Corporate identity, image, and reputation

CORPORATE IDENTITY

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THEORY OF CORPORATE IDENTITY
COMPONENTS OF CORPORATE IDENTITY
CORPORATE IMAGE AND REPUTATION
CORPORATE COMMUNICATION
FEEDBACK
CONCLUSION


The management and communication of a company's identity increasingly is being viewed by senior executives as vital to corporate success. The concept of corporate identity can be traced to the earliest firms that used specific marks or logos to differentiate themselves from their competitors and imprint their image in the minds of consumers. By the 1970s a robust consulting industry that specialized in helping companies improve their image had emerged. More recently, in response to the dynamics of the business environment, many of these design consultants have broadened their focus to embrace a strategic view of communicating corporate identity. With this amplified focus, the epithet for the concept evolved from "corporate image" to "corporate identity" (and, more and more, the term "corporate brand" is being applied).

IMPORTANCE OF CORPORATE IMAGE

The growing significance of managing corporate identity is underscored by a 1989 survey in Britain by Market Opinion Research International, which found that 77 percent of the leading industrialists questioned believed that the importance their firms attached to developing and promoting their corporate identity would increase in the near future. Research a year later by CBI and Fitch Consultants corroborated this finding and the experience of the 1990s strongly suggests that this expectation has materialized.

The overriding reason for the burgeoning concern for corporate identity is abundantly clear. We live in a time of immense environmental complexity and change, and consequently corporations have been forced to significantly alter their strategies to better compete and survive. Mergers, acquisitions, and divestitures represent a major dimension of corporate change over the past several decades. Consider the extreme example of the Greyhound Corporation. For most of this century, Greyhound was the largest busing company in North America. In the 1970s, however, the company initiated an aggressive acquisition/diversification and by the late 1980s was competing in five different industries (it even sold off most of its busing operations). To signal this metamorphosis to its external audiences, the company belatedly changed its name to the Dial Corporation and completely revamped its corporate communications.

The acceleration of product life cycles is another vital dimension of the turbulent business environment. Nowhere is this more apparent than in the electronics industry. Personal computers can become outmoded in the period of less than a year. In the audio segment of the market, tapes replaced records and, in turn, were replaced by compact discs, which may in the future be superseded by digital audiotapes. Companies with strong corporate images, such as Sony Corporation and Casio, obviously have an advantage in such dynamic markets because their name adds value to their products by reducing uncertainty in the eyes of distributors, retailer$, and consumers.

Deregulation has been a critical factor in many industries. For instance, as a result of the court-ordered breakup, AT&T has had to develop a new strategy and a more aggressive marketing-oriented culture to adjust to its new realities. Concurrently, the telecommunications giant adopted a new logo and initiated a communication program to help convey its new identity. In another example, deregulation of the financial services industry has allowed savings and loan associations to expand their services and compete with banks. Consequently, firms such as Glendale Federal Savings and Loan Association and California Federal Savings and Loan Association have changed their charters to become banks. Their new names are Glendale Federal Bank and California Federal Bank, respectively, and they have fittingly redirected their corporate communication programs.

Globalization has been still another catalyst in the rise of corporate identity programs. To illustrate, American Express Co. originally was a freight company in the North American market. As the company matured into a global credit card, banking, and travel organization, it wisely developed a corporate communication program aimed at projecting its new identity. American Express understood that a strong and positive global image can be a powerful weapon for firms expanding internationally. IBM, McDonald's, and Baskin-Robbins are examples of other companies that have been able to expand to all areas of the world with relative ease because of their global prominence.

A related factor is that as a corporation expands its operation internationally, or even domestically, through acquisitions, there is a danger that its geographically dispersed business units will project dissimilar or contrary images to the detriment of corporate synergy. British-based Courtaulds has a globally dispersed organization but until its latest identity review allowed its operating companies to use their traditional names. As a consequence of this policy, there was little cooperation among these units and no cohesive corporate identity. Courtaulds remedied this problem by instituting a common naming policy and a correlated corporate communication program.

Still another factor stimulating the current interest in corporate identity is society's growing expectation that corporations be socially responsive. One salient manifestation of this trend is that many of today's consumers consider the environmental and social image of firms in making their purchasing decisions. Companies such as Ben and Jerry's and Tom's of Maine have built their strategies around this idea and consequently have grown very rapidly. Another manifestation of the trend is the rise of socially responsible investment funds.

