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Consumer Perceptions of Foreign vs. Domestic Firms:

A Case Study of Bangladesh

Introduction

Bangladesh’s consumer market had changes qualitatively with globalization, liberalized trade
policies and foreign direct investment over the period of time. Domestic firms once controlled
local markets; MNCs compete within consumer goods, telecommunications, and banking.
Consumers face trade-offs between foreign firms (quality, prestige, innovation) and domestic
ones (affordability, cultural alignment, local trust) (Ahmed et al., 2019; Islam & Alam, 2018).

The tension between “global appeal” and “local loyalty” is not the exclusive provenance of
Bangladesh but has special relevance as the country sets its sights on emerging into an upper-
middle-income economy by 2031. Competitiveness, investment flows and industrial resilience
will depend on the extent to which the local consumer in Bangladesh favors foreign firms versus
domestic ones (World Bank, 2020). The context of Bangladesh is placed within the background
of consumer ethnocentrism and country-of-origin literature (Verlegh & Steenkamp, 1999;
Sharma, 2015) whose objective is to examine the factors affecting consumer perception and its
impact on purchase intention.

Problem Statement

Bangladeshi consumers face rival enticements from foreign and local companies. In the absence
of empirical evidence for how dimensions such as quality, trust, price and culture are related to
purchase intentions we are prone on the one hand to having firms with misaligned strategies and
on the other to failing policies.

Significance of the Study

The study contributes by:

• Theoretical → contextualizing Bangladesh in the global discourse of consumer

perception.
• Practical → firms are being fed ideas for brands, prices, and the way to position their
offers.
• Policy → informing policy to balance FDI attraction and competitiveness of domestic
firms.

Objectives

1. To assess the important determinants of consumers perception on foreign and domestic

firms in Bangladesh.
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2. To examine variation in consumer belief by demographic characteristics such as age,

income, education and urban/rural residence.
3. To investigate the connection which is underlying between consumer perceptions and
purchase intentions by means of econometric modelling.

Methodology

Methodology 1: Factors Influencing Consumers Perception (for Objective 1)

To address the Objective 1, we want to discover latent dimensions of consumer perception. A 400
experiment as a quantitative cross-sectional survey will be conducted. The perception constructs
(PQ, TR, PR, CA and BI) will be measured with Likert scale items.

Reliability Testing: Internal consistency will be verified using Cronbach’s alpha test :

α =( k / ( k −1 ) ) ( 1−Σ σ 2 Yi /σ 2 X ) .

Here we further restrict the constructs to those with α ≥ 0.70.

Validity: EFA will be conducted using PCA with varimax rotation. Loadings > 0.50 will be
retained. Kaiser-Meyer-Olkin (KMO ≥ 0.60) and Bartlett’s test of sphericity (p <. 05) will be
performed to evaluate sampling adequacy.

Model of Factor:

X = ΛF+ ε ,

where X is denoted as observed variables, Λ is denoted as loading matrix and F is denoted as

factor vector and lastly ε is denoted as error term.

Methodology 2: Investigating Demographic Variation in Perceptions (for Objective 2)

Comparable to the first study , the survey examines if perceptions differ across demographic
dimensions. All subgroups (age, INCOME, education urban-rural) will be examined by
parametric and non-parametric approach.

Comparing Group Means (ANOVA): A one-way ANOVA is used to determine if there are any
statistically significant differences between the means of three or more independent groups.

F=M S between / M S within

where:
S Sbetween S S within
M S between = , M S within=
k −1 N −k
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● k = number of groups
● N = total sample size

Association Tests (Chi-Square): The Chi-square test of independence is used to find the
association between two categorical variables.

