landwind and Brilliance.

Jiangling Landwind

In 2005 the ANWB was involved in a crash test with the Jiangling Landwind, then one of the first Chinese cars that was intended for export. The SUV scored depressing: the driver would not survive a head-on collision at a speed of 64 kilometres. The ANWB stated in their press statement that the Jiangling Landwind was extremely unsafe and even life threatening (Trouw, 2005). Top Gear magazine stated in an article “Do you remember the Landwind? The SUV that was as solid as the

imitation Rolex from the factory next door” (Top Gear, 2012).

In 2010 Jianling Landwind tried again to enter the Dutch market. The newly designed and developed Landwind CV9 has never been a success. According to the information of de Dutch RAI association there were more Ferrari’s (31) being registered in 2012 than Landwind CV9’s (26) (RAI, 2013).

Brilliance

After the failure of the Jiangling Landwind there was a second Chinese brand that went to Europe to try their luck. In 2007 it was the Chinese car manufacturer Brilliance who came to Europa with their Brilliance BS6. Their introduction did not differ much from the introduction of the Jiangling Landwind in 2005.

During a joint crash test organized by the ANWB and the ADAC the Brilliance BS6 scored only one out of five stars. According to these two organizations the car is extremely unsafe and offers passengers the same protection as cars that came on the market ten years ago (AMT, 2007).

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Less than ten years later, the Chinese improved themselves spectacularly. At the 2013 Geneva Motor Show, the biggest motoring event in Europe, the brand new Chinese car manufacturer Qoros made its debut. Qoros is a 50/50 Israeli/Chinese joint venture. In Geneva they introduced their Qoros 3 model (BBC, 2013).

Qoros set up a complete new team with experienced, mostly European, people who designed the Qoros 3. This new team of designers and experts includes Gert Hildebrand (former designer of the New Mini) and Volker Steinwascher (former CEO Volkswagen USA).

As a result, the Qoros 3 is the first Chinese car that was rated by Euro NCAP with a five star score. An impressive score for a Chinese car manufacturer, but what is even more impressive is the safety of the cabin. The cabin is described by the Euro NCAP Institute as "extremely robust" and the scored the highest score since years (ANWB, 2014).

Geely Motors

In the context of this study, Geely requires special attention, because it is since 2010 owner of the brand Volvo and will be used later on in this study.

In 1997 Geely entered the automobile industry and became the first private automobile manufacturing enterprise in China. Geely produced their first car ever in the autumn of 1998. Since then the company has grown steadily resulting in the first batch of Geely automobiles that were exported abroad. Geely is one the four largest independent private automobile manufactures in China.

In 2010 Ford Motor Co. announced they reached an agreement to sell Volvo Car Corp. to Zhejiang Geely Holding Group for the amount of 1.8 billion US dollars. Geely is a car manufacturer with plans to enter the European market (Wall Street Journal, 2010). As part of the envisioned technology sharing, Geely wants Volvo engineers to help improve the engineering capabilities of Geely. For Geely this is important to "lay a solid foundation” and become an established car manufacturer (Reuters, 2012).

The acquisition of Volvo can be a useful step in their process of entering the European market. Because Geely is an unknown brand for many European consumers and Volvo is not.

Of course another possible reason for Geely can be to improve their sales in the domestic market. Because of the limited possibilities for research on this aspect, this aspect will not be taken into account in this report.

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- 10 - in this research. Researchers based their conclusions on a telephone survey were they asked 1.764 random consumers about their perceptions on seven categories, namely: quality, safety, value, performance, design/style, technology/innovation and environmentally friendly/green. The most important factors in buying a new car were quality, safety and value. Notable in these scores is that Volvo leaves competition far behind on terms of safety, even twice as much as number two Ford (Consumer Reports, 2013)

CEO of Volvo, Hakan Samuelsson, is highlighting that the two brands are not yet using each other’s components. According to Samuelsson Geely first have to upgrade their production line to support the transfer of technology. He further submits that Volvo is already helping Geely with their knowledge about vehicle safety (WardsAuto, 2013).

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1.3 Introduction Literature

Before this study may start, a short introduction in the literature will be given to make commonly used terms understandable.

Brands

The American Marketing Association is stating that a brand is a “name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller of group of sellers and to differentiate them from those of competition” (Keller, p.2)

According to Keller (2007) brands matter for consumers and manufacturers. For consumers brands can be helpful to identify products, as a risk reducer, symbolic device or as a signal of quality.

Brand Alliance

When brands are going to work together it is called a brand alliance. A brand alliance can be a good strategy for companies that have plans to enter new markets, because the company can form an ally with another company that is already established in this market. According to Keller (2003) a brand alliance with another brand can offer cost savings and increase perceived quality and image for a company when the company is entering a new market. Cost savings can be realised when the company is making use of the brand equity of the already established secondary brand.

Country of Origin

Brands associations can be derived from the brands country of origin. Many countries have become famous for certain expertise, for example products from Japan are known for their high level of quality and products from Italy for their style. According to Han and Terpstra (1988) the image of a country can have a strong influence on how consumers evaluate products from that country. Papadopoulos and Heslop (1993) conclude that the country of origin can affect buying decisions because consumers project the country image they have in mind on the products from that country. Co-branding

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1.4 Research Questions and Structure

Main question:

“Do Chinese car manufacturers suffer from a negative country of origin effect, and what are the possible benefits of a co-branding strategy?”

Sub questions:

- Why do Chinese companies make foreign acquisitions?

- What is a co-branding strategy?

- How does a co-branding strategy work?

- In what form can a co-branding strategy be useful in the automotive industry?

- What is the country of origin effect?

