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Managing and maintaining corporate reputation and brand identity: Haier Group logo Received (in revised form):

Managing and maintaining corporate reputation and brand identity:

Haier Group logo

Received (in revised form): 10th October, 2005

MAKTOBA OMAR

is a graduate of Leeds University Business School. She is currently a lecturer at Napier University Business School, Edinburgh, Scotland and a member of the research committee. She is also a part-time research visitor at Harbin University of Commerce, China. Current research interests focus on globalisation, international strategy and marketing policy. She has written for a number of national and international academic journals as well as spoken at conferences and workshops. The main research focus of her present work is the impact of political risk, economical development, entry strategy and foreign direct investment in relation to UK companies operating in China.

ROBERT L. WILLIAMS, JR

is currently Assistant Professor of Business and Marketing at Villa Julie College, Business and Paralegal Division Greenspring Valley Road, Stevenson, Maryland, USA, having previously taught at Susquehanna University, Lycoming College and Dusquesne University. He is a graduate of The Pennsylvania State University, USA, and spent more than 20 years in various management positions at Fortune 50 company Tyco International and AMP Inc. Current research interests focus on competitive advantage, branding and market entry strategies of Chinese companies.

Abstract

The riots against the World Trade Organization in Seattle and the protests in Washington present a real threat to the reputation of global firms. Those changes in circumstance led international firms to pay considerable attention to the management of corporate reputation, which has been recognised as a major challenge for firms competing in changing environments. The paper argues a case for the practical management of corporate reputation and investigates its relationship with other related elements. The paper explores the development of the management of corporate reputation in relation to communication, identity and trust, and communication, identity and image. The two concepts create guidelines for managing corporate reputation; firms should manage their corporate reputation in relation to trustworthiness and credibility, which are based on the past achievement of the firm.

Dr Maktoba Omar University of Napier, School of Marketing and Tourism, Colinton Street, Edinburgh, UK

Tel: 44 (0)131 455 4404 Fax: 44 (0)131 455 6269 E-mail: m.omar@napier.ac.uk

INTRODUCTION

While reputation is a difficult concept to measure, managers frequently as- sume a positive relationship between business performance and corporate reputation. Indeed, the literature avers that from a customer’s perspective, a healthy reputation may act as a risk suppressor. 1 Early research on cor- porate reputation started with cor- porate image, corporate identity, and personality. Between the 1950s and the

1970s, the focus was primarily on the image that external stakeholders held of a firm or store. 2 During the 1970s and early 1980s, strategy moved to cen- tre stage and corporate identity and corporate personality became salient. From the late 1980s, the focus has shifted to corporate reputation. 3 Corporate reputation has been gain- ing notice in the last few years as an important asset of the firm. 4 Academicians in corporate strategies

HAIER GROUP CORPORATE REPUTATION AND BRAND IDENTITY

AIER G ROUP C ORPORATE R EPUTATION AND B RAND I DENTITY have begun to recognise

have begun to recognise the fact that corporate reputation provides rms with competitive advantages. 5 The better the organisations quality, the more popular it will become, with its customers continuing to use simi- lar services of the organisation for projects related to its experiences. In many cases, prospective customers are less inclined to work with new or- ganisations with no track record, particularly for large-scale projects, because they fear negative conse- quences that may have an adverse effect on their businesses. 6 The objective of this paper is to review the literature in relation to corporate reputation, its importance, and its relation to other concepts; illustrate the need for companies to pay increased attention to building and sustaining their reputation for economic gain by using a brand logo to shape a unique identity case study; and nish with recommendations and research agenda.