THEORY OF CORPORATE IDENTITY

Theory always underlies good practice. Theory identifies and defines the key variables in the process under consideration and explains the interrelationship among them. In the process for managing corporate identity, the fundamental variables are corporate identity, corporate communication, corporate image, and corporate reputation. Corporate identity is the reality of the corporation. It is the unique, individual personality of the company that differentiates it from other companies. To use the marketing metaphor, it is the corporate brand. Corporate communication is the aggregate of sources, messages, and media by which the corporation conveys its uniqueness or brand to its various audiences. Corporate image and corporate reputation are in the eye of the beholder. Image is the mental picture that people have of an organization, whereas reputation constitutes a value judgment about the company's attributes.

The interrelationship among these variables is shown diagrammatically in Figure 1. The objective in managing corporate identity is to communicate the company's identity to those audiences or constituencies that are important to the firm in a manner that is both positive and accurate. This process involves fashioning a positive identity and communicating this identity to significant audiences in such a way that they have a favorable view of the company. The feedback loops in the model indicate that an unsatisfactory image or reputation can be improved by modifying corporate communication or reshaping the corporate identity or both. The principal issues relating to the five components of the model—identity, image, reputation, communication, and feedback—will now be examined in greater detail.

COMPONENTS OF CORPORATE IDENTITY

Corporate identity, as explained above, is the reality and uniqueness of the organization. It may be broken down into its component parts: corporate strategy, corporate culture, organizational design, and operations. Strategy is the overall plan that circumscribes the company's product/market scope and the policies and programs by which it chooses to compete in its chosen markets. For example, Southwest Airlines is a regional carrier competing in the airline industry through strategies that result in low costs and low fares.


Figure 1
Corporate Image Moedl

Corporate culture is the shared values, beliefs, and assumptions that the organization's members hold in common as they relate to each other, their jobs, and the organization. It defines what the firm's personnel believe is important and unimportant, and explains to a large degree why the organization behaves the way it does. Southwest Airlines has a strong corporate culture that highly prizes company loyalty, internal cooperation, and service to the customer. Southwest's culture supports the company's strategy and is a prominent component of its identity.

Organizational design refers to the basic choices top managers have in developing the pattern of organizational relationships. It encompasses issues such as whether basic departmentation should be by function or product division, the overall configuration (tall vs. flat), the degree of decentralization, the number of staff personnel, the design of jobs, and the internal systems and procedures. All of these factors can affect, to some degree, corporate identity. From the perspective of the firm's external constituents, however, the corporate/product relationship normally is the most critical element of organizational design. The corporate/product relationship refers to the deliberate approach a firm follows in structuring the relationship of its products to one another and to the corporate entity. Corporate/product relationships may be categorized as single entity, brand dominance, equal dominance, mixed dominance, or corporate dominance.

Single entity companies offer one product line or set of services; consequently, the image of the company and that of the product tend to be one and the same. Southwest Airlines is an obvious example of a single entity company; it is 100 percent involved in the airline business. Identity problems typically arise for single entity firms such as Southwest Airlines if they expand into areas and activities not immediately related to their current strategy. The corporate planners must carefully consider the corporate identity they desire to have and the concomitant image they wish to project.

Under the brand-dominant approach, the decision has been made not to relate the product brand and corporate names. This approach is followed by many consumer products companies. For instance, Marlboro and Merit cigarettes, Post cereals, Jell-O, Kraft cheeses, and Oscar Mayer meats are all well-known products but few consumers realize that they are all marketed by the Philip Morris Companies, Inc.

General Motors Corp., historically, has exemplified the equal-dominance approach. The principal General Motors' automobile divisions—Chevrolet, Pontiac, Oldsmobile, Buick, and Cadillac—maintained separate identities, but each was also closely associated with the corporation. Neither the corporate nor the individual brand was predominant.

In mixed-dominance companies, sometimes the brand name is dominant, sometimes the corporate name is dominant, and in some cases they are used together with equal emphasis. The German firm Robert Bosch GmbH follows this approach. Bosch identifies some of the products it manufactures (for example, spark plugs) with the corporate name, but chooses to allow other brands such as Blaupunkt radios to stand independently.

IBM, Hewlett-Packard, Xerox Corporation, and Gerber Products Co. are exemplars of the corporate-dominance strategy. In these companies, the corporate identity is paramount and all implementation decisions are aimed at reinforcing this identity.

