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Asia Pacific Journal of Marketingand Logistics

Vol. 21 No. 3, 2009pp. 355-375

# Emerald Group Publishing Limited1355-5855

DOI 10.1108/13555850910973847

Received August 2008Revised March 2009Accepted April 2009

Brand and country of originvaluations of automobilesKandapa Thanasuta, Thanyawee Patoomsuwan,

Vanvisa Chaimahawong and Yingyot ChiaravutthiBusiness Administration Division, Mahidol University International College,

Salaya, Thailand

Abstract

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

Keywords Brands, Cars, Country of origin, Price positioning, Consumer behaviour, Thailand

Paper type Research paper

1. IntroductionWith its aim of becoming the ‘‘Detroit of Asia’’, Thailand is undoubtedly one of themost important markets for automobile manufacturers. Local demand is sufficient tosupport the direct foreign investment required, whilst skilled labor and the autopartsindustry are available to support the supply side. According to data from the Thailand

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Automotive Institute in 2008, more than one million cars were produced in Thailand foreach of the three previous years, with domestic consumption being around 50 to 60percent of the total production. The growth rate on the production side, which stood at5.57 percent in 2006, increased to 8.36 percent in 2007, whilst domestic consumptionfigures released show negative growth rates over those two periods.

Automobiles produced in Thailand can be grouped into three categories, namelypassenger cars, one ton pick up trucks and other commercial vehicles. As illustrated inTable I, the one ton pick up trucks represent around 73 percent of total automobileproduction in Thailand, whilst passenger cars and other commercial vehicles representabout 25 and 2 percent, respectively. Also, the one ton pick up truck is the fastestgrowing segment in terms of production when comparing 2007 to 2006. Its productionincreased by 9.45 percent in 2007, whereas passenger cars and other commercialvehicles increased by 5.56 and 3.51 percent, respectively.

More than 50 percent of the automobiles produced in Thailand are exported whilstthe remainder is for local consumption. The one ton pick up truck is the largestcategory exported, followed by the passenger car. A total of 690,100 automobiles wereexported from Thailand in 2007, an increase of 28.04 percent on the previous year’sfigures. The top five destinations for exports of the one ton pick up truck are Australia,Saudi Arabia, England, Italy and the USA, whilst Australia, Indonesia, the Philippines,Saudi Arabia and Malaysia are the top destinations for exports of passenger cars(Thailand Automotive Institute, 2007).

Regarding automobile consumption in Thailand, a total of 631,251 automobileswere bought by Thai consumers in 2007, as shown in Table II. The one ton pick uptruck accounted for 64 percent of this figure, whilst passenger cars and othercommercial vehicles amounted to 29 and 7 percent, respectively. Thailand is currentlythe second largest pick up truck manufacturer in the world after the USA. It is worthnoting that the only category witnessing a growth in 2007 was other commercialvehicles, which increased by 15.48 percent. The remaining two categories experienceda downturn in demand during 2007.

Toyota and Isuzu brands dominate the total automobile market, accounting for 69percent of the market share between them. A major factor in this domination comes

Table I.Thailand automobileproduction from 2003to 2007

Description 2003 2004 2005 2006 2007

Passenger car 251,68433.9%

304,34932.8%

277,60324.7%

298,81925.1%

315,44424.5%

One ton pick up truck 468,93863.3%

597,51464.4%

822,86773.1%

866,76972.9%

948,65873.7%

Other commercial vehicles 20,9252.8%

25,8182.8%

24,8462.2%

22,4562.0%

23,2441.8%

Total 741,547100%

928,081100%

1,125,316100%

1,188,044100%

1,287,346100%

Notes: ‘‘Passenger car’’ is an automobile designed for seating purposes, in which the roof ispermanently connected to the body, and the seats, windows, and doors are located beside andbehind the driver; a ‘‘one ton pick up truck’’ is an automobile designed for carrying goods, inwhich the area for carrying the goods has no roof, or seating facilities; double cab and pick-uppassenger vehicles (PPV) are included under this category; ‘‘other commercial vehicles’’ includevans and buses, and also pick up trucks which have a capacity of more than one tonSource: Thailand Automotive Institute (2007)

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from their success in the one ton pick up truck market, as the two brands combinedaccount for more than 78 percent of the total market share. The passenger car market isalso dominated by Toyota, which has almost 50 percent of the market share, withHonda in second place with a market share of 34 percent. The remainder is divided upbetween Chevrolet, Nissan, Mitsubishi, Ford, Mazda and others. (See Tables III and IVfor the market share breakdowns,).

Around 90 percent of the passenger cars have engine capacities of two liters or less,which means that they can be classified as compact or subcompact cars. Theincremental demand for compact and subcompact cars is evident, as shown by theconstant launch of new models in this segment by existing and emerging brands. Forexample, Toyota and Honda are continuously modifying their Toyota Altis and HondaCivic in a bid to stay at the top, while Chevrolet has introduced the Aveo to compete inthe subcompact car segment with the Toyota Vios and the Honda City. Also, emergingbrands such as Kia from Korea and Proton from Malaysia are also posing challenges tothe leaders. During the ‘‘Thailand International Motor Expo 2007’’, Kia introduced thenew Picanto, and Proton introduced the new Savvy in this intensely competitivesegment. One of the more prestigious car manufacturers, Mercedes Benz, also officiallyintroduced the A-Class to the Thai market. With the increasing demand for smallercars, competition in this market is likely to intensify in the future. This is evidenced by

Table II.Thailand automobileconsumption during

2003 to 2007

Description 2003 2004 2005 2006 2007

Passenger car 179,00533.6%

209,11033.4%

188,21126.7%

191,76328.1%

182,76729.0%

One ton pick up truck 309,11458.0%

368,91158.9%

469,65766.8%

449,79666.0%

405,86564.3%

Other commercial vehicles 28,5655.4%

36,0385.8%

40,1635.7%

36,9075.4%

42,6196.7%

Others 16,4923.0%

11,9671.9%

5,4010.8%

3,6950.5%

00.0%

Total 533,176100%

626,026100%

703,432100%

682,161100%

631,251100%

Source: Thailand Automotive Institute (2007)

Table III.Total automobile marketshare from 2004 to 2006

Rank Brand 2004 2005 2006

1 Toyota 37.4% 39.5% 42.4%2 Isuzu 24.0% 25.1% 26.3%3 Honda 12.0% 8.3% 9.8%4 Nissan 7.3% 5.8% 4.5%5 Mitsubishi 5.9% 6.8% 4.3%6 Chevrolet 2.8% 4.8% 4.3%7 Ford 3.9% 3.3% 2.8%8 Mazda 2.2% NA 2.3%9 Others 4.5% 6.4% 3.3%

Total Figures 626,026 703,432 682,161

Source: Thailand Automotive Institute (2004-2006)

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the fact that Toyota Vios has been awarded the best selling car in Thailand for the pastthree years.

