Forces which Influence Corporate Reputation
Question:
Discuss About The Factors Responsible Corporate Reputation?
Reputation of organization is considered as overall estimation of the actions conducted by the organization, and this estimation is done by the internal and external stakeholders on the basis of past actions of the organization and also on the future capabilities. Corporate reputation is the term which refers to the collective judgments related to the corporation which are framed by the observer, and these judgments are based on the impacts of the actions conducted by the organizations in context of financial, social and environmental area (Lexicon, n.d.).
However, reputation is considered as intangible asset, and universal research shows that good reputation of the organization not only increases the worth of the organization but also provides sustained competitive advantage to the organization. Business organizations can achieve its objectives more easily if it has good reputation among its stakeholders such as customers, society, environment, community, etc. (Halleck, 2015).
Generally, customers like to deal with the business which has good reputation instead of those business organizations which does not have good reputation. Customers and vendors become more loyal towards those business organizations which have good reputation. Good business reputation also provides advantages to the organization such as employee recruitment, employee development, and employee retention.
This paper state the importance of corporate reputation, and structure of this paper includes forces which influence the brand’s corporate reputation, factors which create brand corporate reputation, importance of managing corporate reputation, and recommendations. Lastly, paper is concluded with brief conclusion.
For the purpose of understanding the topic related to corporate reputation, we consider case study of united airlines.
Corporation reputation is considered as collective assessment of organization past actions and also the organization’s capability to provide improving results to all the stakeholders with the time.
Management of the organization understands the importance of their company’s reputations. Those business organizations which have strong positive reputations attract better people in the organization. Corporates with good reputation add value to the business and also allowed the organization to charge premium for their services and products. Customers of these organizations are more loyal and buy wide range of products and services offered by the organization. Market believes that companies with good reputation provide sustained earnings and future growth, as they have higher profitability and market values and lower cost of capital (HBR, 2007).
There are number of factors which directly or indirectly influence the reputation of corporate, and some of these factors are stated below (Shaw, 2011):
Internal factors- internal factors play important role in the business management and it directly affects the actions conducted by the organization. Internal factors which have potential to affect the organization’s reputation are stated below:
Resources- employees are considered as most important resource of the organization and they are the key drivers in reputation management of the organization. In case of service industry, employees are the face of business and they directly deals with the client. Therefore, it is necessary that employees of the organization must be well trained and well-mannered so that they can leave good impression on the client. However, this not happen only in service industry but it happens in each and every industry. Sales staff and employees which deals with the external people will act as company’s ambassadors to the company.
Factors which Create Corporate Reputation
Politics- politics of organization also affects the operations of the organization and it also influences the employee morals. Importance of employees is already stated above in context of good corporate reputation.
External factors- External factors also play important role in the reputation of the company, as they indirectly affect the company’s reputation. Some of these factors are stated below:
Political- external political forces are considered as primary factors which determine the corporate governess model used by a firm. Corporate governance provide different ways through which organization safeguard the interest of its financiers such as investors, lenders, and creditors and this has big impact on the company’s reputation. The main issue in this context is related to the nature of the business. Public sector considers the political factors as major driver, because these factors directly impact the decision taken by organization. On the other hand, private sector considers it less important because these factors do not affect the organization directly. However, political policies play important part in the profitability of the organization. Private sector considers the political area as an important factor, and they must frame policies after considering these factors.
Economic- there are number of elements which revolve around the issue of corporate social responsibility and how economy affect the social values of the company. this can be understood through example, number of jobs in manufacturing sector moved to the Far East, and the ability of organization to secure these jobs for local community positively affect the reputation of the company. External factors of economy shape the perception of whole industry such as financial sector and university education affects operations of the organization.
Social- interest of public is linked to the working democracy, and there is growth in the interest groups that have generated a ground as well and public pressure that influence different topics. In this media play important role because through media corporates can endorse their own messages (sandu, n.d.).
Technology- there are two drivers related to the technology, first driver deals with the products offered by company and service technologies and second driver deals with the new mode of information carriers. Review related to global rankings for corporate reputation state that the technology companies in technology industry have the highest positive ranking. Social media impact is considered as another important aspect of technology which drives the increasing transparency of corporations.
