Factors influencing purchasing behavior of counterfeit products

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ĐINH VĂN KHOA FACTORS INFLUENCING PURCHASING BEHAVIOR OF COUNTERFEIT PRODUCTS MASTER OF BUSINESS Ho Chi Minh City – Year 2012 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business DINH VAN KHOA FACTORS INFLUENCING PURCHASING BEHAVIOR OF COUNTERFEIT PRODUCTS ID: 60340102 MASTER OF BUSINESS SUPERVISOR: Dr Dinh Thai Hoang Ho Chi Minh City – Year 2012 i ACKNOWLEDGMENTS I would like to express my sincere thankfulness to my research advisor, Dr Dinh Thai Hoang, for his clear and careful direction, guidance and correction to my thesis I also thank Prof Nguyen Dinh Tho who exerts every effort in guiding me as well as ISB students to implement research I would like to thank my dear colleagues, friend and classmates for their invaluable advice, help, encouragement and support during the time I was doing this thesis Especially, I would like to give my special thanks my family for supporting me spiritually throughout my life Ho Chi Minh City, Dinh Van Khoa ii CHAPTER INTRODUCTION 1.1 Problem statement & Research rationale 1.2 Damage caused by counterfeit goods………….……………… 1.3 The fight against counterfeiting in Viet Nam … .3 1.4 The cause of the existence of counterfeit goods 1.4.1 Objective reasons……………………………………………………….… 1.4.2 Subjective reasons …………………………………………….…….………5 1.5 Research objectives CHAPTER LITERATURE REVIEW ……………………………….…… ……… 2.1 Introduction……………………… .8 2.2 Review literature and hypothesis ……………………… 2.2.1 Counterfeit luxury goods 2.2.2 Attitude Function………………………………….…… … … 10 2.2.3 Conformity ……………………………………………… ………….… 11 2.2.4 Purchase intention …………………….…………………………….… 12 2.3 RESEARCH HYPOTHESIS 12 CHAPTER RESEARCH METHODLOGY 14 3.1 Research process ………………………… 14 3.2 Measurement scale… 15 3.2.1 The attitude function …………………………………………… ……15 3.2.2 Conformity ……………………………………………………… … 16 3.2.3 Purchase intention …………………………………………………… 16 3.3 Sampling method …… 16 iii 3.3.1Sampling … 17 3.3.2 Data collection …………………………………………………… 17 3.4 Statistic method ………………………………… ………………………… 17 CHAPTER DATA ANALYSIS AND INTERPRETATION ……………………… 19 4.1 Sample Specification……… .19 4.2 Data Coding ……… ………………………………………………………………… 20 4.3 Evaluation of meansurement scales .………………………………………….21 4.3.1 The main effects of attitude function, and conformity ……………….… 21 4.3.1.1 Testing the reliability of independent and dependent variable … 21 4.3.1.2 Scale testing by using Exploratory factor analysis EFA ….… …22 4.3.2 Regression analysis ……………………………………………….….…… 25 4.3.2.1 Testing relationship of attitude function, conformity and purchase intention ……………………………………….…………………………………… 25 4.3.2.2 Regression analysis for variables ……………………………… 26 4.4 Conclusion ……………………………………………………………………… 30 CHAPTER IMPLICATIONS AND CONCLUSIONS………………………… 31 5.1 Introduction …………………………………………………………………… 31 5.2 Conclusion ……………………………………………………………………… 31 5.3 Managerial implication ………………………………………………………… 32 5.4 Research limitation and direction for future research ………….……………… 32 Reference ………………………………………………………………………… 33 iv APPENDIX 1: SURVEY QUESTION ………………………… 36 APPENDIX 2: CRONBACH’S ALPHA ……… 38 APPENDIX 3: EFA RESULT OF INDEPENDENT VARIABLES 40 APPENDIX 4: REGRESSION ANALYSIS RESULT………… 43 v LIST OF FIGURES Figure 3.1: Research Procedure …………………………………………………… 14 Figure 4.1: Histogram ………… ………………………………………………… 28 Figure 4.2: Normal P-P of regression standardized residual ……………………… 28 LIST OF TABLES Table 3.1 Attitude function scale …… 15 Table 3.2 Conformity scale ……………… 16 Table 4.1 Sample specification 19 Table 4.2 Data coding 20 Table 4.3 Cronbach’s alpha result of attitude function …… Table 4.4 Cronbach’s alpha result of conformity ………… 21 Table 4.5 Cronbach’s alpha result of Purchase intention … 2 Table 4.6 EFA result of independent variables 23 Table 4.7 EFA result of variables 24 Table 4.8 Correlation among factors 25 Table 4.9 Regression analysis ANOVAa 26 Table 4.10 Regression analysis of variables 29 Table 4.11 Conclusion ………………………… .30 v Chapter 1: Introduction 1.1 Problem statement & Research rationale Counterfeiting is a profitable industry It is the production of copies that have identical packages, trademarks, and labels as the genuine products but use low quality materials in the production process (Kay 1990) Even though counterfeit goods are affordable, they may be harmful to the public due to the inferior quality of materials Counterfeiting appears to be a major