1. Introduction
Remanufacturing is the process in which a particular product is disassembled and restored by reusing working components and replacing the faulty or depleted components [
1]. It reduces pressure on the environment by minimizing the use of raw materials, thus improving the efficient use of limited resources, reducing energy within the production, and decreasing pollutant emission into the environment. Moreover, remanufacturing is an important component of the resource-efficient manufacturing industry. It requires less raw materials than new products do, thus saving material costs, reducing energy requirements and gas emissions to air and water. Economic and social benefits often accompany environmental benefits. For example, remanufacturing provides opportunities for creating highly skilled jobs and contributes to economic growth. In recent years, the global supply chain of remanufacturing has been growing [
2]. Remanufacturing is expected to create global product demand, stimulate innovation, create jobs, and increase trade and investment across various products, including car components, computer peripheries, and technology-related equipment [
3]. The growth of the remanufacturing industry is also significant in emerging economies, particularly in Asia [
4]. Since 2012, more than three million new cars have been sold for five consecutive years in the Southeast Asian (SEA) region [
5], and thus, we can expect the growing demand for remanufacturing in this region [
6]. Remanufacturing is one of the practical answers to environmental issues such as unsustainable resource use and environmental pollution; therefore, it has been consistently included in the Asia-Pacific Economic Cooperation (APEC) meeting agenda since 2006.
The global remanufacturing industry is led by the motor vehicle parts sector [
7], with an estimated growth rate of 7% in 2018–2026 [
8]. The U.S. International Trade Commission (USITC) [
7] estimates that vehicle parts comprise more than 60% of total remanufacturing activities. China is the global leader in automobile production, with 28% of 92 million automobiles produced globally in 2019 [
9]. China’s remanufacturing industry was formally established in 2008 [
7]. Despite China’s relatively short history of remanufacturing industry, the Australian Prudential Regulation Authority [
10] predicted China to be the most preferred remanufacturing destination in the future because of its increasing opportunities for remanufacturing, demand factors, expected improvement in legislative aspects, and global supplier presence. Therefore, remanufacturing in China is significant for the sector’s growth. China is becoming the dominant economic power with justifiable leadership claims in the SEA region. It showed consistent remarkable economic progress, with more than 6% annual GDP growth between 1991 and 2019 [
11]. The immediate impact and aftershock of COVID-19 on the global economy are inevitable. However, China possessed the economic strength to maintain its market leadership positions in the region. Market leaders might lead other firms by market share, price leadership, product innovation, logistics, or marketing promotion [
12].
The study of consumer perception is vital as SEA consumers’ perceived images toward remanufactured products made in foreign countries influence their acceptance and demand for these products. This study investigated Indonesian consumers’ perceived images of remanufactured auto parts (RAPs) made in China. We used the study conducted by Matsumoto et al. [
13] in Malaysia, Thailand, and Vietnam as a theoretical framework in this research. This study found a link between basic product knowledge of RAPs and consumers’ perceived risks and benefits. Moreover, we determine that the trust in the certification on RAPs would increase the purchase intention of RAPs. The study of consumer perception is important as SEA consumers’ perceived images toward remanufactured products made in foreign countries influence their acceptance and demand for these products. Further, we found the link between the purchase intention of RAPs made in Indonesia and those made in China. To our knowledge, studies examining the relationship between nation branding and purchase intentions are limited [
13].
The remainder of this paper is organized as follows. First, we provide the theoretical framework and study questions. Second, we present the methodology, followed by the results of the data analysis. Lastly, we offer findings of research and implications.
