Ways to neutralize the country-of-origin effect in the emerging market firms international branding¹

With the growing number of companies from emerging markets, which expand into foreign developed, emerging, and developing countries, competing with companies from developed economies [Gillespie and Swan, 2022], there is a growing interest in their international marketing and branding [Samiee and Chirapanda, 2019]. However, among the barriers to foreign expansion of emerging market firms are the negative images and stereotypes of these countries. They can translate into attitudes toward these companies, products, or brands [Tashman et al., 2019]. The phenomenon of the country-of-origin (COO) and its various dimensions (e.g. country-of-brand-origin – COBO) has been one of the key issues in international marketing and branding research for a few decades [Witek-Hajduk and Grudecka, 2021], because of the so-called COO effect (COE), that is, its impact on consumer's evaluation of products and brands [Xu et al., 2020]. The results of COE studies are not unequivocal [Sharma, 2019]. However, many confirm that the COO has a significant, direct impact on product evaluation, quality perception, brand equity, and consumer purchasing intentions [e.g. Tjiptono et al., 2016]. Consumers are willing to pay more for products labeled as brands associated with their preferred COO [Zhang et al., 2021], although they often misidentify the COBO [Cakici and Shukla, 2017]. Nevertheless, consumers still better perceive products and brands from developed countries and attribute a higher quality to them [Tjandra et al., 2015]. However, the perception of emerging markets, companies, or brands originating from these countries has improved as exemplified by the Chinese Huawei brand [Troisi et al., 2019]. Moreover, consumers are increasingly aware that many products are designed, manufactured or/and assembled in countries other than the COBO (so-called hybrid products) [Tjiptono et al., 2016].

Brands are playing an increasingly important role in the foreign expansion of emerging market firms [Chattopadhyay et al., 2012]. However, they still face the challenge of confronting stereotypes negatively affecting consumers’ perception of their brands [Motsi and Park, 2020], which may influence the decision of if and how companies apply COO appeals in their international branding and how to limit (neutralize) or eliminate the negative COE [Herz, 2015]. COO marketing has been the topic of a few studies [Magusson et al., 2008], and primarily in the context of referring to a positive COO image by companies from developed countries [Aichner, 2014]. Yet, little research take the perspective of firms from emerging or developing markets with a weaker image [Magunsson et al., 2008], also those European, including Poland. There is also a lack of studies aimed at identification of the approaches to the neutralization of the COE in the emerging market firms international branding.

The authors of publications on international branding [e.g. Kuvykaite and Mascinskiene, 2010] indicate: (1) concept (essence) of the brand, for example, its name/identity/positioning, also due to the COE, and (2) brand marketing communication as the key elements of international branding. Given all of these, the aim of this paper is to identify the approaches to neutralization of the COE in international branding of companies from both European and Asian emerging markets at both (1) brand concept level and (2) brand marketing communication tools level.

In the study, a qualitative approach was applied – multiple case-study of five companies from European and Asian emerging markets that offer household appliances brands, using semi-structured in-depth interviews with managers of the studied companies.

This study contributes to the development of the knowledge on international marketing, in particular on international branding, with reference to the COO, by identifying ways in which how companies from emerging markets neutralize the COE at the brand concept level and within tools used for brand marketing communication.

The structure of the article is as follows. A literature review on the COO phenomenon and its dimensions is presented first, including various approaches to applying COO in companies’/brands’ marketing and branding. This is followed by a description of the research methodology and results of the study. Finally, the paper is summarized with the conclusions, study limitations and directions for further research.

In order to follow the discussion on COE and the ways to neutralize it in the emerging markets’ firms international branding, which is the main focus of this paper, first of all the essence of COO should be covered. As Josiassen and Assaf [2010] emphasize, the COO was initially understood one-dimensionally as the country-of-manufacturing (COM). Some authors have criticized this narrow understanding, calling for its conceptualization as a multidimensional construct, indicating other dimensions. These are: (1) country-of-design (COD) [Insch and McBride, 1998], (2) country-of-assembly (COA) [Insch and McBride, 1998], (3) country-of-parts/key components (COP) [Insch and McBride, 1998], (4) country-of-corporate-ownership (COCO) [Thakor and Lavack, 2003], (5) (COBO) [Takor and Kohli, 1996; Lim and O’Cass, 2001], (6) country-of-technology/innovation origin (COTO), (7) country-of-technical-culture (COTC), (8) country-of-service-network-localization (COSNL), (9) culture-of-brand-origin (CuOBO), and (10) country-of-brand-launching (COBL) [Witek-Hajduk and Grudecka, 2019].