The purpose of this study is to find an answer to these questions. Structure of thesis

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CHAPTER 2: THEORETICAL FRAMEWORK

2.1 Foreign Acquisitions

In the introduction in has already been described, Chinese companies takeover foreign companies. What is the intention behind these foreign acquisitions?

What are the motives for internationalisation for Chinese companies? As mentioned in the introduction China was for a very long time host country for foreign investing companies. Nowadays China is also involved in outward foreign direct investments (FDI). Mergers and acquisitions are more and more order of the day (Salidjanova, 2011). What are the main reasons for Chinese companies to invest abroad?

Internationalisation

Child and Rodriques (2005) provide in their paper three routes towards internationalisation for Chinese companies, namely: the partnership route, the acquisition route and the organic expansion route.

The first route for Chinese companies is the partnership route. Many Chinese companies began their internationalisation with the partnership route. These partnerships meant mainly that the Chinese companies were producing for the large Western companies. This form of internationalisation is also called the original equipment manufacturers route (OEM route). The second route is an interesting one, the acquisition route. Chinese companies have undertaken foreign acquisitions to provide themselves with high-equity brands, new technologies and better R&D. The third route, the organic growth route, is slower than the acquisition route because this strategy is more relying on internal strength and resources (Child and Rodriques, 2005).

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- 14 - avoiding trade barriers. Chinese companies acquire Western companies to remain steady production and to avoid quotas on Chinese imports (Salidjanova, 2011).

Recent Chinese foreign direct investments focus on technology and immobile strategic assets (Buckley et al, 2007). Immobile assets are brands and local distribution networks. These assets take a long time to develop and are therefore attractive to acquire if possible.

The lack of Chinese well-known brand names can also be a motive for Chinese companies to acquire foreign companies. Schüller and Turner (2005) give three main reasons for Chinese companies to invest abroad:

 Access to overseas markets, such as Africa, the US and the European market.

 Foreign technology and brand names, because Chinese companies have a lack of both.

 Local distribution networks, because distribution networks are difficult to build in a new and unknown market.

What should Chinese companies which lack one of the previous mentioned assets do to fulfil their strategy? When Chinese companies set goals which they cannot achieve with their own assets, foreign acquisitions can be the solution. In the next section we will provide the theory of strategic intent for Chinese companies.

Strategic Intent

Strategic intent was first mentioned in the research done by Hamel and Prahalad (1989). In their research they describe the rise of Japanese companies. After the second World War Japanese companies set up strategic objectives that in Western countries were considered to be not realistic. Strategic intent can be seen as ambitious long-term strategic objectives. For example, large companies may have the strategic intent to be global leader within 10 to 20 years from now. Japanese companies

According to Hamel and Prahalad (1989) strategic intent has three components. First, a sense of direction, a good view of the future. Where does the company wants to stand within 10 or 20 years from now? Second a sense of discovery, for employees to create a culture to be competitive. Give employees the possibility to make new discoveries. The third component is a sense of destiny, employees need this emotional aspect, their goal, to know where they are doing it for. These three components are necessary to reach the goals of the company.

Strategic intent is also considered by Hamel and Prahalad (1989) as a management process in order to keep the focus on winning and being the best.

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- 15 - be set up. Secondly, communicate challenges to all the employees. This challenge can be for example: built a car that achieves a five star Euro NCAP score. The third step is to empower the strategic intent. This is a task for the top management in an organisation. Top management must need to involve all the employees and also encourage them to come up with new ideas.

For strategic intent it is very important to set up goals on the future potential of a market, company or industry. Because these goals of the company need to be very ambitious, therefor it is not helpful to base them on present characteristics. The goals of the company and the core capabilities need to be “optimally misaligned”. This misalignment is not necessarily wrong for the company but it is only giving useful insights in where the company needs to improve (Hamilton et al., 1998).

In case of Chinese companies this means that Chinese companies can use their current misalignment to reach for their higher goals. In other words, Chinese companies strategically use cross-border merger and acquisitions to achieve specific goals, such as acquiring strategic capabilities to offset their competitive weaknesses.

Inspired by the finding of Hamal and Prahalad (1989) Rui and Yip (2008) build a strategic intent perspective framework. This framework is showing how companies can use mergers and acquisitions to compensate for competitive disadvantages and to increase competitive advantages. The role of the top managers is also very important. Top management have to analyse internal and external conditions, if they are entrepreneurial enough and have the management capabilities to realise the strategic intent of the company.

According to Rui and Yip (2008) Chinese acquiring companies can be roughly divided into the following four categories in terms of ownership:

1. Large state-owned companies that are seeking for natural resources, like mining and oil companies. The most important task of these companies is to serve the nations demand for natural resources. An example is Minmetal, the largest mining company in China.

2. Large state-owned companies, active in other markets than natural resources. An example is Nanjing Automobile which acquired MG Rover.

3. Large or small public companies. These companies need to acquire foreign companies to serve the corporate strategy and shareholder interests because the domestic market was not profitable enough, such as Lenovo.

4. Large or small private companies. An example is Huawei, a company with the strategy and ambition to grow in foreign markets.

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1. Chinese companies use foreign acquisitions to compensate for their competitive disadvantages.

Competitive disadvantages can be all lack of product technology, a globally recognized brand or international managerial experience. These disadvantages can be the reason to start searching for strategic resources to compensate these shortcomings.

2. Chinese companies also use foreign acquisitions to leverage their competitive advantages.

Chinese companies still have a tremendous advantage in costs for manufacturing, labour and overhead.

3. Chinese companies also use foreign acquisitions to overcome institutional constraints and augment institutional advantages.

Chinese government also wanted that acquisitions succeed in the context of the desired internationalization of China. This can be helpful in situations of negotiation.

4. Chinese companies’ foreign acquisitions were related to entrepreneurial and management skills.

The skills within the Chinese companies enable them to analyse both internal and external conditions and to make decisions to do foreign acquisitions.