5. Discussion
In general, the results of this study are consistent with those of previous studies [
17,
22,
39,
47,
48,
49,
50] that show the links between knowledge and perceived risks (H1), knowledge and perceived benefits (H2), perceived risks, and purchase intention of RAPs made in the home country (H3), and perceived benefits and purchase intention of RAPs made in the home country (H4). Some studies hypothesized that product knowledge reduces the perceived risks (e.g., [
64]). Fatimah et al. [
65] found perceived quality and reliability gaps between new and RAPs among Indonesian consumers. According to a comprehensive risk theory [
66], uncertainty about the outcome may be minimized by acquiring information and reducing uncertainty or delaying the purchase decision. In this study, however, we hypothesized that the more consumers know about RAPs, the greater their awareness of RAPs’ potential risks. This hypothesis is supported because typical consumers may not be familiar with remanufactured parts [
67]. Therefore, their perceived risks or potential losses in purchasing RAPs are higher even when their perceived product knowledge is greater. In consonance with previous research [
13], this study also found that consumers’ willingness to purchase, whether made domestically or in China, increases toward RAPs certified by reliable remanufacturers (H6a and H6b).
Past research found an association between the purchase intention of RAPs remanufactured in the home country and consumers’ risk and benefit perceptions. In this study, we hypothesized the association between purchase intention of RAPs “made in the home country” and those “made in China” (H5). The pace at which Chinese products are entering foreign markets has grown steadily over the years. China is already the world’s largest exporting country, and its products are sold through the SEA markets. As of 2019, China serves as Indonesia’s largest export and import market, indicating Indonesian consumers’ certain degrees of familiarity and interest in Chinese products and brands. The positive link between the purchase intention of RAPs made in Indonesia and that of RAPs made in China found in this study encourages China to continue improving its national brand by focusing on product quality and developing a more robust and positive national image.
We proposed that perceived risks (X1) and benefits (X2) influence the purchase intention of RAPs made in China (Y) through the purchase intention of RAPs made in the home country (Indonesia) (M). This study observed partial mediation between X2 and Y via M (H7b). That is, the mediating variable (M) accounts for some, but not all, of the relationship between X and Y. Partial mediation implies that not only does a significant relationship exist between M and Y, but also that some direct relationship exists between X and Y. This study did not observe an indirect effect between X1 and Y via M (H7a). Although we observed the direct effect between X1 and M, its coefficient magnitude was not large enough to observe the mediation (X1–M–Y). The weaker link between X1 and M may be explained by this study’s respondents’ lower functionality orientations. Atasu et al. [
68] defined functionality-oriented customers as those who value remanufactured products and consider the quality of the product as being close to that of a new one; these customers also think that price must be offered at a lower rate. The results of H7a and H7b imply that by informing and educating Indonesian consumers about the remanufacturing process and remanufactured products, purchase intentions of RAPs made in China may be increased because we can expect consumers’ understanding of actual characteristics of RAPs (e.g., relative to new parts, remanufactured parts do not pose a higher safety risk) to be enhanced.
Another explanation for our results in H7a (i.e., not supported) and H1 (i.e., not supported) is the “newness orientation” of consumers. Ratings on consumers’ perceived risks (mean = 4.86, significantly higher than the neutral point (4) of the scale,
p < 0.001; items such as “the quality and safety of RAPs are not as good as the new products” and “RAPs do not perform and function as well as new products”) may indicate that consumers in this study are categorized as “newness-conscious customers” who equate quality with new products, not the remanufactured ones [
68]. They perceive the remanufactured goods as lower in value than the new product simply because they do not meet their quality criteria of “newness.” For these consumers, remanufacturers should discount the price of RAPs substantially [
68].
