Factors that Influence Purchasing Relationship in Automobile Industry of China
Introduction
The USA, Western Europe, and Japan markets for the automobiles are almost stagnating causing an increased attention and concern to the world automotive industry. They have turned their interest in China market for cars. This is associated with the fast growing economy in China unlike that of European nations and the USA. The Chinese market for cars is indeed the turning point for all auto companies. The environment is conducive to start production in China to supply the potential markets and then export from there to other world markets. This literature will focus on the purchasing relationship in the automobile industry in China. Until 1975, the economy of China was dormant regarding the automobiles because no established firm was producing passenger cars (Shimokawa, 2004, p.15). The primary objective of this literature review paper is to analyze the factors that influence purchasing relationship among consumers of automobiles in China.
The use of the car as the mode of transport was seen a prerogative of the relatively small population. The owners were the high-ranking officials in the government. The vehicles that existent then was the trucks and motor vehicles. The development of the economy took a new trend though very small because by 2004, the domestic passenger car were 2.3 million units a number that is very low compared to the huge population (Chen et al., 2006, p. 5). The number being slow, the sales of automobiles to China that year was a threat as they ranked third by rivaling Germany apart from the two leaders that are USA and Japan market in automobiles. The increased growth in the economy of China is indeed showing a long-term trend in the auto industry. The fact that China is undergoing significant industrialization attracts many auto companies to keep an upper eye on the economy so that they get the highest share in the country. Local production is highly preferred than importation in China (Holweg, Luo, and Oliver, 2008, p. 80).
The increased domestic demand for cars in China, which is influenced by local production rather than importation from developed nations, attracts automobile companies to enter the country and establish new firms in China. Through market research, the early companies that entered China and started producing cars from there are indeed flourishing in sales. For instance, the Volkswagen Company who has been present in China since 1985 is topping to be the leading foreign firm in China based on the revenue they are generating (Holweg, Luo, and Oliver, 2008, p, 88). This has made the Volkswagen Company to invest more in the Chinese market. They have planned to spend US $1.7 billion in the Asia- Pacific region by 2010 of which majority of these investments was going to China.
The growth in the Chinese economy from a low note to very rapid move raises concerns and thus this literature intends to seek the factors that influence the purchasing relationship in the automobile industries in China. There so many questions that the situation of the Chinese economy needs to be answered hence there is room for more research that would respond to these questions. Such issues that have arisen include; what factors are fuelling the rapid growth of Chinese economy? How are the local industries responding to the change in growth? What are some opportunities for domestic and foreign enterprises in the attempt to take the advantage of the growing economy? What implications can we deduce from such rapid growth of an economy?
The graph below shows the development and growth of auto production in industrializing nations and regions. There is a stark contrast to the stagnant and that declining markets in developed regions like North America, Japan, and Europe. The trends to global manufacturing and distribution are indeed long-term in the automobile industry. Most manufacturers of cars are serving local demand and not the exports as Sturgeon and Florida (2000) concluded.
Figure 1: The evolution of car production in selected newly industrialized economies and regions from 1971–2003.
Source: World Motor Vehicle Data (1980–2005)
The literature falls into various parts that include the definition of supply chain management which will cover the information about the whole value chain of the automotive industry in China. Covering the entire value chain is critical because it would give direction to many companies within the auto industry so that they embrace some strategies based on the finding. The other part of this literature is the long-term and short-term strategies in the automobile companies to increase their market share in the continuous growing economy of China. The paper also covers the quality and purchasing relationships of the vehicles in Chinese culture. The culture is very critical in addition, as it gives us the factors that are indeed influencing the buying relationship in China notably the purchase of automobiles. Some factors discussed in this literature that is essential in the auto industry as far as the automobiles are concerned are the brand prestige, telematics services, peer, friends and family influence, digital experience, safety and reputation of the manufacturers’ products as demonstrated by Montemayor, and Pirvulescu, (2015, p. 61). The details would be covered in this literature, and it is useful to all automobile companies that wish to enter the Chinese market. The customer needs based production is currently the core of any business since customers are well informed, they know exactly the product they want and how they want it.
Supply Chain Management
There has been a regular increase of interest in the supply chain management since 1980. This can be associated with the benefits that firms get when they are involved in collaborative relationships either internally or externally. Companies cannot compete effectively in isolation as one entity in the supply chain. With the many concerns to understand the value chain better, several definitions have been proposed by researchers in both literature and practice (Akgun and Gurunlu, 2010, p. 13). According to Cox, Blackstone, Spencer, (1995), supply chain management refers to the combination of all the processes that are involved from the purchase of production of raw materials to the ultimate consumption of finished product by the final consumer within the supply chain. Cox, Blackstone, Spencer, (1995), also add that supply chain management entails the functions that can be within or outside the organization that makes the value chain to make products and provide services to customers in the most convenient way.
Several other definitions include that of Lummus and Alber (1997, p. 11), where they reported that supply chain is the network that involves connection of entities that through which materials flows. The entities that they were referring to included suppliers, manufacturers, distributors that are retailers and wholesalers and customer. Lummus et al. (2001, p. 427) came up with another definition to supply chain management as any effort that is involved in producing goods and services in their final form from the supplier of raw material and inputs to the ultimate customer of the product or service. The processes of planning, sourcing, making or manufacturing and delivery or distribution can define the efforts. A focused customer definition of supply chain management according to Hines (2004 p. 76) is that supply chain strategies need a system in totality that views the linkages in the value chain of a product that combined work efficiently to make a satisfaction of consumer needs. As a consequence, the costs involved in the value chain need to be lowered as the producer adds value to the product to make the customer fully satisfied. On a global point of view for global companies, supply chain management is the process of integrating the main activities of the business across the whole length value chain with the core purpose of adding value to a product so that all stakeholders benefit (Lambert, 2008).