The rise of gasoline prices is also shifting local demand towards smaller sized andmore efficient gasoline consumption cars. Since the beginning of 2005 to the end of2007, the price of benzene in Thailand increased by 67 percent (Energy Policy andPlanning Office, Ministry of Energy, 2008, Thailand). Some consumers are seriouslyconsidering cars with diesel engines, or those with ‘‘gasohol’’ compatible engines.Nevertheless, there are not many passenger car models with diesel engines offered inthe market. European brands, such as Mercedes Benz and Audi, each only carry onemodel with a diesel engine. Another option is ‘‘gasohol’’, which is a blend of regularbenzene and different levels of ethanol. Currently, gas stations in Thailand offer threetypes of gasohol, E10, E20 and E85 made up of 10, 20 and 85 percent of ethanol,respectively. Compressed Natural Gas (CNG) (or so-called Natural Gas Vehicles (NGV)in Thailand) and Liquefied Petroleum Gas (LPG) are other choices, as their prices areonly about one half or a quarter of benzene’s price. Unfortunately, only a fewautomobile models are equipped with NGV capability. Examples are Mercedes Benz’sE200 NGT Elegance and the Chevrolet Optra CNG 1.6. However, in general, consumersmust spend an extra 30,000 to 60,000 Baht to have the NGV tank fitted. LPG is the mostpopular energy choice for taxis, but not for the general public, due to safety concerns.

Increasing concerns on environmental issues and on the rising cost of importedcrude oil has led the government to reconsider the imposition of different tax levels oncars. Cars that are less environmentally harmful and more efficient in gasolineconsumption are therefore subjected to favorable excise tax rates. For example, smallengine passenger cars with a cylinder capacity of less than 2,000 cc are charged anexcise tax of 30 percent, whilst larger engines of more than 3,000 cc face the burden of a50 percent excise tax as demonstrated in Table V.

Each brand’s passenger car market share is a reflection of consumers’ preferencesover the different car brands. Among the top five brands sold in Thailand, four areJapanese and the other is an American brand. Having entered the Thai market fivedecades ago, Japanese cars are viewed as the first choice for most Thai consumers dueto their affordable prices, good quality and exceptional after sales service. On the otherhand, European cars from Germany, Sweden and France convey prestige and status onthose who acquire them. Korean and Malaysian brands, which have not beenestablished long in Thailand, are viewed as being of inferior quality, but with the

Table IV.Passenger car marketshare from 2004 to 2006

Rank Brand 2004 2005 2006

1 Toyota 49.5% 48.0% 48.3%2 Honda 33.8% 30.3% 33.9%3 Chevrolet 3.0% 4.4% 4.1%4 Nissan 4.3% 3.6% 3.5%5 Mitsubishi 2.6% 4.3% 2.1%6 Ford NA NA 2.0%7 Mazda NA 2.7% 1.9%8 Benz 2.5% NA 1.8%9 Others 4.3% 6.7% 2.4%

Total figures 209,110 188,211 191,763

Source: Thailand Automotive Institute (2004-2006)

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advantage of cheaper prices. Kia entered the market in 1995, exited during the Asianfinancial crisis in 1997 and re-entered in 1999. Its situation was similar to Hyundai’s,which also pulled out during the financial crisis. Hyundai decided to conduct itsmarketing efforts in Thailand again in 2007, about the same time that Malaysia’sProton was first launched into the Thai market.

Automakers are competing intensively to persuade consumers to purchase theirbrands. A knowledge of the different evaluation criterion for selecting cars furtherimproves the firm’s capability to influence a purchase. In fact, there are various factorsthat affect consumers’ willingness to pay (WTP). One way is to classify those factors asintrinsic and extrinsic cues (Shiffman and Kanuk, 2000). The intrinsic cues involvephysical characteristics of the product itself, while extrinsic cues refer to factors thatare external to the product such as brand image, manufacturing location image, retailstore image and country of origin (COO).

The WTP premium can easily be quantified under the tangible aspects, namely theproduct’s attributes. The challenge, however, lies in valuing the intangible aspects andcalculating the value to be paid for it. This knowledge once known should provebeneficial to firms that wish to evaluate their current position against othercompetitors, and assist them in coming up with a more accurate premium or discount.Two examples of intangible attributes for automobile selection are the nationality ofthe brand and the brand itself.

Researchers currently acknowledge two major approaches to valuing brands, whichare the accounting-based or financial approach and the customer-based or marketingapproach (Lassar et al., 1995; Motameni and Shahrokhi, 1998; Haigh, 2007). Theaccounting-based approach values the brand as one of the firm’s intangible assets.This brand value can be liquidated during a credit crisis or rated during an acquisition.However, the financial approach has received criticism on its inability to provide brand

Table V.Automobile excise tax

rates

Automobile type Automobile descriptionExcise tax

under 1984 act (%)Excise tax under1996 revision (%)

Passenger car Cylinder capacity not more than 2,000cc, with a horse power of not more than220 50 30a, b

Cylinder capacity more than 2,000 cc butnot more than 2,500 cc, with a horsepower of not more than 220 50 35a, b

Cylinder capacity more than 2,500 cc butnot more than 3,000 cc, with a horsepower of not more than 220 50 40a, b

Cylinder capacity more than 3,000 cc,with a horse power of more than 220 50 50b

Pick-up passengervehicle (PPV)

Cylinder capacity not more than 3,250 cc 50 20Cylinder capacity more than 3,250 cc 50 50

Double cab Cylinder capacity not more than 3,250 cc 50 12Cylinder capacity more than 3,250 cc 50 50

Notes: aStarting January 2008, vehicles using the substitute energy of ethanol, no less than 20percent, receive an additional 5 percent tax reduction; baccording to the revision of 2003, sportsutility vehicles are taxed according to the passenger car rateSource: Excise Department, Ministry of Finance

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management with an opportunity to exploit that value (Keller, 1993). The customer-based approach, on the other hand, contributes more extensive information onconsumers’ perceptions which influence the decision making process. Keller (1993)defines brand value or so-called ‘‘customer-based brand equity’’ as the ‘‘differentialeffect of brand knowledge on the consumer’s response to the marketing of the brand’’.Brand knowledge under this definition depends on brand awareness and image; andthe favorability, strength and uniqueness of the brand association play a critical role indetermining the differential response. Aaker (1991) suggests that brand equitycomprises of five dimensions: brand loyalty, brand awareness, perceived quality, brandassociation and other proprietary assets. The marketing approach also contains someflaws (Srinivasan et al., 2005), one of which is that this approach provides brand equitymeasurement in terms of utilities, not financial numbers. Additionally, future values ofthe brand are also overlooked.