The strategic intent perspective can be a helpful tool to understand Chinese acquisitions of foreign companies.

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2.2 Co-branding

As mentioned in the introduction to the literature, co-branding is a form of brand alliance. The literature is not conclusive when it comes to a definition of co-branding, but various characteristics can be appointed. Helmig et al. (2008) provide the following definition based on these characteristics: A co-branding strategy is a long-term alliance strategy between two independently operating brands. In this alliance strategy the two brands simultaneously give their name, visible for the consumer, to a new product.

This definition is based on the following characteristics from previous studies:

1. Brands which are involved in the co-branding strategy should be operating independent before, during, and after the creation of the co-branded product (Ohlwein and Schiele, 1994).

2. The companies that own the brands and are involved in the alliance (co-branding) should implement and consider this in advance (Blackett and Russell, 1999).

3. A co-branding strategy produces one product containing two brands. These two brands must be visible for consumers. (Rao, 1997).

4. The co-branded product must be recognisable as a combination of the two brands that are involved (Levin et al, 1996).

Co-branding strategy

The philosophy behind branding is based on brand alliance literature. The idea behind co-branding is that brands have all kinds of attributes. These attributes raise all kinds of consumer perceptions towards the brand. When two companies decide to form a brand alliance, they expect that these two brands complement each other or transfer positive attributes to the co-branded product. There is many empirical research done to study these effects. In this section a brief overview will be given.

Rao and Rueckert (1994) present in their article a decision template to analyse the benefits and costs of a brand alliance. They conclude that brand alliances may lead to increased sales because of new market entrance, access to new technology and image improvement.

According to the signalling theory in the research of Rao (1997 and Rao et al. (1999) a brand alliance can help to transfer associations from one brand to another. In this research consumer evaluations of co-branded products are being investigated. They conclude that when two brands form a brand alliance they are being perceived as high-quality products by consumers.

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- 18 - brand when they are involved in a co-branding strategy. A co-branded product as a result of an alliance between a low-quality brand and a high-quality brand will obtain increased product perception.

Levin et al. (1996) find in their research that adding a well-known brand to an unknown brand it can improve consumer evaluations of the unknown brand. By adding a well-known brand to a unknown brand it directly affects consumer perceptions of the alliance product. This direct effect on perceived quality is also supported in the study of Fang and Mishra (2002). They based their study also on the signalling theory and examined how the quality of established products affect the perceived quality of an unknown brand in a brand alliance. In their research they look at the quality level of the partner brand and the heterogeneity of the product category (same vs. different category). Washburn et al. (2000) conclude that a co-branding strategy can be a win-win situation for both brands. When a high-equity brand is forming an alliance with a low-high-equity brand the perceptions of the high-high-equity brand will not be weakened. They also conclude that high-equity brands can transfer their positive associations to their partner brand. These conclusions result in the first hypothesis.

H1: Low-equity brands will benefit from a co-branding strategy with high-equity brands in terms of product perceptions.

Desai and Keller (2002) investigated the differences between self-branded ingredients and co-branded ingredients. They conducted an experiment were participants evaluated two types of ingredient branding for detergents. Conclusions of their research were that co-branded ingredients gave a more favourable evaluation of the product than self-branded ingredients.

Vaidyanathan and Aggarwal (2000) show that a co-branding strategy between an unknown private brand and a well-known national brand can increase perceptions of the co-branded product. In their research they tested consumer evaluations of two grocery products, namely breakfast cereals and raisins. In their research it was also shown that quality perceptions of the national brand were not negatively influenced when the brand name was associated with the private brand.

Park et al. (1996) find that consumers’ positive attitude towards a brand leads to positive direct effects. In their research they looked at two brands working together (constituent brands) to form a co-branded product. Park et al. (1996) examined in their study collaboration between the chocolatier Godiva and Slim -Fast products. Their research showed that consumers of the product "Slim -Fast cake mix by Godiva" appreciated both the good qualities of Godiva ( full flavour) and Slim -Fast ( low calorie). This shows that two brands can complement each other. In other words, the new product can benefit from the strengths of both brands.

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- 19 - and brand fit, and conclude that product fit and brand fit significantly affect attitudes towards the co-branded product.

Washburn (1999) and Washburn et al. (2000) find that low-equity brands may benefit from a co-branding strategy with a high-equity brand. As mentioned before, this can be important for low-equity brands that suffer negative consumer perceptions. Another important conclusion is that high-equity brands will not suffer from an alliance with a low-high-equity brand. This theory was tested with fast moving consumer goods such as potato chips and barbeque sauce. Another conclusion from this research is that when a co-branding strategy is not working it will not damage both brands. In other words, a low-equity brand will benefit if the strategy is successful and the high-equity brand will not be damaged when it fails. This will lead to the second hypothesis.

H2: A co-branding strategy between a high-equity brand and a low-equity brand will not damage the brand-image of the high-equity brand.

Janiszewski and van Osselaer (2000) state that consumers use brand names and product features to predict the performance of a product. Brand names can form cues and be a predictive value for consumers to evaluate products. They base their theory on the research of Erdem and Swait (1998) and so called learning processes. Co-branded products can benefit from learning processes. Osselaer and Janiszewski (2001) call this learning process human associative memory. A co-branded product consists of two brand names and their theory is that when consumers see two brand names they associate this co-branded product with something they learned before.

Erdem and Swait (1998) also conclude that brands can be seen as an information source for consumers. If consumers are not certain about products quality or product specifications they use brands as information cues.

