The Key Forces That Impact On A Company’s Reputation.

This is the second in a series of articles focusing on reputation. The first article looked at the importance of introducing a management reputation process, we will now look at the forces that impact on a company’s reputation.

Many academics and practitioners have written about the reputation of a company and how it is influenced by a number of forces. These forces can be categorised as either external or internal factors. This article will examine these forces in detail. It uses the framework of Phillips and Knoepfel, although I would argue that they have failed to take into consideration the country of origin impact: the issues of reputation for organisations operating in the Middle or Far East for example will be very different to those operating in Europe or the USA (IDRC).

External Forces:

Political: Roe argues that external political forces are the primary factor in determining the corporate governess model used by a firm. Corporate governance defines the ways in which a company safeguards the interests of its financiers (investors, lenders, and creditors) which has a big impact on reputation.

The problem with this argument relates to the nature of business in question: the public sector should see the political aspect as a major factor as decisions will have a direct impact to that area. Small privately owned firms may have no political forces that directly impact on their reputation, although political policies may play a big part in their profitability. These small privately owned companies should still see the political arena as an important factor: policy changes can quickly alter a business reputation, particularly when related to the environment.  The stability of the political system is also an important factor.

Economic: There are now many messages around the issues of corporate social responsibility and the effect of the economy on social values (Davies). In a period when many manufacturing jobs have moved to the Far East the ability to secure employment for a local community will have a major impact on CR.

These external economic drivers can also shape the perception of a whole industry. Two examples are the financial sector and university education. Regardless of which institution is reviewed, the general public will already have a fixed perception of that market. Pharmaceutical companies will need to take into consideration the current economic down turn and the pressure on the health sector when reporting profits.

Social: at the most basic level, public interests are linked to a working democracy (Lindén). There is a growth in interest groups that have generated a ground swell of public pressure that influence a number of topics (Bardes et al). There is a need for the media to promote diversity; this is where Corporations can begin to endorse their own messages.

Pharmaceutical companies have a particular concern with animal welfare groups.

Technology: there are two drivers related to technology, the first is that which relates to a company’s product and/or service technologies, the second is the new mode of information carriers. A review of the global rankings for corporate reputation has highlighted that the technology companies have the highest positive ranking (Carr). The perception of “coolness” of their products and services is the main driver for these rankings.

The impact of social media is the other aspect of technology which is driving the increasing transparency of corporations (Wyman). Dell, to their detriment, have experienced the full force of such technologies (Tapscott and Williams)

Legal: it was Rottenburg who stated that companies that ignore the changes in legislation relating to the environment risk damaging their reputation and losing business. There are many other legislative drivers that could potentially tarnish the image of a company: pharmaceutical companies must continue to focus on those related to the health sector.

Environmental: As with technology, there are two drivers within the environmental field. The first is the physical environment a company operates in and the second is the environmental issues that are now widely discussed. The physical location and fabric of the offices will play an important part to the perception of a company’s reputation. As an example, fashion companies need to have a presence in London, New York, Paris and Milan. In terms of the fabric, it is well documented about Google’s offices.

Looking at the other option: external environmental forces are driven through government policies and public pressure groups (Medeiros-Neto and Olson).

Internal Forces.

Resources: Berry et al and Balmer all stressed that the employees are the key drivers in reputation management and positioning for those businesses operating in the service sector. I would argue that this point should relate to all industries: sales staff or external facing employees will need to act as ambassadors to the company.

Politics: studies have shown that company politics influence the moral of employees (Jones). This report has already highlighted the importance employees in the CR management process.

Clearly there are many facets that can tarnish or enhance the reputation of a corporation in the eyes of its stakeholders. The dilemma now faced by companies is who should take responsibility and how should it be implemented: these questions will be tackled in a future blog which will be coming soon.

 

 

 

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This is the second in a series of articles focusing on reputation. The first article looked at the importance of introducing a management reputation process, we will now look at the forces that impact on a company’s reputation. 