2
❑
( Oij −E ij )
χ =∑
2

❑ E ij

where:

● ( Oij ) = observed frequency in cell (i , j)

● ( Eij ) = expected frequency in cell (i , j)
Subgroup logistic regression: separate logistic regressions are fitted for subgroups (e.g., urban
and rural representatives):

( Pi , g
)
❑
ln ln =β 0 , g + ∑ β j , g X ij + ε i , g
1−Pi , g j

● ( Pi , g )= probability of outcome for individual (i) in group (g)

● ( β j , g ) = coefficient for predictor ( X ij ) in group (g)
● ( ε i ,g ) = error term
Methodology 3: Relationship between Perceptions and Purchase Intentions (for Objective 3)

In the context of Hypothesis 3, the dependent variable Purchase Intention (PI) is dichotomized
(Domestic = 0, Foreign = 1). It is a binary logistic regression model which is needed:

ln ln
( )
Pi
1−Pi
=β 0 + β 1 PQ + β 2 TR+ β3 PR+ β 4 CA+ β 5 BI + ε i

Where, Pi ​ = probability of choosing a foreign firm

We controlled for age, sex, income, education and place of residence. Diagnostics include
Hosmer–Lemeshow test, Nagelkerke R² and Variance Inflation Factor (VIF). Sensitivity analysis
was performed in the form of multivariable logistic regression, interaction terms, and ROC curve
(AUC).
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Expected Results and Discussion

Descriptive Findings

Variable Foreign Firms Domestic Firms Std. Dev. Interpretation

(Mean) (Mean)

Perceived 4.3 3.6 0.85 Foreign firms expected

Quality to score higher due to
perceived durability and
global standards

Trustworthiness 3.5 3.9 0.78 Domestic firms likely to

be trusted more

Price Fairness 2.9 4.2 0.91 Domestic firms expected

to be perceived as more
affordable

Cultural 3.1 4.4 0.82 Domestic brands

Alignment expected to align better
with consumer values

Brand 4.5 3.2 0.88 Foreign firms anticipated

Image/Prestige to have stronger brand
prestige

Regression Findings

Predictor Variable β (Expected) Significance Expected Interpretation

Perceived Quality +0.62 p < 0.01 Higher quality perception

increases preference for
foreign firms

Trustworthiness –0.40 p < 0.05 Higher trust in domestic firms

reduces preference for foreign
firms

Price Sensitivity –0.28 p < 0.10 Price concerns drive domestic

preference
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Cultural Alignment –0.50 p < 0.01 Strong cultural identity drives

domestic preference

Brand Image/Prestige +0.71 p < 0.01 Prestige strongly influences

preference for foreign firms

Figure: A Hypothetical Graph which is a visualization of Predictors Influencing Preference for

Foreign vs. Domestic Firms

Interpretation

Greater alleged quality (β = 0.62, p < 0.01) and brand prestige (β = 0.71, p < 0.01) significantly
increase the foreign preference effect; however, trustworthiness (β = –0.40, p < 0.05), cultural
alignment (β = –0.50, p < 0.01) and price sensitivity construct variables strongly favor domestic
firms in the industry category of the automobile market to a great extent.

Conclusion

The paradox of consumer perception is captured in this proposition where foreign companies
have become associated with the quality and status symbol, while local ones are perceived to be
the authority for trustworthiness, price-competitiveness and cultural congruence. Some of the
predicted results and insights further suggest that consumer choice is less dichotomous in terms
of global or local than it is a matter of trade-off between being global and being local.

References
● Ahmed, S., Rahman, M., & Uddin, M. (2019). Consumer preference for foreign products in
emerging markets. Journal of International Marketing, 27(3), 56–74.
● Islam, M. S., & Alam, S. (2018). Domestic consumer ethnocentrism in South Asia: Evidence
from Bangladesh. Asian Journal of Business and Economics, 12(1), 45–63.
● Rezvani, S., Dehkordi, G. J., & Rahman, M. (2020). Global branding and consumer trust: The
role of country-of-origin. International Journal of Marketing Studies, 12(1), 101–114.
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● Sharma, S. (2015). Consumer ethnocentrism: Conceptualization and empirical evidence.

Journal of International Consumer Marketing, 27(3), 214–228.
● Steenkamp, J.-B. E., & de Jong, M. G. (2010). A global investigation into the constellation of
consumer attitudes toward global and local products. Journal of Marketing, 74(6), 18–40.
● Verlegh, P. W. J., & Steenkamp, J.-B. E. (1999). A review and meta-analysis of country-of-
origin research. Journal of Economic Psychology, 20(5), 521–546.
● World Bank. (2020). Bangladesh: Enhancing competitiveness in an interconnected world.
World Bank Report