Brand and country of origin valuations of automobiles

Abstract

Purpose The purpose of this paper is to quantify the value of brands and countries of origin in monetary units. The automobile industry in Thailand is chosen because of the variety of brands and the intense competition within the industry. Both the pick up truck and passenger car market shares have been dominated by Japanese brands for decades, whilst the luxury market has been dominated by German brands. Design/methodology/approach The data are collected from an authors' survey carried out during the “Thailand International Motor Expo 2007”. A total of 244 models are chosen from 20 brands, and from 7 countries of origin. The hedonic price model is applied to ascertain the price premiums of these different brands, taking into account their countries of origin, since each automobile brand offers several models with distinguishably different features. Findings The results indicate that different brand names affect consumers' “Willingness to Pay,” in which Mercedes, BMW, and Audi brands are ranked the highest. Surprisingly, Subaru, Mitsubishi and Toyota are the only Japanese brands to have significant brand values. The findings also illustrate a direct relationship between market acceptance and the price premium for automobiles in the luxury car segment, however the same relationship does not hold true for the cars in economy car segment. It seems that Thai consumers put the highest value on cars from Germany, whilst cars from Japan and the USA possess approximately the same value. Korean and Malaysian cars, which focus on low‐prices as a means to obtain a competitive advantage, are as to be expected ranked last. An association was found between countries' GDP per capita and the price premium. Countries with a lower GDP per capita show lower price premiums and vise versa. The exception is Germany, which has a low GDP per capita yet has a higher price premium than the better ranked GDP countries such as the USA Research limitations/implications Though the German brands are ranked the highest, competition in the car industry is likely to be intense, since their premiums are not noticeably different. Additionally, there are implications regarding entry barriers for new automobile brands from the same or different countries. These entry barriers are considered to be quite high, as the brand premiums could represent more than 25 percent of the car prices, at least for the compact car segment. A strategy of discounted price penetration is therefore recommended for a brand which is new to the market, and which does not originate from a highly regarded country. For existing brands with below average values, a customer‐based approach is recommended in which those brands improve the attributes in order to create higher premiums. Originality/value In addition to confirming the relationship between the price premiums of brands and their countries of origin, this paper successfully provides valuations in monetary units and rankings accordingly. This research could be useful to both incumbents and new entrants, when designing their pricing strategies.

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