CORPORATE REPUTATION

Corporate reputation is seen as the outcome of a competitive process in which rms signal their essential characteristics to constituents to maxi- mise social status. 7 The cumulative judgment by the public over time provides the company with signicant competitive advantages. 8 The denitions of corporate reputa- tion have considered four main ele- ments. Object specific components 9 are based on the facts that the rm is well known: good or bad. Net effec- tive or emotional reactions 10 are based on the overall estimation in which a rm is held by its constituents. Past actions 11 are where corporate reputation

is dened as a set of economic and non-economic attributes ascribed to a rm and inferred from the rms past behaviour. Information cues result from direct and indirect experiences and in- formation received. 12 Reputation is dened as:

the estimation of the consistency over time of an attribute of an entity. This estimation is based on the entitys willingness and ability to perform an activity repeatedly in a similar fashion. An attribute is some speci- c part of the entity-price, quality, and marketing skills. 13

Fombrun denes corporate reputation as the net perceptions of an organisa- tions ability to meet the expectation of all its stakeholders. 14 In general, the reputation of a rm is perceived as the strong relationship between the cus- tomers and the organisation, which is viewed as client relationship-build- ing. This is considered an important element that contributes to successful organisations. 15,16

WHY IS CORPORATE REPUTATION IMPORTANT?

An empirical study with leading US/UK companies by Fombrun and Rindova found that those companies with a more positive reputation appeared to project their core mission and identity in a more systematic and consistent fashion than companies with lower reputation rankings. 17 Further, these companies try to impart signicantly more information, not only about their products, but also about a range of issues relating to their operations, identity and history. Satis- factory corporate reputation is an important driver of successful organisa-

OMAR AND WILLIAMS

O MAR AND W ILLIAMS tional relationships with clients, which can have a signi fi cant

tional relationships with clients, which can have a signicant impact on the business performance of an organisation 18,19 Academicians agree that corporate reputation is an important asset for the rm; it generates goodwill to the rm and it must be constantly maintained, as it is very fragile and extremely hard to repair. 20,21 Companies known for being extraordinary and having well- managed corporate reputations will gain the consumers condence. 22 An organisations reputation is therefore built on the shared foundation created by all six dimensions the six pillars of reputation. 23 They are the basis of a tool called the Reputation Quotient which Fombrun developed with the market research rm of Harris Interactive to systematically measure corporate reputation. An exceptional reputation will distinguish the rm from its competitors. 24,25 In addition, it will lead the customer to assume that the products have a higher quality 26 and may enable the rm to command premium price, 27 attract better applicants and investors, 28,29 enhance the organisations access to capital markets, 30 generate word of mouth endorsement and act as a barrier against imitation. 31

ENHANCE CORPORATE REPUTATION

Fombrun illustrates that managers should pay increased attention to building and sustaining their reputation for great economic returns. 32 This can be achieved by the following practices:

(1) shape a unique identity and (2) project a coherent and consistent set of images to the public. The organisations reputation derives from its unique

product offering. In turn, the unique- ness of the product offering calls for management practices that stress product quality and customer service. The above two points can include:

design a programme that keeps the customer happy through good quality products and services; keep the employees informed of the reputational side-effects; show sensitivity to the environment; hire PR staff to safeguard communications through the media; and work on community involvement. Balmer and Gray emphasise the importance of the stakeholder groups and their crucial role to the organisations ongoing success. 33 de Chernatony stresses the signicance of bringing the company staff into the brand-building process, making them aware of their roles in delivering their brands identity, then alerting them to their brands reputation, and therefore difference, so they can participate in the process of considering how to change to better deliver the desired identity. 34 He also suggests that if the company decides to capitalise on brand reality the director of human resources should be included on the brands team. An understanding of the complex phenomena surrounding advancing and enhancing corporate reputation is of particular pertinence. These condi- tional generalisations (as social scientists would call them) about the variations are what drive corporate reputation in different countries, industries and strategic situations. The authors alluded to the ero- sion of corporate reputation. Other than highly visible company crisis-type situations such as those mentioned, one rarely reads about the modest deterioration of corporate reputations.

HAIER GROUP CORPORATE REPUTATION AND BRAND IDENTITY

AIER G ROUP C ORPORATE R EPUTATION AND B RAND I DENTITY Rarer still are database

Rarer still are database reports of company reputation in situations of either crisis or modest decline. While more needs to be learnt about building reputation, there is also a need to learn about rebuilding it (if company be- haviour permits).