For the automotive industry, the supply chain will comprise all the activities and efforts that are involved from the point of collecting various raw materials and bringing them together to manufacture an automobile. In the current market, the customer is in the heart and mind of the manufacturer so that the products they are offering on the market meet the customers’ needs and wants (Tyfield, Ely, and Geall, 2015, p. 206). In the auto industry, consumers are convinced that the quality of the vehicle is dependent on the price charged. Thus, they tend to associate the expensive cars to be of high quality as compared to the cheap ones. The most important aspect that customers are seeking is safety. With the profound social, cultural and economic changes in China as a developing economy, there is great potential for the automobile industry than in any other country.
There has been a continuous annual growth, which is not expected to grow further than this. The unexpected increase in growth does not mean China would drop her position in nations that buy cars in the future. Strategizing by the automobile companies is paramount to capture more significant market share in the Chinese economy (Tyfield, Ely, and Geall, 2015, p. 207-208). The company that would understand best the needs and preferences of the Chinese car consumers and what triggers them to purchase a particular brand of car will dominate the market. The automobile companies whether the local or foreign need to give Chinese market what they want regarding vehicle specifications and buying experience.
The increasing gross domestic product of China has led to fast growth in the consumer market. The incomes in China have generally increased. Thus, the Chinese consumers have increased their interest in many products that were not within their reach due to financial constraints. Automobiles fall into the category of the products that the Chinese could not achieve in the previous years (Shimokawa, 2004, p.15). The automakers knowing that there is a ready market for their cars in China, all they need to do is having a clear understanding of the consumer tastes and preferences and their buying behavior so that they reach them very well. Understanding the supply chain in the auto industry will make the companies involved in the manufacturing and selling of automobiles manufacture cars that will meet the current and future needs of the customers. Therefore, the client is the core where the decision of car manufacturers should be rotating on.
The Chinese Culture
The consumer attitude towards a product is influenced by the culture in which they live. For the auto industry to understand the Chinese consumers, who are unique in consumption habits, automobile companies need to understand the stereotype of the Chinese culture fully. As explained by Hofstede (2010 p. 37), the Chinese culture tend to have a major characteristic of collectivism something that is biased as whenever one person is not for a given product, there is a significant probability that many other people in the economy will not like the product too. Collectivism includes a high bias towards obedience, hierarchies, significance of rank and the urge to have smooth social relations (Hofstede, 2010 p. 41). Research carried out by Lee (2011 p. 12), proposed that in the Chinese culture there is need of a modified Fishbein model on the behavioral intention of people that predicts the consumer purchase behavior. This modified proposed model can be used today to predict the behavior of consumers in China.
Quality
The older generation was buying premium cars to reflect their social status. The cars being referred to are the premium cars, like Audi, BMW, Acura, Lexus, Mercedes, Volkswagen Touareg, Maserati, Lincoln, Ferrari, Bentley, Porsche and Range Rover. With the current generation which is very sophisticated is not showing status in the society but they buy these premium autos for other reasons (Bryson and Atwal, 2014 p. 203). According to Sha et al. (2013, p. 24), most Chinese premium car consumers purchase these vehicles due to reasons like the brand sentiment, the purpose that the car would serve and more, so the value added services that these premium cars are offering. The most dominant cars in China for the growing young generation are the Germany automakers like BMW, Audi, and Mercedes. These account for 80% of the market share. The other 20% is the cars from US and Japan premium cars (Bryson and Atwal, 2014 p. 203). Therefore, it can be postulated that the Germany auto companies in China market dominate the market for the premium car.
The ever-growing market is complicated thus; it needs research that would help automakers to serve the market better. The Chinese see buying a car as the same priority of purchasing an apartment and paying for children education. With this conclusion, it shows that Chinese consumers of automobiles value quality by willing to pay more for a car in the same priority as buying an apartment. The increasing income to the Chinese in will allow them to purchase more premium cars by the year 2020 (Sha et al., 2013, p. 24).
Customers cannot be equal as they earn different incomes and have different tastes and preferences when it comes to automobile consumption. Failing to consume premium cars does not mean the Chinese buying second-hand cars do not value quality. The China’s auto market is changing significantly since 2008. At the onset of the global financial crisis, automobile dealers and suppliers get little liquidity levels and high debts. As a result, car dealers in China are reducing prices to increase demand because as the law of application states, when the prices of a product are reduced, the quantity demanded increases (Gong, 2013, p. 247). According to the Association of Automobile manufacturing companies in China, the government breakdown of the taxes and subsidies for brand new vehicle purchases, the sale of vehicles grew by 83.6% in September 2009. Income can dictate the kind of vehicle a customer would buy. The premium car buyers in China are optimistic about their future (Gong, 2013, p. 249). Most of these people had confidence in their professional careers while the rest were optimistic of business prospects thus spending lavishly on premium cars was affected by the assured incomes.
Purchasing Relationships
The purchasing relation is the process that goes beyond the mere maximization of value in a transaction but at the same time, the opportunity to do the business ending up forming a strong long-term relationship between the parties involved. The formed relationship as a result of transacting leads to a mutual benefit, value addition and competitive advantage to all stakeholders. In the supply chain of the automobiles, many parties are involved in the chain and therefore forming purchasing relationship amongst different parties in the chain would create not only mutual benefit but also customer loyalty. If the manufacturers produce the type of vehicles that the customers want, they will regularly be bought (Montemayor and Pirvulescu, 2015 p. 61). As it is evident in the Chinese culture, collectivism is their culture, whenever a brand of the vehicle satisfies one customer or a group would tell their friends who are potential to come and have cars from that manufacturer. In the Chinese market, the auto manufacturers need to know the kind of products and the consumption behavior to fit fully in the competitive market.
