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A Novel Decision Making Model of the Globalizing Consumer Behavior

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A Novel Decision Making Model of the Globalizing Consumer Behavior A NOVEL DECISION - MAKING MODEL OF THE GLOBALIZING CONSUMER BEHAVIOR: EVIDENCE FROM CHINESE MIDDLE - CLASS CONSUMERS WHO PURCHASE LUXURY GOODS FROM OVERSEAS MARKETS Presented by Yang Liu Southern New Hampshire University 2500 North River Road, Manchester, New Hampshire 03106, USA Dissertation Committee: Dr. Aysun Ficici, Chair Professor of International Business and Strategy Dr. Massood Samii Professor of International Business Dr. Tej Dhakar Professor of Management Science Dr. Ling Ling Wang Assistant Professor of International Business Worcester State University 1 Dedication I would like to dedicate my dissertation to my grandparents who raised me up and taught me perseverance. I would also like to dedicate my dissertation to my parents who encourage me to pursue this path, always support me, and teach me to be principled, ethical and intellectual. Finally, I would like to dedicate my dissertation to my friend, Wei Liu who through his giftedness accompanied me in the hard times during this journey. 3 Acknowledgments I would like to thank my Dissertation Committee Chair, Professor Aysun Ficici who has supported me from the very beginning of my doctoral journey. As my Dissertation Committee Chair, she guided me structurally both qualitatively and quantitatively through her deep knowledge in variety of subject areas, who also stayed with me after hours to work on my dissertation with me. She taught me how to be a good researcher, a good writer, and an academician. I would like to thank Professor Tej Dhakar for his valuable assistance in providing me feedback in my quantitative research. I would like to thank Professor Massood Samii for guiding me in the process and sharing his deep knowledge in the field of strategy. I would like to thank Professor Lingling Wang for providing me support in writing this dissertation. I would also like to thank Professor Bulent Aybar for suggesting to include the price index in my dissertation. I would like to thank Professor Nicolas Nugent for supporting me through the doctoral program. 4 Table of Content Dedication ...................................................................................................................... 3 Acknowledgments .......................................................................................................... 4 Table of Content ............................................................................................................. 5 List of Tables .................................................................................................................. 9 List of Figures .............................................................................................................. 1 0 Abstract ........................................................................................................................ 11 Keywords ..................................................................................................................... 11 1. Introduction ........................................................................................................... 12 1.1. Chinese Consume The Most Luxury Goods Amongst The World .......... 13 1.2. A New Trend Of Chinese Consumer Behavior: Purchasing Luxury Goods From Overseas Markets Instead of The Domestic Market .................................. 14 1.3. CoO (Country-of-Origin), The Quality Guarantee from Luxury Companies ............................................................................................................ 18 1.4. A Paradox of Luxury Goods’ Price ......................................................... 19 1.5. A Different Attitude Towards Luxury Goods Holding by Chinese ......... 21 1.6. A Significant Price Gap Of Luxury Goods Between Oversea Market And Chinese Market .................................................................................................... 23 1.7. A Decision – Making Progress of Chinese Consumers Regarding Purchasing Luxury Goods .................................................................................... 24 1.8. Motivation ............................................................................................... 25 1.9. Research Statement ................................................................................. 26 1.10. Contribution ............................................................................................ 27 1.11. Structure of Study ................................................................................... 29 2. Research Background – A Guidebook to the Luxury World ................................. 30 2.1. Luxury Goods ......................................................................................... 31 2.2. Luxury Fashion Goods ............................................................................ 32 2.3. Luxury Industry - Worldwide Expansion ................................................ 34 3. Literature review ................................................................................................... 34 3.1. Main Chinese Consumers Of Luxury Goods: The New Middle - Class 35 3.1.1. Do Customers Behave Universally or Particularly? ........................ 39 3.2.1.1. Universal Theories ............................................................. 39 3.2.1.2. Particular Theories ............................................................. 41 3.1.2. Distinguishing Consumer Behaviors Between The Two Chinese Generations .................................................................................................. 41 3.2. Motivation Theories ................................................................................ 44 3.2.1. Status Motivation Theories .............................................................. 45 3.2.2. Prestige Motivation Theory ............................................................. 46 3.2.3. Theories Regarding a Person’s Self ................................................. 47 3.2.4. Materiality and Materialism Theories .............................................. 47 3.2.5. Luxury Values Theory ...................................................................... 49 3.2.6. Purchasing Luxury Goods as Gifts (Wong And Ahuvia, 1998) ....... 50 3.2.7. Summary of the Motivation Theories and Hypotheses (H1) ........... 51 3.3. Capital Theory......................................................................................... 52 3.3.1. Cultural Capital Analysis of The Chinese New Middle - Class ....... 52 5 3.3.1.1. Geert Hofstede – 6 Dimensions Of Cultures ..................... 5 3 3.3.1.2. How the Chinese Culture Impact Chinese Consumption of Luxury Goods? ..................................................................................... 56 3.3.1.3. Summary of Cultural Capital and Hypotheses (H2) .......... 60 3.3.2. Social Capital Analysis of The Chinese New Middle - Class .......... 61 3.3.2.1. Hukou ................................................................................. 63 3.3.2.2. The New Chinese Female Middle - Class .......................... 66 3.3.2.3. Summary and Hypotheses of the Social Capital (H3) ....... 68 3.3.3. Education Analysis of the Chinese New Middle - Class ................. 69 3.3.3.1. Internal Migration for Education Opportunities ................ 7 2 3.3.3.2. International Migration To Higher Education .................... 73 3.3.3.3. Summary of the Education ................................................. 75 3.3.4. Economic Capital Analysis of the Chinese New Middle - Class ..... 75 3.3.4.1. Income Analysis of Chinese New Middle - Class ............. 76 3.3.4.2. Earmarking Money ............................................................ 76 3.3.4.3. Real Estate ......................................................................... 77 3.3.4.3.1. Real Estate Price -Income Ratio (P/I-Ratio) ............... 77 3.3.4.3.2. Education - Driven Motivation ................................... 79 3.3.4.3.3. Marriage – Driven Motivation .................................... 79 3.3.4.3.4. Investment – Driven Motivation ................................. 80 3.3.4.4. Summary and Hypotheses of the Economic Capital (H4) . 81 3.3.5. Summary and Hypotheses of the Capital Theory Analysis of the Chinese New Middle - Class (H2-4) ............................................................ 82 3.4. Decision-making Theories ...................................................................... 84 3.4.1. Brain Specialization Theory ............................................................. 85 3.4.2. External Conditional Environment Impact ...................................... 86 3.4.3. The Optimal Choice and The Actual Choice ................................... 87 3.4.4. Summary of Decision-making Theories .......................................... 88 3.5. Price Differences Analysis ...................................................................... 89 3.5.1. Pricing Strategies for Luxury Companies ........................................ 90 3.5.2. Taxes, Tariff, and Quotas in China ................................................... 91 3.5.3. Summary of Price Difference Analysis (H5) ................................... 92 3.6. Purchasing Channels Analysis ................................................................ 93 3.6.1. Purchasing During Travel ................................................................ 93 3.6.2. Purchasing In Domestic Market ....................................................... 93 3.6.3. Purchasing from a Dealer (Daigou) ................................................
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