UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Pham Thi My Hien ANTECEDENTS AND OUTCOME OF CONSUMER ATTITUDE TOWARD COUNTERFEIT PRODUCTS MASTER OF BUSINESS (Honours) SUPERVIOR Dr Nguyen Thi Mai Trang Ho Chi Minh City – Year 2014 Acknowledgement I would like to express my sincere gratitude to my supervisor, Dr Nguyen Thi Mai Trang for the valuable supervision, the support and encouragement she gave me I would like to express my gratitude to my ISB class friends for SPPS directions Your encouragement, excellent guidance, and critical comments have greatly contributed to this thesis Finally, I would like to thank all of the respondents without whom, this research would have been impossible Pham Thi My Hien March 2014 Abstract Counterfeiting is increasing and becoming a complicated issue across different countries on the world and Vietnam is not exceptional, so the policy makers and managers always try to find ways to face with the counterfeiting and reduce counterfeit products in the market This paper attempts to investigate the impact of the social cost and perceived risk on consumers’ attitude toward non-deceptive counterfeit products and behavioral intention to purchase these ones In order to this, basing on existing literature in this field, a questionnaire is designed and validated, then based on the data that were collected from the 176 respondents' answers to the designed questionnaire, the analysis is conducted and the results as well as the relations among the factors are explained The results show that the factor of social cost has an impact on consumers’ attitude and purchase intention toward counterfeit products Moreover, the result indicates that intention to buy counterfeit products is influenced by consumers’ attitude toward these products The hypotheses are tested with data collected from convenient sample of consumers in Ho Chi Minh City and the SPSS software is used to analyze the data gathered from the respondents Table of Contents Abstract List of tables Chapter 1: Introduction 1.1 Research background 1.2 Research problems 1.3 Research objectives 1.4 Research methodology and scopes 1.5 The structure of the study Chapter 2: Literature review and hypotheses 2.1 Purchase intention to counterfeit products 2.2 Consumers’ attitude toward purchasing counterfeit products 10 2.3 Perceived risk 12 2.4 Social cost of counterfeits 13 2.5 The conceptual model 15 Chapter 3: Research methodology 16 3.1 Research design 17 3.2 Measures of the constructs 19 3.3 Research process 17 3.4 Data analysis method 23 Chapter 4: Data analysis and data results 27 4.1 Sample characteristics 27 4.2 The reliability test: The cronbach’s alpha test 28 4.3 Exploratory factor analysis (EFA) 30 4.4 Multiple regression analysis 31 Chapter 5: Conclusions, implications and limitations 47 5.1 Conclusion 47 5.2 Managerial implications 49 5.4 Limitations and future research 52 References 53 Appendix A 59 Appendix B 52 Appendix C 65 Appendix D 67 Appendix E 69 List of Tables Table 3.1: The results of collecting questionnaires 38 Table 4.1: Sample chracteristics 39 Table 4.2: The results of Cronbach’ alpha 40 Table 4.3: KMO and Barlett’s Test 40 Table 4.4: Total Variance Explained of Independent Variables 41 Table 4.5: Rotated component maxtrix 42 Table 4.6: Correlations matrix of social cost, risk and attitude 42 Table 4.7: Model summary 43 Table 4.8: Anova 44 Table 4.9: Regression result of “attitude” model 45 Table 4.10: Correlations matrix of purchase, social cosk, risk and attitude 45 Table 4:11: Model summary 47 Table 4.12: Anova 47 Table 4.13: Regression result of “purchase” model 48 Table 4.14: Summary of hypotheses testing result 48 CHAPTER 1: INTRODUCTION 1.1 RESEARCH BACKGROUND Counterfeiting issue started since 1970s and is continuously spreading over the world as the result of the globalization and lowering the trading barriers in international transactions Most of the countries have been influenced by counterfeit products and their economics have faced to the high crisis According to the International Chamber of Commerce, the international trade in counterfeit products is worth $650 billion Vietnam is ranked fifty third globally about the size of its counterfeit market with total pirated market value of US$ 122 million (Counterfeit Goods and Piracy Industry, as cited in Cheng et al., 2011) According to Lai and Zaichowsky (1999), counterfeit products are identical copies of authentic brands and products A product that has the same brand name or logo with legitimate one but without the permission of the registered owner is considered as a counterfeit or “fake” product According to the World Customs Organization, counterfeit