Other than financial and marketing approaches, there are other measures used toidentify brand values. One of the measures uses the outcome of the market; such as theprice premium in order to determine the brand value. Price premiums of brands can bemeasured through simple customer research, or by a trade-off or conjoint analysis inwhich respondents are asked to make trade-off judgments about brand attributes(Aaker, 1991). This paper focuses on this price premium approach in quantifying brandvalues.

2. Literature reviewFirms use brands to identify and differentiate their products or services fromcompetitors. The commercial importance of brands is undoubtedly evident. Benefits ofa great brand include a short-term gain on recognition to long-term competitiveadvantage on loyalty, which are ultimately translated into revenues and profits.Nevertheless, there are several meanings of ‘‘brand’’ depending on whether the focus ison the narrow or broader perspective. For example, Haigh (2007) has proposed threedefinitions: ‘‘trademark’’ is a logo with associated visual elements, ‘‘brand’’ is atrademark with associated intellectual property rights, and ‘‘branded business’’ coversthe whole organization.

As for the origin of the product, though its importance has been studied since theearly 1960s, it is not always a simple task to provide a definition of a product’s origin.At first, scholars adopted the term ‘‘country of origin’’ or COO, being the country wherethe product is originally produced or where its corporate headquarters are located( Johansson et al., 1985; Ozsomer and Cavusgil, 1991). However, as business becomesmore globalized, firms are faced with pressures to lower production costs by searchingfor cheaper raw materials and lower costs of labor. This globalization of productionleads to the possibility that a particular product could be designed in one country butproduced in another. Other than COO, some researchers prefer the term ‘‘made in’’,which refers to the country where the product is manufactured or assembled (White,1979; Han and Terpstra, 1988; Papadopoulos, 1993). Thakor and Kohli (1996) define the‘‘origin of the brand’’ as the place, region, or country where the product or the brand isperceived to have originated from. In many instances, consumers are often mistakenabout products actual COO. For example, Anderson Analytics (2007) conducted asurvey on 1,000 college students from around 375 US universities, and found that 33.7percent of the subjects believed that Lexus is an American firm, rather than a Japanesefirm, whilst 55.7 percent thought that Hyundai was Japanese. Some researchers believethat consumers’ perceptions could be more important than the actual location where

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the product is actually produced or designed, or even where the headquarters isphysically located (Thakor and Kohli, 1996; Lim and O’Cass, 2001; Jo et al., 2003).

2.1 Brand valuationSince there is no formal market for buying and selling brands, valuing brands is not astraightforward task. As stated earlier, there are a few approaches to valuing brands.Those interested in financial approach techniques, should refer to Simon and Sullivan(1993) who extract brand equity from the firm’s intangible assets. Using the financialmarket value of the firm, this technique focuses on a forward-looking perspective andtakes into account new information. Another example is Farquhar et al. (1991) whoadvocate ‘‘momentum accounting’’, which allows premiums and amortizations of brandassets to be incorporated into the accounts, and also allows managers to track thefirm’s actions based on this brand momentum. The Financial World and the Interbrandapproach calculate brand equity as the product of an average of the past three year’sprofits, and apply a weighting system to the brands. These weights are calculatedfrom historical data, and judgments are made regarding other factors (Wentz andMartin, 1989).

Several researchers have attempted to quantify brand equity by focusing on theconsumer side. Srinivasan (1979) measures brand equity by testing preferences fordifferent primary health care physicians. Kim et al. (2003) value brand equity ondifferent dimensions, which include brand loyalty, brand awareness, perceived qualityand brand image, and relates these four dimensions to the financial performance of thehotel industry. Myers (2003) conducts an adaptive conjoint analysis on tangible andintangible attributes to measure the brand equity of nine national soft drink brands.There is also other research that does not rely on survey data, but focuses on scannerpanel data instead. One example of this is Kamakura and Russell (1993), who measurebrand equity by focusing on perceived value, brand dominance and intangible value.

Previous research has not been very successful in quantifying brands’ pricepremiums by utilizing secondary data. Holbrook (1992), for example, attempted tosearch for brand premiums on consumer electronics. Not only is the uni-dimensionalmeasure of quality or ‘‘overall quality’’ rating, across all product categories provided bythe Consumer Reports theoretically questionable; but the results are also not promisingsince no brand provides an additional price premium. The other test on six electronicproduct categories from the Crutchfield Catalog is also not encouraging, as only onebrand dummy is significant.

2.2 COO valuationOver the past four decades, extensive research has been conducted on the effect of COOon consumer decisions. Schooler (1965) pioneered research on the linkage between COOand the perceived quality of the product. The results show that consumers clearly useCOO to judge the product’s quality and performance, i.e. products originating fromhighly industrialized countries are viewed as more superior in terms of quality. Thiswas confirmed in further research by Tongberg (1972), Krishnakumar (1974), Ericksonet al. (1984), Heslop and Papadopoulos (1993) and Ahmed et al. (1994).

COO relates not only to the perceived quality, but also to the perceived risk fromproduct usage. Perceived risk is the negative or unexpected consequences that mightoccur after consumers have purchased the product. Hugstand and Durr (1986)examined the importance of COO on US consumers’ product perceptions of usage riskand quality. The products under the study were automobiles, cameras, canned food,

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automobile tyres, shoes and sports shirts from Japan, China, South Korea, Taiwan andthe USA. The results from the ‘‘mall intercept’’ method verified that shoppers weresensitive to where the product originated from. Coredell (1991) conducted a study oncolor televisions, microwave ovens, bicycles, and telephones. The results showed thatconsumers were biased against the quality of products made from developingcountries. Similarly, Hampton (1997) found a higher perceived risk on productsoriginating from developing countries.

