Chapter 1: 1.0 INTRODUCTION
1.1Background of the Study
Consumer ethnocentrism is a very important marketing concept, especially in the contemporary globalized economy. As people and goods move from one country or region to the other doing business, it is likely to impact on how local products, businesses, and the entire economy works. For developing countries, it is more problematic when their markets are flooded by products from the developed countries. For the most part, products from abroad are usually cheaper than the local products, hence; often take over the local markets at the expense of home made products. Therefore, consumer ethnocentrism comes as a reaction to the impact of foreign products to the local economy. Specifically, consumer ethnocentrism refers to the attitudes and views that consumers in a particular country hold that their products and services are far more superior to foreign products. Therefore, the consumers prefer to consume their local products to promote their local industries, create more jobs and boost their local economy instead of purchasing foreign products (Basu, 2011: 146). Based on this, the consumers believe that it is not appropriate and, in some cases considered immoral, to purchase products from other countries.
Understanding consumer ethnocentrism is necessary for marketers selling products to foreign countries. The determinants for consumer ethnocentrism differ from one region or country to another. For instance, some consumers may be encouraged by their patriotism to promote their local industries and economy. This is more the case in countries that have a collective culture, hence; patriotism is often seen as remaining loyal to the group. In other countries where individualism is the norm, such as in Europe and the US, consumer ethnocentrism may be determined by factors such as nationalism. This is where consumers develop a general feeling their country is superiors to others, thereby making their local products better than foreign products (Basu, 2007).
One of the countries that have been affected to a large extent by consumer ethnocentrism is India. India is the second most populous country in the world, with a population of about 1.2 billion people. It is also the worlds biggest democracy. These factors have made India one of the major centers for global business as more companies seek to exploit the huge population the country has. Besides, India has also emerged as wealthy country in terms of its commercial developments as well as for its rich local culture. The country has a very diverse culture, which allows for locals to be accommodative of people from different places and different cultures and religions.
Indias economy has been flourishing since the past few decades, with the country identified as an emerging market and part of the BRIC alongside Brazil, Russia, and India as the fastest growing economies. Indias economy is currently ranked as the seventh biggest in the world based in its nominal GDP. On the other hand, it is ranked as the third biggest economy based on purchasing power parity (PPP). The country initiated a series of national reforms that saw it open up to the global market in the early 1990s, reform its economy, and create a good environment for conducting business. Today, it is considered one of the newly industrialized nations in the world today.
However, despite these positives, India continues to face a lot of challenges including widespread poverty, insecurity due to terrorism, corruption, malnutrition, and inadequate access to public healthcare. Due to these challenges, some people in the country are of the view that these problems can be alleviated if Indians promoted their own products and supported their own local businesses instead of buying products from abroad (Basu, 2007). These sentiments have accounted to the development of ethnocentric views amongst consumers in the country.
According to the World Bank, economic growth in emerging markets such as Brazil, Russia, India, India, and South Africa commonly known as BRICS is likely to surpass that The US, Germany, Italy, France, and the UK in the next ten years (Camillus, 2014. P. 147). This indicates the great potential of these markets in the future. However, the well established companies on the international scene have already established themselves in these markets with huge investments thereby posing a huge challenge to any emerging businesses in these regions.
Nevertheless, the dramatic surge of the emerging markets in the past few years is a major indicator of s significant geopolitical shift in the world (Gaur, & Delios, 2015 p. 242). The other interesting fact is that companies and businesses from these markets have been able to assert global dominance in the past decade despite the challenges they faced as well as the difficulties in implementing the methods and strategies they used in rising to the top (Christofor, 2008 p. 37). As such, the economic revolution experienced in the world as a result of the Emerging Market Multinational (EMMC) has not only attracted on the businesses themselves, but also on the methods they used to rise to the helm of their global industries. These companies have made their mark on the global scene by moving boldly, fast, stealthily, and strategically by negotiating through volatile political and economic environments. In additions, these EMMCs have also leveraged the use of joint ventures and other initial forays to create learning experiences through acquisitions and expansion programs that have driven them to success (Etemad, 2013 p. 48). This is in sharp contrast to the rigid, top-down, and more plodding methods that have been traditionally employed by established multinational companies from the developed world.
