TERRORISM, COMPETITIVENESS AND INTERNATIONAL MARKETING (6/6)

Future Research and Preparation

 (Final in a series of six)

Valbona Zeneli, Marshall Center, Germany

Michael R. Czinkota, Georgetown University USA and University of Kent, UK

Gary Knight, Willamette University, USA

 

Concluding this series of our research findings, here are future directions for investigating terrorism and international marketing. Like the legs of a sturdy stool, three priority areas; the firm’s value chains, its rapidity of recognizing threats, and its preparedness with responses to terrorist events.

Marketing in emerging economies searches for the most effective operations to reduce the impact of terrorism, to decrease the response time to terrorism and to avoid market failures.

It is important to create business models that minimize interference and disruption. For example, hamburgers do not have to be distributed through burger palaces but can reach customers through outside vacuum tubes. Suppliers don’t all have to come from only a few nations but can be sourced from a wide diversity of countries.

Financial efficiency must now be traded off with robustness and a cushion against disruption.  The balance of benefits and costs needs to be understood: just how much does it cost to increase protection by one percent. What risks are worth taking? What are heuristic spinoff effects of traditional models, and do they need to be revisited? The new aim must be the monetization of alternative terror responsive strategies which improve performance under risky conditions. Real options theory can focus on risk uncertainty and emphasize creating and then exercising the now appropriately understood options.

Research must conceptualize and communicate the exposures of proposed investment projects. Apart from the investment benefits one should also rate an investment for its tie-down effects expressed by the viability and cost to withdraw an investment once it has been made and the restrictive effect on strategic directions. For example, when a certain climatic investment locale has been chosen, it may affect future choices of locale or innovations of car paint. Also worth examining is exogenous uncertainty in international markets that lies beyond managerial control. International marketers need flexibility for unexpected market developments. Financial options theory can help measure and quantify the effect of such management versatility.

Systems theory lets managers examine the threat and vulnerability exposures of the firm. The interdependence of networks of firms, affiliates, and agents within larger systems require examination together with how individuals relate to and interface with other actors in the socio-political sphere of interest. A systems perspective reduces the risk for management to under-specify marketing parameters. It becomes easier to understand and respond to the geopolitical environment, terrorism networks, and newly recognized sources of risk in business systems themselves, with a focus on the vulnerability of specific network nodes.

Future research should differentiate the effects of terrorism on services industries. Some aspects of services, particularly for international markets, may vary substantially from those of traditional goods. We investigated the effects of terrorism on the international operations of manufacturing firms.  By comparison, firms in the services sector are often more vulnerable to terrorism.  Substantially affected industries include airlines, transportation, and hospitality, as well as banks, insurance firms, and other financial actors. Most service-providing firms enter foreign markets via Foreign Direct Investment (FDI).  Services are growing in importance. They represent the fastest growing sector in international business and usually constitute the largest proportion of economic activity in advanced economies and emerging markets.

Assuring service resilience by both an industry as well as an individual person is therefore crucial and imperative for the viability of business under the threat of terrorism.

 

Michael Czinkota teaches international business and trade at Georgetown University’s McDonough School of Business and the University of Kent. He is a trade policy analyst and frequent public speaker. His key book (with Ilkka Ronkainen) is “International Marketing” (10th ed., CENGAGE).

THE INTERNATIONAL SUPPLIER CONUNDRUM

TERRORISM, COMPETITIVENESS AND INTERNATIONAL MARKETING (5/6)

THE INTERNATIONAL SUPPLIER CONUNDRUM

(Fifth in a series)

Valbona Zeneli, Marshall Center, Germany

Michael R. Czinkota , Georgetown University USA and University of Kent, UK

Gary Knight, Willamette University, USA

Terrorism exposes firms to high levels of uncertainty and risk. Growing threats produce higher costs and more disruptions for the international marketing organization. Terrorism highlights the vulnerabilities produced by global sourcing, international distribution, and reliance on independent agents abroad. Unfamiliar settings also complicate intelligence gathering and corporate governance. Yet, firms need a globalizing marketplace.