It is also apparent that COO influences consumers’ ‘‘willingness to pay’’. Yaprak (1978)examined USA and Turkish business executives’ intention to purchase specific brands ofcars, cameras and calculators made in Germany, Japan and Italy. The researcher foundthat COO affected consumers’ WTP through the effect of perceived quality. Roth andRomeo (1992) suggested a framework that rates the importance of product categorybased on several dimensions such as innovativeness, design, prestige, and workmanship.Using a sample of 99 graduate students from Ireland, 130 from Mexico and 139 from theUSA, subjects were asked to evaluate products from ten countries based on six productcategories. The results showed that each country possessed its own unique imagetowards a certain product category, so consumers would be willing to pay higher for theproduct that ‘‘fits’’ that country’s image. For example, consumers were willing to paymore for a car from Japan, Germany and the USA; but less willing to pay for Mexicanand Hungarian automobiles. Tse et al. (1996) focused only on color televisions producedin Hong Kong, Germany, Japan and South Korea. The findings indicated that there was ahigher tendency for consumers to purchase German and Japanese-made color televisionsthan those made in Hong Kong and South Korea. Other related tests include Verlegh andSteenkamp (1999) and Skuras and Vakrou (2002).

However, it should be noted that there are several factors that complicate the studyof how COO affects consumers’ evaluation of products, such as the complexities of theproduct itself (Liefeld and Wall, 1993; Zhang, 1996; Ahmed and D’Astous, 2001), theavailability of other information for the product (Han, 1989; Hong and Wyer, 1989;Nebenzahl et al., 1997), the effect of stereotyping by consumers (Nagashima, 1970;Gaedeke, 1973; White and Cundiff, 1978), the level of consumers’ ethnocentrism (Levinet al., 1993; Johansson et al., 1994), and other characteristics of consumers such asnationality, age, gender and educational level (Schooler, 1971; Wang and Lamb, 1983).

3. HypothesisThis paper aims to discover whether different automobile brands originating fromdifferent countries of origin, possess different price premiums or not. The researchfocuses on the brand premium rankings for all the automobile brands offered in theThai market can be constructed. The COO of the brands are also valued in monetaryterms, those countries being Japan, the USA, Germany, France, Sweden, Korea andMalaysia. Specifically, the following hypotheses are tested:

H1. Brands which consumers perceive to have a higher value receive a positiveand significant premium.

H2. Brands with a high acceptance in the market, hence having a high marketshare, obtain a high price premium.

H3. The COO which consumers perceive to have a higher value receives a positiveand significant premium.

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H4. Brands originating from highly industrialized countries obtain a higher pricepremium. The industrialized countries here are classified according to the2007 GDP (PPP) per capita, which are USA ($45,790), Sweden ($36,365), Japan($33,525), France ($33,414), Germany ($33,154), South Korea ($24,712) andMalaysia (13,379). The data were obtained from the World DevelopmentIndicators Database of the World Bank.

H5. Attributes which consumers perceive to have a higher value, directly affectthe WTP to pay.

The results from H1, 3 and 5 show how consumers evaluate different brands and theirfeatures, which would be of benefit to brand managers of the products. The premiumsderived could also serve as a cross check, and be compared with other methodologiesinvolved in assessing brands. H2 focuses on the relationship between two outcomes ofthe market: market share and price premium, whilst H4 provides implications on entrybarriers for new automobile brands from the same or different countries.

4. Methodology and dataThe hedonic price model could be applied to ascertain the current price premium of aparticular branded product relative to other brands or non-branded products.Generally, the hedonic function has the WTP on the left-hand side, whilst the right-hand side consists of variables that affect the WTP. The function intends to captureconsumers’ preferences over the product’s characteristics. The basic function is asfollows:

Pi ¼ f ða1i; a2i; . . . ; ajiÞ ð1Þ

where P represents the WTP, and a1, a2, . . . , aj are attributes or features of product i.Listed prices or market prices are used as substitutes or proxies for consumers’ WTP.Since its development in the 1920s, the hedonic approach has been applied to a varietyof products and services (Brynjolfsson and Kemerer, 1996), newspapers (Thompson,1988), Swedish wine (Nerlove, 1995), Burgundy wine (Combris et al., 2000), internetinformation (Lee et al., 2003); as well as tests on housing market segmentation(Goodman and Thibodeau, 2003), urban green areas (Morancho, 2003) and islands(Bonnetain, 2003).

The hedonic approach has also been extended to assess the value of a specificfeature, X which can simply be added to the right-hand side of Equation (1):

Pi ¼ f ða1i; a2i; . . . ; aji;XiÞ ð2Þ

where X could be the time dummy, quality-adjusted dummy, or a feature that affectsthe consumers’ preferences. For example, Wang et al. (2007) quantified the pricepremiums of milk products using the Hazard Analysis Critical Control Point labelwhere X is the dummy for products with or without the label. Feature X could also bethe number of existing users or the installed base if the focus is on networkexternalities. A product creates network externalities when the utility that an agentderives from consuming the product increases with the number of other agentsconsuming the same product. Brynjolfsson and Kemerer (1996), and Chakravarty et al.(2006) studied whether network externalities exist in spreadsheet software and wordprocessing software, respectively.

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The major advantage of the hedonic price model is that it focuses on consumers’valuation of a product’s characteristics, rather than relying on subjective judgmentsor estimated figures from financial statements. Nevertheless, the effectiveness of thehedonic price model has also been criticized on several grounds. Statistically,the ‘‘true’’ function is unknown, and additionally the list price may not reflect theconsumers’ WTP but rather part of the firm’s planning strategy. For example, a lowintroductory price could be explained by price discrimination or a predatory pricingstrategy. In these cases, a low selling price clearly does not mean a low WTP, and sothe results from the hedonic price model could be misleading. There is anotherproblem associated with using the hedonic price model and time-series data, namelythat over time, technological advances generally reduces costs, and eventually pricesof the same-quality products as more consumers purchase them. However, thisproblem could be alleviated by adding a quality-adjusted dummy or avoided byusing cross-sectional data.