products account for roughly from to 10 percent of the world’s trade and their sales revenue are rising up (Arog Limited, 2008) As the statement from the International Chamber of Commerce, pirated goods are manufactured and consumed in virtually all global economies and have a big effects on trade, foreign investment, employment, criminality, innovation and the environment (International Chamber of Commerce, as cited in Kozar and Marcketti, 2011) The International AntiCounterfeiting Coaltition forecasted that counterfeiting caused losses of about US$200 billion a year in lost jobs, unpaid taxes and lost sales According to the Organization for Economic Co-operation and Development (as cited in Kozar and Marcketti, 2011), traded counterfeit products occupies over US$250 billion worth of internationally traded goods in 2007 In front of the high demand of consumers about buying counterfeit products and the high profit for counterfeit traders and manufacturers, counterfeiting continues to emerge globally (Amine and Magnusson, 2007) Counterfeiting has spread in every type of consumer goods, in luxury brands market and products, such as electronics, airplane and auto parts, pharmaceuticals, clothes, cosmetic and watches Counterfeiting is a worldwide issue across different industries and Vietnam with its open economy has also faced to its impact In Vietnam, the manufacturing and trading counterfeit products have developed more and more sophisticated in some recent years Most of the high quality products which have high sales revenues have been faked The counterfeit products appear across different provinces, from big center to small shops, from big cities to small towns in Vietnam Moreover, counterfeit products can be found in street vendors as well as legal looking stores In recent years, many stores trading faked products have become well organized and imitate to set up a store the same as selling genuine products Furthermore, with the development of internet, now counterfeit products are increasingly sold online making consumers misunderstand about buying genuine products at discounted prices Businesses have lost billions of dollars and reduced their brand reputation due to pirated goods, for example with LG Vina’s situation According to Nguyen (2011), LG Vina, the owner of cosmetic brands of Essance, Ohui and Whoo, just reached about 70-75 percent of the expected level due to counterfeit products in 2010 The combat of the government to counterfeit goods become tougher and challenged because the technology of making counterfeit products becomes more complicated, low awareness from consumers and high profit for counterfeit merchandises According to the Market Management Bureau (2013), the State found out over 13.101 cases with pirated goods, punished up to 53 billion VND in 2012 The first months in 2013, in the total imported counterfeit goods, there were over 2100 cases and punished more 1960 cases which estimated about 37.544 billion VND (the Market Management Bureau of South, 2013) Recently, much of research about counterfeiting has been deployed on the supply side of the issue, blaming the manufacturers, suppliers and governmental policy for liberation of pirating (McLaughlin, the White house, as cited in Kozar and Marcketti, 2011) However, as a basic economic reason that if no demand for fake goods exist, supply will disappear automatically, consumers are also important participants in the consumption of fake goods and existence of counterfeit trade (Yoo and Lee, Bian and Moutinho cited in Cat, 2010) Therefore, it is necessary to understand clearly potential determinants affecting their attitudes and purchasing behaviors toward counterfeit products In some previous years, some scholars have investigated the counterfeit problems from the consumers’ perspective in different countries such as the research about the consumer’s role in the growth of trade mark piracy of Wee et al (1995) or the consumer attitudes toward counterfeit goods in the paper of Cordell et al (1996) Cordell et al (1996) discovered three motivators for using pirated goods: the status symbolized by brand, the channel of the distribution and price Another example is the research about the impact of non-price factors on purchase intention counterfeits of Hanzaee and Jalalian (2012) Regarding to this topic, Furnham and Valgeirsson (2007) studied the effect of life values and materialism on buying counterfeit products in UK, Phau et al (2009) examined the consumers’ attitudes toward the counterfeit luxury goods in Singapore, and some other researches such as (Wilcox et al., 2009; Bian and Moutinho, 2009; Kozar and Marcketti, 2011; and