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The Impact of Global Financial Crisis on Consumer Behavior in Jordan


European Journal of Social Sciences – Volume 12, Number 4 (2010)

The Impact of Global Financial Crisis on Consumer Behavior in Jordan
Khaled Mohammad Abu Aliqah Tafila Technical University –Administrative and Financial Sciences Faculty Tafila – Jordan, P.O. Box (179) Post Office Zip code (661100) Jordan E-mail: k_diabat@yahoo.com Ahmad Nahar Al-rfou Tafila Technical University –Administrative and Financial Sciences Faculty Tafila – Jordan, P.O. Box (179) Post Office Zip code (661100) Jordan E-mail: ahmadrfou_357@yahoo.com Abstract The purpose of this study is to investigate the impact of the Global Financial Crisis (GFC) on consumer behavior in Jordan, the researchers developed (20) items questionnaire which distributed 800 copy, the returned number was (650) questionnaire, the population of the study composed of all the Jordanian consumers, randomly selected. The study concluded that (58%) of the respondents reported that they aware of the GFC, and its impact on consumer behavior, about (62%), believed that the GFC effect the consumption, (58%) reported that GFC is causing inflation in Jordan, and about (67%) among respondent understand the GFC has an effect on the Jordanian economy. As the impact of the GFC on the consumer behavior in Jordan, the opinions of respondents were varying. About (63%) of the respondents reported that they turned to inexpensive substitute goods, and (61%) switched from buying luxury to essential goods, (57%) mentioned they are buying small quantities of goods. The shifting from the consumption to saving we notice that about (77%) disagree in this item.

Keywords: Global Financial Crisis, Consumer Behavior, Consumption, Purchasing Behavior.

Introduction
The GFC, began in 2007 in USA mortgage and financial sector, then affected all sectors, such as: the oil industry, automotive industry, food industry and others sectors. As result to this crisis, consumer faces daily challenges related to his financial and material safety, increase of unemployment rate, fluctuations in consumer prices, restrictions in loan accessing, fluctuations in currency exchange rate, etc, all these affect the consumer attitude in the consumption and purchasing process. Economic literatures mentioned that the rational consumer use disposable income to maximize the benefit of goods and services consumption and the consumer behavior is affected by two factors: the prices of goods and services, and disposable income. If there is any change in these factors, the consumer change his behavior and try to re-allocate of income and expenditure to reach a balance and maximize the benefits, (Hussein Majid, Saeed Afaf, 2003, Nasr Mohammed , Abdullah Shamiyeh 2008). 618

European Journal of Social Sciences – Volume 12, Number 4 (2010) Kotler, Ph 2000 mentioned that any economic activity aims to meet the actual or potential needs or desires of consumers. Strong consumer orientation requires knowledge of consumer characteristics, needs and purchasing behavior. Individual consumer behavior is defined as the sum of all motivations, attitudes and decisions that constitute his conduct in his capacity of end user of material and intangible products, (Antonides Gerrit , Raaij,Fred, 1998). Many surveys in several countries investigated the impact of GFC in consumer behavior, such as: in Australia more than twothirds of Australians believe that they are currently living in a recession, this indicative the intensifying recessionary mindset influencing consumer behavior, about (41%) of Australians feel their lifestyle has been impacted by the recession. Australian consumers have been forced to re-evaluate their spending, and consumption. (Research and markets web sit, sited in 12/11/ 2009). In another survey the Brazilian respondents believed their country in recession, Brazilian consumers have become more quality conscious and savvier shoppers, but remain prudent spenders. Nearly half perceive that their lifestyle has been impacted by the recession (Research and markets web sit, sited in 15/10/2009). In the South-Eastern Asia (86%) of the Japanese consumers and (82%) of South Korean consumers believe that they are currently living in a recession, and (57%) of Japanese consumers and (25%) of South Korean consumers feel that their lifestyle has been impacted by the recession. (Research and markets web sit, sited in 9/10/2009). In the Arab world about (59%) of consumers in the United Arab Emirates (UAE) and 30% in Saudi Arabia believe that their country is in a state of recession, research shows that consumers are adjusting their consumption behaviors. (38%) of Saudi and (37%) UAE consumers have changed their lifestyle as a response to the global economic downturn, luxury brands have become an integral part of the Saudi Arabia and UAE lifestyle as consumers are willing to pay high prices for products that they believe will bring them social status, at the same time, value consciousness is also prevalent in luxury purchases as 'price' and 'quality' are the most influential factors that affect their purchase decisions. (Mindbranch web sit , sited in 9/10/2009) . The Important of the Study: The current study tries to investigate the impact of the GFC on consumer behavior on Jordan. Problem Statement The problem of the study is to identify the impact of GFC on consumer behavior on Jordan, presented in the following questions: 1. To what extent the Jordanian consumer aware of the GFC and its impact on consumption? 2. What is the impact of the GFC on change of the Jordanian consumer behavior? The Hypotheses H1:- There is no statistical significant difference of GFC effect on the Jordanian consumer behavior, of shifting from buying expensive goods to inexpensive substitute goods. H2:- There is no statistical significant difference of GFC effect on the Jordanian consumer behavior, in terms shifting from buying luxury goods to essential goods. H3:- There is no statistical significant difference of GFC effect on the Jordanian consumer behavior, in terms shifting from buying huge quantities of goods to buy small quantities goods. H4:- There is no statistical significant difference of GFC effect on the Jordanian consumer behavior, in terms shifting from the consumption to saving.