According to Aichner [2014], the COE (nationality bias) is a psychological effect describing different consumers’ response to a product or brand reflected in their attitudes, perceptions or/and purchasing decisions due to the country they believe the product or brand originates in [Tavoletti et al., 2022]. Thus, COE should not be exclusively associated with COBO. Implications of the COE for the international branding have been analyzed from a perspective of a means–end theory. According to it, the way consumers relate to products or brands is represented by a hierarchical model consisting of three interconnected levels: product or brand attributes, consequences of use and personal values [Dibley and Baker, 2001]. COE is reflected through cognitive (COO as a cue for product or brand perceived quality, affecting perceptions of functional attributes), affective (COO emotional connotations may led toward affinity or animosity to products or brands) and normative (normative variables affect the overall perceptions of products or brands from a specific country and consumers’ willingness to buy) mechanisms [Motsi and Park, 2020]. The COO image may be an element of customer value proposition, encouraging buying products [Bukhari et al., 2021] and can be used in marketing and branding communication. Companies differ in how they apply the COO in their marketing and/or branding, depending on the COO image (positive/negative/neutral) or associations attributed to it. In the case of a positive image, they may refer directly or indirectly to the COO by relying on the local consumers’ ethnocentrism or on positive stereotypes attributed to the country [Aichner, 2014]. In the case of a poor image – may apply neutralisation strategies, that is, concealing or suppressing the COO or “borrowing” a better image of another country [Herstein et al., 2014]. Herstein et al. [2014] point out that, depending on the country's political and human capital status, companies may apply different approaches in terms of referring to the image of places: (1) country branding strategy promoting products/brands as originating from the country with a high status (e.g. Germany, USA), (2) city branding strategy referring to the image of a city considered to be the strongest in terms of image in a given country (e.g. Russia, Turkey), (3) region branding strategy referring to the image of a region in a given country specializing in or having a tradition of manufacturing certain products (e.g. India), and (4) continent branding strategy referring to the image of a continent, for example, products from the Far East (e.g. Vietnam, South Africa). These authors also note that the company's approach to the COO application in marketing or branding depends on the COO image and brand image, and point to four options, that is, referring to: (1) COM and the COO of the global brand when both the country image and brand image are strong, (2) COM only – if the country image is strong and the brand image is weak, (3) communicating only the brand, decomposing the COO or referring to COD (“designed in”) when the country image is weak and the brand image is strong, (4) neutralizing the COO and brand when the country image and brand image are weak.

In the case of positive associations with the COO, companies may apply such COO marketing tools as [Aichner, 2014; Curevo-Cazurra et al., 2018]: (1) labels: “made in” (name of the: country/group of countries, for example, the EU/region/city) or “designed in”, (2) quality/origin labels (e.g. Olives from Spain), (3) company/brand name with the COO embedded in, (4) typical COO word/words embedded in the company/brand name, (5) brand name/slogans, etc., in the language of the COO, (6) well-known/stereotypical people from a given COO in advertising communication, (7) flags/symbols/emblems/colors associated with the COO, (8) typical landscapes/buildings/other symbols associated with the COO, and (9) reference to the values/dimensions of a given country's image, in the brand name/company/brand claim. The listed COO marketing tools can also be applied by companies from markets with a weaker image to suggest the origin of a brand/product from another country – with the desired image.