Fernandes, 2012) In Vietnam, some researchers have been studied about this field but the number of scholars is still limited For example, Dinh (2011) researched about factors influencing purchase behavior of counterfeit products that focused on determinants of attitude function and conformity in counterfeit luxury goods, Nguyen and Tran (2013) investigated antecedents of consumer behavior toward counterfeit of fashion products in term of brand image, value consciousness, social influences and personal gratification Moreover, Nguyen and Tran (2013) focused to study with respondents who had experience in using counterfeit products 1.2 RESEARCH PROBLEMS In front of the significant development of counterfeit products, they actually become the top concern of businesses as well as policy makers Beside of initiatives in reducing counterfeiting from the supply side, the other would be to address the demand side of counterfeit products According to Staake et al (as cited in Koklic, 2011), our understanding about structure and mechanisms of the counterfeit market is still limited Therefore, knowing the determinants of the person’s attitude and intention to perform a certain behavior regarding to the counterfeit purchase is very important One of the key constructs that indicates in consumer behavior is perceived risk On the other hand, counterfeiting is a harmful and risky business that has big impact on society as declaration of Pollinger and Lewis (as cited in Cat, 2010) Thus, it is necessary to Furnham, F A., Valgeirsson, V H (2007) The effect of life values and materialism on buying counterfeit products The Journal of Socio-Economics, 36, 677-685 Grossman, G., Shapiro, C (1988) Foreign counterfeiting of status goods The Quarterly Journal of Economics, (February), 79-100 Goodwin, J (2006) The human cost of fakes Harper’s Bazaar, 3530(Jan), 53-54 Hanzaee, H K Jalalian, S (2012) Impact of non- price factors on purchase intention counterfeits Research Journal of Applied Sciences, Engineering and Technology 4(18) Maxwell Scientific Organization, (18), 3313-3322 Hair, J.F., Black, W.C., Babin, B.J, Anderson, R.E (201) Multivariate data analysis (7th ed.) 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New Jersey: Lawrence Erlbaum Associates, Inc 54 Lewis, K (2009) The fake and the fatal: The consequences of counterfeits The Park Place Economist, 17(1), 47-58 Matos, A C., Ituassu, T C., Rossi, A C (2007) Consumer attitudes toward counterfeits: A review and extension Journal of Consumer Marketing, 24(1), 36-47 Nguyen, H V (2011, November 27) Businesses are afraid of combat to counterfeit products because of keeping its reputation Phap Luat Retrieved from http://phapluattp.vn/2011112712044727p1014c1070/dn-ngai-chong-hang-gia-viso-mat-mat.htm Nguyễn Đình Thọ (2011) Phương pháp nghiên cứu khoa học kinh doanh Nhà Xuất Bản Lao Động Xã Hội Nguyen, V P., Tran, T B T (2013) Modeling of determinants influence in consumer behavior towards counterfeits of fashion products Unpublished Master thesis, The Open University Retrieved from http://www.ou.edu.vn/ncktxh/Documents/Seminars/Phuong_Toan_Seminar_Fake %20Products.pdf Norris, Megan & Lecavalier, Luc (2010) Evaluating the use of exploratory factor analysis in developmental disability psychological research Journal of Autism and Development Disorders, 40(1), 8-20 OECD (2008) The economic impact of counterfeiting and piracy organization for economic eo-operation and development (2008) The Economic Impact of Counterfeiting and Piracy Paris Retrieved from http://www.sourceoecd.org/industrytrade/9789264045514 55 Phau, I., Teah, M., & Lee, A (2009) Targeting buyers of counterfeits of luxury brands: A study on attitudes of Singaporean consumers Journal of Targeting, Measurement and Analysis For Marketing, 17(1), 3-15 Pollinger, Z A (2008) Counterfeit goods and their potential financing of international terrorism The Michigan Journal of Business, 1(1), 85-102 Tabachnick, B.G., Fidell, L.S (1991) Using multivariate statistics(3rd ed.) New York: Harper Collin The Market Management Bureau (2013, July 20) Counterfeit products on every kilometer Xa Luan Retrieved from http://www.xaluan.com/modules.php?name=News&file=article&sid=661353 The Market Management Bureau of South (2013, 07 18) Calling businesses against counterfeit products and protect brand name Vietnamplus Retrieved from http://www.vietnamplus.vn/Home/Keu-goi-DN-chong-hang-nhai-bao-ve-thuonghieu/20137/207315.vnplus Xiao, S., He, W (2011) A study of Chinese consumers’ attitudes toward Volvo cars Master’s Thesis in International Business 15 ECTS , Economics and Informatics University West Wee, C.H., Tan, S.J, & Cheok, H (1995) Non- price