For the purpose of studying brand premiums, the X variable in Equation (2) couldbe dummies of different brands and countries of origin. It is appropriate to apply thehedonic model to automobiles since the market is generally represented by a fewplayers with recognized brands. Additionally, one brand could cover several productlines or models. Unlike commodities or services, automobiles also possessdistinguishable features with supposedly different valuations on those features. As aresult, Equation (2) is repeated, but with dummy variables, representing brands, whileother variables represent features of automobiles:

Pi ¼ f ða1i; a2i; . . . ; aji; b1i;b2i; . . . ; bkiÞ ð3Þ

For model i, b represents dummies of different brands or countries of origin from 1 to k.For the brand perspective, it should be noted that certain brands could consist ofseveral sub brands, as is the case with Vios, Altis, Camry, Wish and Fortuner which arecategorized under the Toyota brand. Each sub brand could offer several models, forinstance, 1.5J, 1.6E, 1.8G, 2.0G and 2.4G models with different features for consumers tochoose from.

In order to quantify the brand’s origin, b in Equation (3) is the COO of therespective model. For simplicity’s sake, COO in this study refers to the locationwhere the corporate headquarters are located. Therefore, France’s dummy includesCitroen and Peugeot; Volvo is represented by Sweden’s dummy; Germany’s dummyincludes Mercedes Benz, BMW and Audi whereas Toyota, Honda, Suzuki, Subaru,Nissan, Mitsubishi, Mazda and Isuzu are under Japan’s dummy. Korea’s dummyconsists of Ssangyong, Kia and Hyundai, whilst Malaysia’s dummy representsProton. Lastly, Ford and Chevrolet come under the dummy of the USA.Hypothetically, all dummies of different brands and COO are expected to possesspositive values, indicating that the brands and COO increase brand values relativeto the references.

The data were collected on an authors’ survey during the ‘‘Thailand InternationalMotor Expo 2007’’, which took place from 29 November to 10 December, 2007. Thisevent is one of the two biggest automobile shows in Thailand, the other being the‘‘Bangkok International Motor Show’’. Altogether, a total of 244 data points ofthe models were obtained. Descriptive statistics of prices, brands, COO, along with theexplanations of important features are presented in Table VI.

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5. Results and analysisResults from the hedonic price model of automobile brands are presented in Table VII.The results from the hedonic price models confirm a strong relationship betweenautomobile brands and price premiums. As expected, when compared with Ssanyong,Mercedes Benz brand possesses the highest price premium of 3,887,534 Baht, followedby BMW and Audi brands at 3,844,403 Baht and 3,458,702 Baht, respectively. All theEuropean brands’ dummies have significant positive signs. The Peugeot dummy has ap-value of 0.1068. However, newcomers to the Thai market, namely Korea andMalaysia do not have a strong premium. Some interesting results were found amongst

Table VI.Explanation and

descriptive statistics ofvariables

Variable Mean SD Explanation

Price 2,440,156.790 2,769,345.263 Price in Baht (1$¼ 30-35 Baht in 2008)Audi 0.053 0.225 Audi brand ¼ 1, others ¼ 0BMW 0.095 0.293 BMW brand ¼ 1, others ¼ 0Chevrolet 0.082 0.275 Chevrolet brand ¼ 1, others ¼ 0Citroen 0.037 0.189 Citroen brand ¼ 1, others ¼ 0Ford 0.045 0.208 Ford brand ¼ 1, others ¼ 0Honda 0.111 0.315 Honda brand ¼ 1, others ¼ 0Hyundai 0.016 0.128 Hyundai brand ¼ 1, others ¼ 0Isuzu 0.021 0.142 Isuzu brand ¼ 1, others ¼ 0Kia 0.049 0.217 Kia brand ¼ 1, others ¼ 0Mazda 0.021 0.142 Mazda brand ¼ 1, others ¼ 0Mercedes 0.099 0.299 Mercedes Benz brand ¼ 1, others ¼ 0Mitsubishi 0.037 0.189 Mitsubishi brand ¼ 1, others ¼ 0Nissan 0.062 0.241 Nissan brand ¼ 1, others ¼ 0Peugeot 0.021 0.142 Peugeot brand ¼ 1, others ¼ 0Proton 0.037 0.189 Proton brand ¼ 1, others ¼ 0Ssangyong 0.029 0.168 Ssangyong brand ¼ 1, others ¼ 0Subaru 0.008 0.091 Subaru brand ¼ 1, others ¼ 0Suzuki 0.004 0.064 Suzuki brand ¼ 1, others ¼ 0Toyota 0.136 0.343 Toyota brand ¼ 1, others ¼ 0Volvo 0.041 0.199 Volvo brand ¼ 1, others ¼ 0France 0.058 0.233 France ¼ 1, others ¼ 0Germany 0.247 0.432 Germany ¼ 1, others ¼ 0Japan 0.399 0.491 Japan ¼ 1, others ¼ 0Korea 0.095 0.293 Korea ¼ 1, others ¼ 0Malaysia 0.037 0.189 Malaysia ¼ 1, others ¼ 0Sweden 0.037 0.189 Sweden ¼ 1, others ¼ 0USA 0.128 0.334 USA ¼ 1, others ¼ 0Abs 0.843 0.365 Anti-lock braking system ¼ 1, none ¼ 0Airbag 3.609 3.232 Number of airbagsAuto 0.888 0.315 Automatic gear ¼ 1, Manual gear ¼ 0Disc brake 0.707 0.456 Four-wheel disc brake ¼ 1, others ¼ 0Leather 0.649 0.478 Leather seats ¼ 1, others ¼ 0Front fog 0.803 0.399 Front fog light ¼ 1, none ¼ 0Rear fog 0.373 0.485 Rear fog light ¼ 1, none ¼ 0Diesel 0.244 0.430 Diesel capability ¼ 1, Benzene ¼ 0Speeds 4.983 0.955 Number of gear speeds from 1 to 6Tax 20% 0.037 0.189 Excise tax rate ¼ 20%, others ¼ 0Tax 30% 0.575 0.495 Excise tax rate ¼ 30%, others ¼ 0Tax 35% 0.192 0.394 Excise tax rate ¼ 35%, others ¼ 0Tax 40% 0.125 0.331 Excise tax rate ¼ 40%, others ¼ 0Tax 50% 0.071 0.257 Excise tax rate ¼ 50%, others ¼ 0

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the popular Japanese brands, of Honda, Isuzu and Nissan especially, since Honda iswidely known for its superior after-sales service, whilst Isuzu has been the leader in thepick-up truck segment for decades. Only the Toyota and Mitsubishi brands havepositive price premiums, with the Mitsubishi brand being valued about 100,000 Bahtabove that of Toyota’s.