Our survey of 151 multinational manufacturing firms reveals the threat of disruptions in international supply chains. Increased costs require management to include terrorist contingencies in decision-making. Advanced planning and strategic action can provide the firm with greater resources and capabilities for managing external shocks and adverse events.

Terrorism has become an ongoing challenge and now is part of the “new normal” of international marketing. Enemy groups can access and employ asymmetrically destructive power. In addition to loss of life and property, the growing ferocity of attacks sows panic and triggers new frictions for global commerce. Thus, operational, process, and strategic innovations that shield the firm are an increasingly prudent investment.

Natural disasters and man-made ones can be mitigated by investments which guard against terrorism. Such spillovers need to be considered environmental scanning is a key step in the planning process.

Globalization exposes MNEs to the risk of interdependence and imposes unanticipated perils. However, superior intelligence gathering alerts the firm to vulnerable areas and assists in forecasting as to where and how terrorists will likely strike next.

In international marketing, due to their longevity and fixed locations, channels and supply chains are particularly vulnerable. Sourcing, just-in-time systems, lean production, decentralized planning and supplier configurations, all need to be re-evaluated. For firms that rely heavily on independent suppliers, management needs to emphasize increased coordination, more reliable and transparent partners, and steps to improve trust and commitement.

Enterprise resilience refers to a firm’s ability to operate in risky environments and overcome discontinuities. Resilience requires flexibility, familiarity, and redundancy. To the extent that disruptions result in long-term shortages of needed materials and supplies, firms may opt to produce essential inputs themselves. Alternatively, in spite of cost, theoriticial preference for single source supplies, inputs should be sourced from a wider range of suppliers to provide for contingencies and limit exposure to risk. Even the best systems can fail under circumstances of suddenc stockouts without replacement planning.

Crisis management is effective when disasters are averted or when operations are rapidly sustained or resumed. As already suggested by strategist Sun Tzu, the most effective crisis management minimizes potential risk before an event. Planning for terrorism is akin to financial investors rebalancing portfolios periodically to optimize returns and reduce risks. Management might divest risky assests and increase holdings in other, geographically more safe locations or industries. Re-investments can to optimize the firm’s risk level and absorption capacity.

Innovations give rise to new safeguards in global operations. Management needs to develop metrics that trade off the costs and benefits of risk mitigation measures. For example, while the use of multiple suppliers is useful, it must be balanced against increased costs and the benefit of distribution circumvention. The task can be particularly complex when marketing internationally, because the foreign context introduces diverse contingencies that complicate analyses. But in a world which sometimes resembles a boiling caulderen of disruption and insecurity, such preparatory analysis is required for survival and prosperity. So it needs to be done!

Michael Czinkota teaches international business and trade at Georgetown University’s McDonough School of Business and the University of Kent. He is a trade policy analyst and frequent public speaker. His key book (with Ilkka Ronkainen) is “International Marketing” (10th ed., CENGAGE).

DOES TERRORISM CAUSE POVERTY? OR THE REVERSE?

TERRORISM, COMPETITIVENESS AND INTERNATIONAL MARKETING (4/6)

DOES TERRORISM CAUSE POVERTY? OR THE REVERSE?

(Fourth in a series)

Valbona Zeneli, Marshall Center, Germany

Michael R. Czinkota , Georgetown University USA and University of Kent, UK

Gary Knight, Willamette University, USA

In light of the limited empirical research of terrorism effects on the internartional activities by firms, we undertook a two-phased exploratory investigation. First, we conducted qualitative interviews with internationally-active firms on terrorism to develop a broad understanding of what companies and managers see as the key salient issues. We also conducted discussions, generally 45 to 60 minutes in length, via telephone and at company sites, with senior managers of  nine firms with extensive international operations. These interviews provided a clearer picture of managers’ concerns about and response to terrorism, and facilitated the creation of a survey used in the second phase of our research.

Respondents worried about interruptions of supply chains, distribution channels, and logistics due to terrorism. Concerns also focused on the trustworthiness and reliability of foreign suppliers and intermediaries exposed to terrorism. Attention also rested on corporate capabilities which allow firms to prepare for potential disruptions and delays due to terrorism, and keep resources available to protect from and counteract terrorism.