determinants of intention to purchase intention to purchase International Marketing Review, 12(6), 19-46 Wilcox, K., Kim, M.H., Sen, H (2009) Why consumers buy counterfeit luxury brands? Journal of Marketing Research, 46(2), 246-259 56 Yoo, B., Lee, S.H (2009) Buy genuine luxury fashion products of counterfeits? Advances in consumer research,36, 280-286 Zhang, B., Kim, H J (2013) Luxury fashion consumption in China: Factors affecting attitude and purchase intent Journal of Retailing and consumer services, 20(1), 68-79 57 Appendix A: Guideline for qualitative in-depth interview Measure scales Comments Perceived risk (Dowlingand Staelin cited in Kambiz., 2012) All respondents expressed that they The risk that you take when you understood the meaning of words used in buy a counterfeited product, is it the scales and what the scales implied high? However, the interviewees proposed that the researcher should change the now "You" to "I" for all items and revise the question Do you think there is high sentences to statement sentences because probability that the product doesn't these scales were measured by selfwork? evaluation of respondents Attitude toward purchasing counterfeit products (Huang et al., cited in Kambiz., 2012) Do you like shopping for gray market goods? Do you think, buying gray market goods generally benefits the consumer? Do you think, generally speaking, buying gray market goods is a better choice? The same as above comment, all interviewees suggested that the author should convert the noun "You" to "I" and from question sentences to statement sentences Moreover, respondents recommended to change "gray market goods" to "counterfeit products" in order to consistent with other sentences in questionnaire and avoid confusing for respondents even both concepts have the same meaning Social cost (Kwong et al., as cited in Jason, 2011) All respondents declared that they fully Do you think counterfeit products understood the meaning of the scales hurt the companies that However, as above recommendation, the manufacture the genuine product? interviewees gave ideas that the researcher Do you think counterfeit products should change the now "You" to "I" for all items and revise the question sentences to hurt the world economy? Do you think countefeit products discourage investment in inovation and brand building? Purchase intent of counterfeit products (Summers et al., cited in Zhang and Kim 2013) 58 Do you would like to buy counterfeit products? Do you intend to purchase countefeit goods within the next 10 year? Total agreed with the words using in scales, except revise " You" to "I" Appendix B: Questionnaire in English Dear Ladies and Gentlemen, My name is PHAM THI MY HIEN, a student of MBA program at ISB Institution – University of economics Ho Chi Minh City I am studying about antecedents and outcome of consumer attitude and purchase intention toward counterfeit products We wish Ladies/ Gentlemen for leaving the time to answer this survey Kindly be noted that there is no right or wrong answer All responses of Ladies/ Gentlemen are valuable to this study Sincere thanks to the support of Ladies and Gentlemen PART 1: GENERAL INFORMATION Before answering the survey, kindly go through the definition of counterfeit products: "Counterfeit products which are mentioned in this survey mean products that bear a brand name or logo without the permission of the registered owner" Do you know counterfeit products?  Yes  No If your question for above question is “No”, you could stop your work here Thank you for your time spending in completing this questionnaire 59 If your question for above question is “Yes”, please continue your work by answering the questions in Par and part In case that you have to buy counterfeit products, which kind of counterfeit products you usually refer to?  Clothes/ accessories  Electronic equipment  Cosmetic  Others Perceived risk The risk that I take when I buy a counterfeited product is high There is high probability that the product doesn't work Social cost Counterfeit products hurt the companies that manufacture the genuine product Counterfeit products hurt the world economy Counterfeit products discourage investment in innovation and brand building Strongly agree Generally speaking, buying counterfeit products is a better choice Fairly agree Box 1: Strongly disagree Box 5: Strongly agree As for other levels in the box 2,3,4 respectively Attitude toward purchasing counterfeit products I like shopping for counterfeit products Buying counterfeit products generally benefits the consumer Neutral Please indicate your level of agreement for the following statement by ticking ( X ) in the box