The vehicle dealers in China are confident about the industry growing big to reach that of Japan and America. Through well-established relationships, the manufacturers are aware that the face of the brand as that is what customers love influences the Chinese dealers. This information has been passed to the manufacturers playing a vital role to make the relationship a long-term one (Montemayor and Pirvulescu, 2015 p. 61). The Chinese buyers have a taste with certain brands and have had a significant role in directing buyers to the kind of vehicles they buy first. With the issue of globalization and digital culture, things are changing in the Chinese market. Hence, the customers are no longer influenced by what others feel towards a given brand.
Intensive research in the field of automobile consumption behavior among consumers in both developed and developing nations has been carried out. This literature review will explore some of them, particularly that relating to customer trust towards various automobile products. According to Nayeem and Casidy (2013, p.734), in Australia, the time that consumers spend to come up with the final decision on what car to purchase depends on the advice that the customer gets from family members. The pieces of advice have a great connection to what time the car dealers take to deliver products to their clients. They further stated that in Mexico and Spain, the most influencing factors on the purchasing behavior of automobiles is the country of origin and brand reputation.
Like in many economies, the Chinese women are playing a vital role in the automobile industry, especially for premium cars. When choosing the car to buy, women prefer exterior styling, comfort, and safety of any car. The men counterparts see these features as minor because when selecting a car to buy, men value powertrain technology, recognized brands in the society and bigger model (Tyfield, Ely, and Geall, 2015, p. 210). These findings encourage the auto manufacturers to have market segmentation so that they meet each segment better. With these findings, they can produce vehicles based on gender as men have a different taste from that of women. The foreign companies opening a dealership in China have an added advantage although the Chinese culture seems to look a bit different. They can correct mistakes they did in their home market. This would improve the share market in China.
With the element of changing cars after every six to eight years by most of the Chinese families, the auto manufacturers will enter into a contract and have to sign some agreements. These would ensure customer loyalty as the auto manufacturers need to offer a good deal to their clients when they bring used cars for replacement with new ones (Shimokawa, 2004, p.15). With such a culture, the bond that exists between dealers and the manufacturers should last forever because each party needs one another. The purchasing relationship is critical in the automobile industry because different vehicles from various manufacturers have their spares from the same manufacturers thus when one buys a given brand, an automatic relationship comes into existence.
Customer trust in triggering purchasing decisions
Trust is the confidence that an individual has towards something. In automobility, trust refers to the level of trust that the clients have towards a given brand or car from the particular manufacturer. According to Darsono & Susana (2014, p.10), the mentality that consumers have towards the already brand in the market will define the quantities that the company is likely to sell in the same market in the future. If the previous brands have shown quality, many customers will be happy to trust the brand. However, if a company wants to venture into the car business in various regions, it needs to do research so that it identifies the specific needs of customers and best serve them. Car consumers in Asia will not have the same purchasing behavior like those in Europe, America or any other continent.
Miyamoto and Rexha (2004, p.313) stated that building trust for your customers assures the company loyalty. They added that in the automobile industry, building brand customer trust requires a symbiotic relationship between the clients and the car dealers. The customer needs to see the value of their money through assuring them that the car will satisfy their needs. According to Andaleeb and Anwar (2006 p.39), a win-win relationship, the customers will be attracted to buy products that are worth the value they pay to enjoy the services: this seconds the research by Miyamoto and Rexha, 2004. Utilization of technology to ensure personalization and customization of the services that they offer to the customer value of their money. Through this, the car dealers end up enjoying services from the car they purchase and the company earning healthy profits too. With web connections, partnerships and supply chain availability to the customers shows transparency and indeed building trust with the enterprise.
Through market research and intelligence, a company will develop a brand that best fits customer’s needs and wants. They will, therefore, have the rationale that the company is listening to them and understanding them best. Through innovations like that of using telematics, the company manages to gain competitive advantage and looks very competent before the customers (Miyamoto and Rexha, 2004, p.315). Thus, they will end up building strong relationship and trust towards the company. In China the aspect of culture being key on influencing customer purchasing behavior, they will pass on confidence that they have on particular brands and inform the next generation about the brand. Customer care can also make customers trust car dealers. The after sales services are key here because the way the car dealer serves the customer the more likely to bring them back and attract others.
How has that brand in stock been viewed by the clients who have had experience with the company brand? If the first people to have an encounter with the brand never liked, it will be hard for new customers to prefer buying such brand. Hamin, Baumann, and Tung (2014, p.57) confirmed the previous studies by stating that the brand reputation and country of origin influence consumers’ purchase decision. They further added that the time that a consumer will spend before they come up with their conclusion on which car to purchase relate to the trust that an individual has with the company, brand or the dealer they are purchasing the car. In Brazil, things are not far from the studies carried in other regions because that Brazilians will have their purchase intentions emanating from the love and loyalty that they have developed towards a product (Fetscherin and Toncar, 2014, p.167-169). As one grows, they have ambitions and desire for particular products thus, what they have loved before will guide them to make a decision on what product to purchase.