The emerging market in India is quite unique in relation to the markets in the developed world. India is the second most populous nation in the world, implying that there is both ready labor and a ready market for products (Basu, 2007). Being a democratic country, the citizens enjoy several freedoms, unlike for lost countries in the region. However, the government still maintains a significant level of control over the lives of the people, including economic activities. Since opening up to the international community, India became part of the World Trade Organization (Basu, 2011: 146). The Indian government has been encouraging private ownership of businesses and companies in the country in recent years. Some of the leading industries in the country include the telecommunications sector, the manufacturing sector, and the service industry. The main currency in use in India is the Rupee.
India has also established itself as the world manufacturing center with many manufacturing multinationals setting up their manufacturing campuses in the country. The main advantages of doing business in India include the strong financial services sector, which has evolved over the years to meet the needs of the people. In addition, Indias huge population provides a big market for the businesses that offer good quality products. The privatization trend that has seen most of the public corporations in the country being transformed to private ownership is set to benefit the business sector in the country a great deal. This is likely to spur innovative ways of conducting business in the country.
However, there are also some huge challenges for doing business in India. The political climate in the country is relatively unstable. The communist government remains in control of most activities in the country thus limiting the freedom of those opposed to the government initiatives (Zheng, Khavul, & Crockett, 2012: 241). Therefore the potential of unrests among workers is very high.
Recent developments in India point to the fact that the country is an emerging market. For instance, India has been experiencing massive and rapid economic development in the past ten years. This has seen the country rise to become one of the major economic powerhouses not only in the Asian continent, but also globally. However, despite this huge economic growth, India still experiences many challenges that limit the country from being classified as a developed market (Basu, 2007). For instance, challenges in the countrys political structure, economic problems such as corruption, a powerful government, and lack of uniform development across the country make India an emerging market (Yuanyuan, Holland, Shengfeng & Weicheng, 2008: 67).
Furthermore, India does not have an elaborate infrastructure system as well as vast resources to support their industries. This has led to most of the industries being located in the countrys major cities where there are adequate resources. However, a majority of the citizens in the country come from the rural areas, which lag behind in poverty. These discrepancies only contribute to making India an emerging market.
1.2 Statement of the problem
Consumer ethnocentrism is an essential element of international trade and the globalization process. In a democratic system of governance such as that of India, consumer ethnocentrism affects a huge section of the local market at both the federal national and the local government levels, despite each level of governance exercising its autonomy in terms of making crucial decisions on how to conduct business. Indian products have become something of a national pride, becoming a uniting factor for all Indians. Therefore, consumer ethnocentrism accounts for a significant proportion of economic development in both the national and county governments, which is one of the factors as to why the local economy of the country has been able to flourish in the past few years. Therefore, it is necessary that public institutions practice exceptional management skills when handling consumer ethnocentrism issues in order to avoid creating a negative impact on the economy due to rejection of the foreign products. Basheka (2008) recognizes that consumer ethnocentrism helps to bring sanity to the local economy by promoting local industries and creating more jobs for the locals. However, in the case of developing nations such as India, the management of the economy and business processes at both the county and federal government is marred with massive irregularities that often undermine economic development and effective delivery of public service at both the national and county governments.
Despite being hailed as a new revolution in public governance, the growth and expansion of India in terms of international business has introduced new challenges, especially with regard to issues such as consumer ethnocentrism. There is a conspicuous gap in the management of the countrys economy and business processes in most of the states in the country, especially in the planning process. Revelations derived from the various reports by the government oversight agencies expose massive discrepancies in the countrys international business strategy. These issues have persistently become vocal in the first few years of the democratic governments despite the numerous steps taken by the authorities to ensure realization of long term objectives for improving the lives of citizens in the long-term. A substantial amount of resources has been invested in strengthening the consumer ethnocentrism function at both national and county governments. For example, there have been massive improvements in local in infrastructure, rural development projects such as electrification, human development, as well as improvements in governance. Nevertheless, these efforts to empower local communities and develop local infrastructure have proved to be in futile due to poorly managed consumer ethnocentrism processes at the local levels of governance.
Part of the reasons why public consumer ethnocentrism at in the cou...
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