H2 aims to discover a relationship between brand acceptance as indicated by itsmarket share, and the brand’s price premium. The overall results (not shown here)indicate that there is no strong relationship between market share and brand premium.So, we decided to separate the passenger car market into the luxury and the economysegments since the luxury cars represent only a small fraction of the industry. Theaverage price of 2.5 million Baht was chosen as the separator, which means that all of the

Table VII.Results from hedonicprice models ofautomobile brands

Variable Price Log (price)

Audi 3,458,702 (3.167)* 0.914 (5.247)*BMW 3,844,403 (4.580)* 0.777 (5.800)*Chevrolet 1,444,257 (2.040)* �0.123 (�1.089)Citroen 2,258,902 (2.700)* �0.445 (3.332)*Ford 943,850 (1.186) �0.225 (�1.777)**Honda 1,048,320 (1.300) �0.152 (�1.182)Hyundai 1,467,230 (1.357) �0.091 (�0.525)Isuzu 1,418,786 (1.260) 0.019 (0.107)Kia 783,041 (0.529) �0.391 (�1.656)**Mazda 1,058,689 (1.104) �0.263 (�1.717)**Mercedes 3,887,534 (4.578)* 0.925 (6.827)*Mitsubishi 1,521,714 (1.787)** �0.115 (�0.843)Nissan 1,344,641 (1.500) �0.103 (�0.721)Peugeot 1,914,496 (1.621) 0.422 (2.236)*Proton 770,172 (0.844) �0.635 (�4.360)**Subaru 2,247,998 (1.872)** 0.385 (2.010)*Suzuki 1,763,559 (1.084) 0.126 (0.485)Toyota 1,402,697 (1.992)* �0.043 (�0.385)Volvo 2,690,576 (3.472)* 0.710 (5.742)*Abs �276,897 (�0.698) �0.012 (�0.190)Airbag 137,439 (1.833)** 0.039 (3.289)*Auto gear 214,570 (0.579) 0.064 (1.078)Disc brake 316,623 (0.957) 0.270 (5.110)*Front fog �5,604 (�0.016) 0.086 (1.562)Rear fog �316,747 (�0.848) �0.131 (�2.203)*Diesel 639,543 (1.982)* 0.121 (2.356)*Leather �265,878 (�0.760) 0.070 (1.259)Speeds �32,495 (�0.162) �0.031 (�0.975)Tax 20% �6,110,629 (�6.810)* �0.797 (�5.568)*Tax 30% �6,063,175 (�13.149)* �1.082 (�14.713)*Tax 35% �5,844,641 (�13.049)* �0.813 (�11.380)*Tax 40% �4,384,305 (�9.488)* �0.522 (�7.077)*N 244 244Adjusted R2 0.786 0.941Durbin � Watson 1.720 1.350F-statistic 25.589 107.520

Notes: *p-value < 0.05; **p-value < 0.1; reference brand is Ssangyong and reference tax is 50percent

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European brands come under the luxury segment. The relationship between marketshare and price premium in the luxury segment is clearly shown in Table VIII. MercedesBenz, the leader in this segment, receives the highest price premium. BMW which rankssecond in terms of market share also secures the second rank in the premium. The samepattern persists for the remaining four tested brands, including Volvo, Audi, Peugeot andCitroen. It can be assumed that each brand in the luxury segment already possesses astrong identity. For example, Mercedes Benz holds strong recognition for itsperformance, as BMW and Volvo do for sportiness and safety, respectively.

However, as shown in Table IX, the relationship does not hold for the economysegment. Hyundai, which ranks last in terms of market acceptance, has the best pricepremium. On the other hand, the number one brand in the market, Toyota, is rated atonly sixth in terms of the price premium. Understandably Ford comes second to last inthe ranking of price premiums since has only been established in Thailand since 1995.A surprising result is that of Honda, in which the second largest passenger carmanufacturer is placed ninth. Since it could be very difficult for consumers todistinguish among brands, one brand could easily be substituted by another. Note thatthe ranking is conducted without considering the significance of brand dummies. Infact, only a few economy car segments’ brands are significant.

The relationship between car price and COO is demonstrated in Table X. Dummies ofFrance, Germany and Sweden are statistically significant at a 5 percent level. Compared

Table VIII.Comparisons of market

share and price premiumrankings for luxury

brands

Brand Market share (2006) (%) Rank (market share) Rank (price premium)

Mercedes 2.34 1 1*BMW 0.76 2 2*Volvo 0.28 3 4*Audi 0.07 4 3*Peugeot 0.05 5 6Citroen 0.02 6 5*

Notes: *p-value < 0.05; **p-value < 0.1; reference brand is Ssangyong and reference tax is 50 percentSource: Market share data are obtained from Toyota Motor (Thailand) Company Limited

Table IX.Comparisons of market

share and price premiumrankings for economy

brands

Brand Market share (2006) (%) Rank (market share) Rank (price premium)

Toyota 54.19 1 6*Honda 29.45 2 9Chevrolet 4.47 3 5*Nissan 2.61 4 7Mazda 1.90 5 8Mitsubishi 1.87 6 3**Ford 0.96 7 10Suzuki 0.18 8 2Kia 0.17 9 4Subaru 0.04 10 11**Hyundai 0.04 11 1

Notes: *p-value < 0.05; **p-value < 0.1; reference brand is Ssangyong and reference tax is 50 percentSource: Market share data are obtained from Toyota Motor (Thailand) Company Limited

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to Korean brands, brands originating from Europe are perceived by consumers ashaving a premium over brands from Korea, Malaysia, Japan and the USA. Brands fromGermany have the highest price premium of 3,532,963 Baht, followed by brands fromSweden and France which are valued at 2,224,962 Baht and 1,674,998 Baht, respectively.Japan’s dummy, which offers the most brands in the Thai market, ranks fourth with thepremium of 722,434 Baht and a p-value of 0.1514. Expectedly, Malaysian cars, with theirlow-price competitive advantage, command a low premium of 291,766 Baht.