In some SEA markets, consumers may regard Chinese brands as lesser quality and associate them with a lack of social responsibility and food scandals [
69]. This study also confirmed SEA consumers’ preferences toward RAPs made in their home country over those made in China, rating their purchase intentions of domestic RAPs significantly above the neutral point (4) of the scale. In contrast, those of Chinese RAPs are rated significantly below the neutral point (
Table 3). The results offer some managerial implications for global Chinese remanufacturers. First, Chinese RAP manufacturers can counter the adverse effects of production location, or source effects, by masking or deemphasizing their foreign origins. Source effects occur when consumers in a foreign country perceive a bias against foreign firms or products [
70]. Specifically, we recommend that Chinese RAP manufacturers evaluate their brand names in target markets in Asia carefully. This is an effective nation-branding strategy because the identity of “the country of origin represents the country-specific advantages in precisely the same way that a brand name represents the firm-specific advantages” [
71] (p. 85). Of course, one may argue that as long as the remanufacturers manage their manufacturing process well, the brand name’s strength would offer them a competitive advantage. Therefore, source effects are irrelevant concerns. However, global firms such as Anheuser-Bush (U.S. firm) and Matsui (U.K. firm) intentionally used brand names in an attempt to create the nation branding illusion that their products are from Germany and Japan, respectively [
72]. Second, Chinese RAP manufacturers can establish joint ventures with reputable RAP manufacturers, such as Bosch, Denso, Magna International, Continental, Aisin, Yazaki, and Cardone. Considering the challenges of establishing remanufacturing operations in SEA markets, we believe joint ventures that involve foreign direct investment in Asia are a great nation-branding strategic choice, considering the economic and political animosity against China. In the long run, as Chinese manufacturers may attempt to launch more RAPs labeled as “Made in China” in the region, efforts should be made to promote and maintain a high standard of quality for products from China.
6. Conclusions
This study conducted online surveys with 500 respondents in Indonesia to determine their perceptions of product knowledge, perceived risks and benefits, purchase intentions of RAPs remanufactured in the home country and China, and trust in the RAP certification. Previous studies explored and analyzed various marketing perspectives, including marketing strategies, consumer behaviors, pricing, and branding decisions. However, there seems to be a theoretical gap linking consumers’ perceived images and purchase intentions of RAPs made in foreign countries. This study demonstrated that consumers’ purchase intentions of RAPs made in foreign countries are influenced by the purchase intentions of RAPs made in the home country via their trust in certified RAPs. This study fills the theoretical gap in the remanufacturing management literature by focusing global marketing perspectives on examining the relationship between nation branding (i.e., country-of-origin), product certification, and purchase intentions.
The SEA region exhibited a combined GDP of
$3 trillion in 2019 and is one of the fastest-growing regional economies in the past decade [
73]. The increased merchandise trade between members of the Association of Southeast Asian Nations (ASEAN) and China (e.g.,
$480 billion in 2018, or 17% of ASEAN’s total merchandise trade) affirms their strong trade and economic relationships [
73]. According to ASEAN [
73], the largest external market for ASEAN exports in 2018 was China (14%). Meanwhile, Indonesia is by far the largest economy in the ASEAN region, accounting for more than one-third of its GDP.
Like any other new entrant in the SEA market, China will face well-established competition against global remanufacturers. To gain market share in the SEA market, China should perform activities that improve the value of products deemed necessary by consumers. This is important not only because of the price aspect but also because of the establishment of “the value [US] consumers associate with a [Chinese] brand, as reflected in the dimensions of brand awareness, brand associations, perceived quality, and brand loyalty” [
74] (p. 15). Consumers are hesitant to purchase or even consider purchasing an unfamiliar product; thus, entering foreign markets requires strong market support. Prospects with interest in a new product are unlikely to turn into actual buyers until they experience the comfort of familiarity. When consumers lack detailed knowledge of foreign products, the nation brand plays an essential role in evaluating and purchasing products. Various elements create the source country’s images. For instance, how a government responds to pandemics (e.g., workers’ mobility and containment policies), to some extent, may affect the image of the country. A government may even attempt to shield its market against products made in foreign countries with lax protective measures against pandemics. In this regard, government officials should understand and pay attention to nation branding to avoid the loss of brand reputation or enhance the country’s brand equity. The nation brand may spillover from one product to another. A country with an established positive image (e.g., the U.S., Germany, and Japan) demonstrates substantial brand equity. However, suppose that a country demonstrates a negative or a mixture of positive and negative images; in that case, marketers must manage the product quality image because other products with a bad reputation may negatively influence the perception of the product they are trying to sell. China must improve its product and nation brand image and establish itself as a quality green manufacturer in the Asia-Pacific region.
