Consumer Perception Towards Chinese Cars in Russia
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Consumer Perception Towards Chinese Cars in Russia LAB University of Applied Sciences Bachelor of Business Administration, International Business, Marketing 2020 Samir Mamedov Contents 1 Introduction ................................................................................................................... 1 1.1 Research background .......................................................................................... 1 1.2 Research objectives and delimitations ................................................................. 2 1.2.1 Delimitations ..................................................................................................... 2 1.3 Research questions ............................................................................................. 3 1.4 Research methods ............................................................................................... 3 2 Global industry overview ............................................................................................... 4 2.1 Automotive industry .............................................................................................. 4 2.2 Rise of mass production cars ............................................................................... 4 2.3 Japanese car industry .......................................................................................... 5 2.4 Chinese car industry ............................................................................................ 5 2.5 Liquidity of a car ................................................................................................... 6 2.6 Phenol smell ......................................................................................................... 7 2.7 Vehicle safety ....................................................................................................... 7 2.8 Car safety in Chinese cars ................................................................................... 8 3 Automotive industry and brand image ........................................................................ 10 3.1 Brand image definition ....................................................................................... 10 3.2 Importance of brand image ................................................................................ 10 4 Country-of-Origin Effect .............................................................................................. 11 4.1 COO effect ......................................................................................................... 11 4.2 Country-of-origin definition ................................................................................. 11 5 The buyer decision process ........................................................................................ 13 5.1 The buyer decision process ............................................................................... 13 6 Consumer behaviour “Black BoX” model .................................................................... 15 6.1 “Black BoX” model .............................................................................................. 15 6.2 Customer’s characteristics ................................................................................. 17 7 Brand identity .............................................................................................................. 20 7.1 Brand identity prism by Kapferer ........................................................................ 20 8 Empirical Data ............................................................................................................ 22 8.1 Quantitative analysis .......................................................................................... 22 8.2 Results of the study ............................................................................................ 22 9 Discussion .................................................................................................................. 38 10 Conclusion and Research Answers ............................................................................ 40 List of references ............................................................................................................... 42 Abstract Author(s) Publication type Completion year Mamedov Samir Bachelor’s Thesis 2020 Number of pages 48 Title of the thesis Consumer Perception Towards Chinese Cars in Russia Degree Bachelor of Business Administration Name, title and organisation of the thesis supervisor Emmi Maijanen, Senior Lecturer, Business Administration Abstract In the age of globalisation, many Chinese companies are trying to occupy different market niches in different countries. The Russian market, in general, is a tough place for competition, especially in the car segment. The population of the country is high as well as the various number of brands. The amount of Chinese companies who want a slice of this lucrative place arises year by year. In Russia, PRC car manufacturers are diligently trying to expand their share in this market. On the way to becoming popular brands, Asian manufacturers face several problems such as an unsettled brand image, negative customer perception, and a country-of-origin effect. The quantitative research method was done descriptively to collect reliable and detailed information about customer perception towards PRC companies. The purpose of this study was to identify whether there is a correlation between brand image, country-of- origin effect and the market share of the Chinese car brand. The findings indicated that there is a strong negative perception of Russian customer towards the Chinese automotive industry. The results showed that a weak brand image and cost-of-origin effect have a direct impact on the market share of Chinese car man- ufacturers. Moreover, the core of this issue lies in the general perception towards Chi- nese industry as a whole. Russian consumer is rigorous and conservative when buying a car. Results showed that Russian customer has a lack of trust to the PRC companies and on average, would trust the Japanese, German and South-Korean brands more. Keywords Brand Image, Country-of-Origin effect, Perception, Chinese car industry 1 1 Introduction 1.1 Research background The target of this thesis is to identify how Russian consumer perceives the Chinese car brands as well as to find out whether there is a correlation between brand image and such a small market share of PRC (People’s Republic of China) companies among competitors (Chuprov 2020) . Moreover, this paper is going to break down the values of vehicles that are important for the Russian automobile market and whether the country-of-origin effect negatively impacts the sales of PRC car companies. This study is aimed to contribute to the Chinese automotive industry. The information re- ceived and analysed during this research theoretically will able to help PRC companies to deeper understand the Russian consumer. Therefore, they could make better steps in de- veloping their products, services and marketing strategies. Vehicles are part of our daily lives for already decades. It is one of the most common types of transportation. Since the first mass-production cars such as Ford Model T, they have become something more than just a carriage with internal combustion engines (Candelo 2019). The industry is growing for already more than a hundred years. Every year car brands release new technological solutions that change the customer perception on the concept of the car itself. Vehicles are becoming smarter, faster, safer, eco-friendlier, but also more complicated. With the help of digitalisation, they are no longer just a mode of transport. It is possible to use digital maps, watch content, stream music, update the soft- ware of the vehicle using an internet connection, and even play games in some cases using a car. They are slowly becoming the computers on the wheels, especially when thinking about such advances brand giants like Tesla. (Ogbac 2019) The automobile industry is one of the largest industries in the world. Only in 2019, there were about 70 million cars produced (Statista 2020). This number is significant for the world- wide economy, because for most people, buying a car is the second most meaningful and expensive decision, next to buying a house. China, nowadays, became one of the biggest manufacturing countries in the world, and it has about 28 per cent of the global manufacturing output (Chinadaily 2020). A few decades ago, Chinese products were associated with cheap and low-quality clothing and other con- sumer items. Nevertheless, now they produce actual cars that millions of people drive in a bunch of countries. (Statista 2017) In Russia, for instance, 645 auto dealerships sell cars of Chinese automakers, which is about 20 per cent of all dealerships. However, the market share of all Chinese brands in Russia is relatively small and in 2019 was only 2.5 per cent. 2 Russian consumer might feel a lack of trust for the Chinese car manufacturers. There are many possible reasons for that such as safety factors, technical characteristics, liquidity and reliability. (Chuprov 2020) 1.2 Research objectives and delimitations The main aim of this study is to identify how Russian consumers value cars of Chinese automakers. Besides, the objective is to find out if there a lack of trust towards Chinese cars and whehter customers feel sceptical about them. The aim is to contribute to the industry by collecting and analysing opinions