CHAPTER 5
CONCLUSION AND RECOMMENDATION
5.1 Conclusion
As stated before, the objective of this thesis is to uncover how external factors like
country of origin and corporate reputation affect customers’ initial trust on services and
to compare them across high risk and low risk services. The research questions cover
questions on ethnocentrism, risk tendencies, general trust, risk related to situations,
initial trust, and demographics.
In the original journal, COO and corporate reputation were found to have significant
effect on initial trust. Moreover, ANCOVA analysis has indicated highly significant
interaction effect of COO x Risk Level of Service. As expected, COO does have some
degree of effect on initial trust. However, the findings in the original journal shows that
COO only has effect in terms of high risk service, but not so much in low risk service.
The survey was done in Poland, with Polish company served as local company and
German company representing foreign company.
In this thesis, COO and corporate reputation also found to have effect on initial trust in
service industry. The ANCOVA analysis shows high main effect of Reputation on initial
73 74 trust. Means on initial trust with different scenarios (COO x Risk level of service) are
also different. As for corporate reputation, respondents evaluate foreign company better
than local company in the case of high risk service. Research findings show that
respondents put into considerations for COO regardless of risk level of service. Thus, we
can conclude that COO has a positive effect on initial trust in service industry for both
high risk and low risk.
Comparing to the original research, this research only agrees with two of the three
hypotheses stated. It is proven that country of origin and corporate reputation are put
into considerations when customers are to engage in services provided by companies.
Overall, the research does not find significant high ethnocentrism in respondents, but
risk tendencies of respondents is high. From the survey, the author finds that respondents
are cautious towards purchases, they would like to be sure before purchase and high
tendencies to avoid risky things. In conclusion, initial trust is dependent on, country of
origin and corporate reputation.
75 5.2 Managerial Implication
With the purpose to investigate the effects of COO, corporate reputation, and perceived
risk on initial trust, the research findings in this thesis agree with part of the hypothesis
proposed in the original journal. As perceived risk varies across different categories of
services, two different service categories were compared. Comparing to products,
services are associated with higher perceived risk as services are normally characterized
by higher levels of credence qualities; in the context of services, the precondition for a
company to successfully enter a foreign market is initial trust (Michaelis, Woisetchlager,
Backhaus, & Ahlert, 2008). As the research shows, the effects of COO and corporate
reputation differs by perceived risk, companies must know clearly the risk associated
with the services they provide to quickly gain initial trust: whether to emphasize on
COO, corporate reputation, or service quality.
This thesis finds that perceived risk does not have negative effect on initial trust. Even if
the risk is high, respondents are willing to trust an unknown company. Thus, when
perceived risk is relatively high, positive COO image and corporate reputation can
overcome the perceived risk. Companies have to be aware of the COO image as
consumers form certain COO image. As for corporate reputation, consumers often get
76 external information from various media and thus form their own perceptions toward
companies. Companies that wish to enter a foreign market must ensure that they made
the effort to build and maintain reputation.
Other than COO and corporate reputation, employees and service quality are the factors
that consumers consider before engaging to a service. If the service provider ensures
sufficient training to employees to provide quality service, this can help to lower the
perceived risk too.
5.2.1 Recommendation for local company
In the low risk service, local company was evaluated better than foreign company and
has higher trust compared to that of foreign company. As donut café is used in this thesis,
perhaps taste and flavor are involved when respondents are evaluating the fictional
companies stated in the survey. Thus, for local companies to increase initial trust, they
need to first find out which category of service they fall into.
For low risk service, local companies may relate more to ethnicity, cultural values,
lifestyle, society, beliefs, norms, and history. When perceived risk is low, those things
77 like cultural values and beliefs can help to bind the customers to the company. It seems
that respondents have lower trust to local company for high risk service. Therefore, local
companies should improve more on quality, image, and reputation to lower the risk
associated.
Regardless of the risk associated, local companies must ensure they make the efforts to
build and maintain good reputation. Various media can be utilized to make sure the
market is aware of the good reputation that companies have. Good examples of media
would be newspaper articles, magazine cover stories, and TV programs that introduce
some companies. Corporate Social Responsibilities can also be use to show that the
company is helping the society as they are making profit through the business.
5.2.2 Recommendation for foreign company
The survey result indicates that respondents have a higher initial trust and better rated
reputation on foreign company when perceived risk is high. In order for foreign
company to successfully enter Indonesian market, initial trust should be established
quickly. When the perceived risk is high for the service provided, COO and corporate
reputation can be emphasized if positive. Only positive COO and corporate reputation
78 should be mentioned or else it is not going to help. Service providers must bear in mind
that not all countries have positive image and not all foreign products/ services are
evaluated better than local products/ services.
Quality, procedures, and standards should also make known to potential market to have
higher initial trust. When the service is related to food and drink, the foreign company
should alter the taste to suit the local instead of emphasizing on COO. Even fast food
restaurant chain MacDonald’s in India has to modify the Big Mac to small package with
lowered price for the locals to accept (Cateora, Gilly, & Graham, 2009).
When a foreign company wishes to enter Indonesian market, the company only bears the
name from foreign country; the actual operations are done by local employees. Foreign
service provider must make sure that local employees are well trained to provide same
quality of service as it is in the original country.
In order for a foreign company to successfully penetrate Indonesian market, the
company may utilize media to make a press conference to announce the intention and
the positive reputation the company has.
79 5.3 Limitations
This thesis has limitations just like all other empirical studies. The main limitation of
this research is the experimental design with different scenarios. In the original journal,
2x2x2 model is used with 8 different scenarios while this thesis simplifies the research
design to 2x2x1 with 4 different scenarios. The key difference between the research
design in this thesis and original journal is the external influence of reputation. While the
original journal provides 8 different scenarios to test the perceived reputation with and
without external reputation, this research do not provide external reputation and
respondents are to rate corporate reputation based on their own perceptions.
Another limitation is that external validity is limited as only Jabotabek residents are used
for sampling. The use of Jabotabek residents to represent Indonesia is debatable but not
unusual as the Jabotabek area as population large enough to represent Indonesia.
Getting the respondents to spend their precious time on answering the questionnaires
accurately and honestly is another challenge. Some respondents are hesitant in
answering the part about income that they don’t want to reveal if they earn that much
income.
80 5.4 Future Research Recommendation
For future research to confirm the research findings in the original journal and this thesis,
replications can be done involving different countries and a variety of services industries.
Moreover, additional factors like patriotism and animosity could be used as covariates to
determine if there are any possible reactance effects toward services provided by foreign
company. Further research in the future should focus on other factors for companies to
gain initial trust, such as warranties, especially when the COO effect is not so favorable.
“Empirical studies found that employees as boundary-spanners can reduce perceived
risk and, therefore, are essential for building trust” (Michaelis, Woisetchlager, Backhaus,
& Ahlert, 2008). Although services provided by foreign companies originated from
other countries, the actual standard and procedures are processed by local employees.
Therefore, future studies on COO may also focus on the role of employees in gaining
initial trust. Additional demographic and psychographic profiles can be added to
compare the effects of factors like reputation, COO, risk level, and etc.