The Importance Of Corporate Reputation In 21St Century

Introduction

At the beginning of the 21st century, with the development of the economy, the form of organization became increasingly complex, and the competition among enterprises became gradually fierce. The competitive advantage of business not only depend on tangible assets such as capital and product, but also rely on intangible assets such as reputation and brand. The corporate reputation is becoming the one of main impetus driving sustained economic growth. In this paper, we will discuss the reasons why the corporate reputation plays a significant role in business development in 21st century. There are several reasons to support the opinion as following. Company reputation could affect customers' intention to purchase products or services. Moreover, enterprises may obtain more advantage to attract talent with good reputation.

What is business reputation

According to Lawrence and Weber (2017), the business reputation refers to the quality related with the enterprise and actors that affecting the relationship between corporates and stakeholders. Reputation always is associated with what business delivering itself to the public and what the audience think about the company. In other words, corporate reputation is composed of the public thoughts and feelings about the business, based on their experience with the business. Before consumers deciding to purchase, it is not necessary to make buyer know the total and accurate information about company. Because business reputation will be the readily available reference index of decision making. Furthermore, due to the intangible characteristics of corporate reputation, it is difficult for competitors to imitate, which result in the company maintaining a unique position.

How to affect consumer purchase intention

In this section, we will explain how the reputation to influence consumer decision making from three aspects:

1. word of mouth marketing
2. loyalty relationship
3. price premium.

Reputable companies have more customers and get positive word of mouth from these customers, which gains more new customer acquisition and reduce customer churn. Effective word-of-mouth marketing can enhance the company's reputation, and reputation management will serve word-of-mouth marketing as well. Word of mouth marketing means that companies enable consumers to spread their product information and brands through exchanging opinion between their friends and family. The characteristic of the marketing method is high success rate and strong credibility. For example, in 2012, Chinese athlete Liu Xiang fell and retired during the 110m hurdles race in the London Olympics. Nike took the opportunity of the Chinese people’s collective grief for Liu Xiang’s defeat and made a quick response – find your greatness. Find your greatness is meaningful because athletes are ‘great’ regardless of winning or losing. This is a simple and powerful brand message with only one purpose – to encourage. Therefore, Nike successfully upgraded the brand image and reputation with the Liu Xiang Olympics retiring event. Moreover, the good reputation makes the positive image of the company spread continuously among consumers, thus expanding the brand influence.

Good corporate reputation can increase customer loyalty. Conversely, a crisis of confidence will seriously affect customer loyalty. For example, in 2012, A Shanghai Milk products plant announced that it had recalled a batch of milk contaminated with lye that is a kind of a chemical used to clean the pipe. In 2008, the shady industry of the dairy industry was exposed, that is, the toxic chemical melamine was added to milk. Furthermore, in 2006, the reporter unveiled the shady about that Guangming company return the metamorphic milk to the factory for processing and resale. In the securities market, the market value of Guangming Dairy company has shrunk by more than RMB 100 million in just five trading days. So far, Chinese consumers still have not escaped the crisis of confidence in the dairy industry. Moreover, majority of the new parents are still unwilling to believe in Chinese dairy products and prefer to choose Australian or New Zealand milk powder. Because Australia and New Zealand milk powder have a better reputation. On the contrary, good reputation will retain customer and establish royalty relationship. Product reputation also can be improved by improving product performance, lowing product prices, and producing more customer-satisfying products. Costco, the largest membership warehouse club in the US, is famous for high quality and low price with great reputation. According to Costco's 2014 annual report, the membership renewal rate is 91% approximately (2014). High consumer royalty make Costco obtain a competitive advantage.

The business reputation makes consumers exhibit higher purchase intention and willingness to pay price premium. Consumers are not only willing to pay more for products that have the features they want but also select brand with good reputation. Price premium means consumer is willing to pay extra money for the product or service. Consumers may not sensitive with price. The phenome is common in the luxury industries. For example, on the 13 August 2018, A mysterious young man came to the newsstand on 41st Street in New York and bought all 50 copies of the New York Post at a price of one dollar. Moreover, Office workers at the rush hour found that the local newspaper, The New York Post, magically disappeared from the shelves of the city. The reason why this newspaper was snapped up was the logo of the famous street brand Supreme printed on the front page. In some online shopping platform, the price of the New York Post achieved to 10-12 dollars. Why does Supreme make people rush to buy? Corporate reputation is defined as the cumulative impression of customer interaction with the business. Supreme establish brand image better than another brand in the mind of consumer. With this image, the premium of the brand becomes natural. In the view of buyers, they think the brand stand for rare, expensive and fashion. Therefore, consumers buy those expensive products, using these products to define their own image, their own taste, and even the self-awareness. The business image of Supreme represent expensive and fashion, which meet consumers’ need that show off and be special. For another example, clothing industry is highly standardized industry. It means the technology of production is similar. The different between various brand depend on the value and design. Thus, there is much space of price premium. The price setting will be considered about the brand position, corporate image and reputation. Compared with other unknow brand, high reputation brand charges more price premium. And the consumer prefers to be insensitive with price and seek to the value they need.

Talent attractiveness

Corporate image and reputation are the factors that have a greater impact on job seekers. Corporate image and reputation reflect the human resource reputation of the company from one side in modern society. Although there are many factors affecting talent recruitment, such as wage, occupation and welfare, good reputation still be one of the most important factors. On the contrary, the bad reputation also will result in the loss of talent. For example, in recent years, Foxconn employee suicides have caused people to pay attention to working conditions. During the two months, three employees one after another jumped from the dormitory building and committed suicide. Militarized management mode, intensive work content and boring assembly work are exposed because of the exposure of the suicides, which lead to Foxconn faced with reputation crises. During that period, Foxconn had to increase the wage, welfare and enhancing working condition to attract employees. And if employees have better option, the Foxconn will not be considered.

Conclusion

Given the company's resource base concept, firm reputation is regarded as a uncopiable strategy resource, which conduces to the company's sustainable competitive advantage. In the paper, we have already discussed that word of mouth marketing, loyalty, price premium and talent hiring are the reason why reputation is significant for firm. In addition, a higher reputation contributes enterprises to seek development and gain competitive advantage, which is conducive to reducing financing costs, mitigating business risks, improving business management, increasing social visibility and expanding market share as well. Therefore, establishing a company's good reputation is a key issue for enterprise to focus in the modern society.

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