Companies from countries with a weaker image often tend to eliminate or neutralize the negative COE or try to hide, disguise or suppress the COO and its dimensions, by using brand or company names that suggest a COO with a desired positive image [Herz, 2015] to reduce the bias caused by negative COE and increase the effectiveness of their international branding. They can “neutralize” the COO effect by using a brand name suggesting e.g. “Western” origin [Chailan and Ille, 2015]. The COE neutralization is justified by the results of research on brand origin recognition accuracy (BORA) as the ability of consumers to recognize the COBO is based on associating brand name with a language suggesting the COO [Abdellah-Kilani and Zorai, 2019]. Magnusson et al. [2011] highlight the role of perceived COBO compared with the genuine one. The perceived COBO influences attitudes toward brands regardless of the degree of relevance of the genuine COO recognition. So brand managers applying COO branding (e.g. brand name, colors, symbols or slogans) may not only refer to the genuine COO, but also suggest the COBO from a foreign country. However, Lee [2019] states that the fit between brand origin and brand name leads to the better evaluation of a brand than no fit.

For the household appliances sector, the importance of companies or brands from emerging markets, including those from Central-Eastern Europe (CEE), has been growing for years. Moreover, a growing share of these firms (e.g. Chinese, South Korean, Polish, Turkish) and growing market share of their brands (e.g. Chinese Haier, Turkish Beko) [Arçelik, 2019; CDI Global, 2021] in both highly and less developed markets is observed [Market Watch, 2022].

Given the identified research gap, the authors decided to answer the following research questions: (1)

What approaches to neutralization of the COE in international branding at the brand concept level do companies from both European and Asian emerging markets apply?;

COO international branding of companies from emerging markets has not yet been sufficiently studied. So, a multiple case-study [Hancock and Algozzine, 2017, pp. 7–8] was applied which encompassed five firms. A purposeful sampling was used as recommended by Yin [2003, pp. 48–49] to ensure diversity of the examined phenomenon and disclosure of recurring patterns via literal/theoretical replications. The initial selection of future subjects of the analysis was made as a result of the authors’ preliminary analysis of the strategies applied by the companies so as to ensure this diversity, as recommended above. As further pointed also by Yin [2009, p. 255], the issue of actual “availability” is one of the key concerns when conducting research applying case study method. Thus, companies were selected based on availability (providing full data range), observation, and documents analysis. The study covered household appliance companies from the European and Asian emerging markets according to the MSCI typology [2018]

According to MSCI (2022), inter alia China, Poland, South Korea and Turkey are classified as emerging markets [https://www.msci.com/our-solutions/indexes/emerging-markets].

As these categories originally did not serve for indicating strategies for neutralizing COE, the authors decided to apply also data-driven approach. As a result, another category was identified: “brand alliances.” Finally, with reference to Kuvykaite and Mascinskiene [2010], themes were identified [Fereday and Muir-Cochrane, 2006]: “general and more permanent branding strategy: brand concept” and “situational and more temporal brand marketing communication tools.”As recommended by Flick [2018, pp. 190–200], secondary data (e.g. company websites, industry reports, and magazines) were also used.

The characteristics of the studied companies are presented in Table 1, with all the studied companies offering large and small household appliances.

The ways of neutralization of the COE in the international branding of the companies from emerging markets are presented in Table 2.

A summary of the results obtained due to the all case studies are presented in Table 3.

As shown in Tables 2 and 3, in response to the negative COE, emerging markets companies apply in their international branding various ways of neutralizing (hiding/suppressing/disguising) the genuine COO: (1)

Usage on the home market and/or on foreign markets a brand whose name suggests origin from another, more developed country, associated with the high quality of products made there, or with design (Germany, Italy, Japan, USA etc.) or a brand whose name does not suggest an origin from a specific developed country, but is “neutral” and does not evoke associations with the COBO or its gestor and the COM.

As indicated by the interviewee from Company F1, that uses corporate brand “F1A” suggesting Italian origin: “[…] “F1A” is, after all, an Italian word.” Company F1 also uses on the Eastern European markets a brand “F1B” suggesting German origin as “[…] everything that German evidently supports purchase decisions and results in associating with Germany adding a few points whether in Omnibus or purchase preferences.” The informant from Company F3, explains the usage of a “neutral” brand “F3B” name not evoking associations with the COO: “[…] in European markets, the “F3B” brand was chosen primarily because it is easy to pronounce and easy to promote.” (2)

Usage on the foreign markets of a well-known local, regional or international brand acquired by a company or obtained under a license agreement with the trade mark owner, and associated with a given COO.