Legal- Generally, organizations ignore the changes occurred in environment legislation, and this impose risk of non-completion which ultimately affects the reputation and profitability of company. There are number of legislative a driver which adversely affects the reputation of the company (Leader, 2015).
Environmental- similar like technology, there are two major drivers which affect the corporate reputation within the environmental field. First driver deals with the physical environment in which company operates and second is the issues related to environment which are widely discussed by different authorities and sectors. It must be noted that physical location of the business and fabrics used in the office play important role in the perception of the reputation of the company. This can be understood through example; fashion companies must have office location in London, New York, Paris and Milan. In context of fabric, Google offices are documented as best fabrics in their offices.
Importance of Managing Corporate Reputation
Following are the five forces porter which affects the reputation of the organization:
Threat of new entrants- this factor determines how easy it is to take entry in any particular industry. If trade barriers of any profitable industry are less, then it is very easy to take entry in that industry and this also flourish the rivalry. When more business entities fight for same share in the market, then profit starts to fall. In this situation it becomes necessary for organization to create trade barriers for new entrants and restrict them to take entry in market. While doing this organization’s must create ethical trade barriers, because any unethical activity on part organization affects their reputation (Jurevicius, 2013).
Baraining power of suppliers- in case bargaining power of the supplier is high then it allows the supplier to sell higher prices and low quality material to the buyers. This not only affects the profit of the buying firm but also affects quality of their products. If organization supply low quality products then this directly affects the organization reputation.
Bargaining power of buyers- buyer possess the power to demand the lower price or higher quality of the product from the manufacturers of business if their bargaining power is strong. Lower price of the product results in lower profit for the organizations and this usually increase the production cost of the organization. In this situation organizations decrease the cost of product by adopting unethical means such as lower quality raw material and this adversely affects the reputation of the organization.
Threat of substitutes- this is threatening for the organization when buyers found substitute products with attractive prices or better quality, and in this situation buyers change their products. This can be understood through example, switching from coffee to tea does not cost anything extra. If organization does not charge as per their product capacity or conduct anything wrong then this directly affects their reputation.
Rivalry among existing competitors- this fore is considered as major element for determining the competitiveness and profitability of an industry. It states firm must compete aggressively for the share in the market which ultimately reduce the profit of the organization. Organizations must compete with their competitors in healthy manner and conduct ethical practices. Any wrong moves of the company for demining their competitors affect the reputation of their organization.
Corporate personality: corporates are influenced by their own personalities and also with the personality of individuals who represent them. Corporate personality depends on the words and values of the organization. If organization kept their promises they made from different stakeholders then it already increase the reputation of the company. Personality generally determines the character of individual and corporate personality also reflects the character of organization. People generally attract towards those who have good character and in similar way customers attract towards those who have good corporate personality. Therefore, personality and character of corporate play important role in building the reputation of the organization (Reputation matters, 2013).
In case of United Airlines, personality of the company is not good because they fails to kept their promise with their customers and does not provide adequate services to their customers (united hub, n.d.).
Recommendations
Corporate identity: Generally, corporate reputation and corporate image is considered as similar terms, but after conducting deep research, both the terms are considered different. Roper and Fill (2012) provides matrix which clearly show the four components that are Social image, Financial Image, Product Image and Recruitment Image. It must be noted that all these components together form corporate reputation (PRweek, 2013).
In other words, image of the company reflects the identity of the organization which means actions and appearance of the organization forms the image of the organization. However, image of the organization can changed on frequent basis, but in long term these images create reputation of the company. It must be noted that, there are number of external uncontrollable variables and internal controllable variables which directly or indirectly affects the image of the firm.
United Airlines must consider all necessary factors while framing their long term strategy such as financial, social, environmental, etc. Best performance of organization in all these areas creates good reputation of company in long run. United airlines only focus on their financial performance and fail to fulfill their obligations towards other stakeholders of the organization (Zinkhan, Jaiskankur, Anumpam and Hayes, 2001).
Brand Image- brand image is the part of corporate image, and it states the importance of brand reputation for the organization. It directly affects the reputation of the company because brand is considered face of the company. Therefore, organization must consider their brand image while framing the strategy (Manukian, n.d.).