The auto manufacturers have the task of seeking to know exactly what the customers want so that they have a long-term relationship in the value chain. “You cannot have one vehicle for life,” a Chinese customer explains during a survey by Sha et al. (2013) through McKinsey Company. The findings of their survey shown that most Chinese families replace cars after every six to eight years of use. This shows their trust because they replace them with the companies that they acquired them from. For the owners of premium cars, who seem to be the upper class in Chinese society, were ready to replace their vehicles after two to three years. Every person values safety hence, the public service vehicles and all other passenger cars need repairs regularly and good services so that the customers continue using them.
Chinese Buying Preferences for Competitive Advantages to Manufacturers
Most of the Chinese vehicle buyers are first time buyers. Therefore, to maintain a purchasing relationship, manufacturers have the opportunity to offer vehicles that meet customer needs and more so surprise and delight them with more feature. Companies with significant market share have a psychological effect on consumers thus; the new companies seeking to enter that market should not just enter the market but need to understand their customers entirely (Lane and Potter, 2007, p.1087). Most of the Chinese like the automotive thus there exists a huge market in China.
The results published about the automobile purchasing behavior vary from one nation to another like the findings of the entire globe findings. For instance, the study by Darsono and Susana (2014, p.11) on Indonesians found out that the theory of planned behavior by Ajzen (1991, p.183) play a fundamental role in the consumer behavior. The intentions to make a decision on what automobile to purchase in Indonesia is entirely influenced by the attitude of individually guided by norms of the society. According to Qu, Liu and Zhu (2014, p.56), in China, similar behavior is evident because culture plays a key role. When we talk about norms, we are referring to the culture and beliefs that one has as per their society.
These two studies in China and Indonesia bring into light that before an automobile company comes up with a model to the Asian nations, they need to have a thorough study about what the culture allows being good for the society and what is bad. Through this, the company will end up thriving very fast because they will offer a brand that is supported by the culture. To justify that culture is the main influence on the purchasing behavior in Asian countries, Ou (2007, p.13) carried comparative analysis for three nations in Asia. These nations included China, Taiwan, and Thailand. The findings of the study found out that pre-purchase recommendations and cultural characteristics are key in influencing the final decision of customers making their decision.
The top factors that affect buying behavior in China are similar to that of the U.S. and Japanese clients. These factors are as discussed in this literature; they include brand, price, fuel economy, exterior styling for the female consumers, and the services offered to the customer after purchase. The customers may prioritize these factors differently, but they significantly represent the vehicle purchasing paradigm components (Nelson and McLeod, 2005, p.517). The price of vehicles and fuel economy are very sensitive to the customers, as they perceive the cost and the operation of the vehicle. Brand, on the other hand, relates to the reputation of the manufacturer to the consumers. The customers are becoming more sensitive not only to these five factors but many others will influence their purchasing behavior in the future.
There is a new wave in the automobile industry with knowledge that customers have as either new vehicle buyers or buyers of used cars. Most clients are focusing on safety, quality, technology, and depreciation value of a given brand. These factors are indeed shaping the market since the customers have a choice of buying decisions. Auto buyers from different parts of China have different purchasing behavior influenced either by the city they come from or by region (Lane and Potter, 2007, p.1087). Those in the rural setting have different tastes from those residing in the towns.
The prices of new vehicles in China are very high as compared to the same new models elsewhere. The customers are optimistic the prices would go down in the future thus they are suspending buying the cars at these high prices. Thus, in one thousand Chinese only twenty-four own vehicles. These statistics give the automobile industry hope for business in China. The Chinese automobile company cars are very expensive than the imported cars (Zhu, Sarkis, and Lai, 2007, p.1046). To measure development progress, this will be a reverse in the future if indeed the industry is undergoing development.
Factors that Influence Purchasing Relationship
In the past years between 1980 and 2000, the Chinese were holding their culture. Family members and friends influenced all the decision individuals were making in some way during those years. The early automobile companies like Volkswagen who had established continued to make profits because the Chinese had tasted their cars and seen them serving their needs. With globalization, the culture is changing and thus some factors contribute to purchasing relationship in the Chinese automobile market. Some of the most influential factors that the paper covers in this literature review include brand prestige, peer influence, telematics, digital experience, safety, and reputation.
Brand prestige
Brand prestige is defined as the relatively high-status product and service positioning that customers associate with a particular brand (Steenkamp, Batra, and Alden, 2003, p.55). For over last three decades, the Germany automobile companies were ranking one when it comes to brand prestige. Whenever one was seen driving a Mercedes car, Volkswagen, Land Rover, he or she was viewed to be of high social class. These cars are very expensive which most customers associate with the quality of service that the cars offer. They are not only comfortable to drive but also very fast hence they save the valuable resource time. Dubois and Czellar (2002, p. 4) argued that for a product to be seen and judged prestigious, the features are inherent and unique as compared to other brands. They continued to explain that product categorization regarding performance and quality for a long time brings perception to the customers that the product brand is prestigious. Therefore, manufacturers need to capture the customers by offering the cars with the quality that the clients expect. Provided the clients get the best service from a given brand, there is the likelihood that they will perceive a brand as unique and prestigious to them.
Prestige perception can be as a result of exceptional accomplishment that is inherent from prior generation products (Dubois and Czellar, 2002, p. 6). Additionally, Vigneron and Johnson (1999, p. 8) claim that brand prestige can be developed through interactions between the firm and the customers it serves, the product actual attributes and symbolic values. A brand can, therefore, exist because of the roles that brand experience and brand personality play in the market. Brand experience, which relates but conceptually very different from the other brand concepts like brand image, attitude and awareness are currently drawing attention to the discipline of marketing (Brakus et al., 2009, p. 56).