Many academics and practitioners have written about the reputation of a company and how it is influenced by a number of forces. These forces can be categorised as either external or internal factors. This article will examine these forces in detail. It uses the framework of Phillips (2010) and Knoepfel (2001), although I would argue that they have failed to take into consideration the country of origin impact: the issues of reputation for organisations operating in the Middle or Far East for example will be very different to those operating in Europe or the USA (IDRC, 2010).

External Forces:

Political: Roe (2003) argues that external political forces are the primary factor in determining the corporate governess model used by a firm. Corporate governance defines the ways in which a company safeguards the interests of its financiers (investors, lenders, and creditors) which has a big impact on reputation.

The problem with this argument relates to the nature of business in question: the public sector should see the political aspect as a major factor as decisions will have a direct impact to that area. Small privately owned firms may have no political forces that directly impact on their reputation, although political policies may play a big part in their profitability. These small privately owned companies should still see the political arena as an important factor: policy changes can quickly alter a business reputation, particularly when related to the environment.  The stability of the political system is also an important factor.

Economic: There are now many messages around the issues of corporate social responsibility and the effect of the economy on social values (Davies, 2007). In a period when many manufacturing jobs have moved to the Far East the ability to secure employment for a local community will have a major impact on CR.

These external economic drivers can also shape the perception of a whole industry. Two examples are the financial sector and university education. Regardless of which institution is reviewed, the general public will already have a fixed perception of that market. Pharmaceutical companies will need to take into consideration the current economic down turn and the pressure on the health sector when reporting profits.

Social: at the most basic level, public interests are linked to a working democracy (Lindén, 2009). There is a growth in interest groups that have generated a ground swell of public pressure that influence a number of topics (Bardes et al, 2011). There is a need for the media to promote diversity; this is where Corporations can begin to endorse their own messages.

Pharmaceutical companies have a particular concern with animal welfare groups.

Technology: there are two drivers related to technology, the first is that which relates to a company’s product and/or service technologies, the second is the new mode of information carriers. A review of the global rankings for corporate reputation has highlighted that the technology companies have the highest positive ranking (Carr, 2010). The perception of “coolness” of their products and services is the main driver for these rankings.

The impact of social media is the other aspect of technology which is driving the increasing transparency of corporations (Wyman, 2005). Dell, to their detriment, have experienced the full force of such technologies (Tapscott and Williams, 2008)

Legal: it was Rottenburg (2007) who stated that companies that ignore the changes in legislation relating to the environment risk damaging their reputation and losing business. There are many other legislative drivers that could potentially tarnish the image of a company: pharmaceutical companies must continue to focus on those related to the health sector.

Environmental:  As with technology, there are two drivers within the environmental field. The first is the physical environment a company operates in and the second is the environmental issues that are now widely discussed. The physical location and fabric of the offices will play an important part to the perception of a company’s reputation. As an example, fashion companies need to have a presence in London, New York, Paris and Milan. In terms of the fabric, it is well documented about Google’s offices.

Looking at the other option: external environmental forces are driven through government policies and public pressure groups (Medeiros-Neto, 2003 and Olson 2010).

Internal Forces.

Resources: Berry et al (1988), Alvesson (1990) and Balmer (1995) all stressed that the employees are the key drivers in reputation management and positioning for those businesses operating in the service sector. I would argue that this point should relate to all industries: sales staff or external facing employees will need to act as ambassadors to the company.

Politics: studies have shown that company politics influence the moral of employees (Jones, 1985). This report has already highlighted the importance employees in the CR management process.

Clearly there are many facets that can tarnish or enhance the reputation of a corporation in the eyes of its stakeholders. The dilemma now faced by companies is who should take responsibility and how should it be implemented: these questions will be tackled in a future blog which will be coming soon.

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Dr Alan Shaw is a Senior Lecturer and Marketing consultant focusing on a range of sectors. His main interests are in strategy development, social marketing, digital marketing, advertising, consumer behaviour and marketing application.