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Va ‘5. ~0- ‘l a"- .. I h I;Ar‘< '9' { E‘ .1}. . vi! 3‘" c _ . “.I'. “I.“ .53. ' f. .. . . i '2 Kuwmé‘ glut/0926761 $5.233... llllllllfill?Illllllllllllllll “nun“, ,1 3 1293 00767 6236 This is to certify that the thesis entitled INTERNATIONAL RETAIL BUYING: THE REASONS AMERICAN RETAIL BUYERS PURCHASE FOREIGN-PRODUCED MERCHANDISE , presented by , 3; Eydie Lynn Garland has been accepted towards fulfillment of the requirements for MASTER OF SCIENCE degree in MERCHANDISING MANAGEMENT Date NOVEMBER 6, 1990 0-7639 MS U is an Affirmative Action/Equal Opportunity Institution PLACE ll RETURN BOX to remove this checkout from your record. TO AVOID FINES rdum on or botoro ddo duo. DATE DUE DATE DUE DATE DUE ml usu Is An Affirmdlvo AdioNEquul Opportutity lnothuion EWM' INTERNATIONAL RETAIL BUYING: THE REASONS AMERICAN RETAIL BUYERS PURCHASE FOREIGN-PRODUCED MERCHANDISE By Eydie Lynn Garland A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE Department of Human Environment and Design 1990 $45- "7.2" ABSTRACT INTERNATIONAL RETAIL BUYING: THE REASONS AMERICAN RETAIL BUYERS PURCHASE FOREIGN-PRODUCED MERCHANDISE 8y Eydie Lynn Garland By understanding retail buyers’ perceptions of foreign products and their reasons for purchasing them, retailers may be able to obtain an advantage over their competitors. This study examined sourcing from high versus low risk countries for retail buyers using risk seeking versus risk aversion behavior. 'The objectives were; to examine the effect individual, organizational, and economical characteristics have on the American retail buyers tendency to purchase foreign products, to investigate the reasons retail buyers purchase foreign merchandise, and to develop a model that represents these variables. The results identified individual and organizational variables which were related to percent of imported merchandise purchased. The major findings of the study established that; the retail buyers’ experience and pro-american orientation were significantly related to percent of imported merchandise purchased, and better quality for the price and higher initial markup were the major reasons retail buyers purchase foreign-produced merchandise. ACKNONLEDGEMENTS First and foremost, I wish to thank Dr. Brenda Sternquist, my major professor and mentoru Her invaluable guidance, support, and encouragement throughout my graduate program was appreciated beyond expression. A very special thank you to Dr. Dawn Pysarchik, Merchandising Management, for all of her helpful advise and suggestions. Thank you also to Dr. Tamer Cavusgil, Marketing and Transportation, for his insight and knowledge in the international marketing arena. I shall always be indebted to these three committee members for their time, encouragement and guidance. A very special thanks to my best friend, Troy Meister, for compelling me to remain focused on my goals and to achieve my aspirations. I am eternally grateful. Finally, to my father and mother, Edward and Eppie Garland, for their undying support and love. There are no words to express my gratitude for their continual strength, understanding, and everlasting faith in my ability. It is to them that I dedicate this thesis. TABLE OF CONTENTS Chapter I. INTRODUCTION Statement of the Problem Justification Research Objectives II. REVIEW OF LITERATURE III. IV. VI. Overview of Chapter The Buying Process Theories of Buyer Behavior Buyer Characteristics Perceived Risk Information Sources Vendor Selection Country of Origin Other Research Using This Data Base METHOD Overview of Chapter Sample Selection Models THE RESULTS The Sample Data Analysis Objective Objective Objective Objective Objective 01-hour».— DISCUSSION SUMMARY, IMPLICATIONS & RECOMMENDATIONS Summary Implications Recommendations for Future Research iv Page WNNH Chapter APPENDICES REFERENCES Appendix A: Appendix 8: Appendix C: Appendix D: The Questionnaire Economic Indexes Statistical Results Classification Results Table 4.1 4.2 GOOD “N 0.3 LIST OF TABLES Demographic Characteristics of Respondents Buyers’ Perceptions of Purchasing Foreign Merchandise: Means Retail Buyers’ Perceptions of Purchasing Imported Merchandise Factors: Factor Analysis Retail Buyers’ Perceptions of Purchasing Imported Merchandise: Factor Loadings Regression Analysis of Retail Buyers’ Position Experience and Retail Experience with Imported Merchandise: Standardized Beta Heights Major in College to Imported Merchandise Increase Or Decrease of Imported Merchandise Purchased Over Previous Years Figures High/Low Risk Countries & The Reasons Buyers Purchase Imported Merchandise: Discriminant Analysis - Group Means Correlation Coefficients for Factors: Stepwise Regression Regression of Factors with Imported Merchandise Standardized Beta Heights For Variables Classification of Results - Discriminant Analysis First Sampling: 40% Sampling, 60% Validation Classification of Results - Discriminant Analysis Second Sampling: 40% Sampling, 60% Validation Classification of Results - Discriminant Analysis Third Sampling: 40% Sampling, 60% Validation vi Page 37 41 44 45 49 51 54 55 82 82 83 86 87 88 LIST OF FIGURES A Theory of Merchandise Buyer Behavior Adapted Theory of Merchandise Buying Behavior A Conceptual Model of the Patronage Decision in Retail Buying Summary of Literature Review Markup and Percent of Increase (Decrease) of Merchandise Purchased from specific regions as they Relate to Imported Merchandise Reasons Retail Buyers Purchase Imported Merchandise Average Initial Markup on Products Produced In: United States, Mexico, Korea, China, Japan & Europe Major Countries To Nhich Retail Buyers Travelled Major Countries From Nhich Buyers Purchase Foreign Merchandise: Low Risk Major Countries From Hhich Buyers Purchase Foreign Merchandise: High Risk Retail Buyer Behavior of Purchasing Imported Merchandise: An Experimental Design vii Page 12 19 25 32 33 56 57 62 62 72 CHAPTER I INTRODUCTION Retail buyers are the gatekeepers between manufacturers and consumers. Decisions made by retail buyers dictate the choice alternatives available to consumers. Buyers’ responsibilities to the company motivates them to search for vendors with whom they can achieve a profitable markup on the merchandise as well as obtain unique and fashionable merchandise. The search for this unique merchandise with high markup potential leads the buyer to procure products from foreign manufacturers. Importing merchandise is advantageous to the buyer because the cost can be lower for the equivalent quality of'American-made products. Retail buyers are one group that is directly responsible for purchasing products from foreign manufacturers, importing them into the United States, and selling them to the American consumer. In 1988, more merchandise was imported into the United States than exported, resulting in a trade deficit of $119.8 billion dollars (Economic Indicators, June 1989). This study is concerned with American retail buyers’ decision making processes and their reasons for the procurement of foreign produced merchandise. 2 Statement of the Problem The knowledge base related to retail buyer behavior and the specific aspects that motivate retail buyers to purchase foreign produced merchandise is limited by a lack of empirical research. Buyers could be motivated to purchase merchandise from foreign countries for many reasons including markup, price, quality, and uniqueness. Other motivations may depend on the individual characteristics of the buyer and on the specific aspects of the product and country. Some products, especially fashion merchandise, would have more product risk associated with it. Some countries, especially third'world and underdeveloped countries, would have higher risk associated with them due to political and economic instability. These variables need to be investigated for further insight into retail buyers’ decisions to procure foreign merchandise. Retail buyers’ perceptions of imported merchandise, and the specific variables that affect the subsequent purchase or non-purchase thereof, is key to understanding their buying behavior and decision making process. This study'will examine sourcing from high versus low risk countries for retail buyers using risk seeking versus risk aversion behavior. Justification The American consumer is concerned with obtaining the best value in merchandise by obtaining an equilibrium between price and quality. American retailers of today strive to cater to those consumers, thereby purchasing the best quality merchandise at the best price. Retail buyers are considered ”expert consumers”, therefore, their assessment of import versus domestic merchandise is important” Buyers with more retail 3 experience may be more inclined to purchase high risk products from high risk countries in their search for higher markups and gross margin. Variables that affect buyers’ decisions to purchase foreign products included in this study are the extent of retail and position experience, travel experience, demographic variables, reasons for purchasing imported merchandise, and countries from 'which the merchandise is procured. Obtaining fUrther knowledge of the process of retail buyers’ purchase decisions would yield general guidelines for other buyers to follow when faced with difficult purchasing decisions in the future. American retailers would also benefit from understanding buyers’ perceptions of risk associated with purchasing internationally. This knowledge could provide the retailer with a competitive advantage over their opposition. Research Objectives The research objectives of this study were: I. To determine the effect that individual characteristics (experience, sales volume, salary, education, travel, age, and sex) have on the tendency of American buyers to purchase foreign merchandise. 2. To determine the effect that organizational characteristics (size, policies, and type) have on the tendency of American buyers to purchase foreign merchandise. 3. To determine the effect of economic characteristics (initial markup and economic index) on the tendency of American buyers to purchase foreign merchandise. 4. To investigate the reasons American retail buyers purchase foreign merchandise. 5. To develop a model to represent these variables. CHAPTER II REVIEN OF LITERATURE The major emphasis in this study is on retail buyer behavior and the decision making process as it relates to the procurement of foreign produced merchandise. Because there is little research related to retail buyer behavior, it is necessary to probe into other buyer behavior literature, including industrial and consumer buyer behavior. The literature reviewed is broken down into specific categories; the buying process, theories of buyer behavior, buyer characteristics, collective buying, perceived risk, information sources, vendor selection, country of origin and foreign procurement. Overview of Chapter Retail buyers purchase like consumers in the types of products they buy and like industrial buyers in the buying process. Retail buyers usually purchase end-use products and have autonomous decision making abilities, while industrial buyers usually purchase raw materials and are involved in group decision making (Sheth, 1981). Two factors account for important differences between industrial and retail buying. The first difference is in the buyer’s responsibility for achieving the firms’ profit objectives. Industrial buyers are only concerned with controlling costs while retail buyers have to control costs 5 as well as achieve a profit. The second difference is in the nature of products being purchased. Industrial buyers purchase raw materials or intermediate goods, while retail buyers purchase final goods. In this respect, retail buyers aree most like consumers (Nagner, Ettenson & Parrish, I989). The key difference between industrial and retail buyer behavior is often associated with a profit center (Dickinson, 1988). Price is more important for the retail buyer than the industrial buyer. Another difference is that retail buyers have more aspects to consider in their negotiations with suppliers. Retailers also have a wider selection of suppliers, offering more options for purchasing products than industrial buyers (Dickinson, 1988). Industrial buyer behavior research has focused on the information buyers go through when procuring industrial products (Luffman, 1974). The collection and analysis of information includes two tasks for the buyer; the criteria for vendor selection and identification of alternative products. In consumer and retail purchasing, the decision is usually made by one person, while industrial purchasing often uses a group decision. Five external variables were found to be influential in industrial buyers’ evaluations of suppliers; the type of industry the company was in, degree of perceived risk, status of the buyer, experience of the buyer, and ownership or nationality of the company (Luffman, 1974). Experience and perceived risk were found to influence retail buyers’ evaluations (Ettenson & Hagner, 1986; Hugstad & Durr, 1986). 