The informant from Company F1 justifies the acquisition of a Danish brand “F1C” and its application in the Scandinavia: “[…] Scandinavian consumers are very conservative, used to what they have had over years.” The interviewee from Company F3 explains the acquisition/applying a brand “F3C” that has a German origin and for years has been perceived as a global brand: “[…] We are trying to relaunch this brand in some markets with a great success (…) it is a very strong brand in Germany.” Company F5 has also acquired//licensed many foreign brands, especially European, as they need to have well-known international brands with a long tradition in portfolio. As the informant from Company F5 states: “[…] Another brand that we launch is a refrigerator brand “F5A,” which 20 years ago, mainly in the South (Europe) was a strong Danish brand.” (3)

Usage of product line names typical for a given region of developed countries.

Respondent from Company F1, which, in the case of a brand “F1C” with Danish origin, uses region-specific product line names, others than in the case of the corporate brand: [...] in Denmark, other terms are used because the Danish and the Swedes needed different names.” (4)

Usage of the brand slogan/claim in English/other language suggesting COO.

For corporate brand “F1A,” Company F1 applies claim in English. As the interviewee notes: “[…] Claim adds a slightly different perspective to our brand. We are for a younger group.” The informant from the Company F1 stresses that also for a brand “F1B” suggesting a German origin used in Eastern Europe, the brand claim in German is used: “[…] and even there is a German descriptor (...) we know that whatever comes from Germany is of good quality. It comes out of Russian research.” The informant from Company F2 stresses that the logo and the brand “F2A” slogan in English emphasize the brand's global character: “[…] Our trademark symbolizes our commitment to maintaining close relationships with customers around the world.” (5)

Alliance in the form of sponsorship with a global sports brand to create a global brand image.

Company F3 – the owner of the brand “F3B” decided to sponsor one of the most recognizable global sports’ brands of a football club. The informant from Company F3 justifies it: “[…] World brand, the most recognizable one, very emotionally recognizable (...) and perceived from the perspective of women, fans in the world, but also the place itself.” As part of the brand “F3B” alliance with the football club, there are many joint campaigns, communicated as part of promotional activities aimed at creating brand image. According to the informant from Company F3: “[…] we introduced a campaign that allowed us to involve football players and the club itself in the concept of not only communicating that we are a sponsor, but also to do something for customers. (...).” (6)

Marketing alliance in the form of co-branding consisting of: (a) introduction of a collection of products labeled with a brand from the emerging market and a brand originating from the developed country associated with high quality or (b) introduction of a collection of products labeled with a brand from the emerging market and a brand of a well-known international designer, often originating from the developed country.

As the interviewee from Company F4 emphasizes, to create/strengthen the image of the leading corporate brand “F4A,” firm decided to conclude an international marketing alliance with a German car brand, for example, limited edition of refrigerator-freezers stylized on one of the cult car models of this German brand and with that brands’ logo has been introduced to the market. (7)

Usage of “made in EU” labels on the rating plates for products manufactured in an EU Member State even if the company's COO is not an EU Member State but has a factory or outsource production there.

As the informant from Company F2 – the owner of the brand “F2A” stresses: “[…] one of the reasons why the factory has been located in Poland was that you can put a label ‘made in EU’ (...).” (8)

Creating strong global brand image by increasing prices/product quality.

As noted by the interviewee from Company F2 – the owner of the brand “F2A”: “[…] the solution for these companies is to go a little higher on the price shelf, i.e. better image, but also better products.” (9)

Avoiding, if legally possible, information on the COM of products, in particular for products made in China.

Informant from Company F1 stresses that although the “made in” label is placed on the rating plates, the company does not display the COM of the products in its communication: “[…] we do not even mention it at all (…).”