Study Methodology
The population of the study composed of all the Jordanian province, randomly selected, the researchers developed questionnaire consisted of (20) items, the questionnaire was send out to be reviewer for 619

European Journal of Social Sciences – Volume 12, Number 4 (2010) validation, and verification of the questionnaire, the researchers admitted 80% of items the reviewer approved it. The study used Cronbach Alpha (0.80), test for the interior homogeneity of the questionnaire, and distributed (800) questionnaire, the returned number was (650), the respondent rate was (78%). Analysis and Discussion The study questions were investigated in the following section: Question one: To what extent the Jordanian consumer aware of the GFC and its impact on consumption? Table (1) below illustrated that about (58%) of the respondents reported that they aware of the GFC effect, and (62%) believed that GFC effected in the consumption, and (58%) reported that GFC is causing inflation (67%) of the respondent understand the effect of GFC in Jordan economy.
Table 1:
Factors Jordanian consumer began to feel the impact of global financial crisis on consumption The financial crisis has affected in my consumption priorities I know that the global financial crisis contributed to rising inflation I understand the effects of the global financial crisis on the my country economy Total ? Frequencies

Consumer perception to the GFC
Strongly disagree Fre* % Disagree Fre % Neither agree nor disagree Fre % Agree Fre % Strongly agree Fre % Total

97 107 97

15% 16% 15%

91 128 145

14% 20% 22%

85 11 35

13% 2% 5%

192 190 200

30% 29% 31%

185 214 173

28% 33% 27%

650 650 650

85 386

13% 15%

101 465

16% 18%

27 158

4% 6%

217 799

33% 31%

220 792

34% 30%

650

Question two: What is the impact of the GFC on change of the Jordanian consumer behavior? Table (2) below illustrated that (63%) of the respondents reported that they turned to inexpensive substitute goods, and (61%) switched from buying luxury to essential goods, (57%) mentioned that they are buying small quantities of goods rather than buying huge quantities, (79%) of the respondent mentioned that they disagreed about shifting from the consumption to saving.
Table 2:
Factors Turned from buying expensive goods to inexpensive substitute goods Switched from buying luxury goods to essential goods. Shifting from buying huge quantities From goods to buy small quantities goods. Shifting from the consumption to saving. Total
? Frequencies

The impact of the GFC on Jordanian consumer behavior
Strongly disagree Fre* % Disagree Fre % Neither agree nor disagree Fre % Agree Fre % Strongly agree Fre % Total 650 650 650 650

95 84 98 217 494

15% 13% 15% 33% 19%

102 152 140 300 694

16% 23% 22% 46% 27%

47 19 38 25 129

7% 3% 6% 4% 5%

192 208 190 58 648

30% 32% 29% 9% 25%

214 187 184 50 635

33% 29% 28% 8% 24%

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European Journal of Social Sciences – Volume 12, Number 4 (2010)

Hypotheses Tests
In this part, the researchers tested the hypotheses of the study, to examine the relations among the variables of the current study by using simple regression from the Statistical Package for Social Sciences, (SPSS) as follow: H1:- There is no statistical significant difference of GFC effect on the Jordanian consumer behavior, of shifting from buying expensive goods to inexpensive substitute goods. The result of simple regression test illustrated in table (3) below shows there is statistical significant difference of GFC effect on the Jordanian consumer behavior, of shifting from buying expensive goods to inexpensive substitute goods , equal to (0.584), and the value of the explanatory power (0.342). As the value of (f) calculated (23.176) greater than the tabular value (2.60), therefore the researchers rejected the null hypothesis.
Table 3: Simple regression test for the impact of GFC in consumer behavior of shifting from buying expensive goods to inexpensive substitute goods
R 0.584 R? 0.342 f Calculated value 23.176 f Tabular value 2.60 Significance level 0.000