6 The Buying Process The industrial buyer procurement process was studied and resulted in three types of buying situations; new task, modified rebuy, and straight rebuy. The purchase situation determines the buyers’ behavior, regardless of product features. New task purchases are high risk situations that are relatively rare. It usually takes more time for the decision to be made. New task buying, if successful, sets the pattern for routine purchases. Straight rebuys are most common when purchases are simply routine. Modified rebuys are mixtures of new task and straight rebuy characteristics (Robinson, Paris, and Wind, 1967). These three different types of industrial purchases relate to retail buyers in a similar, but different fashion. New task purchases, even with their high risk, are more comon in retail purchasing due to high fashionability and short shelf life characteristics of'merchandisen Often a retailer gains competitive advantage due to this new task purchasing, obtaining unique yet risky merchandise. The modified rebuy for the retail buyer would consist of evaluation of past merchandise combined with knowledge of ‘the ever' changing tastes and preferences of’ consumers (Anderson, Chu & Neitz, 1987). Straight rebuys in retailing would occur for very standard products where style variations and vendor shifts are unlikely to occur, such as in products like hosiery. Collective buying behavior has become synonymous with industrial buying behavior. Research done in this area indicates that industrial purchasing is conducted in group situations and the purchase decision is the result of the interaction process between that group. A model was developed which accounted for internal (controllable) variables, external 7 (uncontrollable) variables, and the actual decision process prior to the group decision. The outcome is the group decision, or the actual purchase (Choffray 8 Lilien, 1978). Group decision making in the industrial buying process was found to be predominant in purchase decisions that had a need for high problem- solving capacity. Group decisions were also predominant for purchases that were higher in importance and had larger resources associated with them. The more routine a purchase decision becomes, the more likely it would be handled by one individual (Gronhaug, 1975). Theories of Buyer Behavior One of the best known models of consumer buyer behavior includes variables such as buyers’ attitudes, motives, intentions, confidence, and choice criteria (Howard & Sheth, 1969). This model has been adapted to both industrial and retail buyer behavior. In the adaptation to industrial buyer behavior model, variables transgressed into buyers’ expectations, background (education, life style and role orientation), and satisfaction (Sheth, 1973). However, in the adaptation to retail buyer behavior, variables regarding buyers’ personal influences and individuality were omitted. In the industrial purchasing process, it was suggested that variables which influence industrial buyers’ decision processes could be grouped into three major categories; product, organizational, and personal. The product and organizational categories refer to the actual characteristics of the firm and its products. The personal category refers to retail buyers’ individual characteristics and includes their 8 background, experience, education, and life style. A comprehensive model of industrial buyer behavior was developed which integrated existing knowledge of organizational and industrial buying (Sheth, 1973). Based on research conducted in consumer and social psychology, the model relies heavily on the psychological world and individual characteristics of the decision makers. The first section of the model illustrates the expectations of buyers with five processes; the individual’s background, information sources, active search, perceptual distortion, and satisfaction with past purchases. The second section in the model is the industrial buying process. Variables that affect this section are grouped into product- specific and company-specific factors. Product specific factors include time pressures, perceived risk and type of purchase. Company—specific factors include the organization orientation, size, and degree of centralization. The buying process divides into autonomous decisions and joint decisions, depending on product and company characteristics. If a joint decision is the method used, the model allows for a conflict resolution factor (Sheth, 1973). The model ends in the actual supplier or brand/product choice. This choice can be influenced by situational factors and can also send information back to individuals involved in the decision process regarding satisfaction with the purchase (Sheth, 1973). Jagdish Sheth, in 1981, developed a theory of merchandise buying behavior (Figure 2.1) which was designed to consider the uniqueness of the retail buyer’s situation. The merchandise model includes attributes of the retail organization, including its merchandise requirements, supplier accessibility, and a phenomenon Sheth referred to as choice calculus. The Retailer Sin Retailer Type ‘ Retailer Location Management Mentality Type of Merchandlae Product Poeltloning Regulatory Conatrainta Type oi Declalon L J Co 'a I Bueheae "'9'” Climate Flnanclal Merchandiee P°""°" Requiremente I 1 Ideal Actual °"°'°' Supplier! Supplier! °"°“'"' Product '—"’ Product I Choice Choice Supplier [ i j A°°'"'P""Y Buelneea Market I Negotla- Dieturb- I I *1 tione IMO Competitive Relative Corporate Structure Marketing Image Effort Figure 2.1: A Theory Of Merchandise Buying Behavior 10 merchandise requirements represent the retailer needs, motives and purchase criteria, while supplier accessibility refers to suppliers that are known and available to the retailer. The choice calculus reflects the strategic purchasing policy of the company, and balances their merchandise requirements with their supplier accessibility. The choice calculus contains three types of choice calculi retailers follow when selecting vendors. In the first, trade-off choice calculus, retailers make trade-offs between or prioritize choice criteria like price, packaging or delivery. In other words, retailer consciously chose the criteria that are most important and the ones that could be sacrificed, if necessary. In the second, dominant choice calculus, retailers make choices on only one of those criteria. For example, if the delivery date was crucial to the selling of the product, the retailer would purchase the product from the vendor'who could promise that delivery would be on time. In the third, sequential choice calculus, the retailer has multiple criteria, based on importance, and then sequentially eliminates supplier choices. This is more difficult, and can eliminate every vendor alternative. To illustrate, if a retailer has three criteria for vendors, the criteria are rated by importance and all three criteria must be met before that vendor is selected (Sheth, 1981). The final section in Sheth’s (1981) model is the ideal and actual supplier/product choice. The model depicts four variables that have an effect on the actual supplier/product choice: business climate (economic trends); business negotiations; company’s financial position (profitability and liquidity position of retailer); and market disturbance (unexpected events). The effect that these variables have on the supplier 11 and product choice is what makes the difference between the ideal and actual choice (Sheth, 1981). A serious limitation in this model is the absence of the individualistic characteristics of the buyers, and the effect that those variables have on vendor selection and purchase decision. An empirical investigation was made on Sheth’s (1981) Theory of Merchandise Buying Behavior, which resulted in an adapted model which includes the personal attributes of the buyer such as buyer experience, gender, education and training (Figure 2.2) (Fairhurst & Fiorito, 1988). This study examined the congruence among merchandise requirements, personal attributes and supplier accessibility, and how these related to the financial performance of the company. Gross margin return on investment (GMROI) was one variable used to represent financial performance. Two buyer attributes were found to have major influences on GMROI: job experience and training. Job experience, or the number of years experience in the buying situation, positively affected GMROI. The extent of training required for the buyers’ job had a negative influence on GMROI (Fairhurst G Fiorito, 1988). 12 cc_>~=om ac,»:m «movcagucc: cc xgccgh wouacv< ”~.~ «Lamp; . decade can no eoceuuoouu . , oeuuuem . mdmmmammmmrg no uuqauaeuueu . nuoueeeeu . , ccucauccaco - _ eueeuueonu nema- - nondeueu oedeuoen house. no eshh eenaeaueb «uneven» uneven. eedueadou o 13 Buyer Characteristics Retail buyers’ decisions are influenced by many variables. Individual characteristics including background, education, social class, religion, age, experience, sex, and life style, all impact the buyer’s decision making process. These characteristics, plus others, have been used in research to help determine the effect on the buyer. Buyer experience was researched in a study which asked buyers, assistant buyers, and fashion merchandising students, to judge the saleability of a basic women’s blouse. The subjects were provided with information related to fiber content, cut, color, brand, country of origin, mark-up, selling history, and advertising allowance. Results varied among buyers, assistant buyers, and students; however, selling history was important with all three groups. Mark-up was important to buyers and assistant buyers, while advertising allowance was important to assistant buyers and students. All three groups used quantitative information (selling history, markup) over the qualitative information (fiber, cut, color, brand, country of origin) to evaluate the garment’s saleability. One other finding was that the country of origin variable, was found to have little influence in the judgement of saleability (Ettenson & Wagner, 1986). Intrinsic and extrinsic factors affect retail buyers’ motivation. Intrinsic motivation refers to the retail buyer who is motivated by the job content itself. Intrinsically motivated people tend to set their own goals and objectives. They enjoy the job itself and usually need little supervision. The extrinsically motivated retail buyer is motivated by external rewards. Extrinsically'motivated people need to be managed, they 14 are not self-initiated. They do not enjoy the content of the job, and they see the job as a means to an end (Keaveney, 1988). Previous research has suggested that intrinsically motivated buyers prefer new buy situations and perform them better than extrinsically motivated buyers (Keaveney, 1988). Intrinsically motivated buyers use more information, more varied sources of information, and is more creative than extrinsically motivated buyers. Intrinsically motivated buyers are more likely to take risks by purchasing new merchandise, while the extrinsically motivated buyer would not take risks, and possibly nfiss unique merchandise. Also, intrinsically motivated buyers would be more likely to locate and use new vendors, rather than use previously approved vendors (Keaveney, 1988). Retail buyers’ purchasing decisions have various degrees of efficiencies. Inefficiencies in retail buying were measured in terms of buyer mistakes, and how these mistakes stem from buyers’ beliefs about planning for merchandise and using new vendors. Results indicated that increased planning tended to reduce mistakes; mistakes of buying poor merchandise are unrelated to planning and using new vendors; and an increased amount of new vendors increased venturesome mistakes (Keaveney & Nelson, 1988). Overall, if a retail firm has inefficiency among its buyers, then that firm becomes inefficient. 15 Perceived Risk The perception of risk and risk taking behavior*was first introduced into consumer behavior literature by Bauer (1960). Bauer premised that consumers perceive~risk1whenever their actions could produce consequences, be it financial, performance, or psychological. Cunningham (1967) defined perceived risk as I) ”the level of uncertainty concerning some aspects of a purchase” and 2) ”the magnitude of loss from a bad decision in regard to that aspect of the purchase.” Perceived risk was later defined by Webster & Mind (1972) as a function of the buyer’s uncertainty about the likelihood of occurrence of an event and the consequences associated with that event if it should occur. A critical review' of perceived risk literature revealed that perceived risk has been analyzed with such variables as information search and processing, product adoption, store/brand loyalty, and consequences and relievers of risk (Ross, 1975). The results suggested that consumers’ risk perceptions were reduced when they received information from personal sources. In high risk situations, personal influence was rated most important (Arndt, 1967). Consumers were also found to rely on brand and store loyalty to reduce risk (Bauer, 1960). Nhen consumers perceive risk in purchasing a product, they seek out information, become brand-loyal, and stick to well-known brands to minimize the risk (Folkes, I988). Perceived risk was also analyzed with certain personality characteristics of consumers. Some consumers were found to exhibit high or low risk tendencies, that is, general tendencies to perceive either a high or low risk perception across a range of products (Cunningham, 1967). Self confidence was another characteristic that was analyzed and it was 16 found to have an inverse relationship with perceived risk (Hisrich, Dornoff, and Kernan, 1972). The results of this inverse relationship indicates that the higher the self confidence of the consumer, the lower the perceived risk. Consumer judgments in risky situations were analyzed with high and low probability and consequence levels. Probability measured how likely the consumer was to purchase the product and consequence measured the possible negative aspects the consumer would experience after the purchase. Products with low probability/high consequence were viewed as more risky purchases than products with high probability/low consequence. Subjects judging these risks were affected more by the consequence, rather than the probability, of the purchase (Diamond, 1988). The above discussion of perceived risk has been concentrated on consumers. Many similarities can be drawn to include retail buyers, due to the similarities of purchase behavior. Perceived risk has also been studied in the industrial and organizational buyer behavior fields. A perceived risk model of industrial buyer behavior postulates that industrial buyers are more motivated to reduce their perceived risk when buying than to maximize any potential pay-offs (Moriarty, 1983). This is a key difference between industrial and retail buyers. Potential pay-offs are very important to retail buyers because they are profit centers (Dickinson, 1988). Therefore, the retail buyers would be expected to be more likely to take risks to achieve a higher profit than industrial buyers. Also, findings from another study suggests that industrial buyers engage in external information search as a primary risk reduction strategy (Gronhaug, 1975). 