Two examples will illustrate the identity considerations involved in corporate/product relationship decisions. A number of years ago, Pillsbury developed a franchised restaurant chain called Bennigan's Tavern. The company had to decide if it wanted to create an identity for Bennigan's that linked the restaurant to Pillsbury or create a separate identity for it. A crucial question was whether a corporation known for its traditional kitchen products such as flour and cake mixes should associate its name with an institution serving beer. Prudently, Pillsbury chose the brand dominant approach.

The classic example of the Transamerica Corporation illustrates an equally logical but very different outcome. Transamerica was a conglomerate with divisions in such diverse fields as air travel, business forms, entertainment, and insurance. For many years the company followed a brand dominant (or more precisely, a subsidiary-dominant) approach in which the relationships between the subsidiaries and the parent were deemphasized. In the late 1960s, however, company executives decided to take advantage of the synergies that a unified corporate identity could render. As part of the implementation program, Transamerica created the "T" logo as a unifying symbol to connect the various subsidiaries to the parent and to each other. Each subsidiary retained the company name under which its reputation had been built, and the corporate relationship was communicated through a linking phrase such as, "Entertainment from the Transamerica Corporation."

Operations, the fourth and final component of corporate identity, is the aggregate of activities the firm engages in to effect its strategy. These activities become part of the reality of the corporation and can influence its image and/or reputation in a wide variety of ways. Several examples will highlight the range of possibilities. First, the cleanliness of Disney Corporation's theme parks, together with the efficiency and helpfulness of their employees, has become a significant and very positive dimension of the corporation's identity. At the other end of the spectrum, the inappropriate treatment of African-American customers at some Denny's restaurants negatively affected that company's overall reputation as did the now infamous Exxon Valdez oil spill for the Exxon Corporation.

CORPORATE IMAGE AND REPUTATION

Corporate image and reputation are discrete but related concepts. As noted earlier, corporate image is the effigy that people have of a company. Corporate reputation, on the other hand, represents a value judgment that people make about the firm as a whole or one or more of its attributes. Corporate images typically can be fashioned fairly quickly through specific actions and well-conceived communication programs, whereas reputations evolve over time as a result of consistent performance (and they can be reinforced through corporate communication).

Clearly, a corporation must be concerned about its image and reputation amongst its important constituent groups. In academic parlance, these significant constituent groups are called stakeholders. They are groups that have a stake in the company. Stakeholders are affected by the actions of the company and, perhaps more importantly, their actions can affect the company. Consequently, its image and reputation in the eyes of its stakeholders is critical to the company. The principal stakeholders with which most large firms must be concerned are:

* Customers
* Distributors and retailers
* Financial institutions and analysts
* Shareholders
* Government regulatory agencies
* Social action organizations
* The general public
* Employees

The company's image and reputation vis-a-vis its various stakeholders will influence their willingness to provide or withhold support. Thus, if its customers develop a negative perception of the company or its products, its sales and profits assuredly will decline. Consider the recent travails of the Nissan Motor Company. In the 1980s it enjoyed the image of a customer-oriented, trendsetting automobile manufacturer with an excellent reputation for automotive engineering. By the mid-1990s, however, as a result of a series of poor decisions, its image as a cutting-edge producer, along with sales and profits, had declined precipitously. It is now perceived by customers as well as other stakeholders as a conservative maker of stodgy, boxy cars with its engineering reputation compromised.

The impact of corporate identity in the financial community can be seen through the history of the British packaging, printing, and coating company that recently changed its name from Bowater to Rexham in response to confusion in the financial community as well as among its customers as to its identity. In North America the company traded under the name Rexham, whereas in the rest of its markets it operated under the Bowater banner. The name change was initiated by its chief executive officer to create the image of a global competitor in the eyes of financial institutions and investors, as well as its customers.

The company's shareholders are another critical stakeholder group because they ultimately give or withhold their approval of management's decisions through their proxies. Moreover, their "buy" and "sell" decisions influence the corporation's stock price.

Government regulatory agencies, another important set of stakeholders, are required by law to monitor and regulate firms for specific, publicly defined purposes. Nevertheless, these agencies have considerable discretion in how they interpret and apply the law. Where they have a positive perception of the firm, they are likely to be much less censorious.

Social action organizations represent still another set of stakeholders. To the extent a corporation has a negative reputation in the particular area of concern of a social action group, it likely will be targeted for criticism and harassment by that group. For example, the Labor/Community Strategy Center has organized a boycott of Texaco stations and products in an effort to influence the company to reduce the air pollution emanating from its refinery in Wilmington, California. Although there are many refineries in the Wilmington area, the environmental group targeted Texaco for its boycott because of a recent much publicized explosion at the company's refinery.