Co-branding can be a an interesting option for companies that suffer problems with their quality image. When consumers are not willing to buy products because they are afraid of quality issues, the help of a another brand can be a useful tool. The secondary partner brand can successfully signal quality associations to primary brand (Rao et al., 1994) In addition, a combination of two brands provides better assurance of product quality and will lead to better consumer perceptions of the co-branded product (Rao et al, 1999). As Park et al. (1996) and Simonin and Ruth (1998) demonstrate, combining two well-known brands enhances the anticipated value of the co-branded product, because well-known ingredient brands provide positive direct effects. This will lead to the third hypothesis.

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2.3 Country of Origin

Perceived origin associations, also known as country-of-origin (COO) associations are associations evoked by products from a certain country. Country image (similar to brand image) is a set of country-of-origin associations that consumers have about a country.

The first country of origin study was done by Schooler (1965). He was the first to conclude that country of origin could have an effect on the consumers opinion about the product. General country of origin associations have a significant effect on consumer attitudes towards brands from a given country (Bilkey and Nes, 1982). Most country of origin research is focussing on high involvement product groups like cars and consumer electronics (Ahmed et al., 2002). This is a big difference compared with the literature about co-branding strategies where fast moving consumer goods are mainly subject of research.

Consumer perception and country image are closely related (Papadopoulos and Heslop, 1993). Success or failure of products from a given country will largely depend on the associations that are being evoked. Consumers tend to develop their quality associations about a product from the country’s national image where it is produced. The relationship between consumer attitudes and purchasing behaviour is often subject in recent international marketing research (Jaffe and Nebenzahl, 2001; Chinen and Yang., 2011).

According to d’Astous et al. (2008) the country of origin of a product is a cue that has become more and more important because of the ongoing globalization. As mentioned before, China is often called the factory of the world. Country of origin acts as a cognitive cue from which consumers can infer beliefs about a product based upon beliefs about the country where the product is produced (Verlegh and Steenkamp, 1999). Loo and Davis (2006) even notice that product groups sometimes benefit from their country of origin image and being marked with labels like “Norwegian Smoked Salmon” and “Scottish Whisky”.

Han (1989; 1990) suggests that brands from less developed countries have to put effort in overcoming the tendency to exclude their products in advance. Brands from less developed countries should communicate to consumers why their products are worth considering.

Brands from countries with a favourable country image typically are more readily accepted than brands from countries with less favourable images (Yasin et al., 2007). China suffers price depression on its products because China has a reputation of being a low cost, less developed producing country Loo and Davis, 2006). Therefor the fourth hypothesis is formulated.

H4: Car brands from highly developed countries are perceived better than car brands from less developed countries due to a negative country of origin effect.

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- 21 - therefore become extremely important to brands that have yet to be established in a given market. When brands suffer from a negative image they certainly need to improve this image. Country of origin can have different effects. Country of origin can influence purchase decisions, product perceptions and evaluations of products (Lin, 2006).

Pappu et al. (2007) demonstrated in their study that consumers hold different associations across different product categories, and that their attitudes towards products from a given country also vary by product category. These effects are limited when the manufacturing process is simple (for example shoes) than when it is complex (for example cars) (Ahmed et al., 2002). The implications of a favourable country image therefore become extremely important to brands that have yet to be established in a given market as is the case with developing country car brands.

According to Hong and Wyer (1989) country of origin can act as a signal. Consumers have certain perceptions of the general product quality of a country. Consumers will use these perceptions and generalize these perceptions to other products from that country.

Han (1990) examined that country image is more likely to have a direct effect on consumers purchase intentions. According to this study consumers may use their country of origin associations to form a judgement about new products from that country, this is called the “Halo effect”. Another conclusion from this research is that country image have a greater impact on consumers attitudes towards products from a developed country than from an less developed country. If a consumer is unfamiliar with products from a certain country this will indirect influence purchasing decisions of consumers (Wang, 2008).

H5: A co-branding strategy will lead to increased behavioural intention towards the product.

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2.4 Conceptual Model

Figure 2 is showing the conceptual model which has been constructed for this research and that will be implemented in chapter 3.

Figure 2. Conceptual Model

The abbreviations in figure 2 are the hypotheses that are formulated in paragraphs 2.2 and 2.3:

H3: A co-branding strategy between a high-equity brand and a low-equity brand will lead to increased brand image of the low-equity brand.

H4: Car brands from highly developed countries are perceived better than car brands from less developed countries due to a negative country of origin effect.

H5: A co-branding strategy will lead to increased behavioural intention towards the product.

Co-branding strategy

Co-branded product

Brand image low-equity brand (H3) Brand image high-equity brand (H2)

Product perceptions (H1)

Country image (H4) Country of origin effect

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CHAPTER 3: RESEARCH DESIGN

3.1 Data collection

The data required for our statistical analyses were collected by means of an internet survey. Of course there are several other options. The main options that were considered are:

- Depth-interviews. - Focus groups.

The main reasons for choosing an internet survey are: - Speed of distribution.

- Efficiency: needed time per interview, digital data are immediately ready for analysis. - Costs (for example travel expense).

- High level of participation.

- Quantitative (statistical) analysis should be possible, to test the hypotheses.

An internet link directing to the online questionnaire was spread using email and social media. The program used to generate the survey and to collect all data is called “Thesistools.com”. This is a frequently used and helpful tool to collect data.

The population studied consists of potential Dutch car buyers: Dutch nationals of 18 years or older, holding a driving license. These people all were considered potential car buyers, as they are able to drive a car.

To get enough respondents personal relationships were used, including friends from friends, family of friends etc. (snowball effect). The main reasons for this approach were:

- To limit the costs.

- To get as much cooperation of the respondents as possible. - To limit the needed time to get enough respondents.

3.2 Research method

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- 24 - respondents will be distributed randomly with the survey tool “Thesistools”. It is important to randomly distribute the participants to get an equal distribution per group and an equal distribution of the characteristics of the respondents. The differences between the answers of each group will be investigated.