17 Information Sources Sources of information regarding vendors and their merchandise selection are important criteria buyers use in their purchase decision making process (Hagner et al., 1989). Research has indicated that criteria vary among types of retailers. Department store buyers were identified as using price and innovativeness, while chain store buyers used quality, manufacturer’s size, selling history, and merchandise marketability (Hirschman, 1981). The retail buyer'gathers the information needed and sorts through it to decipher between the reliable and useful, and the unreliable and not useful. One study characterized information sources as external versus internal as they combine with nonpersonal versus personal information sources. External nonpersonal sources include the trade press, historic and predicted sales levels, and recommendations from central buying offices. External personal sources include vendor advise and consultation with other buyers. Internal personal sources include the buyers own experiences. Results showed that due to the perceived cost of external personal information sources, retail buyers rely more on external nonpersonal sources (trade press) and internal personal sources (own experience) (Mazursky & Hirschman, 1987). Vendor Selection Vendor selection process of retail buyers and the criteria used for selection was also researched. Vendor selection criteria including vendor reputation, vendor service, delivery, quality, markup, country of origin, fashionable merchandise and selling history were evaluated by buyers. The 18 criteria used most frequently by buyers were selling history (82%), markup (74%), and delivery (56%). Fashionability and quality criteria were used less often. Country of origin criteria accounted for only 10% of the responses (Nagner et al., 1989). Seven factors were identified that provided retailers with guidelines to use in vendor selection. This ranking system of criteria was specifically developed to assist retailers in the vendor selection decision. The factors were: media advertising, request for the line, seasonal changes in line, fit, markup, reorders, and fashion leadership. This approach to supplier evaluation and selection could help to eliminate the choosing of a supplier due to incomplete evaluation or unconscious bias. This decision matrix system is especially useful for high risk purchases (Berens, 1972). Other research using department store buyers cited the most frequently used vendor selection criteria as selling history followed by markup and delivery (Nagner et al., 1989). Cravens and Finn presented a conceptual model of the patronage decision making in retail buying. This model (Figure 2.3) depicts the variables that have an affect on the patronage decision. The product, organization and the decision situation are external variables, while the buyer experience and their expectations about alternative suppliers are internal variables. The authors identified three elements in the decision; the evaluative criteria that is used, the relative importance of the criteria, and the expectations of the buyers (Cravens and Finn, I983). 19 Decision _. adflnmflon Frodbct/ £flmflUaflbn.. service - 'i criteria Buying Evaluation Patronage 15' organization —' process —' decision , X perienc Expectatiori Information ._ 81’0"! sources alternative suppflbrs Figure 2.3: A Conceptual Model Of The Patronage Decision In Retail Buying Country of Origin Considerable research has been conducted on the country of origin’s affect on product evaluations. The studies reported in a literature review by Bilkey & Nes (1982), indicated that country of origin did influence product evaluations. Also, a positive relationship was found between product evaluation and degree of economic development (Schooler, I971). The country of origin effect on product evaluation was found to occur whether the product was sourced from more developed countries or less developed countries. Intrinsic cues, such as product characteristics, were found to have a greater impact on quality judgments than extrinsic cues such as country of origin (Olson a Jacoby, 1972). 20 Country of origin variable activated consumers’ interest in products and induced them to analyze product information and evaluation. The country of origin variable was found to influence consumers’ product evaluations regardless of their knowledge about product attributes (Hong & Nyer, 1989). The country of origin aspect was examined with the consumer’s willingness to buy products from foreign countries. The consumers were more willing to purchase products from politically free and economically rich countries (Hang & Lamb, 1983). Concerning the male and female views on the country of origin, men tended to use technological development and political orientation of the country to form their opinions about the overall quality of the product, while the women used geographic proximity and specific products such as clothing and footwear to determine the quality of the product (Hall, Heslop, & Hofstra, 1988). Women perceived the overall quality of products higher from the U.S., Canada, France, Italy, Czechoslovakia, Spain, U.S.S.R., Hungary, Romania, Brazil and China, while men chose Japan, Nest Germany and Sweden. Overall, mens ratings were higher for countries which produced technological equipment, while womens ratings were higher for countries which produced fashion goods (Hall, Heslop & Hofstra, 1988). Consumers had positive evaluations for products from (in order); Australia/New Zealand, Europe, Latin America, Asia, Middle East/North Africa, and Africa (Hang & Lamb, 1983). The images that are formed by consumers toward foreign countries were found to influence their perception toward foreign—made products and country of origin. Positive characteristics were associated with products produced in a country possessing a positive image, and negative 21 characteristics were associated with products produced in countries with negative images. Hhen a foreign product possesses a superior image, such as wines from France, the strong product image becomes difficult for domestic producers to overcome. Quality perceptions associated with country of origin were found to vary across product classes (Kaynak & Cavusgil, 1983). Another investigation to examine consumers’ purchase intentions, perceived quality, and overall attitudes toward a product, included the country of origin variable as it interacted with retail store image and warranty coverage. The store image, product warranty, and country of origin, had a significant effect on the consumers’ perceived quality and overall attitude toward the product, however, they did not significantly affect purchase intention (Thorelli, Lim, & Ye, 1988). When store prestige and country of origin were analyzed with price and quality cues, store prestige was found to significantly increase consumers’ perceptions of quality. However, no significant quality differences were perceived between domestic and imported products (Sternquist and Davis, 1986). Research evidence has suggested that relative product quality was an important determinant of foreign success in the U.S. consumer products market (Curry, 1988). However, less informed and less confident shoppers were found to judge the value of a product based solely on the country of origin. Also, North American and European products were perceived to be better in quality and style than Asia and Latin American products (Hung, 1989). Products from the developing countries were perceived to produce lower priced products than those from developed countries (Hung, 1989). Canadian consumers believed that Canadian-made products had higher quality 22 than foreign-made, but also had a higher price (Hall & Heslop, 1986). The country of origin effect on retail buyers’ decisions were studied and the results indicated that 92% of the buyers agreed that profit achieved on the imported merchandise was more or equal to that of domestic merchandise. The reasons for purchasing imported merchandise included better quality for the price, low wages overseas, and higher profit achieved. These buyers also indicated purchasing sportswear from the ”Big Three" with 70% from Korea, 70% from Taiwan and 83% from Hong Kong (Atkins & Jenkins, 1988). Nith regards to the demographic effects on peoples’ opinions of purchasing foreign merchandise, older consumers were found to evaluate foreign products higher than younger consumers (Schooler, 1971). Females were found to rate foreign products higher than males (Schooler, 1971; Dornoff, Tankersley, & White, 1974; Nall & Heslop, 1986). People with more education tended to rate foreign products higher than people with limited education (Schooler, 1971; Anderson et al., 1972; Dornoff et al., 1974), and higher income consumers tended to have a more favorable acceptance of foreign products than lower income consumers (Anderson & Cunningham, 1972). Also, American consumers rated the quality of American-made products higher than foreign consumers (Bilkey and Nes, 1982), while consumers generally had a more favorable opinion towards their own country’s products than did foreigners (Lillis 8r Narayana, 1974), although Canadian upscale consumers were the most negative toward Canadian-made products (Hall & Hesl0p, 1986). Consumers’ level of perceived risk associated to country of origin revealed that products from the People’s Republic of China, South Korea, 23 and Japan had greater perceived consumer risk than American products (Hugstad a Durr, 1986). Individual buyer characteristics were found to influence their willingness to buy products from particular countries (Hang & Lamb, 1980). Other Research Using This Data Base The data base used in this study has been reported in previous manuscripts. Department, specialty and discount store buyers’ reasons for procuring foreign products were analyzed. Department store buyers based decisions on factors such as better quality for the price, higher markups, and exclusive merchandise. Specialty store buyers ranked better quality for the price first, followed by exclusive merchandise and higher markups. Discount buyers ranked higher markups as the most important reason, followed by better quality for the price (Sternquist, Talbert & Davis, 1989). Retail buyers from specialty, department and discount stores were surveyed as to their reasons for sourcing from foreign countries. Overall, these buyers indicated that better quality for the price was the number one reason for purchasing merchandise from foreign countries. The ability to obtain higher mark—ups on the foreign merchandise ranked second. Other reasons included exclusive merchandise/private branding, specification buying, and unique merchandise selection. Discount store buyers ranked markup first, followed by quality for the price. Specialty store buyers put more emphasis on exclusive merchandise over markup (Sternquist et al., 1989). The perceptions that retail buyers have of imported versus domestic 24 merchandise is another aspect that influences their decision to purchase internationally. One research study investigated retail buyers’ perceptions which resulted in a profile of Pro-American and Pro-Import buyers. Pro-Import buyers had higher sales and more experience in their position. The Pro-American buyers purchased more merchandise from developed countries such as Japan, European countries, and newly industrial countries of Korea, Taiwan & Singapore. These countries are less risky than the less developed Mexico, Caribbean, and China, from which the Pro-Import buyers procured more products. A higher mark up was achieved by purchasing products from the more risky/less developed countries (Sternquist, Tolbert a Davis, 1986). Social and economic influences often interject into retail buyers’ perceptions and decisions about purchasing foreign products. Retail buyers’ opinions of the "Buy American” campaign were profiled which classified retail buyers into two categories, Potential Promoters and Active Promoters. Results indicated that the majority of American buyers were not heavily influenced by this campaign, nor were they currently supporting it (Tolbert, Sternquist & Davis, 1988). This is consistent with the Ettenson and Wagner (1986) study where country of origin was of little importance in the purchasing decision. Ettenson & Wagner, 1986 Keaveney, 1988 Keaveney & Nelson, 1988 Arndt, 1967 Bauer, 1960 Folkes, 1988 Cunningham, 1967 Hisrich, Dornoff, & Kernan, 1972 Diamond, 1988 Moriarty, 1983 M &Hirschm W an’ Wagner Ettenson & Parrish, 1989 Bilkey & Nes, 1982 Schooler, 1971 Olson & Jacoby, 1972 Hong & Wyer, 1989 Wang & Lamb, 1983 Retailer Retailer Retailer Consumer Consumer Consumer Consumer Consumer Consumer Industrial Retailer Retailer Consumer Consumer Consumer Consumer Consumer Buyer Characteristics Buyer Characteristics Buyer Characteristics Perceived Risk Perceived Risk Perceived Risk Perceived Risk Perceived Risk Perceived Risk Perceived Risk Information Sources Vendor Selection Country of Origin Country of Origin Country of Origin Country of Origin Country of Origin Se ' history and mark-u were most 0 Judge mer disc saleability. Intrinsicall motivated buyers were found to more creative and more inclined to take risks. hm plafnning tended to reduce es 0 u r merchandise. ying poo Risk was reduced with personal information sources. Brand and store loyalty were used to reduce risk. Consumers become brand loyal to reduce risk. High or low risk tendencies were exhibited across a range of products. Self confidence had a significant inverse relationship With perceived risk. Consequence of purchase affected risk ore than the purchase itself Buyers more motivated to reduce risk when bu rather than manmize potenti pay-offs. Retailers rely on external nonpersonal and internal personal sources most. Criteria used most 3 selling history, mark-up, and delive - country of origin accounted for 0% of the responses. Country of o ' ' influenced product ev nations. Positive relationship between . roduct evaluation and economic evelopment. Intrinsic cues (characteristics had greater impact on g ty udgments than extrmsrc cues country of origin). Product evaluations were . _ influenced coun of o regardless 0 product attributes. Consumers more willing to purchase from politically free and . economically rich countries. Figure 2.4: Summary 01' Literature Review W Heslo I-ailt’)fstra,& 89 Kaynak & Cavusgil, 1983 Thorelli, Lim & Ye, 1988 Sternquist & Davis, 1986 Hung, 1989 Wall & Heslop, 1986 Atkins & Jenkins, 1988 Hugstad & Durr, 1986 Wang & Lamb, 1980 Davis, Kern & Sternquist, 1990 Consumer Consumer Consumer Consumer Consumer Consumer Retailer Consumer Consumer Consumer Country of Origin Country of Origin Country of Origin Country of Origin Country of Origin Country of Origin Country of Origin Country of Origin Country of Origin Country of Origin Men base opinions on techno cal development and potical orientatio while women use eogra c mum and product% to judge qiiality. ty Quali rce ons were found to vtaiiryp‘iicroisigl product classes. Store image, warran and country of origin had s cant effects _0 ngrceived quality and attitu Store pres chigemgmfi increas perceptions of quality. No quali differences were perceiv between domestic and imported products. Products from developgy countries were rceived to pr uce lower pri products Consumers (Canadian believed that Canadian-made ucts had higher quality, but at a liigli 92% of the buyers agreed that profit achieved on imported merchandise was equal to or iiziore tha? domestic merchandise. easons orp urchasingfo products were better qualityiFnr es overseas, and Higher1 proiigchieved. Risk was er in foreign products an American- made. Individual characteristics influence eir willingness to purchase foreign products. Ofistore prestige significan ueneed consumers’ quality perceptions and price estimates. er price. Figure 2.4: (Continued) CHAPTER III METHOD Overview of Chapter This study is part of a larger research project on retail buyers’ perceptions of imported versus domestic apparel, and the Buy American campaign. The three objectives of the original research project were to: investigate consumers’ perceptions associated with imported versus domestic merchandise, examine retail buyers’ perceptions of the ”Buy American" campaign, and investigate retail buyers’ reasons for purchasing imported merchandise. This study is concerned with developing a model which will predict retail buyers’ reasons for purchasing imported merchandise. Sample Selection A self-report mail survey with 42 questions was sent to retail buyers (Appendix A). A random numbers table was used to select 100 each of specialty, department and discount stores. These stores were selected from the most current listing of three directories: omen’ an ChfldnenLflleaLBuxens (1983). rtm t r . and WW (1980)- A men’s sportswear buyer and a women’s sportswear buyer were selected from each store for the sample. If the retail stores did not 27 28 have a separate buyer for each department, then the person who executed the buying responsibility for the merchandise was selected. On July 31, 1984, 482 questionnaires with a cover letter were mailed to the sample of buyers. The cover letter informed them of the purpose of the study, assured the buyers of complete confidentiality, and requested that the questionnaire be returned by August 20, I984. The questionnaires were pre-coded for the re-contact of non-respondents. After adjusting for all returned letters, the original response rate was 11.97%. Questionnaires marked ‘return to sender’ for the second time or ‘out of business’ were deleted from the sample. The non-respondents were identified with the pre-coded questionnaires and a follow-up mailing consisting of a cover letter and a postcard. In ‘the second cover letter, the original researchers emphasized the importance of the buyers’ participation along with the re— explanation of the purpose of the study and the reassurance of confidentiality. Of the total 448 surveys, the final sample population size accounted for 69 usable questionnaires yielding a 15.4% response rate. Due to the use of the three directories to determine the sample, the actual response rate may be underestimated because it is unknown if the unreturned surveys were received by actual buyers. 