The second phase of our research was an online survey of a sample of international firms headquartered in the United States but active in many countries around the world. The survey aimed to validate earlier findings, to better understand perceptions about terrorism, and to assist with the planning and responses that managers are undertaking when confronted with terrorism.

The unit of analysis was the firm. For standardization purposes, company resources were assessed as ‘annual revenues per employee’, where total annual revenues were divided by number of employees for each firm. We used 5-point Likert scales.

In conducting the survey, we collaborated with a large trade association and its members. About one-third of the group’s 8,000 members are engaged in international marketing. We sent all members an e-mail and requested members active in international marketing to complete the questionnaire at a separate website. This approach ensured responses from a relatively random sample of U.S. firms engaged in international marketing. Results were received from 551 member firms, a response rate of about 21% considered acceptable for unsolicited research participation.  We then selected firms active in manufacturing (as opposed to services) in order to focus on companies working in the international marketing of physical goods.  This step resulted in a final sample size of 151 manufacturing firms engaged in international marketing.

To achieve research robustness, we assessed respondent representativeness in two ways: A wave analysis compared the scores from a sample of early respondents to those in a sample of late respondents.  Second, we compared randomly chosen samples of responding and nonresponding firms.  In both cases, the tested variables did not reveal any significant differences between samples thus, nonresponse bias was not expected to affect study results. Moderated regression analysis was used to assess the research hypotheses.  We found normal probability distribution and no outlier observations, suggesting no violation of the normality assumption.

In internationalizing firms, it appears that the threat or occurrence of terrorism is associated with immediate increases in international marketing costs and with disruptions in international supply chains.  Management becomes likely to include terrorism as a detrimental factor in international marketing planning, and in the design of global distribution channels.

Finally, the more resources held by the firm, the more willingly terrorism and its repercussions will be recognized. The trend appears to be that particularly among informed and wealthy firms a terrorism presence creates early and significant corporate responses. Terrorism seems to be a key causal factor in fomenting poverty much more so than poverty creating terrorism.

A significant insight!

Michael Czinkota teaches international business and trade at Georgetown University’s McDonough School of Business and the University of Kent. His key book (with Ilkka Ronkainen) is “International Marketing” (10th ed., CENGAGE).

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.

The relationship between legitimacy, reputation, sustainability and branding for companies and their supply chains PT2

2. Legitimacy and corporate performance perceptions

The term legitimacy was defined by Parsons, 1956 and Parsons, 1960 and then Weber (1978) as a state of congruence towards laws, rules and social values. Scholars of social theory, organization, and the Resource-based View Theory introduced the notion of legitimacy in their theories (Johnson et al., 2006Ruef and Scott, 1998Salancik and Pfeffer, 1978 and Suchman, 1995). In the late ’70s, pioneers of the Neo-Institutional approach, such as Meyer and Rowan (1977) and Zucker (1977), while analyzing the ability of an organization to achieve survival, stressed the importance of expressing behavioral patterns conforming to standards, rules and beliefs of the reference context, in addition to more established factors such as organizational efficiency. From the seminal work of Meyer and Rowan onwards, all scholars belonging to the neo-institutional school argue that organizations that shape their behavior to moral rules and regulations of their reference context can be defined as legitimate. According to Fan (2005) (in Kaufmann, Vrontis and Czinkota, 2012 and Camilleri, 2008), effectively communicating legitimacy related values might give the company a differential and competitive advantage. In this context, Hawn, Chatterji, and Mitchell (2011)differentiated between market (related to market actors) and social legitimacy (related to non-market actors) in generating economic value and, innovatively, investigated their interactions. They elicited that increasing their social legitimacy is less beneficial for companies being already on a high level of market legitimacy; on the other hand, the high level of market legitimacy may substitute for a decreasing social legitimacy.

This constant search for contextual conformity and, hence, survival may shield the company from any behavioral change that could induce sanctioning reactions (i.e. strikes) from context members (Brown, 1998). The meaning of legitimacy employed in this study is succinctly expressed by Scott (1995, p. 45), who argues that “legitimacy is not a commodity to be possessed or exchanged but a condition reflecting cultural alignment, normative support, or consonance with relevant rules or laws”. The social dimension of branding in this context is expanded by Meads and Sharma (2008, p.9) who state that: “The business becomes a social purposeful system with the brand aspiring towards ‘social value’” (Meads & Sharma, 2008, p.9).