problem for brand name, luxurious, and high priced consumer products A number of industries have encountered counterfeiting problems These industries include foodstuffs, petroleum products, medicines, perfume, cosmetics, glasses, computer accessories, phone accessories, electrical appliances, audio and video cassettes, automobile spare parts, toys, apparel, watches, and leather products However, this study only focuses on those counterfeit items that are used by consumers on a daily basis and consumers know that they are counterfeits Hence, the counterfeit objects in this study will be confined to clothing items and accessories The focal products consist of apparel, watches, leather handbags, purses, shoes, and belts Counterfeiting is a result of the violation of patent laws and is pervasive in most developing nations, particularly developing countries in Asia With a high taste of western products and limited budgets, consumers in these nations consider buying counterfeit goods as an alternative to owning brand name luxurious goods Loss of sales due to counterfeiting should not be considered a major problem since consumers who purchase and use counterfeit goods have no intention to purchase the genuine ones Under this situation, deception is not an issue since consumers know and are willing to pay for the items These consumers consider using counterfeit brand name products as a way to enhance their personal appearance and impress others Counterfeiting may enhance the value of the brand instead of diluting it since only prestigious brand name products have counterfeits (Nia and Zaichkowsky 2000) Counterfeiting has existed for a long time and is now considered as a serious economic, social and political problem (Veloutsou and Bian, 2008) OECD (2008) estimates that counterfeit and pirated goods could amount up to USD 250 billion in 2007 Consequently, there has been a long tradition of academic and industry led-research on the supply and the demand side of counterfeiting However, there is a general absence of agreement in the literature with respect to the scope and magnitude of this problem, its actual social and economic impacts, and the effectiveness of anti-counterfeiting measures (Eisend and SchuchertGueler, 2006) On the other hand, researchers and analysts consent that the phenomenon is global in nature and that an in-depth understanding of the factors driving counterfeiting activities are a pre-requisite for national, industry or policy-driven actions While globalization has resulted in the lowering of international barriers, it has also created new opportunities for illegal trade The international trade in counterfeit products is growing at an alarming rate and, according to the International Chamber of Commerce, is worth $650 billion Vietnam is ranked fifty-third globally in terms of the size of its counterfeit market, with a total counterfeit market value of US$ 122 million, including software (US$ 96 million), books (US$ 16 million), movies (US$ 10 million) and cable (unauthorized connections) (US$ 1.37 million), as well as clothes, cosmetics, watches, etc The US International Trade Commission and The Allen consulting group (2003) define counterfeiting as “the unauthorized duplication of a product protected by one or more intellectual property rights Regarding origin, quality and price Dornoff and Tatham (1972) observed that original product brand image was the main driver of the purchase of fakes (Penz and Stottinger, 2005) The economy of Viet Nam in recently years in growth, in 2011 GDP is 5.89% (http://vneconomy.vn/20111229091632776P0C9920/tang-truong-gdp-nam2011-dat-589.htm) In recent years due to strong economic growth, improved living standards have changed consumer trends in Vietnam in all fields, increase the need of the consumer (Keynes theory) For example In fashion industry, the Viet Nam consumer more and more family with fashion brand such as Versace, Emporio Armani, Giovanni, San Sciaro, Valentino Creations, Carven Paris and Pierre Cardin, Guess The economy growth the same with the demand of the customer is more and more difficult, they want to use the products with famous brand with high quality, high price and the after sales service is good However, there are still remain a lot of consumers still want to use the counterfeit products of the famous brands This cause the difficulty for the company which business the real products And also influence to the Brands that have face products on the market 1.2 Damage caused