29 Models The fifth objective of this study was to develop a model which represents the relationship of individual, organizational, and economic characteristics to the percent of imported merchandise purchased. The percent of imported merchandise purchased was the dependent variable. The buyers were asked ”Using your best estimate, what percent of the total merchandise that you buy for your organization is manufactured in a foreign country" on a scale from I—lOO percent. Individual characteristics included variables such as the buyers Pro-American Orientation, retail experience, position experience, education, salary, age, sex, and travel experience. Organizational characteristics included the size and the type of retail store, and organizational policies. The size was determined based on the annual sales volume for the organization. External Risk Reducer was used to explain the organizations’ risk reducing strategies of using external organizations to procure foreign merchandise. Economic characteristics were included to determine if the sourcing country’s classification of high or low risk would influence buyers purchase behavior. Basic economic indicators such as population, area, gross national product per capita, average annual rate of inflation, and life expectancy, were examined for 120 countries in the World Development Report, 1989 (Appendix B). The countries were categorized into low- income, middle income, upper-middle income, and high-income economies. Low-income economies included China, India, Haiti, Sri Lanka, Indonesia and others. Middle-income economies included the Philippines, Dominican Republic, Thailand, Jamaica, Ecuador, Poland, etc. Upper-middle 30 income economies included Brazil, Uruguay, Hungary, Greece, Libya etc. High-middle income economies included the rest of the European countries, and other'Organization for the Economic Cooperation and Development (OECD) members including Japan and the United States. The categorization number given by the World Development Report (1989) based on these economic indicators became the economic index that was used as a determination factor of the perceived risk associated with purchasing from high versus low risk countries. Those countries with an economic index lower than 96 were classified as high risk countries, and those countries with an economic index of 96 — 120 were classified as low risk countries. Average initial markup that was obtainable for products from these countries was also used in the determination of perceived risk. The retail buyers were asked questions pertaining to the regions from which they purchased merchandise, the amount of increase or decrease of imported merchandise they purchased from each region, and the initial markup they could obtain on merchandise produced in those regions (Appendix A). The first question, "In your buying area what has been the increase or decrease in buying of merchandise manufactured in these foreign countries in the past two years: Mexico and other Caribbean Countries; Korea, Taiwan, Singapore, etc.; China; Japan; and European Countries,” was the actual amount of increase or decrease of merchandise bought from different regions. The second question, "What is your average initial markup for apparel products from the following countries: United States; Mexico and other Caribbean Countries; Korea, Taiwan, Singapore etc; China; Japan; and European Countries," pertained to the average initial markup that they could obtain on that merchandise from each of 31 those foreign regions. The final question, "What are the three major countries that account for the imported merchandise that you buy," asked the buyers to list, in order, the actual countries that accounted for the majority of that imported merchandise. Figure 3.1 includes the manipulation of these variables to determine the effect they have on the total percent of imported merchandise purchased. A stepwise regression analysis was conducted on each region, the increase or decrease purchased from each region, and the obtainable initial markup on merchandise from each region. The result of this operation was to predict the buyers’ perceived risk associated with buying merchandise from each region. For example, if the increase of imported merchandise purchased from a region was relatively high, and the average initial obtainable markup on merchandise purchased from that region was high, then the buyers’ actual perceived risk of that region was expected to be high. Therefore, the greater the percent of imported merchandise from a region, the higher the buyers’ perceived risk was from that region. If a buyer perceives a high amount of risk associated with purchasing from a particular region of the world, and they continue with the purchase anyway, then the buyer'must expect a profit associated with that purchase. Their profit is the potential pay-off for taking the risk. The fourth objective is the reasons retail buyers purchase foreign merchandise, and if these reasons could be used to predict whether the buyer would purchase from high and low risk countries (Figure 3.2). The dependent variable, the countries from which buyers purchased merchandise, was a nominal level of measurement (e.g. l-Brazil, Z-Canada etc.), therefore, discriminant analysis was used. ‘The objective of this analysis 32 % OF IMPORTED MERCHANDISE PURCHASED REGION 1 REGION 3: REGION 1: Mexico 8 Other Carlbbean Countries REGION 2: Korea. Taiwan. Slngapore, etc. China REGION 4: Japan REGION 5: European Countries REGION 2 REGION 8 REGION 4 REGION 5 I l l l l l s mc/oec commute meonrso mnxue .uencu rnou' nearest x REGION x Figure 3.1: Markup and Increase (Decrease) of Merchandise Purchased From Specific Regions as They Relate to Percent of Imported Merchandise Purchased. 33 REASONS FOR PURCHASING HIGH RISK IMPORTED MERCHANDISE COUNTRIES '- 1. Better quality for price _. 2. More unique merchandise LOW RISK J 3. Higher markups COUNTRIES 4. Exclusive march/private label 5. Specification buying Z-W1X1-I-W2 X2-I-W3X3'I-W4 X4-I-W5X5 WHERE: Z a DISCRIMINANT SCORE W1- DISCRIMINANT WEIGHT FOR QUALITY Xl- QUALITY . W2- DISCRIMINANT WEIGHT FOR UNIQUE MERCHANDISE X2- UNIQUE MERCHANDISE ' WS- DISCRIMINANT WEIGHT FOR HIGHER MARKUPS XSIIflGHER MARKUPS W40 DISCRIMINANT WEIGHT FOR EXCLUSIVE MERCHANDISE X4- EXCLUSIVE MERCHANDISE W5- DISCRIMINANT WEIGHT FOR SPECIFICATION BUYING X5- SPECIFICATION BUYING Figure 3.2: American Retail Buyers’ Reasons for Purchasing Imported Merchandise. 34 was to identify the importance of the reasons why retail buyers purchased foreign merchandise. Therefore, it was necessary to test part of the population and use the remaining portion of the population to validate it. According to Hare, Anderson and Tatham (1987), in order to test and validate a model, discriminant analysis should be analyzed with a split sample. Forty percent of the sample was selected and the analysis was computed three times. The average of the three runs was used to determine the average reasons for purchasing imported merchandise from high or low risk countries. The reasons retail buyers purchased foreign merchandise were: 1) Better quality for the price 2) More unique merchandise selection 3) Higher obtainable markups 4) Exclusive merchandise/private branding 5) Specification buying 2 - W,X1+W2X2+W3X3+W4X,.+W,5X5 Where: Z-Discriminant Score W1-Discriminant weight for quality X1-Ouality W2=Discriminant weight for unique merchandise XZ-Unique merchandise Iris-Discriminant weight for higher markups X -Higher markups Wi-Discriminant weight for exclusive merchandise X,-Exclusive merchandise Its-Discriminant weight for specification buying X5=Specification buying (Hare et al., 1987). The buyers were asked to list the three major countries that accounted for the majority of thetmerchandise that they purchased, and the reasons why they purchase foreign merchandise. The reasons that they purchased foreign merchandise was used as an index to predict 35 characteristics between high and low risk countries. Economic indicators were used to classify countries into high and low risk categories. The economic indicators were taken from the World Development Report, 1989 (Appendix B). The reasons buyers purchase imported merchandise was analyzed to determine the importance of each reason to the buyers. They were asked to allocate 100 points between the five reasons for buying foreign products. The higher the points they assigned to a reason, the more important that reason was to the buyer. The dependent variable was the first major country that accounted fer the imported merchandise. The first country listed by the retail buyers was used, due to the assumption that, the reasons to purchase foreign merchandise, and the importance assigned to those reasons, would most closely be reflected in the first major country listed from which they purchased foreign merchandise. CHAPTER IV THE RESULTS The Sample The majority of the respondents (66%) were between the ages of 31 to 50 years; however, the sample included buyers aged 22 to 69 years. A four-year college degree was indicated to be the highest level of education completed by 44% of the respondents. Also, seven percent indicated that they had taken some graduate work, and seven percent indicated that they had completed a graduate degree. Marketing was the major for the highest percent (25%) of the sample. Merchandising management/retailing major in colleges of human ecology represented seven percent of the sample. Twenty-nine percent of the retail buyers had five or fewer years of experience before obtaining their current position; twenty-one percent had over 15 years experience. Over forty-two percent of the buyers had five or fewer years of position experience, while 21% had over fifteen years of position experience. Twenty—four percent of the sample had a salary between $20,001 and $30,000 while 21% fell between the $30,001 and $40,000 range (Table 4.1). Fifty-one percent of the respondents made more than $40,000 dollars a year. The majority (72%) of the respondents were male. The stores in this study had a mean annual sales volume of $175,900,000 dollars. The buyers were responsible for buying an average of $14,200,000 dollars at cost which was dispersed between an average of 36 37 Table 4.1 Demographic Characteristics of Respondents N - 69 Variables Number Percent AGE Under 30 6 9.0 31 - 40 Years 28 41.8 41 - 50 Years 16 23.9 Over 50 17 25.4 Totals 67 100.0 No Responses 2 EDUCATION 2 Years of High School 1 1.5 Completed High School 12 17.6 2 Years of College 15 22.1 Completed College 30 44.1 Some Graduate Work 5 7.4 Completed Graduate Work 5 7.4 Total 68 100.0 No Responses 1 MAJOR IN COLLEGE Marketing (BUS) 14 25.0 Retailing (BUS) 7 12.5 Management (BUS) 8 14.3 Merchandising Management (HE) 4 7.1 Clothing & Textiles (HE) l 1.8 Accounting (BUS) 3 4.3 Other 19 33.9 Totals 56 100.0 No Responses 13 BUS - College of Business HE - College of Human Ecology Continued 38 Table 4.1 (Continued) N - 69 Variables Number Percent SALARY $20,000 & Under 3 5.2 $20,001 - $30,000 14 24.1 $30,001 - $40,000 12 20.7 $40,001 - $50,000 9 15.5 $50,001 - $60,000 9 15.5 $60,001 - $70,000 3 5.2 $70,001 - $80,000 3 5.2 $80,001 & Over 5 8.6 Totals 58 100.0 No Responses 11 RETAIL EXPERIENCE - YEARS IN RETAILING PRIOR TO CURRENT POSITION 0 - 5 Years 18 28.6 6 - 10 Years 18 28.6 11 - 15 Years 14 22.2 Over 15 Years 13 20.6 Totals 63 100.0 No Response 6 POSITION EXPERIENCE - YEARS IN CURRENT POSITION O - 5 Years 29 42.6 6 - 10 Years 16 23.5 11 - 15 Years 9 13.2 Over 15 Years 14 20.6 Totals 68 100.0 No Response 1 SEX Male 49 72.1 Female 19 27.9 Totals 68 100.0 No Responses Continued 39 Table 4.1 (Continued) N - 69 Variables Number Percent STORE’S ANNUAL SALES VOLUME 0 - 1,000,000 12 21.4 1,000,001 - 5,000,000 6 10.7 5,000,001 - 10,000,000 3 5.4 10,000,001 - 50,000,000 11 19.6 50,000,001 - 100,000,000 1 1.8 Over 100,000,000 23 41.1 Totals 56 100.0 No Response 13 Mean - $175,900,000 ANNUAL SALES VOLUME (AT COST) THAT THE BUYER IS RESPONSIBLE FOR BUYING 0 — 500,000 7 12.1 500,001 - 1,000,000 7 12.1 1,000,001 - 5,000,000 18 31.0 5,000,001 - 10,000,000 14 24.1 Over 10,000,000 12 20.7 Totals 58 100.0 No Response 11 Mean - 5 14,200,000 NUMBER OF STORES INCLUDED IN THE ANNUAL SALES VOLUME 1 - 5 Stores 24 38.1 6 - 10 Stores 6 9.5 11 - 20 Stores 11 17.5 21 - 30 Stores 6 9.5 31 — 40 Stores 2 3.2 41 - 50 Stores 6 9.5 51 — 100 Stores 4 6.3 Over 100 Stores 4 6.3 Totals 63 100.0 No Response 6 Mean - 35 Stores 40 thirty-five stores. “These results averaged approximately $400,0001dollars of merchandise being purchased at cost, per year, per store. The final sample included thirty-two buyers from department stores, eighteen buyers from specialty stores, and nineteen buyers from discount stores. Data Analysis