2.1. Central hypothesis

These definitions mark the central hypothesis of our research: legitimacy should be regarded the conditio sine qua non both to the social acceptance of the company and to a coherent implementation of reputation strategies.

 These considerations, however, highlight the existence of a gap in the line of studies regarding corporate/brand reputation. According to research by Van Riel and Fombrun the corporate image that stakeholders develop as a result of corporate communication activities, refers to four domains (product, social, financial and employment) and is aimed to distinctly recognize the company from among its many competitors (Brown et al., 2006Davies et al., 2001Fombrun, 1996Fombrun and van Riel, 2003Gioia et al., 2000Illia and Lurati, 2006Pruzan, 2001Scott and Lane, 2000Van Riel and Fombrun, 2007 and Whetten and Mackey, 2002). However, this assumption considers conformity of the company to rules, norms and cultural values of the reference context, as a behavior merely aimed at standing out in the competitive scenario characterized by a condition of rivalry. This view overlooks that behavior consistent with context requirements also allows the company to reach a perceptive, solely institutionally and even context targeted, positioning in constituencies’ minds (cognitive legitimacy) and does not necessarily result in distinctive evaluations compared with competitors, or an effect on financial results (Suchman, 1995). Hence, corporate legitimate behavior should not be regarded as having competitive and/or financial motives in the first place.

For example, many place marketing studies conclude that the extent of compliance of an organization with social expectations can reinforce or reduce a territory’s attractiveness (for example, companies that do not meet environmental standards may make the area in which they operate to be perceived as highly polluted and, therefore, economically, socially and/or touristically unattractive) (Chiu, 2011 and Zimmermann, 2001).

Following this line of thought, corporate behavior and, in its wake, the entire supply chain behavior, may trigger a dual (economic and institutional) approach towards its reference context.

This work shows that in the first case, when corporate behavior is merely geared towards the bottom line, reputation is exclusively seen as the capacity to cause results related to competitiveness.

The institutional approach, on the other hand, caters to the social, cultural, ethical role that the company plays within its reference context, and, therefore, is also about how the company itself is socially perceived by the community with which it interacts either directly or indirectly (Rindova, Williamson, Petkova, & Sever, 2005).

2.2. Differences between legitimacy and reputation

Some researchers describe the firm as either a social ( Kogut & Zander, 1996) or a discursive ( Tsoukas, 1996) community, or as a community of practice ( Constant, 1987 and Kreiner and Lee, 1999). Shifting the perspective, scholars like Kjellberg and Helgesson (2006)Andersson, Aspenberg, and Kjellberg (2008), orAraujo, Kjellberg, and Spencer (2008), and Storbacka and Nenonen (2008) refer to the notion of co-created markets as actors increasingly engaged in market and/or social practices. Recurring social practices, undertaken by individuals and social organizations within a social system, enable the establishment of relations between social players. Such relations in turn will evolve to mutual adaptation of social actors’ respective activities ( Giddens, 1984). This phenomenon marks a process of reflexive self-regulation, typical of social integration phenomena and of cybernetic systems as well as the expression of relational reciprocity among actors who are co-present ( Staber and Sydow, 2002Wiener, 1948Bateson, 1977Beer, 1959,Beer, 1966Beer, 1985 and Yolles, 1999). Berger and Luckmann (1966), furthermore, argued that organizations eventually mirror their environment as they reflect socially assembled realities.

A constant search by the company for such a state of consonance in the creation and/or maintenance of its relationships and mutual adjustment/change of practices and behavior employed by the social players, therefore express the existence of a continuous adaptation process (Golinelli, 2010 and Maturana and Varela, 1980).

In such a dynamic business scenario, the corporate system constantly looks for players with which to create and maintain lasting relations, through the development of, first, a state of consonance, and, then, of resonance. Consonance, as previously mentioned, is a condition that is achieved when the relevant players (corporate and supply chain system and context members) identify a common language and shared emotions/passions, while resonance marks a relational evolution in which the players create opportunities to reach common goals (Barile, 2006 and Golinelli, 2010).