The aim of testing H4 is to identify the relationship between the level of countries’industrialization and the price premium. The results from Table XI show clearly that

Table X.Results from theHedonic price model onthe automobiles countryof origin

Variable Price Log (price)

France 1,674,998 (2.643)* 0.506 (4.809)*Germany 3,532,963 (5.495)* 0.919 (8.617)*Japan 722,434 (1.440) �0.009 (�0.114)Malaysia 291,766 (0.388) �0.519 (�4.154)*Sweden 2,224,962 (3.413)* 0.731 (6.755)*USA 684,477 (1.360) �0.101 (�1.209)Abs �181,865 (�0.489) 0.005 (0.080)Airbag 125,840 (1.848)** 0.042 (3.702)*Auto gear 39,435 (0.271) 0.043 (0.756)Disc brake 279,577 (0.967) 0.267 (5.570)*Front fog �71,459 (�0.231) 0.085 (1.650)Rear fog �282,829 (�1.317) �0.040 (�1.125)Diesel 417,212 (1.636) 0.104 (2.170)**Leather �155,209 (�0.478) 0.071 (1.322)Speeds �147,740 (�0.882) �0.042 (�1.630)Tax 20% �5,938,669 (�8.782)* �0.748 (�6.665)*Tax 30% �6,120,184 (�14.228)* �1.091 (�15.280)*Tax 35% �5,832,003 (�13.658)* �0.806 (�11.382)*Tax 40% �4,459,565 (1-10.018) �0.518 (�7.007)N 244 244Adjusted R2 0.794 0.938Durbin–Watson 1.724 1.335F-statistic 44.446 172.791

Notes: *p-value < 0.05; **p-value < 0.1; reference brand origin is Korea’s COO and reference taxis 50 percent

Table XI.Comparisons of GDP percapita and pricepremium rankings

Country 2007 GDP per capita ($) Rank (GDP per capita) Rank (price premium)

USA 45,790 1 5Sweden 36,365 2 2*Japan 33,525 3 4France 33,414 4 3*Germany 33,154 5 1*South Korea 24,712 6 7Malaysia 13,379 7 6

Notes: *p-value < 0.05; reference brand origin is Korea’s COO and reference tax is 50 percentSource: GDP per capita data are obtained from World Bank

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highly industrialized countries collect higher price premiums than less industrializedones. Countries ranked 2nd, 3rd and 4th in terms of GDP per capita, namely Sweden,Japan and France, maintain close rankings in price premiums. For instance, Swedenwhich ranks second with a GDP per capita of $36,365 has the same price premiumranking. As for the less industrialized counties, including Malaysia and South Korea,the results are also consistent in their price premium rankings. The exceptions to therule, which show an inverse relationship between GDP per capita and their pricepremium ranking, are the USA and Germany. The US ranks first in the terms ofindustrialization, but ranks fifth in the price premium, whilst the opposite is true forGermany. It can be inferred from this that Germany is more highly regarded as an automaking country than the USA. According to the Global Automotive Image Survey byMarket Opinion Research (1997), Germany is considered the best vehicle producingcountry in the world, Japan second and the USA is ranked third.

All the sample models are subjected to different excise tax levels, namely 20, 30, 35,40 and 50 percent, respectively depending on their cylinder capacity. Automobile pricesclearly reflect these different tax rates. The results show that with the tax rate of 50percent as a reference dummy, all other tax dummies possess expected negative signs.For example, cars with a smaller cylinder capacity, which are subjected to the excisetax rate of 20 percent are, on average, 6,110,629 Baht less expensive.

Regarding the car’s features (H5), the availability of the airbag and the diesel-capability engine are positively associated with higher car prices, with p-values of0.068 and 0.049, respectively. Usually, an upgraded model within the same sub brand isequipped with extra features, namely ABS braking system, airbags, front and rear foglights and leather seats. The results from the hedonic model show that the airbag is theonly proxy for a particular upgraded model based on the consumers’ perspective, andconsumers are willing to pay 137,439 Baht for it. The diesel engine constitutes a639,543 Baht premium. Some consumers are willing to pay higher for the diesel enginesince the government fixes the diesel price a few baht cheaper than benzene.Specifically, during 2007 and early 2008, diesel was subsidized so as to be 3 Bahtcheaper on average, compared to benzene’s price. Another reason may be that onlycertain European models with large cylinder capacities have such engines.

Based on the results from the hedonic price model, brand premiums are quantifiedas shown in Table XII. Since automobiles sold in Thailand are subjected to differentexcise tax rates depending on cylinder capacity, the rankings are also classifiedaccordingly. Since every brand offers cars of 2,000 cc or less, which are subject to a 30percent tax rate, the analysis of brand valuation is based upon this tax level. Excludingtheir features, Mercedes, BMW and Audi are ranked highest with the price premium ofapproximately three million Baht. Amongst Japanese brands, Subaru and Suzukicommand premiums of about 1.7 million Baht and 1.2 million Baht, respectively. Withits racing car image, Subaru could be viewed as having a superior engine capability.The only surprise is Suzuki which is valued at more than 0.3 million Baht above otherJapanese brands. The values of popular Japanese brands range from 0.5 million Baht to0.9 million Baht. The last position belongs to Korean’s Ssanyong brand. This is as to beexpected, since the brand was introduced into the Thai market less than ten years agoand has only five showrooms currently located around Bangkok. As a result, the brandis not widely recognized by consumers.

Although there are many players in Thailand’s automobile industry, entry barriersare considered to be high. The Proton from Malaysia entered the market with its lesswell-known brands in 2007, offering nine models. Its brand premium is well below Ford

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or even popular Honda brands. In fact, the Proton brand is valued at approximately170,000 Baht and 270,000 Baht cheaper than Ford and Honda brands, respectively.Considering a compact car with a price of 700,000 Baht, a new entrant with anunrecognized brand must set its price more than 25 percent cheaper than the USincumbent, and more than 40 percent below the Japanese incumbent to be attractive.

The COO valuation provides another piece of important information for newentrants in terms of pricing strategy. Taking a 2,000 cc car as a benchmark, COOrankings can easily be conducted. Amongst the European COO valuation, Germanyscores the highest with the value of more than 4 million Baht, followed by Sweden andFrance with perceived values of around 2.5 million Baht. Automobiles from the U.S.and Japan have values of approximately 1.3 million Baht, and the lowest valuation inthis category are cars from Korea.