3.3 Design of survey

The sequence of the survey is as follows:

1. Explanation of the scope and goal of the survey.

2. Questions about the image of highly developed countries and less developed countries. 3. Information about the car the respondents are going to see.

Now the respondents are divided randomly into 3 groups.

4. Respondents are exposed to manipulated advertisement. The advertisement is different per group.

5. Questions about brand image, product perception and behavioural intentions.

6. Final questions about demographic characteristics of the respondents. To keep the attention focused these questions are at the end.

Each group gets exactly the same set of questions 5 and 6, to make good comparison between the groups possible.

It is very important that all respondents start with the same amount of information. To ensure respondents have the same starting point they were offered the same information before they will see the manipulated stimuli (the advertisement).

Given information:

When you click to continue the survey you will see an advertisement from the Chinese car manufacturer Geely. Geely is a Chinese car manufacturer with plans to enter the Dutch car market. Geely is planning to create a dealer network of 100 dealers, this can be compared with Kia. The model Geely is going to sell is the Geely EC7. The Geely EC7 is a car with the same size as popular models like the Volkswagen Golf, Ford Focus and Renault Megane. Prices of the Geely EC7 start at approximately 14.000 euro. Compared to the best-selling car in this segment (Volkswagen Golf) it is 5.000 euro cheaper with a similar level of equipment.

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- 25 - evaluation of cars were used. Attributes have been adjusted if necessary and were pre-tested by a small group before setting up the questionnaire. Multi-item indicators are also successfully used in the research of Dodds et al. (1991).

These attributes are ordered to the hypotheses as follows:

Number Hypothesis Aspect Item

1

Low-equity brands will benefit from a co-branding strategy with high-equity brands in terms of product perceptions.

Product perceptions

Reliability,

workmanship, safety, quality

2 A co-branding strategy between a high-equity brand and a low-high-equity brand will not damage the brand-image of the high-equity brand

Brand-image Safety, reliability, perfection, quality 3

A co-branding strategy between a high-equity brand and a low-high-equity brand will lead to increased brand image of the low-equity brand

4

Car brands from highly developed countries are perceived better than car brands from less developed countries due to a negative country of origin effect

Country image Reliability, workmanship, infrequent repairs, quality, safety 5

A co-branding strategy will lead to increased behavioural intention towards the product

Behavioural intention

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- 26 -

General requirements

Other requirements for the survey are: 1. Unambiguous questions.

2. Fixed possibilities for answers (no open questions). In this way the processing of information is easier, and the possibilities for statistical analysis are much better.

3. Clear questions (clear for the respondent, not too long sentences; no inventory of facts but perceptions).

4. No complex formulations, and limited repetition of parts of questions.

5. No questions that stimulate a respondent in a certain direction. The questions need to be non-normative, free of value judgments.

6. Clear distinctions in the answer options.

7. Realistic that the respondent can finish the survey within the estimated and an acceptable time, with enough thoroughness (not in a hurry)

8. Enough options to make subtle distinctions clear (for example distinction between “totally agree”, “agree” and “slightly agree”).

9. The same starting information for every respondent.

To check if the questionnaire fulfils these requirements, a small pre-test was fulfilled with 5 respondents. After filling in the questionnaire, they were interviewed about their experiences. The results of these interviews were:

- Some questions were guiding. - Some questions were too long.

- More organized when new questions started on new page.

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- 27 -

3.4 Manipulated advertisements and reasoning

After the introduction and the first two general questions concerning country image respondents were asked to take a look at an advertisement. Before respondents were exposed to this advertisement they were given a brief introduction in the car they were about to see.

As mentioned before, respondents were randomly divided into three groups:

1. One group gets only information about the Chinese car. From now on defined in results as: “no co-branding ad”

2. One group sees that the car is a coproduction of a Chinese manufactures and Volvo. From now on defined in results as: “co-branding ad 1”

3. One group also sees that the car is a coproduction of a Chinese manufactures and Volvo, but with another form of the advertisement. From now on defined in results as: “co-branding ad

2”

Therefore three groups required three different advertisements. To test the hypotheses, the advertisements were manipulated.

All three advertisements show the same image of the brand new Geely EC7. This is the actual car Geely wants to export to Europe. All three advertisements have the same header, namely: The brand

new GEELY EC7, the same car/model, colour, font type and background. The only thing in which the

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- 28 - Advertisement 1

Figure 3. Manipulated advertisement without a co-branding strategy (No co-branding ad) Advertisement 2

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- 29 - Advertisement 3

Figure 5. Second manipulated advertisement with a clear co-branding strategy (Co-branding ad 2)

Reasoning for the brands Geely and Volvo.

According to the theory of Rui and Yip (2008), there are four categories for Chinese companies. In this line of thought Geely belongs to the fourth category according to their mission and vision on their corporate website (Geely, 2013). Their mission and vision are as follows:

Mission:

Make good cars that are the safest, most environment-friendly and most efficient and let Geely cars go around the whole world.

Vision:

Let Geely be a widely known brand around the world.

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- 30 -

CHAPTER 4: RESULTS

In this chapter, the results from the analysis will be presented, accompanied by the interpretations of these results. The results will give insights in our main hypothesized relationships.