HAIER GROUP LOGO SURVEY

Case studies are dened as an intensive examination of a single instance of a phenomenon of interest, such as a factory or a leveraged buyout, and are often used in the exploratory stages of research. 35 According to Yin, 36 case studies as a research strategy comprise an all-encompassing method with the design and data analysis. A case study is neither a data collection tactic nor merely a design feature, but a comprehensive research strategy. He points out 37 , you would use the case study methods because you deliberately wanted to cover contextual conditions believing that they might be highly pertinent to your phenomenon of study. The purpose of this case study is to analyse consumer attitudes and feelings for the new Haier logo, to determine whether it will have a positive or negative impact upon Haiers reputa- tion, especially in the US market.

BACKGROUND

Haier Group is the largest white goodsmanufacturer in China, and has recently surpassed General Electric to become the third largest world- wide, with manufacturing locations in Europe, China, America, the Middle East, Spain and New Zealand. Their full product line includes products such as refrigerators, freezers, wine cellars,

air conditioners, beer dispensers, dish- washers, fans, water dispensers, HVAC, plasma televisions, small appliances and other electronic products. Haier was rated the top brand in China, and it was also ranked 95th among the 100 top world brands the only Chinese brand recognised. 38 The American division of the Haier Group (Haier America) was founded in 1999, with headquarters in New York City and production facilities in South Carolina. Haier is the only Chinese company to establish manufacturing operations in the US market. So the initial activities to introduce the Haier brand into the large US market will be a critical component of establishing Haiers reputation with US consumers. Haier products are currently avail- able through a US distribution channel which includes retail chains such as Wal-Mart, Lowes, Best Buy, Home Depot, Ofce Depot, Target, For- tunoff, Menards, Bed Bath and Beyond, P.C. Richards, BJs, Frys, ABC and BrandsMart. Indeed, Haier products received some of the highest quality ratings from Wal-Mart buyers. Haier is also available through the websites of many retail channel partners. In 2002 Haier America President Michael Jamal stated that we promote Haier as a global brand not Chinese or American, and Haier introduced the new two brotherslogo (Figure 1) which shows two children: one hold- ing an ice cream cone and the other giving a thumbs up.

CASE STUDY OBJECTIVES

Objective

how

respondents perceive the new Haier logo.

1:

To

determine

OMAR AND WILLIAMS

O MAR AND W ILLIAMS Figure 1 Reproduced by permission of the Haier Group. Haier logo
O MAR AND W ILLIAMS Figure 1 Reproduced by permission of the Haier Group. Haier logo

Figure 1

Reproduced by permission of the Haier Group.

Haier logo

Objective 2: To determine how im- portant a products logo (reputation) is to the respondents.

RESEARCH METHODOLOGY

A questionnaire instrument was con- structed using, wherever possible, validated measures of the concepts to serve the aims of this study. In the autumn of 2004, a face-to-face interview survey was distributed to 200 randomly selected

people

over the age of 18 in Baltimore,

MD

and Harrisburg, PA, both

metropolitan areas of the USA. Undoubtedly this small sample is an issue as regards statistical validity, and future work should encompass a larger

sample size. The survey included a

series of questions including open-

and close-ended, ranked responses,

single-multiple response checklists and

Likert scale questions. Question types

involved demographic, behavioural, knowledge and attitude/opinion areas.

The survey also included a colour picture of the new logo.