Regarding the status, the individual stakeholder could fulfill an alternative or complementary double role. For example, an individual could be a citizen and/or a consumer. In the first case the corporate aim should be to satisfy the environmental and social norms (legitimate behavior), and in the second case to evoke some idiosyncratic features arousing a distinct positioning compared to other competitors (reputation related behavior).

The plan is to have the stakeholder express relational consensus following an assessment of corporate conduct. That conduct in turn is shaped by corporate skills and abilities, which are expressions of two dimensions. First, it reflects conformity to social norms, values, rules and meanings operating within the reference social systems (legitimate behavioral corporate skills). Second, it demonstrates firm-specific features, aimed at making the individual/target discern from other companies, due to the perception of either tangible or intangible specific assets (reputation related corporate skills) (Hawley, 1968Hirsch and Andrews, 1984Parsons, 1960Thornton, 2002 and Tolbert and Zucker, 1996).

The company that meets the expected standards, rules and values can either present itself as a value setting within its context (industry, place, etc.) together with the other players (constituence/audience), or as a system whose survival goals are the result of differentiation towards its competitors (Deephouse and Carter, 2005 and Golinelli, 2010).

Attention is drawn to the innovative organizational behaviors implemented by the firms in Silicon Valley. These behaviors have been, and are still, useful for both to qualify the place, contributing to regional and national economic growth and to increase the reputation and the competitiveness of the local firms.

On the other hand, the organizational behaviors applied by some Chinese firms and supply chains, characterized by disrespect of the environmental or legal (i.e. counterfeiting) norms, detrimentally influence the firms’ and country’s reputation.

Hence, a social actor evaluates, different from a consumer, the condition of a social organization and may rate this organization “adequate”, because of congruence with the contextual legal and cultural values and norms (Albert and Whetten, 1985Hannan et al., 2007Rao, 1994 and Zuckerman, 1999).

This acceptance condition reflects a rational-cognitive firm that is congruent with laws, norms and social practices, and mimics the reference context, becoming, in turn, an expression of contextual values. This mimetic approach represents a phenomenon defined by the institutionalist and neo-institutionalist theories as isomorphism ( Di Maggio and Powell, 1983 and Di Maggio and Powell, 1991).

2.3. Legitimacy and isomorphism

Neo-institutionalist scholars regard isomorphism as the key to understanding why companies that operate within the same institutional/social context take decisions and follow behavioral patterns that are usually very similar (Barley and Tolbert, 1997Di Maggio and Powell, 1991Jepperson, 1991Leblebici et al., 1991,Meyer and Rowan, 1977 and Zucker, 1977). According to Meyer and Rowan (1977), the notion of isomorphism implies that organizations should meet the rational criteria set by the institutional context in order to be considered efficient, to maximize legitimacy and resources, and their ability to survive. Isomorphism processes are determined not only by the tendency to conform to the external environment, but also by the action of the environment itself that leads to the creation of new organizations consistent with rational myths (institutionalized rules, norms, procedural ceremonials). With every new myth that consolidates, new organizations correspond to meet the needs that the myth itself has produced (an example is that of companies pursuing the me-too strategy). The best way to manage the conflict between internal rationality criteria and environmental pressure is to develop two parallel structures, one formal, consistent with myths and ceremonials, the other informal, aimed at gaining competitive advantage (Meyer & Rowan, 1977). Taking the generally accepted importance of authenticity, for example, for branding and transformational leadership in terms of leaders and brands being able to “walk the talk” into account (i.e.Kaufmann, Vrontis and Czinkota, 2012 and Lopez, 2011, July 29), Meyer’s and Rowan’s view seems to be very debatable. The relevance of this statement is further supported by the case of the European horse meat scandal. Another example could be the Nike case, where Nike was accused of utilizing children that lived in underdeveloped countries, to produce goods. To show that the behavior was legitimate, the company implemented a control process to evaluate the job agreement and the occupational safety conditions. Nike, by means of these activities, improved its social legitimacy and reputation. Furthermore, Nike adopted the politics named re-use, through which the consumers were encouraged to deliver the used rubber of the shoes to the Nike store, to build and donate some running tracks.