4.1 Sample

Group 1 No co-branding Group 2 Co-branding ad 1 Group 3 Co-branding ad 2 Significance Count (%) Count (%) Count (%)

Gender Male 29 (58) 29 (58) 27 (54) p = 0,897a Female 21 (42) 21 (42) 23 (46) Age 18-25 year 9 (18) 14 (28) 13 (26) p = 0,394b 26-35 year 11 (22) 13 (26) 11 (22) 36-45 year 10 (20) 5 (10) 6 (12) 46-55 year 10 (20) 13 (26) 8 (16) >55 year 10 (20) 5 (10) 12 (24) Level of education primary school 0 (0) 0 (0) 0 (0) p =0,191b VMBO/MAVO 0 (0) 0 (0) 2 (4) HAVO 1 (2) 0 (0) 0 (0) VWO 1 (2) 1 (2) 3 (6) MBO 3 (6) 4 (8) 2 (4) HBO 21 (42) 11 (22) 15 (30) WO 24 (48) 34 (68) 28 (56) Car ownership Yes 40 (80) 30 (60) 34 (68) p = 0,092a No 10 (20) 20 (40) 16 (32) Income

(gross per month)

< €2.750 14 (28) 23 (46) 17 (34)

p =0,112b € 2.750 - € 5.500 24 (48) 19 (38) 15 (30)

> € 5.500 5 (10) 3 (6) 9 (18) Did not answer 7 (14) 5 (10) 9 (18)

a

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- 31 - Conclusion

There are no significant differences between the characteristics of the groups. So the differences in answers of the 3 groups are not caused by differences between the characteristics of the groups.

4.2 Statistical Analysis

All data were analysed with use of the Statistical Package for the Social Sciences (SPSS) for Windows, version 20.0. A p-value of ≤0,05 was used for statistical significance, significant differences presented as bold in the results. To compare the distributions, different statistical tests were used. To compare nominal variables the Pearsons Chi Square test was used. To compare interval variables from two independent samples the independent sample t-test was used. For two dependent samples the paired t-test was used.

The responses on the distributed survey were successful, after some time there were 213 questionnaires filled in. Unfortunately not all questionnaires were filled in completely. The incomplete questionnaires were not useful in this study, because we need all the information and therefore we removed incomplete questionnaires. The following actions were taken to get three equal groups, see figure 6.

Figure 6. Distribution into three equal groups.

Respondents (n=213) Dividing randomly Advertisement 1 (n=72) Advertisement 3 (n=62) Advertisement 2 (n=79) Questions part 2 Questions part 1

Exclusion of not completely filled in questionnaires

Advertisement 1 (n=56) Advertisement 3 (n=51) Advertisement 2 (n=69)

Random sample Random sample Random sample

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- 32 - For the purpose of the analysis four new variables were created. These variables are the average value of the items used in the questionnaire, see table 2. These variables were all checked with Cronbach Alpha on internal consistency. As shown in table 2, all variables score well above the general accepted score of 0.7. This means that the consistency is very high.

New variable Mean score of: Cronbach’s Alpha EC7 product

perception

EC7 model reliability EC7 model workmanship EC7 model safety EC7 model quality

,956

Brand image Safety Reliability Perfection Quality

,951 for Geely ,874 for Volvo

Country Image Reliability Workmanship Infrequent repairs Quality Safety ,932 for China ,894 for Sweden

Behavioral intention Intention to acquire information Intention to visit dealer

Intention to make a test-drive Buying sensible decision

,916

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- 33 -

4.3 Hypotheses testing

In this paragraph the results of the testing of the hypotheses will be presented. The results of the tests will be discussed per hypothesis.

Results

The distribution of the 4 variables that reflect the product perception (reliability, workmanship, safety and quality) differ significantly between groups 1 and 2. A significant difference is also found between groups 1 and 3, regarding the variables workmanship, safety and quality. The distribution of the variable reliability is showing a tendency to a significant difference between groups 1 and 3. The groups 2 and 3 do not show significant differences on the 4 variables.

Mean Distribution Group 1 No co-branding ad Group 2 Co-branding ad 1 Group 3 Co-branding ad 2 Group 1 vs 2 (asymp.sig.) Group 1 vs 3 (asymp.sig.) Group 2 vs 3 (asymp.sig.)

EC7 model reliability 3,80 4,68 4,24 ,000 a ,082 a ,065 a EC7 model workmanship 3,80 4,46 4,40 ,011 a ,035 a ,819 a EC7 model safety 3,64 4,46 4,36 ,000 a ,007 a ,268 a EC7 model quality 3,76 4,54 4,26 ,001 a ,055 a ,254 a EC7 product perception 3,75 4,58 4,32 ,000 a ,027 a ,254 a

a

= Independent sample T-test Table 3. Product perception.

Conclusion

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- 34 -

Results

The distribution of the 4 variables that reflect the brand image of Volvo (safety, reliability, perfection and quality) do not differ significantly between groups 1 and 2 (p=,560) and between 1 and 3(p=,825). Mean Distribution Group 1 No co-branding ad Group 2 Co-branding ad 1 Group 3 Co-branding ad 2 Group 1 vs. 2 (asymp.sig.) Group 1 vs. 3 (asymp.sig.) Group 2 vs. 3 (asymp.sig.) Volvo safety 6,26 6,26 6,20 1,000 a ,701 a ,726 a Volvo reliability 5,98 6,00 6,04 ,885 a ,665 a ,784 a Volvo perfection 5,78 5,44 5,78 ,061 a 1,000 a ,081a Volvo quality 6,02 6,02 6,14 1,000 a ,449 a ,476 a Brand Image Volvo 6,01 5,93 6,04 ,560 a ,825 a ,460 a a

= Independent Sample T-test Table 4. Brand image of Volvo. Conclusion

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- 35 -

H3: A co-branding strategy between a high-equity brand and a low-equity brand will lead to increased brand image of the low-equity brand

Results

The distribution of the 4 variables that reflect the brand image of Geely (safety, reliability, perfection and quality) differ significantly between groups 1 and 2 (p=,000). A significant difference is also found between groups 1 and 3 (p=,002) on these variables.

The groups 2 and 3 do not show significant differences on the 4 variables.

