The relationship between legitimacy, reputation, sustainability and branding for companies and their supply chains PT3

3. The focus: Reputation, legitimacy, corporate identity and branding in industrial marketing

If homogeneity or harmony is the predominant social condition in support of legitimacy, a different assumption can be made with relation to reputation (Baccarani & Golinelli, 1992).

According to a popular definition, reputation is the expression of corporate conduct aimed to differentiate the company from competitors in the perception of competitive rivalry (Elsbach, 2006Rao, 1994 and Rao et al., 2003). A key marketing strategy to achieve this competitive differentiation is product or corporate branding. In this context, Mudambi (2002) holds that B2B decision making is increasingly drawing on branding, a fact which has been generally underestimated so far in industrial marketing. Based on a literature review and differentiating consumer and industrial market characteristics, Mudambi suggests a model for B2B branding with the company brand as the central form of the branding strategy identifying three buyer clusters. The model, however, lacks a wider triadic stakeholder marketing perspective as referred to by Abdolvand and Charsetad (2013).

Reputation is therefore that set of aggregate perceptions and evaluations, developed by stakeholders and induced by the process of corporate branding, that favor the company against its competitors ( Fombrun, 1996 and Roberts and Dowling, 2002). Referring to a supply chain perspective, this view is reflected in the following quote: “Greening your supply chain can achieve reputational and efficiency gains, savings to the bottom line and ultimately increased revenue” (http://www.carbontrust.com/client-services/advice/business-advice/green-supply-chain). In this context, Abdolvand and Charsetad (2013) innovatively proved that social corporate performance positively influences positioning differentiation and, importantly, brand equity.

A bi-directional relationship between legitimacy and reputation is implied when juxtaposing Fombrun’s and Rindova’s et al.’s proposed perspectives. While the first holds that compliance with rules and social practices may be what actually favors the establishment of competitive differences between the compliant company and its competitors, Rindova et al. (2005) argue that a perceived high quality of products means a greater business prominence in the minds of the stakeholders involved. This view is exemplified by the Italian company Parmalat which, due to de-legitimated financial behavior did not reflect contextual consonance (Bank of America declared ‘false’ a bank active account of Euro 3.95 billion specified in the balance sheet). The firm managed to keep its reputation due to a re-vamped corporate identity and personality (see Fig. 2). The result was that the savers continued to buy Parmalat’s bonds. In this case, from a consumer perspective, reputation gave legitimacy to the firm.

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Fig. 2.

Reputation and legitimation process.

Figure options It is clear that the reputational state, also due to contextual conformism (legitimacy), tends to add value to the corporate brand, allowing the company to offer products with higher (reputational) quality at higher prices.

Corporate branding planning aims therefore to reduce information asymmetry with relation to target evaluation, the degree of purchase risk faced by the individual/consumer, and unawareness by the target of corporate features that are beyond the products/services on offer (firm specific).

For the purpose of this work, it is important to consider the adoption of a symbolic approach which considers reputation as a conformity aimed at competitiveness, representing on the one hand its resources and dynamics, and, on the other hand, the current results and future ambitions (Love and Kraatz, 2009 and Van den Bosch et al., 2005).

As part of this symbolic approach, the notion of conformity does not only express the semantic adaptability that the company displays towards the relational partner (individual/consumer/target), but also a cognitive, emotional and cultural adjustment in terms of structures and practices (Love & Kraatz, 2009).

Symbolic representation, aimed at conformity, can be therefore seen as the process of creation/maintenance of corporate reputation, which covers both spontaneous and planned communication activities. While spontaneous communication results from corporate behavior seen as expression of values, culture and corporate personality, planned communication (corporate identity) is on the other hand the symbolic representation (visual identity) of what the company is (corporate brand) and of what it offers in terms of values and culture (product brand) (Fombrun & van Riel, 2003).

Van Riel and Balmer (1997) define corporate identity as ‘the way in which an organization’s identity is revealed through behavior and communications, as well as through symbolism to internal and external audiences’ (Van Riel & Balmer, 1997). The process of corporate identity is that set of marketing and communication activities undertaken by the company in order to build favorable associations and positive reputation towards all stakeholders (Hatch & Schultz, 2008). The creation of a corporate identity, either of brand or of product, aims so as to achieve a high level of recognition by relevant stakeholders and at developing the ability to transfer value to them.

Corporate identity has therefore the purpose of helping the individual/evaluator to develop his perceptions by reducing the risk linked to the purchase of company products.

We can say that corporate brand is a ‘script’ that simplifies the decision-making process while associations, developed on the basis of expectations, are about cognition, affection, evaluations.

Such evaluations (corporate image) represent the result of perception that stakeholders, as recipients of corporate behavior, develop either towards the distinctive/competitive capabilities of the company (with relation to finance, organization, production, sales, etc.) or towards the corporate essence compared to that of other companies (Barnett and Salomon, 2006Rindova et al., 2005 and Van Riel and Fombrun, 2007).

According to such principles, the firm, both through planned and spontaneous marketing and communication activities, tends to create, maintain and develop its reputation on the basis of two main goals: being known and being known for something (Lange, Peggy, & Dai, 2011). The ‘being known’ goal is about stimulating and developing stakeholders’ awareness in order to make the company/organization/brand prominent compared to its competitors, with relation to corporate essence, the latter considered from a holistic perspective (Rindova & Petkova, 2007).

‘Being known for something’, on the other hand, is about the intention of the company to be perceived by stakeholders as different from its competitors, as a result of specific features of the product/service offered (see Fig. 2). A study by Staw and Epstein (2000) provides a compelling example of this proposed ‘symbolic conformity mechanism’. They found that firms enhanced their reputations by adopting various popular management practices (e.g. total quality management, employee empowerment, and teams). They argued that this effect occurred because these practices embodied the normative values and cultural beliefs of the audiences who ascribed the reputations. In this respect, behavioral branding as discussed by Kaufmann, Basile, and Vrontis (2012), and Kaufmann, Vrontis and Czinkota (2012) can be regarded as a further efficient leadership and branding related concept, particularly in light of the research finding by Fiedler and Kirchgeorg (2007) that “marketing strategies can specifically target single stakeholder groups in order to position a corporate brand.”

In conclusion, conventional thinking holds that legitimacy is a requirement of all organizations whereas reputation is a desirable, but not an essential property.

This article is a part of a series. Read part 2 here.