According to EL-Omari (1991, p.25), the decision on what car to purchase is directly influenced by the income that an individual gets. Personal resources will tell what cash can be given to luxury as most people see the car belong to the category of the luxury budget. The research also found that a comparison of what cars other people have purchased influence the decision on what car to go and purchase. Some people compare themselves to others. With a good income, the customer has to choose the brand to buy. One customer during the interview for the research said, “I work hard to buy an exact car like that of my uncle; it is comfortable and speedy. I just love it, and that is the only car I can buy.” The car that his uncle was driving is a Mercedes. This shows that the customer loves the brand and is ready to have the same car.
According to Chang and Chieng (2006, p. 931), the brand experience is subjective to the innate consumer responses. These can be sensations, cognitions, and feelings towards a brand. A brand stimulus is always developed as part of the brand design and identity. Customers have developed the perception of the shape of a car and if the manufacturer makes a car of high quality but the shape is not exactly what the customer wants, there is a problem of losing such clients. Brand experience occurs to an individual in their process of searching, buying, receiving and using the product (Brakus, Schmitt, and Zarantonello, 2008, p.176). As one consumes a product like for our case the driving of cars, they gain experience and can attest to that product as being either good quality, or it is a fake product. Due to tastes and preferences among different consumers, they will not give the same information on consuming a product, but it cannot happen that many customers who have experience with your products give negative feedback. A consumer who does a product search acquires information about a product and ends up buying the product can provide accurate information as to whether the product served him or her as expected. This is because such a customer is wholly experienced about the brand.
Brand personality is an attribute that contributes significantly to the brand prestige. Sung and Kim (2010, p. 641), defined brand personality as the human characteristics, which are associated with a particular brand. Some customers never feel like they are driving or they own a vehicle unless it is a specific brand. They have developed a personality towards that particular brand to be the best car. Therefore, brand personality can be associated with customer loyalty because if someone has developed a preference towards a product, he or she will always buy that brand. Brand personality is an affiliate to brand attributes, symbol, price, category association and the distribution channel. Hence, if brand personality is in the mind of the customer, they make and maintain a belief in a product that keeps them to keep on using a given brand. Brand prestige has a positive impact on the customers, as they are satisfied with products that they have developed prestige towards such brands.
Brand prestige, therefore, will influence the purchasing relationship in the automotive industry. The Chinese culture where the economy is rapidly growing, the net income of the households would allow them to have a brand prestige. The country of origin of an automobile determines the buying behavior of customers who have developed brand personality and eventually brand prestige. Most Chinese love Germany vehicles because of their quality. The efficiency of some Japanese models like that of Honda are some prominent brands for the upper class in Chinese society.
The Volkswagen and Mercedes companies have gained a big market share in the sale of premium cars in the Chinese automobile market. The quality of their cars and the perception of customers that expensive cars are of high quality have made them dominate the market (Zhu, Sarkis, and Lai, 2007, p.1049). Even among small vehicles, the client's brand prestige would continue to play a vital role to the customers when they are making purchasing decisions. Most Chinese clients in the automobile industry are attracted by tangible product differentiation such as brand, safety, engine performance and the appearance of the vehicle. With such features, the Chinese perceived social status and economic status were increased attracting them to buy a given brand.
Telematics Services
The Chinese consumers are moving to the digital world thus embracing technology in their products. According to research in 2012, 85% of the Chinese consumers are looking for the technology incorporated in the manufacturing of automobiles (Bochmann et al., 2001, p. 6). The male customers in the Chinese auto market make a decision on which model of vehicle to purchase based on the technology they find in that model or brand. The Chinese consumers are always willing to spend more on a car that is well-designed embracing the modern technology in its feature. Telematics means the technology used during car manufacturing. Businesses are going global, and the use of modern technology in cars is a competitive advantage to the production companies. In the automotive industry, the global positioning system technology that integrates computers and mobile communication is indeed a development (Wang et al., 2012, p.328). The technology assures the customer safety in case the car is stolen. The car tracking technology where one can track the movement of his or her car at the comfort of their homes indeed attracting many customers to buy the models that have this technology.
In Asian Pacific region, the customers do not look at the features of the vehicle, but they investigate where the components of the car came from which country (Seidenfuss, Kathawala, and Dinnie, 2010, p.490). These consumers have developed trust with particular country’s products. The perception that they have on the component origin is that the quality image of the car depends on the components making the car. Whether is a luxury, or non-luxury car, the component making the car is the baseline. It is what they think makes a car durable and efficient. Therefore, we can conclude that in this region, the price does not matter, as the component of the car is the main thing these consumers look at.
Vehicle telematics makes the car safer that is it very rare to get lost when your car has telematics. With the increased criminal activities, it is never advisable to ask for directions, especially in the cities. The advancement in technology has created safety in the transport sector. It is not in the Chinese market this technology has caught the attention of many people but also to the whole world. To most people, Telematics is the communications, navigations, security, increased infotainment and safety. Technologically, we can define telematics as a black box-like device that receives wireless information more than the wireless radio used by the traffic police and does something useful with the information (Bochmann et al., 2001, p.6). It does mean the utilization of a two-way communication but involves going in both directions.
At first, General Motors used the technology in the OnStar subsidiary corporation where they had an embedded cellular modem to allow information to go both ways. The GM Company made the highest profits. The most important feature of the OnStar Corporation telematics is the automatic crash notification (ACN) (Faezipour et al., 2012, p.96). When the car sensor reports an accident on the road, telematics sends the information immediately to the call center where immediate action is taken to save lives. The information is passed to all nearby public safety answering points and a call to the helpline 911. The technology involves the customer or vehicle user to have many benefits in their vehicles.