Mean Distribution Group 1 No co-branding ad Group 2 Co-branding ad 1 Group 3 Co-branding ad 2 Group 1 vs. 2 (asymp.sig.) Group 1 vs. 3 (asymp.sig.) Group 2 vs. 3 (asymp.sig.) Geely safety 3,42 4,38 4,10 ,000 a ,007 a ,235 a Geely reliability 3,44 4,44 4,14 ,000 a ,006 a ,244 a Geely perfection 3,28 4,10 4,06 ,001 a ,003 a ,872 a Geely quality 3,24 4,34 4,06 ,000 a ,001 a ,241 a Brand Image Geely 3,35 4,32 4,09 ,000 a ,002 a ,323 a

a

= Independent Sample T-test Table 5. Brand image of Geely. Conclusion

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- 36 -

H4: Car brands from highly developed countries are perceived better than car brands from undeveloped countries.

Results

The questions about the country image of China and Sweden were asked before respondents saw one of the manipulated advertisement. Therefore in table 6 the results of all 150 respondents are shown. Because the distribution is on an interval scale, the paired sample t-test is chosen. The asymp.sig. (2-tailed) for both variables is < 0,05, so there is a significant difference. The five variables (reliability, workmanship, infrequent repairs, quality and safety) are combined to one variable country image. The results are presented very clear in table 6. Car manufacturers from Sweden are perceived significantly better than Chinese manufacturers on every single scale. This results in a significant better country image for Sweden.

Sweden > China Sweden < China Sweden = China Asymp. Sig. (2-tailed)

Reliability 136 3 11 ,000a Workmanship 127 7 16 ,000a Infrequent repairs 129 7 14 ,000a Quality 131 7 12 ,000a Safety 139 2 9 ,000a Country Image 141 3 6 ,000a a

= Paired sample T-test

Table 6. Country image of China versus Sweden

Conclusion

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- 37 -

H5: Behavioural intentions towards co-branded products will be better.

Results

The distribution of the 4 variables that reflect the behavioural intentions towards Geely (acquire information, intention to visit dealer, test-drive, sensible decision) differ significantly between groups 1 and 3.

Between groups 1 and 2 only two variables are significantly different: visit dealer and sensible decision. The 2 other aspects (acquire information and test-drive) do not differ significantly.

The groups 2 and 3 do not show significant differences on the 4 variables. The distribution of the variable acquire information is showing a tendency to a significant difference between groups 2 and 3. Mean Distribution Group 1 No co-branding ad Group 2 Co-branding ad 1 Group 3 Co-branding ad 2 Group 1 vs. 2 (asymp.sig.) Group 1 vs. 3 (asymp.sig.) Group 2 vs. 3 (asymp.sig.) Intention to acquire information 4,14 4,64 5,00 ,138 a ,022 a ,286 a Intention to visit dealer 3,84 4,58 4,68 ,037 a ,024 a ,772 a Intention to make a test-drive 3,90 4,48 4,74 ,103 a ,025 a ,455 a Buying sensible decision 3,30 3,88 3,80 ,025 a ,076 a ,747 a Behavioural intention 3,80 4,40 4,56 ,041 a ,019 a ,567 a a

= Independent Sample T-test

Table 7. Behavioural intentions towards Geely

Conclusion

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- 38 -

4.4 Additional research

Also a multivariate regression analyses has been performed to give extra insights on the role of income and gender. Independent variables for these analyses were income, gender and type of advertisement.

The analyses were performed for the following dependent variables: - Product perceptions of the Geely EC7 (model shown in ad) - Brand image

- Country image - Behavioral intention

The independent variables (ordinal scale) are converted into dichotomous variables (dummy variables).

For every reference category a stepwise multivariate regression analysis is performed in which the dummy variables from the same source variables were being blocked.

Due to the enormous amount of data output of these analyses is chosen to provide the main finding in clear table. The main findings of these analyses are being presented in the following table (table 8).

Gender Income Advertisements

EC7 product perception

No causal relation Causal relation, perception is decreasing when income is increasing Causal relation, product is better perceived by groups 2 and 3(advertisements with co-branding). These groups saw the advertisement with co-branding. Brand image Volvo No causal relation No causal relation No causal relation Brand image Geely Causal relation,

brand image of Geely is being perceived better by women than by men.

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- 39 - Country Image Sweden Causal relation, country image of Sweden is being perceived better by women than by men.

Causal relation, perceived country image is decreasing when income is increasing.

Not tested, asked before

advertisement was being displayed.

Country Image China No causal relation No causal relation Not tested, asked before

advertisement was being displayed.

Behavioral intention No causal relation No causal relation Causal relation, behavioral intention towards product is better in groups 2 and 3(advertisements with co-branding). These groups saw the advertisement with co-branding. Table 8. Multivariate regression analysis

Conclusion

The results shown in table 8 give useful information for Chinese car manufacturers who are planning to enter the European market.

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- 40 -

4.5 Overview of results

Hypothesis Accepted Rejected

H1: Low-equity brands will benefit from a co-branding strategy with

high-equity brands in terms of product perceptions. X H2: A co-branding strategy between a high-equity brand and a low-equity

brand will not damage the brand-image of the high-equity brand. X H3: A co-branding strategy between a high-equity brand and a low-equity

brand will lead to increased brand image of the low-equity brand. X H4: Car brands from highly developed countries are perceived better than car brands from less developed countries due to a negative country of origin effect.

X H5: A co-branding strategy will lead to increased behavioural intention

towards the product. X

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- 41 -

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS

The last chapter of this study will obtain further insights in the results as presented in chapter 4 combined with the findings of the literature study as presented in chapter 2. In the conclusions, the recommendations for car manufacturing companies from China will be presented. After the conclusions of this research, the discussion of this study and recommendations for further research will be presented.

