Made in a Developing Country or in a Developed Country? That is the Question

Would have Corona beer sales been better initially if, instead of Mexican, the beer had been produced in USA? Probably yes. Would have KIA car sales increased swifter if, instead of Korean, these automobiles had been manufactured in Germany? The same positive answer as before. This is what the Harvard Marketing professor Rohit Dehspandé calls the provenance paradox.

According to him a product’s country of origin establishes its authencity: French wine, Italian sport cars, Swiss watches… Competing products from other countries -particularly developing countries- are considered less authentic, even though their quality can be the same or even better. In fact the lower prices of these products are a fake reinforcing sign of less quality.

Nonetheless there is a solution to break this vicious circle, consider how Japanese firms expanded into the U.S. in the 1950s and 1960s and how Korean companies moved into global markets in the 1980s. Is it an easy way? Not at all. This is a slow and asymmetric process mainly since emerging markets are developing faster than the stereotypes are eroding.

Professor Dehspandé provides some illustrative examples of the so-called provenance paradox:

• When the Korean manufacturer Lucky Goldstar wanted to sell its electronics in the U.S. in the 1980s, Best Buy and Home Depot refused. They thought the products were low quality -their prices were relatively cheap. Therefore the company entered the U.S. market through regional retailers and began to slowly transform its brand. In 1995 the company renamed its brand LG. Today its appliances and cell phones are deemed top quality and found all over the world.
• When Corona beer entered developed markets some derided it as “Mexican lemonade”. But this wasn’t the only obstacle: in 1987 Corona filed a lawsuit against U.S. Heineken for spreading rumors that Mexican brewery employees urinated into the product during the brewing process. In order to succeed Grupo Modelo, Corona’s producer, had to brand aggressively the product and downplay the fact it was produced in Mexico. Currently Corona is the number one imported beer in the USA.

Japan car manufacturers are the best example of succeding in upmarketing positioning: from Datsun to Infiniti, from Honda to Acura, from Toyota to Lexus… Nevertheless these automobile brands have taken between 20 and 50 years and have had to invest a vast amount of money to achieve this upscale positioning.

Thus next time you want to buy a product, take your time and think whether the provenance paradox is conditioning your purchase habit.