by counterfeit goods Turnover decreased from 20-30%, even 50% is consequences that many businesses are suffering due to the problem caused by counterfeit goods and throughout the years the fight against counterfeit goods, counterfeit goods still held strong and fierce in the business However, with the sophistication, increasingly unpredictable evolution, counterfeit goods still business on the market and put many businesses facing risk, especially enterprises with products related to health lives and safety of consumers The fight against counterfeiting in worldwide In worldwide, the fight against counterfeit goods, has become a global issue and developed countries are specially interested in And to be able to fight this dangerous problem many countries have been linked together to act together 10/2011, the United States, Australia, Canada, European Union, Japan, Mexico, Singapore, Switzerland have signed an agreement – Anti-Counterfeiting Trade Agreement (ACTA) This agreement will strongly help the prosecution of criminal and civil against manufacturers of counterfeit products, as well as imitation of the famous brands 1.3 The fight against counterfeiting in Viet Nam In Vietnam, with the strongly on the functions of agencies, the newspaper has helped many businesses in the fight with a counterfeit goods However, the counterfeit goods still maneuver and fight as they increasingly sophisticated, more and more unpredictable According to the Administration of the market from January to March 11/2011, the Department examined 793 for production processing and trading of counterfeit goods, infringing intellectual property rights, administrative penalty in the amount 4.034 billion worth of confiscated goods destroyed more than $ 1.8 billion, Which of cases were prosecuted as criminal fraud business performance Rinnai gas stove; counterfeit bottled sauce and printing, copying, publishing copyright infringement More dangerous, as the number of piracy cases, counterfeit products related to safety and health of consumers, such as drugs, cosmetics, helmets, automobile parts, motorcycles are increase (http://www.qltt.gov.vn/) This situation makes consumers extremely nervous, confused and constantly vigilant The commercial production of the 30 The linear regression equation as follows: Purchase intention = -0.124 * AF + 0.301 * C Results of regression analysis show that conformity has the strongest effect on Purchase intention with Standardized Coefficients β C = 0.301, the second is attitude function with Standardized Coefficients β AF = - 0.124 Results of regression analysis also show that has Sig = 0.000 < 0.05, and conformity has Sig = 0.001 < 0.05 Therefore, conformity and have strong correlation and statistic significance when included in model analysis Attitude function has Sig = 0.102>.01, it mean attitude function have weak correlation and statistic significance when included in model analysis 4.4 Conclusion In this chapter the data collected from the survey was analyzed by using SPSS version 20 Reliability Testing, Factor Analysis EFA, and Regression Analysis were run The result of three hypotheses in all kinds of sectors, state sectors, and other sectors are sum up as table below: Table 4.11 conclusion Hypotheses Beta Sig Conclusion With all kinds of sectors which include state sectors and other sectors Hypotheses (H1) counterfeit luxury attitude function , When goods the have it will affect -.124 102 Not supported 000 Supported consumer’s purchase intention positively Hypotheses (H2) When counterfeit luxury goods have conformity it will it will affect consumer’s purchase intention 301 positively The reason why attitude function not affect to purchase intention maybe come from the Vietnamese culture 31 - The first main reason is consumers don’t care about attitude function In another way we can say they are n o t considering attitude function as the main purpose of their purchasing - The second main reason is consumers not fully think that counterfeit luxury brand products can identify their appearance, their social position Chapter IMPLICATIONS AND CONCLUSIONS 5.1 Introduction This chapter is used to conclude about the research, conclusions are drawn based on the obtained results and recommendations for future research In chapter one of this thesis, the research objectives and two research questions were mentioned, and from these two questions, three hypotheses were created, in next section conclusion of each hypothesis, and research