Telematics uses centric vehicle information, communication technologies like the network-enabled cars where the driver has in-vehicle services like the Global Positioning System (GPS) navigations, emergency assistance in case of an accident, local search to know nearby filling station and restaurants, and all traffic information (Taylor et al., 2007, p.167). The Chinese men are involved in businesses and with such technologies; they are in a position to reach their destinations faster. The Chinese men are willing to spend more on vehicles that are using this technology hence they would influence their spouses to go for similar cars. It is upon the manufacturers to do a market research and determine the customer need and meet these requirements satisfactorily so that they the gain customer loyalty.
The discovery of telematics has changed the tastes and preferences of many customers since they value safety. The value-added benefits of this technology include the quick response to emergencies, vehicle tracking in case of theft, remote vehicle diagnosis, teen driver management and the safety on the roads as drivers will not be able to text, call and use the phone while driving due to reporting by the telematics. The traffic police have an easy task when diagnosing the cause of the accident. The device helps in analyzing driving patterns thus encouraging healthy and safe driving habits (Faezipour et al., 2012, p.92). With this technology, many drivers are no longer careless. Hence, there is a possibility that the number of road accidents would reduce. Customers with a hint of these advanced technologies will check such feature in the car they want to purchase. The issue of safety is very critical to many hence they would consider buying a car that has installed the technology of telematics in their cars. The purchasing relationship will be developed if the vehicle's manufacturer is offering has the features expected.
The Chinese economy is faced with rapid growth and development. Such are a nation has her people moving the technology especially in the modern world. This leads to an expectation that those involved will have a better understanding of the customer and the environment surrounding them. There is enough workforce in China and more of the Chinese are learning the international language that would allow them to trade in the global market without difficulties. Their workforce is striving to know the English language; hence, they must have gained technology basics as stated by Chau et al. (2002, p. 139). Therefore, they understand fully the information they need. The automobile manufacturers need to incorporate technology devices in the cars so that they get more customers.
Influential buying
Influential buying is the type of shopping where one purchases an item by first consulting with friends, family member and peers. In the Chinese market, many automobile consumers rely prevalently on four disclosed factors when they are planning to buy a car. According to research by Sha et al. (2013), forty-nine percent of the Chinese auto consumers look into recommendations they get from their colleagues at workplace and friends. Sixty-four percent seek family advice first and use that information to buy a car. Fifty-three percent look for information about the cars in the market from various manufacturers’ websites and finally Sixty-four percent are influenced greatly by the information they see in different social media like Facebook (Lane and Potter, 2007, p 1087). Therefore, it is of great importance for the automobile industry in China to act and know where to get most of the customers from. The marketing department in each automobile should bridge the gap and ensure any brand-new release with replete details of their products reach the customers for competitive advantage.
Kotler and Armstrong (2012, p.14) stated in their marketing theory that any marketing intention by a company should revolve around the needs and the wants of consumers. It, therefore, call for market segmentation so that the marketer can identify the exact needs that consumers are seeking satisfaction for. Having an understanding of the purchase intentions for different consumers is paramount in this case. According to Schiffman and Wisenblit, (2014, p. 19), the intention purchase definition is the possibility that consumer will buy a company’s product offered in the market. They added that the intention comes in with the level of trust that they have as far as the product is concerned. Individual consumers will have great purchase intentions when they are convinced that the product will serve their needs best.
Schiffman and Wisenblit, (2014, p.19), corroborated the research by Dodds, Monroe, & Grewal (1991, p.313-314); that when the measure of purchase intentions of a consumer is seen to be at high level, it indicates that the consumers have very strong willingness to make a purchase of the offered product. Several studies on the consumer purchase intentions not only on automobile products have been done before. However, according to Ajzen (2011, p.1116-1117) and Hong-Youl Ha et al. (2014, p.598-599), there is a big room for further studies that will lead to empirically test more the antecedents and variables of consumer purchase intention. The products offered in the automobile research are complex thus various research on the purchase behavior of different consumers have resulted in very different findings for consumers in the different regions.
Car buying experience behavior in China is deliberate; that is they are influenced by what they see from their friends and see from the automobile industry. Other customers are affected by the comfort they get when doing drive-tests at local dealers (Grinblatt et al., 2008, p. 737). During a driving test, one compares the difference in features that they had seen on the webs and the in the encounter with the cars at the dealer's outlets. During this process, the customers are still gaining experience with that particular brand which may make them loyal to that car brand. Advertising is very vital in any business since it is through advertising that a company’s product is widely known in the market. Through various social media channels, the sharing of company information and products offered reaches many customers. Many people are going digital making most likely young population own smartphones with access to the internet (Lane and Potter, 2007, p. 1089). Through these smartphones, they get so much information that can influence them to buy a given brand of car. Some testimonials have had a taste of the brands. Thus, they attract more customers. Automobile manufacturers need to identify the social media that are accessed by many fans so that they regularly give information about their products.
Digital Experience
With globalization in the modern market setting where every company wants to go international, customers have become more sensitive, and they want to feel digitalized in all the products they consume. In the automobile industry specifically in the Chinese market, the consumer buying behavior is influenced by digital experience. Three features that Chinese customers wish to see incorporated in the vehicles include more accessibility, more comfort, and digital feature (Shende, 2014, p.13). Digital elements, in this case, is an online experience that easy to understand and use. The economy of China is growing rapidly and seeing development and use of technology in the nation; the citizens are involved in embracing the events. They are using modern facilities that allow access to the internet, and this has extended to influence their buying behavior. General Motors have seen this gap and with Chevrolet model, they made the highest sales than any other automobile company in 2008. Chevrolet and General Motors went ahead and started to produce the electric car and ‘green’ which has improved their competitive advantage in China.