Managing the reputation of the organization or a brand can be challenging for the organization, and this happens because of various reasons. Increase in use of social media imposes pressures on companies to redefine their digital strategy on different platforms such as Facebook, Twitter, Instagram, and YouTube. These platforms are considered as most common platforms used by people across the globe. Here is an interesting fact but not very effective that there are number of organizations which make efforts to manage their reputation on social media in similar way as they do through traditional media.
Because of all this, organizations does not prepare for those moments in which customers prefer to interact actively with the brands, and companies fail to follow any protocol while dealing with the areas of communication. Organizations are also not prepare for the informality, speediness and lack of censorship that social media communications tend to have (BV, n.d.).
Therefore, because of these reasons there are number of organizations which face troublesome cases for brands and companies. Some company’s fails to respond to the internet attacks on the basis that these attacks were committed by those individuals who are not part of their target audience and attention to these complaints is not necessary. On other side, executive of marketing think that issues related to cyber cases does not affect real world. However, but truth is completely different because one complaint on Facebook can cause permanent closure of the organization or removal of product from the market. This is very simple example which shows management of corporate reputation is important at all the platforms and management must frame accurate strategy to manage the reputation.
It is recommended to united airlines to consider the approach of digital era and improve their digital corporate strategies. It does not mean that organization use more digital tools, as it only means that organization change their outlook related to corporate and value their reputation management. This transformation started with the culture of the company which directly influence executives and employees of the company. United airlines must develop an online personality which must reflect in its image and communication which take place in the cyber hub.
Conclusion:
After considering the above facts, it can be said that management of corporate reputation is equally important like any other operation of the company and for this purpose organization must consider all important aspects such as financial, social, environmental, etc. Image of the company reflects the identity of the organization which means actions and appearance of the organization forms the image of the organization. However, image of the organization can changed on frequent basis, but in long term these images create reputation of the company. It must be noted that, there are number of external uncontrollable variables and internal controllable variables which directly or indirectly affects the image of the firm.
References:
The Importance of Corporate Reputation Management. Retrieved on 7th march 2018 from: https://www.bv.com/insights/expert-perspectives/importance-corporate-reputation-management.
Development in Marketing, Vol. 12. Chicago: American Marketing Association.
Halleck, T. (2015). The Importance of Corporate Reputation. Retrieved on 7th march 2018 from: https://www.linkedin.com/pulse/importance-corporate-reputation-treavor-halleck.
HBR, (2007). Reputation and Its Risks. Retrieved on 7th march 2018 from: https://hbr.org/2007/02/reputation-and-its-risks.
Jurevicius, O. (2013). Porter’s Five Forces. Retrieved on 7th march 2018 from: https://www.strategicmanagementinsight.com/tools/porters-five-forces.html.
Leader, (2015). 5 key factors to improve your corporate reputation. Retrieved on 7th march 2018 from: https://www.leader.co.za/article.aspx?s=6&f=1&a=5871.
Lexicon. Definition of corporate reputation. Retrieved on 7th march 2018 from: https://lexicon.ft.com/Term?term=corporate-reputation.
Manukian, R. Corporate reputation evaluation and service quality. Retrieved on 7th march 2018 from: https://www.theseus.fi/bitstream/handle/10024/88281/Manukian_Roksana.pdf?sequence=1&isAllowed=y.
PR Week, (2013). Businesses should use a four-point plan to build credible and sustainable corporate reputation. Retrieved on 7th march 2018 from: https://www.prweek.com/article/1209903/four-factors-top-reputation.
Reputation matters. The building blocks of a good reputation. Retrieved on 7th march 2018 from: https://reputationmatters.co.za/2013/07/26/the-building-blocks-of-a-good-reputation/.
Sandu, M. (2015). The factors Responsible with corporate reputation. Retrieved on 7th march 2018 from: https://revecon.ro/articles/2015-1/2015-1-9.pdf.
Shaw, A.(2011). The Key Forces That Impact On A Company’s Reputation. Retrieved on 7th march 2018 from: https://www.strategic-planet.com/2011/03/the-key-forces-that-impact-on-a-company%E2%80%99s-reputation/.
United Hub. Our Shared Purpose. Retrieved on 7th march 2018 from: https://hub.united.com/sp/purposes/.
Zinkhan, G. M., Jaiskankur, G., Anumpam J., and Hayes, L. 2001. Corporate Image: A Conceptual Framework for Strategic Planning. Enhancing Knowledge
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