The first seventeen questions of the survey (Appendix A) were measurements of buyers’ perceptions regarding the purchasing of imported merchandise. These were first analyzed to identify the mean level of agreement or disagreement with each measure. The buyers were asked to state their level of agreement or disagreement with each measure on a scale from one to seven (1aStrongly Disagree, 7-Strongly Agree), and the mean scores for each measure were analyzed (Table 4.2). The statements that possessed extreme means, those under 3.0 and 5.0 and over, are discussed. The statements with means under 3.0 were considered to be general disagreement. These statements are: ”Imported merchandise is more likely to have flaws than domestic apparel," (2.9), "The sizing for imported merchandise does not really correspond with 0.8. sizing," (2.8), ”We have more returns of imported merchandise than we do of 0.5. apparel," (2.6), and "We generally have to put imported merchandise on sale earlier than we do U.S. apparel," (2.7). The statements with means 5.0 and over’were considered to be general agreement. These statements are: I'Imported merchandise is generally higher quality for the price than domestic merchandise," (5.4), ”I have 41 Table 4.2 Buyers’ Perceptions of Purchasing Foreign Merchandise: Means MEASUREMENTS OF BUYERS’ PERCEPTIONS MEAN Imported merchandise is more likely to have flaws than domestic apparel 2.9 If there is something wrong with imported merchandise it is too expensive to return it, so we just absorb the losses 4.5 There is a lot of red tape to go through before buying imported merchandise 3.3 We buy our imported merchandise through a wholesaler rather than buy direct 4.4 The sizing for imported merchandise does not really correspond with U.S. sizing 2.8 We have more returns of imported merchandise than we do of U.S. apparel 2.6 We generally have to put imported merchandise on sale earlier than we do U.S. apparel 2.7 Imported merchandise is generally higher quality for the price than domestic merchandise 5.4 Quality control is not as good for imported merchandise as it is for domestic apparel 3.0 I am buying more imported merchandise for my department this year than I did last year 4.4 I have found that we can take higher markups on imported merchandise than we can on domestic merchandise 5.3 Consumers frequently ask for American made products 3.6 Before placing an order with a vendor I find out whether the product is made in America or in a foreign country 4.0 l-Strongly Disagree, 7-Strongly Agree 9Continued 42 Table 4.2 (Continued) MEASUREMENTS OF BUYERS’ PERCEPTIONS MEAN In buying merchandise for my department I almost always buy nationally known brand names 4.0 I depend primarily on the manufacturer to supply me with high quality merchandise 5.0 I depend primarily on my own knowledge of the product quality to assess the products I buy for my department 5.7 I do not think that consumers care about where a product is manufactured 4.4 IiStrongly Disagree, 7-Strongly Agree 43 found that we can take higher markups on imported merchandise than we can on domestic merchandise," (5.3), 'I depend primarily on the manufacturer to supply me with high quality merchandise,“ (5.0), and "I depend primarily on my own knowledge of the product quality to assess the products I buy for my department," (5.7). An item reliability analysis was then conducted on these seventeen questions to find and eliminate the questions that did not correspond to the underlying construct of the remaining questions. "Imported merchandise is generally higher quality for the price than domestic merchandise" (Question 8), I'1 am buying more imported merchandise for my department this year than I did last year” (Question 10), "I depend primarily on my own knowledge of the product quality to assess the products I buy for my department" (Question 16), and ”I do not think that consumers care about where a product is manufactured" (Question 17) were omitted. The remaining scale yielded a Chronbach alpha of .76. Factor analysis was used to reduce the questions into smaller related groups. Varimax rotation was used to arrive at the final factor solution. A cutoff point of .50 for the loadings was used as an inclusion criterion. The criterion of eigenvalue greater than 1.1 was used to determine the number of factors, yielding four factors (Table 4.3). The factors were then given a name based on the statements that loaded heavily on each factor (Table 4.4). The first factor was defined as Pro-American Orientation. This factor included five pro-american statements from the questionnaire; "We have more returns of imported merchandise than we do of U.S. apparel " (.88), ”Imported merchandise is more likely to have flaws than domestic 44 Table 4.3: Retail Buyers’ Perceptions of Purchasing Imported Merchandise Factors: Factor Analysis (N-69) FACTOR EIGENVALUE CUMULATIVE PERCENT OF VARIATION 1 3.88059 29.9 2 1.69039 42.9 3 1.37608 53.4 4 1.11286 62.0 45 Table 4.4: Retail Buyers’ Perceptions of Purchasing Imported Merchandise: Factor Loadings (N-69) Rotated Factor Matrix: Factor 1 Factor 2 Factor 3 Factor 4 Imported merchandise is more likely to have flaws than domestic apparel .85* .14 .10 .03 If there is something wrong with imported merchandise it is too expensive to return it, so we just absorb the losses .18 .80* -.19 .01 There is a lot of red tape to go through before buying imported merchandise .03 .82* .05 -.06 We buy our imported merchandise through a wholesaler rather than buy direct .14 -.04 .74* .28 The sizing for imported merchandise does not really correspond with U.S. sizing .68* -.02 .18 .24 We have more returns of imported merchandise than we do of U.S. apparel .88* .17 -.05 .15 We generally have to put imported merchandise on sale earlier than we do U.S. apparel .26 .65* .14 .22 Quality control is not as good for imported merchandise as it is for domestic apparel .67* .24 .22 -.18 I have found that we can take higher markups on imported merchandise than we can on domestic merchandise .03 .04 .03 .02 Consumers frequently ask for American made products .61* .20 .10 .45 Continuedi 46 Table 4.4: (Continued) Rotated Factor Matrix: Factor 1 Factor 2 Factor 3 Factor 4 Before placing an order with a vendor I find out whether the product is made in America or in a foreign country .21 -.06 -.34 In buying merchandise for my department I almost always buy nationally known brand names .09 .10 .40 I depend primarily on the manufacturer to supply me with high quality merchandise .12 .01 .76* Factor 1 Pro-American Orientation Factor 2 - Import Problems Factor 3 . External Risk Reducer Factor 4 Buyer Risk Reducer .62* .73* -.O6 * Statements that loaded heavily (greater than .50) on each Factor 47 apparel" (.85), "The sizing for imported merchandise does not really correspond with U.S. sizing” (.68), ”Quality control is not as good for imported merchandise as it is for domestic apparel" (.67), and "Consumers frequently ask for American made products" (.61). The second factor was defined as Import Problems, and consisted of three statements; ”There is a lot of red tape to go through before buying imported merchandise” (.82), ”If there is something wrong with imported merchandise it is too expensive to return it, so we just absorb the losses” (.80), and "We generally have to put imported merchandise on sale earlier than we do U.S. apparel” (.65). The third factor was defined as the External Risk Reducer. These were the policies related to the buying of products and included two statements; ”I depend primarily on the~manufacturer to supply me with high quality merchandise" (.76), and "We buy our imported merchandise through a wholesaler rather than buy direct" (.74). The fourth factor was defined as Buyer Risk Reducer which included two statements; "In buying merchandise for my department 1 almost always buy nationally known brand names” (.73), and ”Before placing an order with a vender I find out whether the product is made in America or in a foreign country” (.62). Factor scores were calculated for each of the four factors and a new variable was subsequently used as an independent variable. A correlation analysis was conducted on these four factors with the dependent variable, percent of imported merchandise. Two factors were highly correlated with the percent of imported merchandise; Pro-American Orientation (-.39) and External Risk Reducer (-.268) (Appendix C, Table 48 C.1). The more the buyer was oriented toward pro-american purchasing, the less likely they were to purchase imported merchandise. The factor External Risk Reducer was also negatively correlated with the percent of imported merchandise purchased, which suggests that the more the organization wanted to reduce risk, the less likely they would be to purchase imported merchandise. Stepwise regression analysis was conducted using the four factors as independent variables and the percent of imported merchandise purchased by the buyer as the dependent variable. Percent of imported merchandise was determined from the question "Using your best estimate, what percent of the total merchandise that you buy for your organization is manufactured in a foreign country?" The first factor, Pro-American Orientation, was significantly related to the percent of imported merchandise the buyer purchased where p<.05 and a R-square of .15 (Appendix C, Table 0.2). Research Objective 1: To Determine the Effect That Individual Characteristics Have on the Tendency of American Buyers to Purchase Foreign Merchandise. Individual regression analysis was conducted with retail experience, position experience, and total experience with percent of imported merchandise the buyer purchased to establish beta weights. Forty percent of the sample was selected, and the analysis was computed three times using percent of imported merchandise bought as the dependent variable. The use of three separate random samples is a dubbing technique used to compensate for the small sample size. A new variable, total experience, 49 was created by weighting retail experience and position experience by their individual beta weights and summing the variables together (Table 4.5). Table 4.5: Regression Analysis of Retail Buyers’ Position Experience and Retail Experience with Imported Merchandise: Standardized Beta Weights — 40% Sample, Average of Three Analyses Standardized Beta Weights: REX PEX First 40% Sampling —.33 -.03 Second 40% Sampling -.26 .12 Third 40% Sampling -.39 -.01 Average -.33 .03 REX - Retail experience prior to current position (years) PEX - Position experience in current position (years) Individual characteristics were included in the model so as not to exclude or diminish the significance of the individual and the unique characteristics that each individual possesses. The variables that were tested for inclusion in the model were: education, major, salary, age, sex, travel experience, and the factor Pro-American Orientation. These final variables will be used to assist in the development of a model of retail buyer behavior in regards to the purchasing of imported merchandise. A regression analysis of these variables was conducted independently, with the dependent variable, percent of imported merchandise purchased; to obtain standardized beta weights (Appendix C, Table C.3). Of these variables, only the ones that were highly related to percent of imported merchandise purchased, were retained for the final 50 model. The following lists the final individual characteristic variables and their beta weights that were retained for use in the final model: age (-.37), sex (.15), education (.14), major (.37), Pro-American Orientation (-.31), retail experience (.60), and total experience (.51). Major and sex were both dumy variables; that is, they were categorical numbers and cannot be explained in a correlation with percent of imported merchandise purchase. Both retail experience and total experience had a very high positive relationship with the dependent variable, percent of imported merchandise purchased. This included the buyer’s position experience because total experience, by design, includes the amount of years the buyers held their buying position. These positive relationships suggest that the more retail experience, position experience, and total experience a buyer has, the more likely they would be to purchase imported merchandise. Thus, the more experience the buyer has in purchasing, the more likely they would be to purchase foreign merchandise. Education also had a positive relationship with percent of imported merchandise purchased, which suggests that the higher the education of a buyer, the more likely they would be to purchase imported merchandise. The factor, Pro-American Orientation, had a negative relationship‘with the percent of imported merchandise purchased. This would suggest that buyers with a strong conviction of purchasing American products would be less likely to purchase imported merchandise. The major that people studied in college was analyzed with the percent of imported merchandise that they purchase. The College of Business majors purchased a higher percentage of foreign products than any 51 other'majoru However, no significant relationship existed between college major and the amount of imported merchandise purchased (Table 4.6). Table 4.6: Major in College and Percent of Imported Merchandise Purchased P R C N Percent M9518 Business: 32 58.2% Human Ecology: 5 9.1% Other: 18 32.7% Column Total: 55 100.0% Missing 14 Research Objective 2: To Determine the Effect That Organizational Characteristics Have on the ‘Tendency of' American Buyers to Purchase Foreign Merchandise. The size of the organization was based on the stores annual sales volume, the annual sales volume (at cost) for which the buyer was responsible, and the number of stores included in the annual sales volume. Factor 3, External Risk Reducer, was used as the independent variable with the percent of imported merchandise purchased, as the dependent variable. A regression analysis was used with a forty percent sampling, to obtain standardized beta weights for these variables (Appendix C, Table C.3). Of these variables, only the ones that were highly related to the percent of imported merchandise purchased, were retained for the model. 