corresponding to: Fairly disagree "Counterfeit products which are mentioned in this survey mean products that bear a brand name or logo without the permission of the registered owner" Strongly disagree PART 2: MAIN CONTENT 5 1 2 3 4 5 1 2 3 4 5 Purchase intention of counterfeit products 60 I would like to buy counterfeit products 10 I intend to purchase counterfeit goods within the next year 1 2 3 4 PART 3: OTHERS INFORMATION He/ She tell us the following information to serve the classification and presentation of statistical data: Gender:  Male  Female Age:  18 – 30 years old Career:  Business  31 – 45 years old  Office staff Income per month:  to  to 10  Student  10 to 15  > 45 years old  Housewife  15 to 20  Others  Over 20 (million VND) THANK MUCH FOR YOUR SPENDING TIME -Appendix B: Questionnaire in Vietnamese PHIẾU KHẢO SÁT Kính chào Anh/ Chị, tên Phạm Thị Mỹ Hiền, học viên cao học Viện Đào Tạo Quốc Tế (ISB) – Trường Đại Học Kinh Tế TP HCM Tôi nghiên cứu thái độ vaf ý định người tiêu dùng việc mua hàng giả Rất mong Anh/ Chị dành khoảng phút trả lời Phiếu khảo sát Lưu ý, câu trả lời hay sai Tất ý kiến Anh/ Chị hoàn toàn bí mật có giá trị cho nghiên cứu Trong trình thực phiếu khảo sát, Anh/Chị có thắc mắc, vui lòng liên hệ với qua số điện thoại 01696389489, email hienpham2906@gmail.com Chân thành cám ơn hỗ trợ nhiệt tình Anh/ Chị! 61 5 Trước trả lời bảng khảo sát, Anh/ Chị vui lòng đọc qua khái niệm “Hàng giả” đề cập Phiếu khảo sát sau: "Hàng giả sản phẩm mang nhãn mác, logo, thương hiệu cách trái phép không chấp thuận chủ sở hữu thương hiệu đó" PHẦN 1: THÔNG TIN TỔNG QUÁT Anh / Chị có biết đến hàng giả không?  Có biết  Không biết Chú ý: - Nếu câu trả lời Anh/Chị cho câu “Không biết”, Anh/ Chị dừng việc trả lời phiếu khảo sát Chân thành cảm ơn hỗ trợ nhiệt tình Anh/ Chị - Nếu câu trả lời Anh/ Chị cho câu “ Có biết”, Anh/ Chị vui lòng tiếp tục khảo sát cách trả lời câu câu hỏi Phần bên Trong trường hợp phải mua hàng giả, Anh/ Chị thích mua hàng giả sau đây?  Quần áo/ phụ kiện thời trang  Thiết bị điện tử  Mỹ phẩm  Khác 62 Hoàn toàn đồng ý Hơi đồng ý Trung dung Không đồng ý "Hàng giả đề cập Phiếu khảo sát định nghĩa sản phẩm mang nhãn mác, logo, thương hiệu cách trái phép không chấp thuận chủ sở hữu thương hiệu đó" Xin cho biết mức độ đồng ý Anh/ Chị phát biểu sau cách đánh dấu ( X ) vào ô tương ứng, với Ô số 1: Hoàn toàn không đồng ý Ô số 5: Hoàn toàn đồng ý Còn mức độ khác đánh vào ô số 2, 3, tương ứng Hoàn toàn không đồng ý PHẦN 2: NỘI DUNG CHÍNH Thái độ việc mua hàng giả Tôi thích mua hàng giả Tôi nhận nhiều lợi ích mua hàng giả Theo tôi, mua hàng giả lựa chọn tốt Mức độ chấp nhận rủi ro Theo tôi, mua hàng giả gặp nhiều rủi ro so với mua hàng hãng Tôi nghĩ có nhiều khả hàng giả không sử dụng không phù hợp với nhu cầu Hao tổn cho xã hội Tôi cho hàng giả gây thiệt hại cho công ty sản xuất hàng hãng Tôi cho hàng giả gây thiệt hại tới kinh tế toàn cầu Tôi cho hàng giả gây hạn chế đầu tư xây dựng thương hiệu doanh nghiệp Ý định mua hàng giả khách hàng Tôi sẵn lòng chi tiền để mua hàng giả 10 Tôi dự định mua hàng giả năm tới 1 2 3 4 5 5 1 2 3 4 5 1 2 3 4 5 63 Appendix C: Histogram, Normal Regression & Scatter plot of Dependent Variable: Consumers’ attitude toward counterfeit products 64 65 Appendix D: Histogram, Normal Regression & Scatter plot of Dependent Variable: Purchase intention toward counterfeit products 66 67 APPENDIX E: Table 4.3 KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling 771 Adequacy Bartlett's Test Sphericity of Approx Chi-Square 774.978 Df 45 Sig .000 Table 4.4: Total Variance Explained of Independent Variables Extraction Loadings Initial Eigenvalues Sums of Squared Rotation Loadings Sums of Squared Factor Total % of Variance Cumulative % Total % of Variance Cumulative % Total % of Variance Cumulative % 3.847 38.466 38.466 3.517 35.167 35.167 1.982 19.817 19.817 2.122 21.225 59.691 1.767 17.672 52.839 1.748 17.484 37.302 0.965 9.652 69.343 0.594 5.937 58.776 1.566 15.664 52.966 0.896 8.958 78.301 0.551 5.515 64.29 1.132 11.324 64.29 Extraction Method: Principal Axis Factoring 68 ... function and conformity in counterfeit luxury goods, Nguyen and Tran (2013) investigated antecedents of consumer behavior toward counterfeit of fashion products in term of brand image, value consciousness,... intention to counterfeit products The impact of consumers’ attitude toward purchasing counterfeit products on purchase intention to counterfeit products 1.4 RESEARCH METHODOLOGY AND SCOPES The... to consumers’ attitude toward counterfeit products H3: Perceived risk is negatively related to purchase intention to counterfeit products 2.4: SOCIAL COST OF COUNTERFEITS The social cost of counterfeits