Consumer behavior Shifting to inexpensive substitute goods

H2:- There is no statistical significant difference of GFC effect on the Jordanian consumer behavior, in terms shifting from buying luxury goods to essential goods. The result of simple regression test illustrated in table (4) below shows there is statistical significant difference of GFC effect on the Jordanian consumer behavior, in terms shifting from buying luxury goods to essential goods equal (0.271), and the value of the explanatory power (0.074). As the value of (f) calculated (3.544) greater than the tabular value (2.60), therefore the researchers rejected the null hypothesis.
Table 4: Simple regression test for the impact of GFC in consumer behavior in terms of shifting from buying luxury goods to essential goods
R 0.271 R? 0.074 f Calculated value 3.544 f Tabular value 2.60 Significance level 0.016

Consumer behavior Shifting from buying luxury goods to essential goods

H3:- There is no statistical significant difference of GFC effect on the Jordanian consumer behavior, in terms shifting from buying huge quantities of goods to buy small quantities goods. Table (5) below shows there is statistical significant difference of GFC effect on the Jordanian consumer behavior, in terms shifting from buying huge quantities of goods to buy small quantities goods equal (0.748), and the value of the explanatory power (0.559), the value of (f) calculated (56.717) greater than the tabular value (2.6), therefore the researchers rejected the null hypothesis.
Table 5: Simple regression test for the impact of GFC in consumer behavior in terms of shifting from buying great quantities from goods to buy small quantities goods
R 0.748 R? 0.559 f Calculated value 56.717 f Tabular value 2.6 Significance level 0.000

Consumer behavior Shifting to buy small quantities goods.

621

European Journal of Social Sciences – Volume 12, Number 4 (2010) H4:- There is no statistical significant difference of GFC effect on the Jordanian consumer behavior, in terms shifting from the consumption to saving. The result of simple regression test illustrated in table (6) shows there is no statistical significant difference of GFC effect on the Jordanian consumer behavior, in terms shifting from the consumption to saving. Equal (0.203) and the value of the explanatory power (0.041). As the value of (f) calculated (3.84) less than the tabular value (5.823), and significant level (0.917), therefore the researchers accepted the null hypothesis, this result support the respondents view when they asked about this point.
Table 6: Simple regression test for the impact of GFC in consumer behavior In terms of Shifting from consumption to saving
R 0.203 R? 0.041 f Calculated value 3.84 f Tabular value 5.823 Significance level 0.917

Consumer behavior shifting from the consumption to saving

Conclusions & Recommendations
The study concluded that the Jordanian consumers are aware of the GFC, and its impact on the Jordanian economy, also on the consumption, as well as on the consumer behavior. The GFC influence on consumer behavior in many countries, such as Australia United Arab Emirates (UAE) and Saudi Arabia. In Jordan consumers has realized the financial crisis, and its impacts, and adapted with the crisis through adjusting their behavior, so they turned to inexpensive substitute goods, and switched from buying luxury to essential goods, buying small quantities of goods rather than buying huge quantities. But the respondents disagree about converted to saving from consumption, because their level of incomes is low, and the majority of their incomes spent on consumption. The study recommend to support the Consumer Protection Society, to increase consumer awareness, and to follow the rational consumer behavior to achieve the greatest possible benefit of using the disposable income. Governments also should create institutional, and legislative structures to reduce the undesirable effects of the GFC. The Governments must tolerate the GFC through expansion of investment in human resources, which increasing competition and production, and facing inflation and rising prices.

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European Journal of Social Sciences – Volume 12, Number 4 (2010)

References
[1] [2] [3] [4] [5] [6] [7] Antonides Gerrit ,and Raaij,Fred, (1998) , "Consumer behavior A European perspective", Johen Wiley&sons , England. Hussein Majid and Saeed Afaf, (2003) , "Introduction to macroeconomic analysis". Dar Wael for publication Amman http://www.researchandmarkets.com/reportinfo.asp?report_id=1053134, (sited in 12/11/ 2009). http://www.researchandmarkets.com/reportinfo.asp?report_id=1084255, (sited in 15/10/2009) http://www.researchandmarkets.com/reportinfo.asp?report_id=1056343, (sited in 15/10/2009) http://www.researchandmarkets.com/reportinfo.asp?report_id=1057016, (sited in 15/10/2009) http://www.mindbranch.com/Global-Economic-Crisis-R313-56388/, (sited in 9/10/2009) the global economic crisis, the impact on consumer attitudes & behaviors in the UAE and Saudi Arabia. Kotler, Ph., (2000) , "Principles of Marketing ", Prentice Hall International Inc, the millennium edition, New Jersey. Nasr Mohammed , Abdullah Shamiyeh (2008), .The micro-economic principles, fourth edition, Dar Al-Fiker, Amman, Jordan.

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