FINDINGS

Objective 1

In general, half of the respondents were

neutral about the logo, 38 per cent of respondents viewed the logo as posi-

tive, while 18 per cent considered it negative. However, 71 per cent of

the positive respondents indicated they thought it was for a company offering childrens products, while only 8 per cent thought it was for appliances. Descriptions included happy, ex- cited, kidsand cute. Comments

smiles are

included: thumbs up

positiveand it has nothing to do with

appliances. When asked whether they would consider buying a product from a

company with this logo on it, given

a list of choices, respondents indi- cated they would buy the following

HAIER GROUP CORPORATE REPUTATION AND BRAND IDENTITY

AIER G ROUP C ORPORATE R EPUTATION AND B RAND I DENTITY products: ice cream (37

products: ice cream (37 per cent), childrens clothing (33.6 per cent), televisions (7.5 per cent), shoes (6.2 per cent), cleaning supplies (4.8 per cent), washing machines (1.4 per cent) and microwaves (0.7 per cent). No one would consider purchasing a refrigerator with this logo on it. When specically asked about this new logo related to home appliances, 57 per cent felt it was negative, while only 41 per cent indicated it was positive. When asked to rank manufac- turers of refrigerators, Whirlpool scored highest in brand reputation (41 per cent), followed by General Electric and Maytag (tied at 27 per cent) and Neptune (5 per cent). Haier scored the lowest. Indeed, when asked the last brand of appliance most recently bought, 31 per cent stated Whirlpool, followed by General Electric (20 per cent) and Maytag/Kenmore (tied at 16 per cent). Respondents described the boy on the left as Hispanic (52 per cent), Japanese/Asian (18 per cent), or Chinese (10 per cent). Eighty-eight per cent felt the boy on the right was Caucasian. Sixty-one per cent indi- cated that both children in the logo were boys, while 39 per cent thought they were boy/girl. In fact, according to David Parks, COO of Haier America, the Haier twinslogo depicts the toddler on the left with black hair and black eyes representing China, while the other has blonde hair and blue eyes and represents the West.

Objective 2

Respondents indicated that quality (70 per cent) at an affordable price (32 per cent) had the greatest inuence on their purchase decisions, followed by

the brand (14 per cent). Additionally,

61 per cent indicated that a familiar

logo created the expectation of higher

quality. When asked to agree or disagree with the statement A products logo helps me to recognise what brand the product is before I buy it, 65.6 per cent indicated they agreed/strongly agreed, 22.6 per cent were neutral, while 11.8 per cent disagreed/strongly disagreed. However, only 17 per cent of the respondents stated that a products logo would have an effect on

how much they would be willing to pay for the product, with 47 per cent indicating it would have no effect and

36 per cent remaining neutral.

The one word most often associated with this new Haier Logo was child- like(40 per cent), friendship(24 per cent), fun(20 per cent), diversity(5 per cent), dependable(5 per cent) and quality(4 per cent).

IMPLICATIONS AND FUTURE RESEARCH

A brand is dened as consisting of any

name, design, style, words or symbols, singly or in combination that distin- guishes one product from another in the eyes of the consumer. 39 Brands act

as a kind of ag, waving to consumers,

creating awareness of the product and differentiating it from other com- petitors. 40

In this initial case study involv- ing Haier, it seems that in terms of a logo as a symbol represent- ing corporate reputation, the sur- vey sample indicated that half of the respondents were neutral overall regarding the logo. However, if the logo was assigned to products for children, as opposed to their actual

OMAR AND WILLIAMS

O MAR AND W ILLIAMS product line of white goods, then nearly three-quarters felt positive about

product line of white goods, then nearly three-quarters felt positive about the logo/brand/company reputation. Responses related to quality, price, purchase intentions and other factors relate to the importance of corporate reputation expressed earlier. 4143 This study reveals that Haier is deficient in brand recognition in the sample market, and would appear to lack the previously referenced exceptional reputation. 44 Haiers new logo may in fact negatively impact the company, by devaluing an important asset (in China, and outside the USA). As pointed out, corporate reputation is very fragile and must be constantly maintained. 45,46 The new logo may in fact not provide Haier with significant competitive advantages. 47 There do not appear to be any object specific components, 48 as many respondents did not know Haier. And far from signalling their essential characteristics, 49 the new Haier logo was in fact proven to mislead consumers as to corporate reputation. Future research should expand the sample size beyond the two metropolitan areas. While the wider sample population was desirable, cost and time considerations precluded this possibility. An exploration involving the relationship between the previous logo and the new logo could expand upon consumersperception of cor- porate reputation.

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