A strong positive image with the general public can be beneficial to the firm. Research suggests that a prominent corporate image and an outstanding reputation are a consequential factors in attracting a high quality workforce. Merck, Microsoft, and Hewlett-Packard, for instance, have traditionally attracted topnotch job applicants because of their sterling reputations.

Current employees represent the internal constituency that a firm must consider when communicating corporate identity. It is widely believed that a positive reputation in the eyes of employees is a prime causal factor of high morale and productivity. This condition is frequently cited as a fundamental reason for the success of Japanese firms. Additionally, it should be emphasized that employees play a large role in representing the company to its external stakeholders.

Obviously, each of the various stakeholder groups is likely to have a somewhat different perception of the corporation because each is concerned primarily with a different facet of its operation. Thus, customers are principally interested in the price, quality, and reliability of the company's products and services. Financial institutions are concerned with financial structure and performance. Employees are mainly concerned with wages, working conditions, and personnel policies. Logically, then, a company should tailor its communication to each stakeholder group individually to engage the special concerns of that group.

A consistent image among the various stakeholder groups, however, is also essential. Although it is prudent to stress different facets of the firm's identity to its various publics, the firm should avoid projecting an inconsistent image for two key reasons. First, some of the concerns of the stakeholders overlap. For example, the financial community and the shareholders would have many of the same financial and strategic concerns about the company. In fact, many shareholders rely heavily on the advice of experts from financial institutions. Both employees and the general public have an interest in the overall prestige of the firm and the reputation of its products. A social action group's criticism, as in the case of the Texaco boycott, whether economically effective or not, is bound to influence some customers and affect the company's public reputation. Of course, a regulatory agency such as the Occupational Safety and Health Administration would focus narrowly on the firm's safety record and policies but the company's employees and their labor unions also have a stake in these matters.

The second and related reason for avoiding an inconsistent image is that the sundry stakeholders are not separate, discrete entities. Membership overlaps. Consider the example of a typical public utility where almost all of its employees are also customers and a significant number may also be shareholders. Furthermore, it is not unlikely that some of its employees will be active in environmental or consumer rights groups that challenge the company on specific issues. It is also likely that some of the company's bankers and regulators will be among its customers.

CORPORATE COMMUNICATION
Corporate communication is the link between corporate identity and corporate image and reputation. It should be defined in the broadest possible sense because companies communicate their identities in many different ways. This includes almost everything they do from the way telephones are answered to the involvement of their employees in community affairs. A description of the principal communication media is presented below.

NOMENCLATURE.
The primary concerns in this category are the names used to identify the corporation, its divisions, and its products. In recent years, many firms have changed their corporate names to communicate a major change in identity. To illustrate, International Harvester changed its name to Navistar to signal its exit from the agricultural equipment industry. Carter Hawley Hale Stores changed its name to Broadway Stores to identify more closely with its store operations and accentuate its revitalization since emerging from Chapter 11 bankruptcy.

GRAPHICS.
Graphics, which were the original focus of image consultants, are concerned with the overall visual presentation of the organization. The graphics system should dictate the design style of the company's literature, signs, and stationery. It involves coordinating the style of the typeface, photography, illustrations, layout, and coloring in all the company's graphics. The key question here, as with the nomenclature issue, is whether the company's visual presentation is appropriately communicating its identity. Consider the example of Alitalia Airline. Although Alitalia was one of the largest transatlantic carriers, it projected an image of a relatively small, casual, inefficient "Italian" airline. To counter this negative image, Alitalia, following the lead of Olivetti and Ferrari, developed a graphics program stressing superior design and high technology. All forms of corporate communication such as aircraft insignias, uniforms, baggage tags, and promotional materials were redesigned to consistently project and reinforce this positive image. Today Alitalia is regarded by the flying public as a major global carrier.

The logo is the heart of the corporate graphics design system. Unlike nomenclature, logos can be changed subtly over time to reflect the evolving corporate identity. For example, Shell has varied its graphics system many times over the past century. Through all its changes, the company retained, for the sake of continuity, some version of its basic seashell logo. In contrast, Transamerica Corporation abruptly replaced its recognizable "T" logo with the "Transamerica Pyramid" (a well-known San Francisco landmark) to signal its metamorphosis from a conglomerate to a focused financial services company.