Consumer expectations are changing now and then; therefore, a continuous research will come up with details of current needs of consumers. The available literature put it that consumers in the automobile industry have different purchasing behavior that is influenced by the trust that they have on the product. The key factors that were identified to have more influence in Chinese market included culture. Most people believe in their culture, and thus they will buy cars based on the influence of the society, friends, and relatives. To conclude the literature review, it is evident that the identified factors in most studies that are seen to impact the purchase behavior significantly include individual intrinsic and extrinsic characteristics, as well as technology incorporation into the automobile products (value added features on improving performance and comfort of automobiles). Some of the value-added features that most customers seek are the availability of the spare car parts. Some clients who have purchased some car models have strained to get spare parts, as there are no dealers of the components around their region. These make customers prefer cars whose spare parts can be obtained easily. The main factors that stand out include the product itself, the price charged and the after sales services that the company or car dealer offers to customers.
References
Ajzen, I. 2011. The theory of planned behavior: Reactions and reflections. Psychology & Health, 26(9), 1113-1127.
Andaleeb, S.S. and Anwar, S.F., 2006. Factors influencing customer trust in salespersons in a developing country. Journal of International Marketing, pp.35-52.
Ajzen, I., 1991. The theory of planned behavior. Organizational behavior and human decision processes, 50(2), pp.179-211. doi:10.1016/0749-5978(91)90020-T
Akgun, M., and Gurunlu, M., 2010. Cash-to-Cash Cycle as an Integral Performance Metric in Supply Chain Management: A Theoretical Review. IUP Journal of supply chain management, 7. p. 7-20.
Bochmann, H., Vahle, A., and Almayer, R., Robert Bosch GmbH, 2001. Telematics Device for a Motor Vehicle. U.K. 6,282,491.
Brakus, J.J., Schmitt, B.H. and Zarantonello, L., 2009. Brand Experience: What is it? How is it measured? Does it Affect Loyalty? Journal of Marketing, 73(3), pp.52-68.
Brakus, J.J., Schmitt, B.H. and Zhang, S., 2008. Experiential Attributes and Consumer Judgments. Handbook on Brand and Experience Management, pp.174-187.
Bryson, D. and Atwal, G., 2014. Going beyond Misconceptions: Avoiding Pitfalls on the Route to Sustainable Growth in Luxury Brands in Emerging Markets (pp. 201-210). Palgrave Macmillan UK.
Chang, P.L., and Chieng, M.H., 2006. Building Consumer–Brand Relationship: A Cross‐Cultural Experiential View. Psychology & Marketing, 23(11), pp.927-959.
Chau, P.Y., Cole, M., Massey, A.P., Montoya-Weiss, M. and O'Keefe, R.M., 2002. Cultural differences in the online behavior of consumers. Communications of the ACM, 45(10), pp.138-143.
Chen, Z., Shi, P., Ni, C. and Chen, Y., 2006. China’s WTO accession impacts on domestic automobile industry—a rudimental approach from the view of scale economy. Available at: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.541.3226&rep=rep1&type=pdf
Cox, J.F., Blackstone, J.H., Spencer, M.S. (Eds), 1995, APICS Dictionary, American Production and Inventory Control Society, Falls Church, VA.
Darsono, J.T., & Susana, E. 2014. Structural Model of Intention to Buy on Purchase Decision Saloon Car in Surabaya: Theory of Planned Behavior Approach and Stimulus Response Theory. Journal of Business and Management, 16(10.Ver.II), 09-12.
Dodds, W.B., Monroe, K. B., & Grewal, D. 1991. Effects of price, brand, and store information on buyers’ product evaluations. Journal of Marketing Research, 28(3), 307-319.
Dubois, B., and Czellar, S., 2002. Prestige Brands or Luxury Brands? An Exploratory Inquiry on Consumer Perceptions. 1-7.
El-Omari, H.A. 1991. Word-of-mouth communication and its influence on the purchase of cars in Jordan (Ph.D.). University of Glasgow (United Kingdom), Scotland. Retrieved from http://search.proquest.com.eserv.uum.edu.my/pqdtglobal/docview/900216741/169CC3FFA01E4F3CPQ/4?accountid=42599
Faezipour, M., Nourani, M., Saeed, A. and Addepalli, S., 2012. Progress and Challenges in Intelligent Vehicle Area Networks. Communications of the ACM, 55(2), pp.90-100.
Fetscherin, M. & Toncar, M. 2014. The effects of the country of the brand and the country of manufacturing of automobiles: an experimental study of consumers’ brand personality perceptions. International Marketing Review, 27 (2), 164-178.
Gong, Y., 2013. Cross-Function Global Operational Practice in Global Operations Strategy (pp. 243-281). Springer Berlin Heidelberg.
Grinblatt, M., Keloharju, M. and Ikäheimo, S., 2008. Social Influence and Consumption: Evidence from the Automobile Purchases of Neighbors. The Review of Economics and Statistics, 90(4), pp.735-753.
Hamin H., Baumann C., & Tung, R. L. 2014. Attenuating double jeopardy of the negative country of origin effects and latecomer brand. Asia-Pacific Journal of Marketing and Logistics, 26(1), 54–77. doi:10.1108/APJML-07-2013-0090
Hines, T., 2004. Supply Chain Strategies: Customer-Driven and Customer-Focused. Routledge.
Hofstede G. J. and Minkov M. (2010). Cultures and organizations: software of the mind: intercultural cooperation and its importance for survival, 3rd ed., New York: McGraw-Hill
Holweg, M., Luo, J. and Oliver, N., 2008. The Past, Present, and Future of China's Automotive Industry: A Value Chain Perspective. International Journal of Technological Learning, Innovation, and Development, 2(1-2), pp.76-118.
