The effect of the moral failure of a foreign brand on competing brands

The purpose of this paper is to examine the impact of the moral failure of a scandalized foreign brand afflicted with a product-harm crisis on competing brands (i.e. within the same product category) while taking into account the country of origin (COO) of the brands.

This paper presents the results of two studies. The first study uses an experimental design, while the second uses a survey to examine a real-life product-harm crisis.

The results indicate that the moral failure of a scandalized foreign brand has an indirect negative effect on the intention to purchase competing foreign brands from the COO of the scandalized foreign brand. This effect is, however, reversed for domestic brands, where moral failure has an indirect positive effect on the intention to purchase competing domestic brands.

The results of this research were based on an examination of how US consumers responded to the moral failure of Japanese and German brands. Future studies should examine brands from different COOs in different countries.

These results suggest that competing foreign brands from the COO of the scandalized brand should collaborate to quickly handle a product-harm crisis to prevent a spillover and that domestic competitors should capitalize on the opportunity to attract new customers.

This study represents a first attempt to examine the effect of a foreign brand’s moral failure in handling product-harm crisis on competing brands, both foreign and domestic.