The following Fig. 1 suggests that that rational behavior that is aligned to normative and cultural expectations of social context members, especially individuals, gives the company social legitimacy, which could in turn support the creation and/or maintenance of a favorable reputation for the company itself and its members (employees, managers, consultants, owners, etc.) (see Fig. 1).

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Fig. 1.

Isomorphism and differentiation.

Figure options

More detailed, isomorphism tends to have different connotations depending on whether it evolves according to cognitive (social beliefs), normative (existence of scarce resources whose acquisition is essential to survival) and/or coercive conditions (existence of rules essential to social and economic activity) (Di Maggio and Powell, 1983 and Leydesdorff, 2000).

Cognitive or mimetic isomorphism is characterized by a spontaneous process of imitation and/or interpretation in which the interaction between actors and relevant messages is processed and turned into cultural meaning (Bridwell and Mezias, 2012 and Rao, 1994).

In sum, the prevailing existence of rules and resources leads to the identification of forms of isomorphism based on:

1.

Awareness of the importance of acquiring new know-how and practices in order to survive: Normative Isomorphism

2.

Pressure factors such as laws, regulations etc., that lead to compliance: Coercive Isomorphism (Golinelli, 2010).

 Normative Isomorphism is found in company–context interactions in which a greater ability, knowledge and/or possession of intangible assets is present (facility = ability / capacity), so as to define a condition of pre-eminence of one towards the other.

Coercive Isomorphism is found in interactions between actors, every time it becomes necessary to identify rules and/or standards useful to determine how a social actor should behave in order to gain legitimation (i.e. Basel III).

The relationship between players and context can therefore be seen as a continuous and mutual adaptation that depends on environmental determinism and the ability of the company to influence its reference context. While the former affects and constrains corporate activities, the latter is intended to influence context entities and to establish the autonomy of the corporate system towards the surrounding reality (Golinelli, 2010).

Legitimacy and isomorphism, as described, display something very useful to the development of this study: legitimacy is based on the notion of contextual homogenizing aimed at establishing conformity and congruence, and therefore non-rivalry, against the entire reference context and/or members of it (Deephouse & Carter, 2005). At this stage, it is useful to reiterate that legitimation and reputation play a mutual role aimed at company survival. Based on the conditions of the banking industry, Deephouse and Carter (2005)investigated various interrelationships between isomorphism, performance, and legitimacy reputation as well as the antecedents and dimensions of the latter. They concluded that isomorphism has a positive effect on legitimacy and reputation of companies with a lower level of reputation, however, a negative influence on the reputation of companies with a higher level of reputation. Furthermore, the authors found that a better financial performance increases reputation but not legitimacy. They suggest a study researching the corporate effectiveness implications when losing legitimacy and/or reputation for further research. In addition, they call for an informative case study deviating from the best practice standards to an extent of actually losing legitimacy and for knowledge on managing legitimacy and reputation.

2.4. The curative marketing

By discussing the European horse meat scandal and its managerial cross-functional implications, this paper intends to give a contribution in this context.

Cognitive, normative and coercive isomorphism implies a new role definition of marketing, reflecting a paradigm change. In this context, Czinkota (2012) invites participation in an interesting discourse. He recognizes a major shift in the discipline of Marketing related to an increasing societal discontent with marketing and marketing actors due to the detrimental effects of globalization and a resulting global crisis of trust.

Czinkota dubs this paradigm shift as curative marketing. He defines this term as a required contribution of marketing/international marketing to restoring and developing international economic health as a precondition for overall welfare. This new direction implies a new spiritual and behavioral orientation for marketers towards bettering the respective societies characterized by salient motives to deliver joy, pleasure, fulfillment, safety, and personal growth, and achieving advancement towards a better society across borders. According to Czinkota the time is ripe for an intensive reflection of marketers in terms of analyzing and accepting the responsibility for the various global shortcomings caused by companies and their supply chains. Mistakes inflicted by the discipline in the past should lead to future action improvements, driven by a ‘damage restitution spirit’. The multidisciplinary theory provided by this paper underpins the development of curative marketing strategies and the corresponding operational marketing behavior. Values, know how or competences reflecting a curative marketing approach should reflect factual truthfulness and honesty, simplicity, guided by transparency and system understanding. These are aspects important in the context of supply chains’ authenticity, consisting of expanded international expansion and inclusion, communication and empathy with critics, and the acceptance of personal responsibility.