Hong-Youl Ha, Raphael K. Akamavi, Phillip J. Kitchen, & Swinder Janda. 2014. Exploring key antecedents of purchase intentions within different services. Journal of Services Marketing, 28(7), 595–606. doi:10.1108/JSM-01-2013-0025
Kotler, P. & Armstrong, G. 2012. Principles of Marketing. 14th Edition. Prentice Hall: New Jersey.
Lambert, D.M., 2008. Supply Chain Management: Processes, Partnerships, Performance. Supply Chain Management Inst.
Lane, B., and Potter, S., 2007. The Adoption of Cleaner Vehicles in the UK: Exploring the Consumer Attitude–Action Gap. Journal of Cleaner Production, 15(11), pp.1085-1092.
Lee, C., 2011. Modifying Chinese Consumer Behavior Model for Consumers in Confucian Culture: The Case of Fishbein Behavioral Intention Model. Journal of International Consumer Marketing, 3(1), pp.27-50.
Lummus, R.R. and Alber, R.J., 1999. Defining supply chain management: a historical perspective and practical guidelines. Industrial Management & Data Systems, 99(1), pp.11-17.
Lummus, R.R., Krumwiede, D.W. and Vokurka, R.J., 2001. The Relationship of Logistics to Supply Chain Management: Developing a Common Industry Definition. Industrial Management & Data Systems, 101(8), pp.426-432.
Miyamoto, T., and Rexha, N., 2004. Determinants of three facets of customer trust: A marketing model of Japanese buyer–supplier relationship. Journal of Business Research, 57(3), pp.312-319.
Montemayor, H.M.V. and Pirvulescu, R., 2015. FDI Success Factors: Evidence from a European Manufacturer in the Chinese Automobile Industry. Journal of Management Policy and Practice, 16(2), p.61.
Nayeem T., & Casidy, R. 2013. The role of external influences in high involvement purchase behavior. Marketing Intelligence & Planning, 31(7), 732–745. doi:10.1108/MIP-02-2013 0030
Nelson, M.R., and McLeod, L.E., 2005. Adolescent Brand Consciousness and Product Placements: Awareness, Liking and Perceived Effects of Self and Others. International Journal of Consumer Studies, 29(6), pp.515-528.
Ou, Y. T. 2007. Differences in consumer attitude toward the foreign car market in Taiwan, China, and Thailand regarding factors motivating consumer decision to purchase or not purchase American-made vehicles (D.B.A.). Alliant International University, San Diego, United States
Qu, Y., Liu, Y., and Zhu, Q. 2014.The motivating small-displacement car purchasing in China. Transportation Research Part A: Policy and Practice, 67, 47–58. doi:10.1016/j.tra.2014.06.002
Schiffman, L. G., & Wisenblit, J. (2014). Consumer Behavior. New York: Pearson Education, Limited.
Seidenfuss, K-U., Kathawala, Y., & Dinnie, K. (2010). Assembly and component origin effects: an ASEAN consumer perspective. Journal of Consumer Marketing, 27(6), 488–498. http://doi.org/10.1108/07363761011078226
Sha, S., Huang, T. and Gabardi, E., 2013. Upward Mobility: The Future of China’s Premium Car Market. McKinsey & Company: Automotive & Assembly Practice.
Shende, V., 2014. Analysis of Research in Consumer Behavior of Automobile Passenger Car Customer. International Journal of Scientific and Research Publications, 4(2), p.11-23.
Shimokawa, K., 2004. The Business History of the Global Automotive Industry. Yuhikaku, Tokyo (in Japanese).
Steenkamp, E.M, Batra, J.B., and Alden, D.L., 2003. How Perceived Brand Globalness Creates Brand Value. Journal of International Business Studies, 34(1), pp.53-65.
Sturgeon, T. and Richard, F., 2000. Globalization and Jobs in the Automotive Industry Final Report to the Alfred P. Sloan Foundation, International Motor Vehicle Program. Center for Technology, Policy, and Industrial Development, Massachusetts Institute of Technology, Cambridge, MA. Available online at http://web. mit. edu/IPC/publications/papers. HTML.
Sung, Y. and Kim, J., 2010. Effects of Brand Personality on Brand Trust and Brand Affect. Psychology & Marketing, 27(7), pp.639-661.
Taylor, D.W., McCarthy, K.C., Lynam, N.R. and Schofield, K., Donnelly Corporation, 2007. Vehicle Navigation System for Use with a Telematics System. U.K. 7,167,796.
Tyfield, D., Ely, A. and Geall, S., 2015. Low carbon innovation in China: from overlooked opportunities and challenges to transitions in power relations and practices. Sustainable Development, 23(4), pp.206-216. Available at: http://onlinelibrary.wiley.com/doi/10.1002/sd.1588/full
Vigneron, F. and Johnson, L.W., 1999. A Review and a Conceptual Framework of Prestige-Seeking Consumer Behavior. Academy of Marketing Science Review, 1999, p.1-17.
Wang, L., Wakikawa, R., Kuntz, R., Vuyyuru, R. and Zhang, L., 2012, March. Data are Naming in Vehicle-to-Vehicle Communications. In Computer Communications Workshops (INFOCOM WKSHPS), 2012 IEEE Conference on (pp. 328-333). IEEE.
Zhu, Q., Sarkis, J. and Lai, K.H., 2007. Green Supply Chain Management: Pressures, Practices, and Performance within the Chinese Automobile Industry. Journal of Cleaner Production, 15(11), pp.1041-1052.