52 The following is a list of the final independent organizational characteristic variables, and their beta weights, that were retained for use in the final model: stores annual sales volume (-.27), number of stores (-.16), and the factor, External Risk Reducer (-.12). The store’s annual sales volume, number of stores, and the factor, External Risk Reducer, all had negative relationships with percent of imported merchandise purchased. This suggests that: the greater the organization’s annual sales volume; the greater the number of stores; and the greater the organization’s perceived need to reduce risk; the less likely the organization will be to purchase imported merchandise. Research Objective 3: To Determine the Effect of Economic Characteristics on the Tendency of American Buyers To Purchase Foreign Merchandise. The economic characteristics of the countries were also investigated. The initial markup on the foreign produced merchandise that the buyers felt they could obtain was used as an economic variable, as well as the economic index from the World Development Report (1989) which classified the countries into high and low risk. The third objective of this study is to investigate the effect of economic characteristics on the percent of imported merchandise purchased. Elements included in this model were the percent of increase or decrease of the amount of imported merchandise purchase, the countries where they purchased the merchandise, and the obtainable markup on this merchandise. Countries were divided into five specific regions which produce merchandise for export to the United States. These regions are 1) Mexico and other Caribbean countries, 2) Korea, Taiwan, Singapore, etc., 3) 53 China, 4) Japan, and 5) European countries. These regions were analyzed separately with regards to the increase or decrease purchased over last year’s figures, and the average initial markup for apparel products from these regions. The specific region, the amount of increase or decrease of merchandise purchased from that region, and the obtainable initial markup for that region were analyzed. These variables were used as independent variables with percent of imported merchandise purchased, as the dependent variable. The stepwise regression analysis of these variables resulted in no significant differences. The average initial markup for the products from each region; Mexico, Korea, China, Japan, and Europe, was analyzed (Table 4.1). Initial markup is the difference between the cost (wholesale price) and the original retail price of the merchandise. Average initial markup on merchandise produced in the United States, is 48%. The average initial markup was higher on merchandise produced beyond American borders as compared to American produced merchandise. Mexico was the closest, with American retailers getting almost a 53% markup on Mexican products. Japanese products averaged a 55% markup, while European merchandise averaged 56%n Merchandise produced in China, Korea, Taiwan, and Singapore comanded the highest obtainable average initial markups at 57% each (Figure 4.1). The average total foreign-produced merchandise purchased was forty- six percent. The amount of increase or decrease of merchandise purchased from specific foreign regions over the previous years figures, were as follows; Korea, Taiwan, and Singapore had the highest amount of increase 54 at thirteen percent, China was second with an increase of eleven percent, Europe exhibited an increase of six percent and Japan was noted as having a substantial decrease, the only decrease, of six percent. Mexico and other Caribbean countries were found unchanged (Table 4.7). More buyers had traveled to Taiwan than any other country (16.4%). Hong Kong and Korea were the next most frequently visited (15.6%). Only 8.2% of the buyers had been to Japan, Singapore, and the United Kingdom (Figure 4.2). Table 4.7: Increase Or Decrease Of Imported Merchandise Purchased Over Previous Years Figures REGION COUNTRIES % INCREASE (DECREASE) 1 Mexico and Caribbean Countries 0% 2 Korea, Taiwan, Singapore 13% 3 China 11% 4 Japan (-6%) 5 Europe 6% 55 Research Objective 4: To Investigate the Reasons American Retail Buyers’ Purchase Foreign Merchandise. The means for the reasons retail buyers purchase foreign merchandise are presented in Table 4.8. These reasons are: better quality for the price, more unique merchandise, higher markups, exclusive merchandising, and specification buying. The mean responses indicated better quality for the price (39%) as the most important reason for purchasing overseas, followed closely by the ability to obtain a high initial markup (35%). Exclusive merchandise/private branding (24%) was the third most important reason with the ability to obtain unique merchandise (18.7%), and specification buying (18.4%), least important. Table 4.8: High/Low Risk Countries & The Reasons Buyers Purchase Imported Merchandise: Discriminant Analysis — Group Means QUALITY UNIQUE HIGHER EXCLUSIVE SPECIFICATION MERCHANDISE MARKUP MERCHANDISE BUYING OVERALL MEAN 38.6 18.7 35.4 24.0 18.4 HIGH RISK 37.7 8.5 29.7 14.3 5.7 LOW RISK 29.1 11.9 27.1 17.2 6.9 56 Average Initial Markup On Products Produced In: UNITED STATES 48 MEXICO 52.8 KOREA 57.2 CHINA 57.4 JAPAN 55.1 EUROPE 55.9 - PERCENTAGE *Mexico - Mexico 3 Other Caribbean Countries Korea - Korea, Taiwan, Singapore, etc. Figure 4.1: Average Initial Markup on Products Produced In: United States, Mexico, Korea, China, Japan 8 Europe 57 MAJOR COUNTRIES TO WHICH RETAIL TAIMN J HONG KONG e KOREA ~/ JAPAN a SINGAPORE a UNITED KINGDOM a ITALY a EUROPE 0- THAILAND w/ FRANCE a FAR EAST °~/ OTHER a LOW RISK COUNTRIES J HIGH RISK COUNTRIES BUYERS TRAVELLED _ 16.4 — 16.6 _ 16.0 — 8.2 _ 0.2 — 8.2 — 7.4 — 4.9 - 4.: _ 3.3 — 3.3 — 4.9 - PERCENTAGE ° EXCLUDING PREVIOUSLY LISTED COUNTRIES Figure 4.2: Major Countries To Which Retail Buyers Travelled 58 A discriminant analysis was used to analyze whether the reasons buyers purchased imported merchandise were predictors of purchasing primarily from a high or a low risk country (Table 4.8). The group means results indicated that better quality for the price~was the most important reason when purchasing from a high risk country. Higher markups were more obtainable from the high risk countries. Unique merchandise and exclusive merchandise/private branding were more important to the buyers when they were purchasing from low risk countries. The retail buyers were asked to list, in order, the three major countries where they procured merchandise. A discriminant analysis was conducted on the first major country that the buyers listed. A forty percent sample was used to test and the remainder, the hold out sample of sixty percent, was used to validate. The independent variables used in this analysis were the reasons why retail buyers purchased imported merchandise. The forty percent sampling was conducted three times. All three of the classification results for the selected and unselected cases are in Appendix D. The first sampling revealed that only 43% of the cases were classified correctly in the validation sample (Table 0.1). This result is lower that what would have occurred by chance. According to Hare, Anderson and Tatham (1987), the percent of correctly classified cases of the validation sample on the first analysis should have been 52.8%. The 67% accuracy for the analysis sample is higher than the 43% accuracy for the holdout sample, which demonstrates the upward bias in not using a holdout sample to validate the discriminant function (Hare et al., 1987). To compare the 67% classification accuracy with the priori chance of 59 classifying individuals correctly without the discriminant function, the proportional chance criterion model was used. 2 2 CW, = p + (l-p) Where: C o - the proportional chance criterion p - proportion of individuals in group 1 l-p - proportion of individuals in group 2 (Hare, Anderson and Tatham, 1987). Inserting the appropriate» numbers from 'the first analysis into the formula, we obtain: cp, - (is/42)2 + (26/42)2 - (. 38)2 + (. 62)2 = .145 + .383 = .528 or 52.8% The classification accuracy of forty-three percent is lower than the proportional chance criterion of 52.8%; therefore, this result cannot be considered a valid predictor. Inserting the appropriate numbers from the second analysis into the formula, we obtain: =- (19/45)2 + (26/45)2 - (. 42)2 + (. 58)2 . .178 + .334 . .512 or 51.2% The second sampling resulted in sixty percent of the unselected cases correctly classified (Table 0.2). The proportional chance criterion for this analysis was 51.2%. The validation sample had a higher percentage than the proportional chance criterion. This result can be considered a valid predictor. 6O Inserting the appropriate numbers from 'the third analysis into the formula, we obtain: cm - (is/39)2 + (21/39)’ - (.46)2 + (.54)2 = .502 or 50. 2% In the final sampling, only thirty-eight percent were correctly classified for the validation sample (Table 0.3). The proportional chance criterion for this analysis was computed to be 50.2%. This result could not be considered a valid predictor. The three run average of the validation sample was forty-seven percent, and the average of the proportional chance criterion was 51.4%. The result of the three run average suggests that it could not be used as a valid predictor of percent of imported merchandise purchased. Major countries from which retail buyers purchased foreign merchandise are presented in Figure 4.3. The buyers were asked to list the three major countries that account for the imported merchandise that they buy. The first, second and third major countries listed by the respondents were used in this analysis. Taiwan was the most mentioned country by the buyers with 26.9 percent. Second was Korea with twenty- two percent, followed by Hong Kong and China at 14.5% and 12.4% respectively. Italy was the only European country, falling fifth at seven percent (Figure 4.3). Of these countries, Taiwan, Korea and China; all have economic indexes that would classify them as high risk countries (Figure 4.4) (World Development Report, 1989). Overall, higher quality for the price was the number one reason for purchasing merchandise overseas, followed closely by the ability to obtain 61 a higher markup on the foreign merchandise. The reasons associated with buying from high risk countries included better price for the quality as the number one reason, followed by higher obtainable initial markups on foreign merchandise. When the buyers were purchasing from low risk countries, it was more difficult to obtain unique merchandise, exclusive merchandise, private branding, and specification buying. Research Objective 5: To develop a model to represent these variables. The final objective examines the relationship among the individual, organizational and economic characteristics and the effect these variables have on the percent of imported merchandise purchased. All of the variables that were highly related to the percent of imported merchandise, were retained for use in the final model. These variables include: age, sex, education, major'in college, retail experience, total experience, the factor Pro-American Orientation, store’s annual sales volume, number of stores, and the factor External Risk Reducer. These variables and their beta weights were analyzed with a regression analysis and a forty percent sample, to Idetermine which variables were related to percentage of imported merchandise purchased. Of these variables, the factor Pro-American Orientation and total experience, were significantly related to percent of imported merchandise purchased. The residuals were plotted and no abnormalities were found. 62 14.5 7 5.9 I 3.2 HONG KONG ITALY JAPAN EUROPE: - PERCENTAGE ° EXCLUDING PREVIOUSLY LISTED COUNTRIES Figure 4.3: Major Countries From Which Buyers Purchase Foreign Merchandise: Low Risk 26.9 22 12.4 5.9 - 2.2 TAIMN . KOREA CHINA FAR EAST. SOUTH AMERICA - PERCENTAGE ' EXCLUDING PREVIOUSLY LISTED COUNTRIES Figure 4.4: Major Countries From Which Buyers Purchase Foreign Merchandise: High Risk CHAPTER V DISCUSSION The first seventeen questions of the survey (Appendix A) were measurements of retail buyers’ perceptions about purchasing imported apparel. They were first analyzed to obtain the average agreement or disagreement with each measure. The results of this analysis suggests that the buyers strongly disagreed that 1) there were more flaws in imported merchandise, 2) the sizing of imported merchandise does not correspond to U.S. sizing, 3) they had more customer returns of imported merchandise than of U.S. merchandise, and 4) they had to put imported merchandise on sale earlier than American merchandise. Buyers strongly agreed that they depend on their own knowledge about product quality to assess the products, and they also depend on their manufacturers to supply them with quality merchandise. This is congruent with Mazursky G Hirschman’s (1987) findings that retail buyers rely on external nonpersonal sources (the manufacturer) and internal personal sources (own knowledge) for their information. Buyers also agreed strongly that they can take higher markups on imported merchandise, and that imported merchandise is higher quality for the price. These results are supported by Atkins and Jenkins (1988) study which found 92% of the buyers agreed that profit achieved on imported merchandise was equal to or greater than profit achieved on domestic 63 64 apparel. Factor analysis was conducted on the seventeen measures of retail buyers’ perceptions regarding the purchasing of foreign merchandise, and resulted in four factors; Pro-American Orientation, Import Problems, External Risk Reducer, and Buyer Risk Reduceru A correlation analyses was conducted on the four factors independently with percent of imported merchandise purchased. The factors Pro-American Orientation and External Risk Reducer, were both highly related with percent of imported merchandise. This suggests that the individual characteristics of retail buyers, especially their pro-american orientation, is highly significant to their actual purchase or non purchase of foreign merchandise. The negative relationship that exists between Pro-American Orientation and the percent of imported merchandise purchased, indicates that the less the buyer is oriented toward pro-american buying, the more they would purchase foreign-produced merchandise. The factor, External Risk Reducer, also has a negative relationship with percent of imported merchandise purchased, which suggests the more the organization wants to reduce risk, the less likely they would be to purchase imported merchandise. A risk-reducing strategy the organization might use would be to employ an importer or middleman to import the merchandise. An organization that takes a risk reducing strategy, would be against the purchase of imported merchandise due to the usual amount of risk involved. The risk reducing strategy is supported by Moriarty (1983) which states that buyers are more motivated to reduce their perceived risk than to maximize their profit. Hugstad and Durr (1986) found perceived risk to be higher in foreign products than American made products. 