In particular, FutureBrand Country Index [
75] expresses concern for China’s environmental issues due to its rapid economic progress. Undoubtedly, “made in China” has become a recognizable brand and noticeable label [
76]. However, this label exhibits both positive and negative connotations [
77]. For RAPs, the Chinese government has put efforts to promote the industry and the market. Circular Economy Promotion Law, enacted in 2008, defines government roles to promote remanufacturing. The Chinese government sets quality standards for RAPs and requires RAPs marketed in China to meet the standards. These policies effectively improve the quality and consumer images of RAPs, and it would be effective to apply them to export RAPs.
During the improvement process, Chinese remanufacturers may establish a strategy to prioritize markets with older demography and with more experience in using RAPs in the early stage and then move to other markets as the quality image improves. At this time, RAPs remanufactured in China are not favored over domestically made RAPs in the SEA countries. Fortunately, well-recognized Chinese companies, such as Alibaba, Baidu, Tencent, Huawei, Xiaomi, Nio, Xpeng, or BYD, can be used to promote China as an advanced, industrialized country. Chinese remanufacturers can consider a joint-venture with a foreign company in a developed nation that demonstrates a well-established name.
These research results provide important implications for global remanufacturers. In globalization and open borders, the distinction between domestic- and foreign-made products is becoming less relevant. According to Ohmae [
78], “You do not worry about where the product was made… All you care about is the product quality, price, design, value, and appeal to you as a consumer” (p. 144). This statement is correct if consumers know such marketing information cues. However, consumers often do not realize product quality, value, or even price, especially when they are not familiar with auto parts. Our study’s results, the main effect of product quality and purchase intention, support past research that shows consumers still associate and evaluate product lines [
54]. This leads to another implication for countries. To strengthen, change, or build their national image, governments are turning to professional image-marketers.
This study presents perceptions of SEA consumers toward RAPs made in China. The results reveal a need for Chinese remanufacturers to focus on extra efforts to improve its nation brand image. Understanding consumer needs and purchase processes are essential to building effective marketing strategies for the remanufacturing industry. Moreover, understanding how consumers go through need recognition (e.g., warranty and functionality), evaluation of alternatives (e.g., new vs. remanufactured; domestic vs. foreign; brand A vs. brand B), purchasing decision, and post-purchase behavior (e.g., satisfaction or dissatisfaction with parts), marketers in the industry can pick up cues from consumers.
We recommend Chinese remanufacturers or the remanufacturing industry to provide opportunities to increase consumers’ understanding of the remanufacturing process and quality of remanufactured products in the SEA region. Even if consumers are characterized as newness-oriented and willing to pay more for a new product, their quality perceptions and purchase intentions may be changed over time if they accurately understand the actual quality of RAPs.
We acknowledge a major limitation to this study. Chinese remanufacturers will continue to play a significant role in developing the industry in the SEA region. The present research examined Indonesians’ perceptions of RAPs made in China, assuming used automobile parts (i.e., cores) and finished products (i.e., RAPs in this study) move freely between importing and exporting countries. However, in reality, ASEAN members intervene in international trade to protect the interests of domestic producers, people, or groups. Therefore, future research should examine other factors apart from consumer perceptions that affect global remanufacturing operations. Based on our interviews with several remanufacturers of ink toners, home electronics products, and auto parts operating in the region, the critical marketing factors for remanufactured products are the consumers’ acceptance of remanufactured products. Specifically, studies should examine policy factors in regional economic integration, including trade restrictions, barriers, and logistic challenges regarding the remanufacturing processes and products [
68] because they influence remanufacturing effectiveness operations in the region. Although the authors are not aware of significant policy changes in the remanufacturing sector that would affect consumers’ perceptions in Indonesia in the last five years, we remind readers that this research was a snapshot of Indonesian consumers in 2017.