objectives will be made Moreover, in this chapter implications and limitations of the research will be discussed, and it will be finished by recommendations for further research 5.2 Conclusion This study has attempted to identify the influence of consumer’s value type on purchasing counterfeit luxury goods focusing on ness From the evidence described above, some conclusions may be drawn about consumer’s attitude and purchasing behavior This study advances theoretical understandings of consumer’s buying behavior on counterfeit luxury goods Across this study we find that consumers will buy counterfeit luxury goods because of the ness and the conformity Importantly, this study also suggests attitude function will possible to have influence on consumer’s counterfeit consumption behaviors But in this study, there was negative relationship between attitude function and purchase intention on counterfeit products Maybe, there was different between culture of Viet Nam and other country I thing that Vietnamese people don’t see famous people or their friends as their target objective for using luxury products In recently, there was many scandal regarding famous people, and this maybe is the answer for re reason why there was negative relationship between attitude function and purchase intention 32 5.3 Managerial Implications The study finds numerous implications for anti-counterfeit businesses and will be helpful for developing marketing strategies of fashion brands To begin with, according to our research, many people like to buy luxury goods because they can show off ness It gives the managers some hints that if too many people abuse the ness, the mark will lose its original value They should develop some strategies to protect their brand Finally, as we know, luxury goods industry is different from other industries and very unique So as to succeed, it is important for marketers to understand their target market and how their customers evaluate products and make buying decisions 5.4 Research Limitations and Directions for Future Research There are some limitations of this research First of all, the survey to collect data use for this research only conducted in Ho Chi Minh City, therefore it may not reflex truly for the whole Vietnamese economy system Further research could conduct a survey for the whole country, it will increase reliability Second, the time of doing this research is quite short and the number of participants in the survey was quite small, the ability of research author is limited, so the quality of the research may not so high Further research should increase the number of participants and put more time and effort in doing research that could improve the quality Third, there are many determinants that affect on Purchase intention, but in this study only three determinants were analyzed, Some other variables that may influence the purchase intention of counterfeit luxury goods can be considered in the further research such as brand image and product involvement so further research could extend the number of determinants which may explore and contribute more valuable knowledge to theory and practice Four, the studies conducted in this study mainly designed by words and pictures in print advertisement As it is difficult to distinguish between counterfeit and original goods through photographs, using real items would be more meaningful In the further research, the real 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be a symbol of social status Iphone would help me ft into important social situations Rating scale 7 I would likely to be seen using Iphone 5 I would enjoy it if people knew I was using Iphone 5 Iphone 5would reflect the kind of person I see myself to be Iphone would help me communicate my self- identity 37 Iphone would help me expressive myself Iphone would help me define myself I want to buy the products 10 Very likely I'm going to buy the product 11 I purchase luxury products when I see friends or colleagues own them 12 I purchase luxury products when I see a celebrity wearing or using it 7 13 I purchase counterfeit luxury products when I see friends or colleagues 14 own I purchase counterfeit luxury products when I see a celebrity wearing or them using it Personel information Gender Male Female Single Married Marital status Income per month (1,000,000vnd / month) 2–5 6– 10 >11 – 15 >15 38 APPENDIX 2: CRONBACH’S ALPHA Reliability Statistics Attitude function Cronbach's Cronbach's Alpha Based on Alpha Standardized