65 The opposite would be true for the organization which employs a risk taking strategy. The risk-seeking organizations would be more likely to purchase foreign merchandise and import these products into the United States. This is usually the behavior of an assertive company looking for higher profit margins. The first objective was to determine the effect that individual characteristics have on the tendency of American buyers to purchase foreign merchandise. Individual regression analyses were conducted on individual variables, to determine which of the independent variables were significant in predicting percent of imported merchandise purchased. The variables that were related to the percent of imported merchandise purchased were: age, sex, education, major in college, retail experience, total experience, and the factor Pro-American Orientation. These results indicated that all of the above mentioned variables had some affect on buyers’ import purchase decisions, and they were retained for use in the final objective. Studies found that the age and gender of buyers influenced their opinions of foreign countries and of foreign products. Older consumers were found to evaluate foreign products higher than younger consumers (Schooler, 1971). Females were found to rate foreign products higher than males (Schooler, 1971), and women had a higher rating for countries which produced fashion products, while men rated countries higher which produced technological equipment (Wall, Heslop & Hofstra, 1989). The individual characteristics were independently correlated with percent of imported merchandise purchased. Both retail and total experience had a high positive correlation with imported merchandise. 66 This suggests that as the buyer’s retail and total experience increases, the amount of imported merchandise purchased is likely to increase. This is supported by Fairhurst and Fiorito (1988), who found buyer’s experience to have a major influence on the buyer’s decision process and the financial performance of the company. The positive relationship with experience and financial performance, indicated that the company with the most experienced buyers would have the strongest financial performance. Ettenson & Wagner (1986) found that the experience of the buyer affected the evaluation strategies of buyers, assistant buyers, and students, when judging the saleability of merchandise. Education also had a positive correlation with imported merchandise. Therefore, the higher the buyer’s education, the more likely the buyer would be to purchase imported merchandise. This is congruent with many studies that concluded people with more education tended to rate foreign products higher that people with limited education (Schooler, 1971; Anderson et al., 1972; Dornoff et al., 1974). The major that people studied in college had no significant relationship ‘with percent. of imported merchandise purchased. Pro-American Orientation of buyers was negatively related to percent of imported merchandise. This indicates that the buyers with a strong pro-american orientation would be less likely to purchase imported merchandise. Individual characteristics were found to influence their willingness to buy products from particular countries (Wang & Lamb, 1980). Thus, retail buyers’ orientations and perceptions toward foreign produced merchandise definitely influences their purchasing decisions. 67 The second objective was to determine the effect that organizational characteristics have on the tendency of retail buyers to purchase foreign merchandise. The organizational characteristics that were related to the percent of imported merchandise purchased included stores annual sales volume, annual sales volume for which the buyer was responsible, and the number of stores. These were used as a measurement of the organization’s size. They were negatively related to percent of imported merchandise, which suggested that the larger the organization, the less likely they would be to purchase imported merchandise, and the smaller the organization, the more likely they would be to purchase foreign merchandise. One explanation could be that the larger the organization, the greater the room for advancement. This would lead to a higher turnover rate in the buyer position, which suggests that the buyers holding these positions would not be as experienced as a buyer in a specialty store. Typically, in a small specialty store, the only position above the buyer is the owner, therefore the specialty store buyers are restricted in their job advancement. Since the buyers’ experience was found to directly relate to the percent of imported merchandise purchased, and retail buyers with more experience would tend to purchase more foreign-produced products, then the less experienced buyers in the larger organizations would be hesitant to purchased imported merchandise. Another explanation could be that the larger stores may have most of the overseas purchasing done in central headquarter*offices; thus, the buyer taking our survey may not have» experienced the actual buying techniques used to purchase merchandise from foreign countries. 68 A third explanation could be that once the organization develops into a very large and powerful retail company; they have the resources and capabilities to either integrate themselves vertically and do their own manufacturing, or find a domestic manufacturer and source from them exclusively. A small organization typically would not have the financial strength to vertically integrate or source exclusively from a domestic manufacturer; yet, they must compete on the same level with the large retailers. Therefore, small retailers generally take more risks. They must obtain unique merchandise, and merchandise that is of good quality for the price. Small retailers recognize that foreign countries can offer an endless supply of fresh and unique merchandise with good quality and lower prices. These retailers are willing to take the necessary risks involved with purchasing overseas to gain the competitive advantage. Economic characteristics, including initial markup and economic indexes, were analyzed for the third objective; to determine the effect of economic characteristics on the tendency of the buyer to purchase foreign merchandise. The regions from which the buyers purchased foreign merchandise, the increase or decrease of merchandise purchased from each region, and the initial markup they could obtain from merchandise from each region was analyzed. No significant relationships were found. A study of country of origin concluded that product evaluations were influenced by country of origin regardless of product attributes (Hong & Wyer, 1989). The average initial markup obtainable on American made products was 48%. Mexican merchandise had an average markup of 53%, Japanese products were at 55%, European merchandise had an average markup of 56%, and 69 merchandise produced in China, Korea, Taiwan, and Singapore achieved an average markup of 57%. This extra markup percentage will directly affect the maintained markup of those products, which results in a higher profit margin on imported merchandise, assuming the reductions are constant. This profit is the key motivator for buyers to purchase imported merchandise. A high achieved profit was found by Atkins & Jenkins (1988) to be a key motivator for buyers to purchase imported merchandise. Studies have confirmed that price and profit are key reasons why buyers purchase foreign merchandise (Atkins &.Jenkins, 1988; Hung, 1989) and that markup is a very significant factor to buyers when purchasing (Wagner et al., 1989). Forty-six percent of the total merchandise purchased was imported from foreign countries. This is compared to 1988 statistics which lists the total percent of imported apparel purchased at 34 percent (U.S. Industrial Outlook, 1990). Asian countries except Japan had an increase in merchandise purchased over last years’ figures. Overall, the Asian countries seem to have maintained their low production costs; including low wages for labor, and that they maintained or increased the quality of the merchandise they were producing. Even with transportation costs, tariffs, and duties that are levied on that merchandise before entering the United States, their prices were still lower and the quality still higher, than comparable American products. Country of origin was found to influence product evaluation (Bilkey 8: Nes, 1982), and a positive relationship was found to exist between product evaluation and the economic development of the producing country (Schooler, 1971). This suggests that the higher the economic development 70 of the country, the more likely the consumer was to evaluate the product in a positive manner. Wang & Lamb (1983) found that consumers were more willing to purchase from politically free and economically rich countries. This study does not support these conclusions. Consumers are purchasing products that are manufactured in underdeveloped, politically suppressed, and economically poor countries. Almost half (46%) of the retail buyers’ merchandise has been manufactured in foreign countries and the majority of that merchandise had been imported from Taiwan, Korea, and China. All of these countries are classified as high risk countries; all are economically underdeveloped and politically suppressed. This is comparable to the 1988 U.S. trade statistics which list Korea, China and Taiwan as the three countries which produced the majority of apparel imported into the United States (Statistical Abstract of the United States, 1990). Retail buyers’ stated Taiwan, Hong Kong, and Korea as the counties travelled to most often buying trips. The fourth objective investigated the reasons retail buyers purchase foreign merchandise. Better quality for the price was the most important reason given for purchasing merchandise from high risk countries. Hung (1989) found that products from developing countries were perceived to produce lower priced products. The ability to obtain a higher markup on merchandise, was the second most important reason for purchasing foreign- produced merchandise from high risk countries. Atkins & Jenkins (1988) support both findings; foreign-produced merchandise is generally better quality for the price, and retailers have the ability to obtain a higher initial markup on that merchandise. Unique merchandise and exclusive merchandise/private label were the most important reasons for purchasing 71 goods from low risk countries such as the United States and Canada. The final objective was to develop and validate a model to represent the variables and the effect they have on the retail buyers’ decisions when purchasing foreign produced merchandise. The variables that were highly correlated or had a significant relationship with percent of imported merchandise were retained for use in the cumulative model of retail buyer behavior of purchasing imported merchandise (Figure 5.1). The results indicated significant relationships to percent of imported merchandise purchased, with the factor Pro-American Orientation and total experience. Total experience consisted of two variables, retail experience and position experience; thus, the combination of these experiences are significant to the amount of imported merchandise purchased. Also, the factor External Risk Reducer, had a high negative correlation to percent of imported merchandise purchased. This concludes that the greater the organization’s desire to reduce risk, the smaller the amount of imported merchandise that is likely to be purchased. Retail experience had a high positive relationship with percent of imported merchandise purchased. This result indicates that the more retail experience a buyer has, the more likely they would purchase imported merchandise. 72 EDUCATION MAJOR .37' . 4 IN COLLEGE\ l 1 (-.16i PERCENT OF IMPORTED MERCHANDISE PURCHASED c: K RETAIL EXPERIENCE .5 1 {-.31) TOTAL EXPERIENCE NUMBER / OF STORES ('37) STORE SALES VOLUME ' (-.12i EXTERNAL RISK REDUCERS PRO-AMERICAN ORIENTATION* - HIGHLY SIGNIFICANT TO N OF IMPORTED MERCHANDISE PURCHASED Figure 5.1: Retail Buyer Behavior of Purchasing Imported Merchandise: Beta Weights. CHAPTER VI SUMMARY, IMPLICATIONS AND RECOMMENDATIONS Summary The research objectives for this study included: I) to determine the effect that individual characteristics have on the tendency of American buyers to purchase foreign merchandise, 2) to determine the effect that organizational characteristics have on the tendency of American retail buyers to purchase foreign merchandise, 3) to determine the effect of economic characteristics on the tendency of American retail buyers to purchase foreign merchandise, 4) to investigate the reasons retail buyers purchase foreign merchandise, and 5) to develop and validate a model to represent these variables. A self-report mail questionnaire was developed to collect information, and was randomly sent to retail buyers from department, discount, and specialty stores. The ffinal sample included sixty-nine usable questionnaires. The variables that were strongly related to percent of imported merchandise purchased were included in the model (Figure 5.1). Total experience (which includes both retail and position experience), and the factor Pro-American Orientation, were significantly related to percent of imported merchandise purchased. Retail experience had a high positive correlation, and the factor External Risk Reducer had a high negative correlation with the percent of imported merchandise purchased. Age, sex, 73 74 education, major in college, store sales volume, and number of stores were the other variables which were related to the percent of imported merchandise purchased. Each of these variable to some extent were found to have an effect on the retail buyer when purchasing imported merchandise. The most important reasons retail buyers gave for purchasing merchandise from high risk countries were better quality for the price and higher initial markup. Unique merchandise and exclusive merchandise/ private label were the most important reasons when purchasing goods from low risk countries. The results of the initial markup analysis suggested that on the average, American retail buyers can obtain approximately 50% markup on American products. Merchandise produced in China and Korea averaged a 57% markup and merchandise from Europe averaged an initial markup of fifty- six percent. Japanese products averaged 55% markup and Mexican products had an average initial markup of fifty—three percent. This was the lowest markup on merchandise produced outside of the United States. This high obtainable initial markup is a key motivator for retail buyers to purchase foreign merchandise. Forty-six percent of the total merchandise purchased by retail buyers was foreign-produced. The asian countries all had an increase of merchandise purchased over last year’s figures except Japan, which experienced a decrease. Taiwan was the country which produced the largest amount of apparel merchandise imported into the United States. The final model of retail buyer behavior of purchasing imported merchandise included the