6. ConclusionsThe hedonic price model has proven to be an effective tool in evaluating brand andCOO premiums. All brands are positively related to price, and certain brand variablesare statistically significant. All the German brands are ranked the highest, withMercedes at the top, BMW second and Audi in third position. Competition betweenupscale models could be intense since their premiums are not notably different. Volvoand Citroen brands are next in the rankings. The Japanese brands, which haveestablished their presence in the Thai market for over five decades, surprisingly are insimilar valuation ranges as their American competitors. However, regarding Subaru,Mitsubishi and Toyota brands, the results may not imply a low entry barrier since thebrand premium could represent at least 25 percent of the compact car price.

Any new brand deciding to enter the Thai automotive market is recommended tohave a clear direction of the segment it wishes to serve. The luxury car segment hashigh entry barriers as seen by the positive relationship between market share and the

Table XII.Ranking of automobilebrand valuation

Brand Tax 50% Tax 40% Tax 35% Tax 30% Tax 20%

Mercedes 9,430,855 5,046,550 3,586,214 3,367,680 3,320,226BMW 9,387,724 5,003,419 3,543,083 3,324,549 3,277,095Audi 9,002,023 4,617,718 3,157,382 2,938,848 2,891,394Volvo 8,233,897 3,849,592 2,389,256 2,170,722 2,123,268Citroen 7,802,223 3,417,918 1,957,582 1,739,048 1,691,594Subaru 7,791,319 3,407,014 1,946,678 1,728,144 1,680,690Peugeot 7,458,013 3,073,708 1,613,372 1,394,838 1,347,384Suzuki 7,306,880 2,922,575 1,462,239 1,243,705 1,196,251Mitsubishi 7,065,035 2,680,730 1,220,394 1,001,860 954,406Hyundai 7,010,551 2,626,246 1,165,910 947,376 899,922Chevrolet 6,987,578 2,603,273 1,142,937 924,403 876,949Isuzu 6,962,107 2,577,802 1,117,466 898,932 851,478Toyota 6,946,018 2,561,713 1,101,377 882,843 835,389Nissan 6,887,962 2,503,657 1,043,321 824,787 777,333Mazda 6,602,010 2,217,705 757,369 538,835 491,381Honda 6,591,641 2,207,336 747,000 528,466 481,012Ford 6,487,171 2,102,866 642,530 423,996 376,542Kia 6,326,362 1,942,057 481,721 263,187 215,733Proton 6,313,493 1,929,188 468,852 250,318 202,864Ssangyong 5,543,321 1,159,016 (301,320) (519,854) (567,308)

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price premium rankings of the top two brands, Mercedes and BMW. The price shouldnot be set at a comparative level with those two leading players. A discounted pricestrategy is more favored. On the other hand, the economy market has a morewelcoming environment since it possesses a lower entry barrier. Despite the fact thatthere are many strong players in this segment, consumers are receptive to a newcomer.If the newcomer’s brand does not have a highly rated reputation, a price premiumsetting should not be employed, but a higher price can be imposed later as brand valuebuilds up. This implication is strongly supported by actual evidences from examples ofsuccesses and failures in the market place. Ssangyong which originates from SouthKorea insists on offering one to three million Baht cars, and could not maintain itssuccess in the Thai market. This fact is confirmed by a decrease in the number ofshowrooms in Bangkok, from five showrooms in 2008 to three showrooms during thefirst quarter of the year 2009 (the information is based on a personal interview with aSsangyong salesperson). The company attempts to position itself as a luxury brand;however, its brand value is not perceived by customers as warranting such a highpremium. The consequence is that Ssangyong was only able to sell a total of 151 unitsin 2007 (Toyota Motor (Thailand) Company Limited, 2009). Proton from Malaysiachose to implement an opposite strategy from Ssangyong, entering the economysegment with an average price of 520,111 Baht, the lowest amongst all brands. Thesuccess can be shown through its ranking in 2007, in which it was able to sell morethan 3,000 units.

For the existing players in the Thai market, the implications go beyond the pricingissue. The focus should be expanded to discover consumer needs in order to offer a bettervalue-added product. A customer-based approach is recommended. For the luxurymarket, brands which already have a reputation registered in consumers’ minds cancharge according to the price premium. For example, BMW has just launched its newmodel, a Series 1 coupe, in the Thai market during early 2009 with a price tag of3,699,000 Baht. On the other hand, if the decision to charge a higher premium falls belowexpectations, a customer-based approach can help solve the current weaknesses. As forthe economy market, in-depth research on consumers is needed for almost all the brandssince the results from the analysis show that consumers have difficulty in picturingdifferences amongst brands. An obvious example is Honda, which ranks second in termsof market share, but is unable to charge a higher premium.

Focusing on the COO, Thai consumers still put the highest valuation on Europeanbrands. Products from Germany are ranked first, followed by Sweden and France.Japanese and US cars have similar values, whilst Korean automobiles are ranked last.Existing and new brands which decide to conduct business in Thailand should takeaccount of the consumer’s valuation of its brand’s COO into their pricing strategies.Brands originating from Germany, Sweden and France are able to charge higherpremiums. However, this does not apply to brands originating from the USA andJapan. In order for brands from these two countries to raise their prices, a customer-based approach is needed.

As for the car’s features, consumers’ WTP depends positively on the availability ofairbags which consumers perceive as a proxy for the upgraded model, the other factorbeing a diesel engine, which is valued higher than the benzene engine.

7. LimitationsThere are major limitations of this research. Namely, the lack of access to information,and the classification of data into different categories is limited. Also, comparison of

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the price premiums of different car brands competing under the same model cannot bemade. Moreover, there are other attributes which consumers consider when purchasinga car that cannot be taken into consideration under the hedonic model. Attributes suchas after sales service, design and other emotional attachments, are not quantified here.

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About the authorsKandapa Thanasuta is an Instructor of Marketing at Mahidol University International College.Her research interests are the valuation of house brands amongst different cultures, and the effectof product categories on house brand purchasing decisions. Kandapa Thanasuta is thecorresponding author and can be contacted at: ickandapa@mahidol.ac.th

Thanyawee Patoomsuwan is an Instructor of Accounting at Mahidol University InternationalCollege. Her research interests are intangible asset valuation and auditing quality.

Vanvisa Chaimahawong is an Instructor of International Business at Mahidol UniversityInternational College. Her research interest focuses on country of origin valuations.

Yingyot Chiaravutthi is an instructor of Economics at Mahidol University InternationalCollege. His research focuses on pricing strategy, product valuations and experimentaleconomics. His recent articles have been published in the Journal of High TechnologyManagement Research and in Information Economics and Policy.

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