FORMAL STATEMENTS.
This category includes mission statements, credos, codes of ethics, annual reports, advertising copy, and company slogans. Company slogans can be a particularly potent means of communicating to stakeholders. Avis's "We Try Harder," for instance, has been remarkably effective in conveying the company's identity. Other examples include Prudential's "Own a Piece of the Rock," which communicates the company's financial stability, and E.I. du Pont de Nemours & Co.'s "Better Living through Chemistry," which underscores the firm's science-driven culture.

ARCHITECTURE.
The design of corporate buildings and the interior layout of offices and factories also can reveal much about a company. A series of closed offices suggests a very different culture from a large open room with desks in full sight of each other. The Transamerica Pyramid as a symbol of financial services illustrates the potential for communicating through architecture. SmithKline Beecham (the resultant company from the merger of the pharmaceutical firms Beecham and SmithKline Beckman) specifically selected a corporate headquarters complex in London that projects a culture that it hopes will evolve at the merged company.

INTERACTIONS AND EVENTS.
This is a catch-all category, but a critical one, because every interaction a company employee has with a stakeholder, and every event related to a company, communicates something of the firm's identity. This means, for one thing, that employees should be trained and motivated to project a positive image of the company. The increased popularity of training employees on answering telephones shows that many firms understand the criticality of this communication source.

Unexpected events also can conspicuously communicate corporate identity. As mentioned above, the Exxon Valdez oil spill became a dimension of the Exxon Corporation's identity, but it also immediately imparted the image of an environmentally insensitive firm to most, if not all, of the company's stakeholders. In similar fashion, the catastrophe at Union Carbide's Bhopol plant projected a negative image, as did the controversy over the treatment of African-American customers at Denny's. A company's reaction to such events, however, also can play a prominent role in its projected image. The failure of Chairman Rawls to travel to the site of the oil spill further compounded Exxon's image problems. Conversely, Johnson & Johnson's prompt nationwide recall of Tylenol bottles after Chicago-area deaths were attributed to a few poisoned Tylenol capsules significantly reduced the negative impact of these tragedies on the company. In fact, many observers believe that Johnson & Johnson's image and its reputation for social responsiveness has emerged stronger than ever.

FEEDBACK
Feedback is essential to managing the corporate image. Without it, company executives are "flying blind." They need accurate information on stakeholder perceptions if they are to make sound decisions. Ideally, feedback should be continuous. As a practical matter, relatively continuous feedback can be elicited from salespeople, public relations executives, finance managers, and other employees who routinely interact with stakeholders. Based on such input, modifications may be made in the company's communication methods or, if warranted, a formal study of the corporate identity initiated. In addition to systematically utilizing internal sources, it is prudent to conduct formal studies on a regular basis, say every five years. Formal studies are typically performed by identity/image consultants using in-depth, one-on-one and group interviews as their chief research tools. This type of comprehensive outside review would normally include an analysis of the corporate identity, an appraisal of the firm's image and reputation in the eyes of its stakeholders, and an evaluation of the efficacy of its corporate communications. The consultant's recommendations might run from making slight alterations in the corporate communication program to a reshaping of the firm's identity.

Two examples illustrate the importance of feedback and taking appropriate remedial measures based on the feedback. In the first example, Consolidated Foods found that it had a deficient and inaccurate image in the financial community. Specifically, it learned that its rather bland sounding name translated into a bland image in the eyes of financial analysts. The company also discovered that not only was its name bland, but it also was inappropriate because its organization was decentralized and encompassed a variety of business units; therefore, it could not be accurately described as "consolidated." To remedy the situation, the company renamed itself Sara Lee after its most prestigious product line. Subsequent research showed that awareness of the company among financial analysts increased significantly.

In the second example, Jaguar, in the days prior to privatization, learned from research that it had a terrible reputation for quality and reliability among customers. To correct this problem, Jaguar initiated a rigorous quality program which has helped the firm regain its earlier reputation for quality vehicles.

CONCLUSION
In the past, corporate identity was seen almost universally as the narrow, peripheral function of graphic design. Today, however, as a consequence of the epochal, often abrupt changes occurring throughout the business world, and the resultant danger of corporate images becoming outmoded and erroneous and reputations deteriorating, the issue of managing the corporate identity has been elevated to a level of strategic importance in executive circles.

The modern concept of corporate identity has a broad sweep and a strategic focus. It views a company's image and reputation among its several stakeholders as critical resources over which the firm has control. The framework presented here outlines a conceptual model through which management can comprehend, monitor, and influence the development of these intangible assets. The concept is relatively simple but its effective implementation can be profoundly challenging. The firms that master this challenge will, in all likelihood, be the ones that will survive and prosper today's turbulent business environment.