2.5. Previous eclectic literature in the field

The following Table 1 confirms the relevance of eclectic concepts applied in this work but, so far, does not provide them in the coherent and holistic manner as suggested in this research. The papers reflect that CSR, in order to achieve corporate missions and objectives such as social and environmental responsibility (Fearne et al., 2012 and Mäkelä and Näsi, 2010), social welfare, market share (Manning, 2013) as well as competitive advantage (Fearne et al., 2012), is commonly perceived as the key corporate strategy driven by legitimacy as the most important corporate concern (Dodds et al., 2013 and Johansen and Nielsen, 2012). This corporate performance is based on a focus on public reputation (Abratt and Kleyn, 2012b and Zulhamri and Yuhanis, 2013), preferable consumer perception (Blombäck & Scandelius, 2013), sustainable organizational development, employee loyalty (Kryger Aggerholm et al., 2011), product/service differentiation, or effective resource management (Fearne et al., 2012). Increasingly, the authors presented in Table 1 take a wider stakeholder orientation. As means to these ends, isomorphic processes (Johansen & Nielsen, 2012), corporate self-storying (Johansen & Nielsen, 2012) or employer branding and, relating to aspects of behavioral branding, long-term employer–employee relationships (Kryger Aggerholm et al., 2011) are discussed. In addition, a number of papers strongly link the factors of global supply management, especially in the food industry, with the concepts of reputation, legitimacy and sustainability (CSR). These driving factors include:

– a system control based on belief and interactive systems (Nijhof et al., 2008)

– chain members’ bargaining power (Cruz & Boehe, 2008) and balance of power (Spence & Bourlakis, 2009)

– differentiation strategies (Cruz and Boehe, 2008 and Manning, 2013)

– consumer engagement and loyalty in relation to Consumer Social Responsibility (Manning, 2013)

– collaborative awareness building (Cruz & Boehe, 2008)

– reputation risk management at all stages of the global value chain (Lemke & Petersen, 2013)

– positioning sustainability activities (authenticity, due diligence, product safety, credible environment management) in communication messages as an intrinsic aspect of quality (Camilleri, 2008)

– holistic approaches (Spence & Bourlakis, 2009)

– (re)allocation of resources (Fearne et al., 2012)

– linking SME idiosyncrasies with stakeholder interaction and product and process innovation (Theyel & Hofmann, 2012)

– decision on the supply chain length (Lehtinen, 2012)

– requirements for exporting, protection of agricultural land (Dodds et al., 2013).

Table 1.

Previous eclectic literature.
Mäkelä and Näsi (2010) Legitimacy and stakeholders and social contract
Farache and Perks (2010) CSR and advertising and legitimacy
Johansen and Ellerup Nielsen (2012) CSR and legitimacy and isomorphism
Zulhamri and Yuhanis (2013) CSR and reputation and legitimacy
Kryger Aggerholm, Esmann Andersen, and Thomsen (2011) Employer branding and organization sustainability & long term employer-employee relationships
Fearne et al. (2012) Value chain analysis, sustainability and competitive advantage
Manning (2013) Corporate and consumer social responsibility and food supply chain
Nijhof, Forterre, and Jeurissen (2008) Legitimacy and supply chain; belief and interactive systems
Cruz and Boehe (2008) Sustainability and global value chain
Lemke and Petersen (2013) Reputation risk management and supply chain
Camilleri (2008) Sustainability and supply chain and corporate reputation
Spence and Bourlakis (2009) CSR and supply chain responsibility (food chain)
Dodds, Graci, Ko, and Walker (2013) Sustainability and CSR and wine
Theyel and Hofmann (2012) Sustainability and value chain and SME and CSR
Lehtinen (2012) Sustainability, supply chain (food chain)

This article is a part of a series. Read part 1 here.