Answering the research questions, the study enabled identification of approaches to neutralizing the COE in international branding of emerging markets companies. It confirms previous conclusions that companies from emerging markets use in their international branding, especially in the developed countries, primarily strategies focused on the neutralization of the negative effect of the genuine COO [Herstein et al., 2014]. This may indicate that the COO and its dimensions (e.g. COM, COA, COBO) are perceived by decision makers as a barrier to the international expansion. Referring to the studied firms, household appliances, especially large ones, are high-involvement products for which the COE is stronger compared with low-involvement ones [Barbarossa et al., 2018]. The situation is also complicated by that many household appliances are so-called “hybrid products” – designed, manufactured or assembled in another country than company's or brand's COO [e.g. Tjiptono et al., 2016].

To neutralize the negative COE in international branding of emerging markets companies at the brand concept level, firms apply brand/sub-brand names neutralizing genuine COBO, and brand-origin appeals in their brand positioning/brand slogans/claims in English or other language of the suggested COBO, which is to enhance the impact of the brand name used. To neutralize COO, the studied companies use a rather limited repertoire of tools. The research confirms the conclusions of previous studies [Kim, 2006], that many firms decide to use on the foreign markets, brands whose names suggest origin from a highly developed country, associated with high-quality/technology of products or valued for design (e.g. Italy) or brands with “neutral” names, not implying association with the COBO/COCO/COM. Among them are brands in the occidental-style created by emerging market companies [as indicated by Chailan and Ille, 2015], large group of brands with a local (e.g. UK) or regional (e.g. Nordic) range, and acquired or licensed global (especially of German or Japanese origin) brands with a long tradition in the household appliances or consumer electronics. These companies, taking advantage from restructuring of some Western enterprises, have acquired long-established firms – owners of well-known brands. In turn, due to the difficult situation of Japanese companies – owners of brands with a long tradition in the consumer electronics industry and household appliances, firms from emerging markets are increasingly licensing these brands to ensure fast and relatively cheap access to their usage in the international scale. This is justified by the BORA concept, to which many researchers refer [e.g. Abdellah-Kilani and Zorai, 2019]. The study indicates also that, at the situational or more temporal brand marketing communication tools level, companies may refer to the suggested COO in promotion, establish marketing alliances/apply “made in” labels. Only a few studied companies want to suppress the COO/COBO effect by creating the image of their brand as global, improving the quality of products offered and gradually increasing prices [Herstein et al., 2014]. Among the tools used to strengthen the reputation of brands from emerging markets as global ones are: sponsoring a global sports brand, co-branding with a strong brand of another product category (e.g. cars) originating from developed country associated with high quality (e.g. from Germany) or co-branding with a brand of a well-known international designer, and also usage of the “made in EU” label for products made in an EU Member State, even if the company or brand does not originate from there. It can be assumed that the barriers to creating brand images by companies from emerging markets are, especially compared with well-known concerns from developed countries, their limited marketing budgets, and also less international branding know-how of marketing managers managing these brands.

It can be supposed that with improvement in the images of countries from which the investigated companies originate, the COE would cease to be such a significant barrier to the development of companies and brands [Kim, 2006]. This is why it seems so important for government institutions to initiate and implement promotional campaigns on foreign markets, and aimed at changing the perception of a given emerging country not only in developed countries, but also in other emerging markets.

This study contributes to the existing literature by developing a deeper understanding of the international branding in terms of the COE applied by companies from emerging markets, including brand concept level and marketing tools level. In contrast to this study, previous ones did not pay attention to such ways of negative COE neutralization as marketing alliances and licensing. Many studies were based mainly on the conceptual approach [e.g. Herstein et al., 2014]. The paper also contributes toward the literature on the internationalization of emerging markets firms and international marketing in terms of how they associate the COO as a strategic imperative. These results can be useful for managers of emerging market companies when shaping marketing strategies that boil down to neutralizing the COE, that is, general and more permanent branding strategies (at the brand concept level) and the ones that are more situational and temporal in nature (marketing communication tools).

This exploratory study is limited to the case studies of companies from only one industry (household appliances) and originating from a few emerging markets. With regard to the recommendations for future research, it would be valuable to compare brand marketing strategies in terms of the COE applied by companies from other emerging markets representing various industries. Taking into account the results of this research, it would be also worthwhile to study the relations between the brand marketing strategies in terms of the COO effect applied by companies from emerging markets and the company and brand performance on the foreign markets.