5.1 Conclusions

In the case of Geely as a low-equity brand and Volvo as a high-equity brand the conclusions are as follows:

1. Low-equity brands will benefit from a co-branding strategy with high-equity brands with improved product perceptions.

2. A co-branding strategy between a high-equity brand and a low-equity brand will not damage the brand-image of the high-equity brand.

3. A co-branding strategy between a high-equity brand and a low-equity brand will lead to increased brand image of the low-equity brand.

4. Car brands from highly developed countries are perceived better than car brands from less developed countries.

5. Behavioural intentions towards co-branded product will be better.

The main question of this study is as follows:

“Do Chinese car manufacturers suffer from a negative country of origin effect, and what are the possible benefits of a co-branding strategy?”

Based on the conclusions mentioned above the following answer can be given:

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- 42 - Furthermore, also gender and income seem to affect the results. We can conclude that the higher the income of respondents the lower the perceptions of the product, brand image of Geely and country image of Sweden.

Gender affects the variables brand image of Geely and country image of Sweden. The brand image of Geely is being perceived better by women than men. Country image of Sweden is also perceived better by women than men.

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- 43 -

5.2 Discussion

Comments on study design

A. Level of significance (entrepreneurial risk)

In this study the generally accepted levels of significance were used (p ≤0,05). It can be doubted if the high level of certainty of the conclusions is not too high for (Chinese) entrepreneurs investigating chances for new business. Therefore it can be useful to really choose the level of significance, depending on the risks that the entrepreneur wants to take. The question is if Chinese companies want 95 % certainty about the conclusions, if this means that conclusions with 80 % certainty are rejected.

B. Differences between group 2 and 3

The only difference between group 2 and 3 is the bottom of the right hand corner of the advertisement: “Powered by Volvo” versus “Geely (logo) + Volvo (logo) = Combined logo” (see figures 3, 4 and 5, paragraph 3.4). Therefore it would be expected that groups 2 and 3 answer (almost) similar. If differences are found, the cause of this can only be generated by the mentioned small difference in the advertisement.

The results show that the answers are quite similar. Only the intention to acquire information, the intention to make a test-drive and the perception of the perfection of Volvo are different between the groups. We have no probable explanation for the differences on these 3 aspects, especially because there is no difference found regarding the other aspects of behavioural intentions and the brand image of Volvo.

These small differences are an indication that further study can be useful regarding the best advertisement of a branded car.

Comments on interpretation of the results A. Perception of involvement by Volvo

In the questionnaire it is not exactly defined what the involvement by Volvo in this case means. For example, are all parts of this new car coming from Volvo or just the seats?

Therefore it is not clear what the perception of each respondent is of the involvement. And therefore it is also not clear if there would be effect on the answers depending on the mentioned possible types of involvement. This could be an interesting subject for next studies.

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- 44 - To make this study relevant to Geely, information is needed about the group of Dutch buyers of new cars of this category in the next years (here called: Dutch buyers). But one can doubt if the characteristics of the group respondents is comparable with the Dutch buyers. For example the income of the respondents is much higher than the average Dutch buyer. And probably the education level also.

In a future study we recommend to add questions that give more insight in future buying intentions for new cars, and specially future buying intentions in the same category as the Geely EC7. In order to give much better predictions only the respondents can be included with plans for buying a new car in the near future, in the same category as Geely.

Further improvement of the worthiness of the results can be achieved by correcting the categories, by weighting on basis of comparison with the characteristics of the Dutch buyers. Of course therefore it would be needed first of all to investigate what the characteristics of the Dutch buyers are. That would enlarge the validity of the results.

C. Relevance for markets outside the Netherlands

This study gives insight in the usefulness of co-branding for the Dutch market. Therefore the conclusions cannot be copied to other countries. Assuming Geely does not want to sell their cars only in The Netherlands.

D. Relationship between behavioural intentions and buying

For the usefulness of the results it is important that there is enough relationship between behavioural intentions towards the product and the real buying in the future. Literature has proven such a relationship, but not specifically for cars.

It would be a useful subject for study in the future if such a relationship can be proven for cars. A possible research design would be a longitudinal study in which a group is monitored for several years, so that afterwards this relationship can be studied.

E. Answers are a product of the time

The respondents have a perception based on the present situation in Holland. These perceptions are probably influenced by negative publications about Landwind.

If for example the Chinese brand Qoros is introduced successfully, the perceptions can change within a short period of time. History has proven that one joke on television by a famous Dutch comedian can destroy the image of a brand (Lada cars, Buckler beer).

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- 45 - F. Costs of implementing a strategy

The Chinese are coming!

The Chinese are coming!

“Co-branding effects for Chinese car manufacturers”

Erik van Raalten

S1632183

Master Thesis:

The Chinese are coming!

“Co-branding effects for Chinese car manufacturers”

Author:

Erik van Raalten

H.J. van Heekplein 80-26

7511HN Enschede

e.j.van.raalten@student.rug.nl

+31 613964171

University of Groningen:

Faculty of Economics and Business

MSc Business Administration, Marketing Management

Management Summary

Preface

Contents

CHAPTER 1: INTRODUCTION

1.1 Introduction

1.2 Unsuccessful attempts to enter Western Market

1.3 Introduction Literature

1.4 Research Questions and Structure

CHAPTER 2: THEORETICAL FRAMEWORK

2.1 Foreign Acquisitions

2.2 Co-branding

2.3 Country of Origin

2.4 Conceptual Model

CHAPTER 3: RESEARCH DESIGN

3.1 Data collection

3.2 Research method

3.3 Design of survey

3.4 Manipulated advertisements and reasoning

CHAPTER 4: RESULTS

4.1 Sample

4.2 Statistical Analysis

4.3 Hypotheses testing

4.4 Additional research

4.5 Overview of results

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS

5.1 Conclusions

5.2 Discussion