Items 936 936 N of Items Item Statistics Mean Std Deviation N Attitude Function1 3.8661 1.66746 254 Attitude Function2 3.7087 1.62301 254 Attitude Function3 3.6850 1.74093 254 Attitude Function4 3.8071 1.75309 254 Attitude Function5 3.0906 1.59411 254 Attitude Function6 3.0709 1.56887 254 Attitude Function7 3.4646 1.67660 254 Attitude Function8 3.3701 1.70237 254 39 Reliability Statistics conformity Cronbach's Cronbach's Alpha Based on Alpha Standardized Items 862 865 N of Items Item Statistics Mean Std Deviation N Conformity1 3.1693 1.39128 254 Conformity2 2.8740 1.47706 254 Conformity3 2.5000 1.32995 254 Conformity4 2.3307 1.29795 254 Reliability Statistics purchase intention Cronbach's Cronbach's Alpha Based on Alpha Standardized Items 961 961 N of Items Item Statistics Mean Std Deviation N Purchase intention1 3.7362 1.28741 254 Purchase intention2 3.6496 1.28508 254 40 APPENDIX 3: EFA RESULT OF INDEPENDENT AND DEPENDENT VARIABLES KMO and Bartlett's Test KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling 807 Adequacy Bartlett's Test of Sphericity Approx Chi-Square 3185.258 df 91 Sig .000 Communalities Initial Extraction Attitude Function1 619 450 Attitude Function2 663 536 Attitude Function3 710 696 Attitude Function4 786 697 Attitude Function5 782 719 Attitude Function6 868 812 Attitude Function7 756 754 Attitude Function8 815 736 Purchase intention1 888 980 Purchase intention2 881 871 Conformity1 607 491 Conformity2 606 529 Conformity3 789 770 Conformity4 779 843 Extraction Method: Principal Axis Factoring 41 Total Variance Explained Facto Initial Eigenvalues Extraction Sums of Squared Loadings r Rotation Sums of Squared Loadingsa Total % of Cumulative Variance % Total % of Cumulative Variance % Total 6.954 49.674 49.674 6.643 47.450 47.450 6.271 2.230 15.927 65.600 2.097 14.975 62.425 4.584 1.406 10.043 75.643 1.145 8.180 70.604 2.071 728 5.201 80.844 512 3.658 84.502 495 3.538 88.040 476 3.397 91.437 314 2.246 93.683 257 1.839 95.522 10 217 1.552 97.074 11 175 1.248 98.322 12 097 695 99.017 13 084 601 99.618 14 053 382 100.000 Extraction Method: Principal Axis Factoring a When factors are correlated, sums of squared loadings cannot be added to obtain a total variance 42 Pattern Matrixa Factor Attitude Function1 741 Attitude Function2 722 Attitude Function3 800 Attitude Function4 868 Attitude Function5 714 Attitude Function6 872 Attitude Function7 775 Attitude Function8 899 Purchase intention1 982 Purchase intention2 934 Conformity1 071 Conformity2 720 Conformity3 858 Conformity4 990 Extraction Method: Principal Axis Factoring Rotation Method: Promax with Kaiser Normalization a Rotation converged in iterations Factor Correlation Matrix Factor 1.000 585 030 585 1.000 219 030 219 1.000 Extraction Method: Principal Axis Factoring Rotation Method: Promax with Kaiser Normalization 43 APPENDIX : REGRESSION ANALYSIS RESULT Correlations Attitude Purchase Function intention 052 583** 411 000 Pearson Correlation Attitude Function Purchase intention Conformity Sig (2-tailed) N 254 254 254 Pearson Correlation 052 229** Sig (2-tailed) 411 N 254 254 254 Pearson Correlation 583** 229** Sig (2-tailed) 000 000 N 254 254 000 ** Correlation is significant at the 0.01 level (2-tailed) Model Summaryc Model R 250b Conformity R Square Adjusted R Std Error of the Square Estimate 055 1.22696 062 a Predictors: (Constant), Attitude Function, Conformity b Dependent Variable: Purchase intention 254 44 ANOVAa Model Sum of Squares df Mean Square F Sig Regression 25.181 12.591 8.363 000c Residual 377.866 251 1.505 Total 403.047 253 a Dependent Variable: Purchase intention b Predictors: (Constant), Attitude Function, Conformity Coefficientsa Model Unstandardized Standardize Coefficients d t Sig Collinearity Statistics Coefficients B Std Beta Tolerance VIF 102 660 1.515 4.001 000 660 1.515 Error (Constant) Attitude Function Conformit y 14.15 3.195 226 -.113 069 -.124 328 082 301 1.643 000 ...UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business DINH VAN KHOA FACTORS INFLUENCING PURCHASING BEHAVIOR OF COUNTERFEIT PRODUCTS ID: 60340102 MASTER OF BUSINESS... and often lower quality replicas of products that typically possess high brand value (Lai and Zaichkowsky 1999) Counterfeit products are often produced with the intent to take advantage of the... enterprises is the object in the line of production and trade of counterfeit goods of that enterprise, or is the product of the business is high, not yet the vast majority of serving the masses One reason