variables, age, sex, education, major in college, 75 retail experience, total experience, Pro-American Orientation, External Risk Reducer, store sales volume, and number of stores. The factor Pro- American Orientation and total experience were found to be significantly related to percent of imported merchandise purchased. No other significant relationships were found. Implications Understanding retail buyer behavior as it relates to purchasing foreign merchandise is key to better understanding retail performance. Retailers must pay closer attention to their buyers and the variables that influence the buyer’s behavior. Further research into this area is warranted. There are many aspects of retail buyer behavior that have yet to be explored. One of the most important is developing a model that depicts the stages retail buyers go through when making their purchasing decisions. Retail experience was found to be significantly related to the percent of imported merchandise purchased. Therefore, the experienced buyers, or ‘expert buyers’ are more willing to take risks to obtain the foreign merchandise which yields a higher profit margin. In the competitive retailing industry, these risk-taking buyers may gain the competitive advantage necessary to insure the success of their retail establishment. The less experienced buyers not willing to take risks and obtain foreign merchandise, may lose profit potential. Retail buyer behavior will be of key importance to retailers concentrating on becoming financially stable, successful, and leaders in 76 the 19905. Retail buyer behavior must be studied and understood as it may be an essential element in the development of a competitive advantage in the retailing of the future. Recommendations for Future Research This study was an exploratory attempt to identify the variables which would explain buyer’s purchasing of imported products. Validation of the variables included in the models, and inclusion of other variables omitted or not included in this study, would enrich our understanding of retail buyer purchasing decisions regarding imported merchandise. Since the relationships of the variables to the percent of imported merchandise purchased were established in this data base, a new data base should be collected to test and validate these relationships, as well as develop a mathematical model to represent these relationships. Previous studies have focused on measuring retail buyers’ attitudes about imports. This study went one step further by studying the amount of imported merchandise bought by retail buyers. Subsequent analysis should include a modeling of actual retail buyer behavior. Further exploration into obtainable markup on foreign produced merchandise, and the characteristics of the country which produces the merchandise, could yield valuable insight into the reasons retail buyers purchase foreign merchandise. Classifying apparel producing countries into high versus low risk categories, allows for a platform to examine retail buyer’s perceived risk. as it relates to purchasing imported merchandise. APPENDICES APPENDIX A: The Questionnaire 77 b . (I?) (:4) I, m... stretmlbuysrs'attltudseabsatqparallnparteaedthe' Alerts-Dew bdngcsmda’tedbyresesrahereaslohlguflatsilm. namwwuulheyamteg: ummfllm YemehdngemeyeomnstreOodthesttltudeeodothorewltflmyeue ..rgaiuastlsm. Al respmisee wll at a... r 2* i g i S t I W0 wll be itlchtgan Stats Uslverdty. last Lansing. Ilchlgam «O24. Pisaselndtcsteyeuragresmawterdleagresmsmtwlththohllowlngstatsmsmtsbyotrellngsnumbsr. from I to 7. 8mm Strongly Dim A“. l. Imported merchandise to more likely to have ° 1 2 2 4 S O 7 (a) tlaws than domestic apparel. 2. It there Is something wrong with Imported. merchandise It to too expand” to return it. so we lust absorb the losses. 1 2 l t 2 O 7 (SI 3. Tharelsslototredtapetegethreugh hetero buying imported merchandise. 1 2 s a S a 7 (I) 4. We buy our Imported merchandse through a wholesaler rather than buy direct. l 2 s a 2 I 7 (7) 3. The slslng tor imported merchandise does not really correspond with 0.2. dalng. l 2 l a S O 7 (I) I. We have more returns of imported merchandtss than we do at 0.8. apparel. l 2 l 4 S I 7 I” 7 . We generally have to put Imported merchandise on sale earlier than we do U.S. apparel. l 2 3 t S O 7 (IO) 2. Imported merchandise ls generally higher quality tor the price than domeetlo merchandise. 1 2 2 4 S I 7 (ll) 9. Quality control to not as good tor imported mer- chandse as it is tor domestic apparel. l 2 3 4 2 O 7 (I2) is. lambuytngmoreimportedmsrchandlsetormy ‘ department this year than I dld lest you. t 2 3 4 S O . 1 ~ (13) it. t have tound that we can take higher markups on I Imported merchandise than we can on domestle merchandise. 1 2 3 4 S O 7 (14) :2. Consumers treauently ask for American made ' products. I 2 3 4 S O 7 It!) :3. Deters placing an order with a vendor l and out whether the product Is made In America or In a torelgn country. i 2 l 4 S s 7 (ll) '4 In buying merchandise tor my department I almost always buy nationally known brand names. 1 2 l 4 S a 7 (17) :5. I depend primarily on the manufacturer to supply me with high quality merchandise. 1 2 J 4 S I 7 (ll) 16. I depend primarily on my own knowledge Gt the product quality to assess the products I buy tor . my department. 1 2 l 4 S s 7 (t!) .7. i do not think that consumers care about where a product is manufactured. l 2 l 4 S 6 7 (20) '1 78 v.— v“ ruaunfuuthebuowlng'luym'u-phsandhdaueysuragnsmastwdsagm with the following statements. mm §:‘ Strongly Strongly . William ““4!” Agree .. w U.S.A . ll. , The "buy American“ campdg: has influenced me to buy more American-made goods than i would have otherwise. i 2 2 4 S 4 1 (21) it. i am currently promoting American made goods via the inclusion of 'Iuy American“ in advertisements. l 2 2 4 S 4 1 (22) 20. ll materials were available i would promote more American-made goods by including 'lluy - American' in advertisements. l 2 2 4 S 4 1 (22) 2). i am currently using "Iuy Amerlcsn' hangtaga and labels to promote American-made goods. l 2 2 4 4 4 7 (24) .‘2. i would use more 'Suy American“ hangtaga and labels to promote American-made goods if they were available. _ l. 2 3 4 S 4 1 (25) .‘3. i am currently using ”Buy American“ point-cf- purchase display materials in my department. 1 2 2 4 S 4 1 (24) . 24. i would use more 'Iuy Amarican' point-of- display materials if they were avdlsble. l 2 3 4 S 4 1 (21) :4. The "Iuy American" campaign has influenced me to buy more imported goods than i would have otherwise. i 2 3 4 S 4 1 (24) :4. Using your best estimate. what percent of the total merchandise that you buy be your organisation is manufactured in a foreign country? 4 (22°24) 27. if you buy the following items lor your department what percent would you estimate is manufactured in a foreign country? 4 Sweaters (ll-22) 4 Slacks (32-34) 4 Shirts (woven) (ll-24) 4 Shirts (knit) (21-24) 4 Jackets (2H4) 4 Costs (4242) 4 Suite (4244) 4 risslscarves (44-44) 4 Shoes (4144) 4 Hosiery (44.44) _4 Dresses (Si-42) _4 Sflrta (ll-44). 2.4. in your buying area what has been the increase or decrease in buying of merchandise manufactured in these foreign countries in the past two years! increase 2m 4 4 lied. and other Caribbean Countries (54-41) 4 __ 4 Korea. raiwan. Singaporecetc. (44.44) 4 4 China (4242) 4 4 Japan (4444) 4 4 luropeam Countries (Ingland. Germany. italy. etc.) (4144) 4 4 9thers (Please specify: ) (10-12) (12-72) 2!. what is your average initial markup for apparel products from the following countries? (Jilted States 04-") Mexico and other Caribbean Countries (14-14) korea. reiwan. Singapore etc. (2I4-4) Chins (214-1) Japan (2I4-l) . Surcpean Countries (Ingland. Germany. ltaly. etc.) (2llO-it) Others (Please specify: ) (2122-l4) 'is. 41. 33. JJ. 30. 30. 30. 37. 30. 30. 40. 41. 79 m is your podtion 111141 (2114-14) ucwmany yearallavayoubeeninyourcurrentpodtlsnr Years ‘ (2Il1-14) llow many yeere did you work in retdling before being promoted to your current rank) - Years (2114-24) What is your sgo1 ‘ Years (2I21-22) Your sen? Male Female (2122) What is the highest level of education you have achieved) (2124) Some elementary school ( 1) Completed elemuntsry school (1) 2 years of high school (3) _ Completed high school (4) 2 years of college (I) ' ' Completed college (4 year degree) (4) '— Some graduate work (Master's or Professional degree) (1) Completed graduate program (4) if you went to college what was your major? (2124-24) Marketing (1) _ Retailing (College of business) (2) ' Management (J) Retailing/Merchandising (liome lconomicallluman Ecology) (4) Clothing and Textiles (S) - Accounting (4) Social Science (1) Liberal Arts (4) Other (Please specify: ) (4) What is your gross salary (before taxes)? (2721-21) Under 010.000 (1) 000.001 to 010.000 (7) 010.001 to 010.000 (1) 010.001 to 000.000 (0) 010.001 to 030.000 (3) 000.001 to 000.000 (0) 000.001 to 040.000 (4) 000.001 to 0100.000 (10) 040.001 40 000.000 (0) 0100.001 to 0110.000 (11) 000.001 40 000.000 (0) 0110.001 sad 0'” (11) What Annual Sales Volume (at cost) are you responsible for buying? (2122-44) How many stores are included in that sales volumef (2! 41044) What is your store's Annual Sales Volumal (2I44-42) if you had 100 points to allocate between these reasons for buying foreign products. how many points would you ve to each of these reasons. The more points you assign toaressonthamoreyou lnit. _ Porslgm products are better quality for the price. (2142-44) _ Poreigm manufuturars offer a more unique merchandise selection. (2144-44) __ liigher mark-ups can be taken on imported merchandise. (2144-41) __ Inclusive merchandiselprlvata branding. (2142-44) __ Specification buying. (2/40-41) __ Other (Please specify: ‘ ) (1/44-14) What are, the three major countries that account for the imported merchandise that you buy ' 1. (2111-14) 2. (2714-44) 3. (414-4) What countries. if any. have you personally traveled to in buying for your organisaticnl (lI4-4) APPENDIX B: Economic Indexes Table 1. Bali: indicators 80 .47. ad ""9“ rap-him (ii-us ml. “4‘4““ m" pail-a also-II Dabs (pm-s w (run nae-1947 chow-s I941 190-47 till-m 190-47 1947 “ j. 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ONPumhmOOR 165 APPENDIX c: Statistical Results u-ma 82 TABLE C.l: Correlation Coefficients for Factors: Stepwise Regression, 40% Sample, Imported Merchandise Dependent. FACTOR l FACTOR 2 FACTOR 3 FACTOR 4 Pl -.390 -.104 -.268 -.104 FACTOR l .320 .238 .580 FACTOR 2 -.151 .098 FACTOR 3 -.108 Factor 1 - Pro—American Orientation Factor 2 - Import Problems Factor 3 - External Risk Reducer Factor 4 - Buyer Risk Reducers TABLE 0.2: Regression of Factors with Imported Merchandise, 40% Sample D,E, §ufl QF SQUARE§ MEAN SQUARE E §jgnif F PRO-AMERICAN 1 1648 1648 4.31* .0487 RESIDUAL 24 9172 382 *p<.05 R2 = .15 83 TABLE C.3: STANDARDIZED BETA HEIGHTS AGE Multiple R .36579 R Square .13380 Standard Error 19.52127 Variable B SE B Beta Sig T AGE —.75575 .37006 -.36579 .0510 (Constant) 80.99605 16.24555 .0000 SEX Multiple R .14553 R Square .02118 Standard Error 21.07272 Variable B SE B Beta Sig T SEX 6.71429 9.31711 .14553 .4781 (Constant) 40.28571 12.52690 .0037 EDUCATION Multiple R .14095 R Square .01987 Standard Error 22.96376 Variable 8 SE B Beta Sig T EDUCATION 3.01314 3.99950 .14095 .4575 (Constant) 28.69262 22.91728 .2209 SALARY Multiple R .08281 R Square .00686 Standard Error 21.48199 Variable 8 SE B Beta Sig T SALARY -.58744 1.54266 -.08281 .7072 (Constant) 45.61435 9.98206 .0002 Continued 84 TABLE C.3: (Continued) PRO-AMERICAN ORIENTATION Multiple R .30834 R Square .09507 Standard Error 18.84087 Variable B SE 8 Beta Sig T PRO-AMERICAN -1.93444 1.33450 -.30834 .1627 (Constant) 43.55213 4.07492 .0000 RETAIL EXPERIENCE WITH BETA WEIGHT AND STANDARDIZED RETAIL EXPERIENCE Multiple R .60175 R Square .3621] Standard Error 18.63765 Variable B SE B Beta Sig T RETAIL EXPERIENCE 39.55159 11.73823 -.60175 .0030 (Constant) 47.51114 3.97596 .0000 TOTAL EXPERIENCE - STANDARDIZED BETA HEIGHT, POSITION AND RETAIL EXPERIENCE Multiple R .50469 R Square .2547] Standard Error 16.59356 Variable B SE B Beta Sig T TOTAL EXPERIENCE 28.25282 10.07703 .50469 .0101 (Constant) 56.02148 3.38447 .0000 STORE SALES VOLUME Multiple R .27126 R Square .07358 Standard Error 23.34017 Variable 8 SE 8 Beta Sig T STORES SALES VOLUME -3.19817E-08 2.83703E-08 -.27126 .2762 (Constant) 48.56356 6.41983 .0000 Continued TABLE C.3: (Continued) 85 NUMBER OF STORES Multiple R .15526 R Square .0241] Standard Error 20.54974 Variable B SE B Beta Sig T NUMBER OF STORES -.02255 .02992 -.15526 .4586 (Constant) 41.95537 4.35053 .0000 EXTERNAL RISK REDUCERS Multiple R .12219 R Square .01493 Standard Error 21.90355 Variable B SE B Beta Sig T EXTERNAL RISK REDUCERS -2.12226 3.59459 -.12219 .5607 (Constant) 46.95307 4.38107 .0000 APPENDIX D: Classification Results 86 TABLE D.1: Classification Of Results - Discriminant Analysis First Sampling: 40% Sampling, 60% Validation Classification Results for cases selected for use in the analysis - Actual Group No. of Predicted Group Membership Cases __1_ 2 HIGH RISK 12 8 4 66.7% 33.3% LON RISK 12 4 8 33.3% 66.7% Ungrouped Cases 1 0 1 .0% 100% Percent of "grouped" cases correctly classified: 66.67% Classification Results for cases not selected for use in the analysis - Actual Group No. of Predicted Group Membership Cases _1_ 2 HIGH RISK 16 6 10 37.5% 62.5% LON RISK 26 14 12 53.8% 46.2% Ungrouped Cases 2 2 0 100% .0% Percent of "grouped” cases correctly classified: 42.86% 87 TABLE 0.2: Classification Of Results - Discriminant Analysis Second Sampling: 40% Sampling, 60% Validation Classification Results for cases selected for use in the analysis - Actual Group No. of Predicted Group Membership Cases __J_ 2 HIGH RISK 9 7 2 77.8% 22.2% LOH RISK 12 5 7 41.7% 58.3% Ungrouped Cases 1 0 l .0% 100% Percent of "grouped” cases correctly classified: 66.67% Classification Results for cases not selected for use in the analysis — Actual Group No. of Predicted Group Membership Cases __1_ 2 HIGH RISK 19 8 11 42.1% 57.9% LOH RISK 26 7 19 26.9% 73.1% Ungrouped Cases 2 0 2 .0% 100% Percent of "grouped" cases correctly classified: 60.00% 88 TABLE 0.3: Classification 0f Results - Discriminant Analysis Third Sampling: 40% Sampling, 60% Validation Classification Results for cases selected for use in the analysis - Actual Group No. of Predicted Group Membership Cases ___1_ 2 HIGH RISK 10 5 5 50.0% 50.0% LOH RISK 17 3 14 17.6% 82.4% Ungrouped Cases 3 0 3 .0% 100% Percent of "grouped” cases correctly classified: 70.37% Classification Results for cases not selected for use in the analysis - Actual Group No. of Predicted Group Membership Cases ___1_ 2 HIGH RISK 18 3 15 16.7% 83.3% LOH RISK 21 9 12 42.9% 57.1% Percent of ”grouped" cases correctly classified: 38.46% LIST OF REFERENCES REFERENCES Anderson, Erin, Hujin Chu, and Barton Heitz. 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