Individual Report on a Contemporary Corporate Reputational Issue

 

 

 

Introduction

 

Corporate reputation not only creates a competitive advantage for a corporation, but also influences its profitability and financial position. Reputation according to Serrat (2010) is the cumulative estimation in which a company is held others and the public it terms of its past actions and projected future prospects. A company with a positive corporate reputation is competitive and profitable because it can attract consumers. On the other hand, a company with a bad corporate reputation has poor financial position in the market, profitability, competitiveness, and low customers trust and confidence. Thus, a corporate reputation is a crucial strategic asset that enhances companies to create value (Serrat, 2010). According to de Marcellis-Warin and Teodoresco (2012) corporate reputation can be viewed as an intangible asset developed over a period time, and it symbolizes the trust and value that all different stakeholders have for the organization. As an asset, corporate reputation enhances the attainment of strategic objectives, including sustainable competitive advantage, profitable growth, and value creation. The report purpose is to present an analysis of a corporation that has recently experienced a reputation issue, and to provide ways that the corporation can employ in order to re-gain their reputation.

 

The Corporation and Corporate Reputation Issue(s)

 

General Motors Company (GM) is an international company that operates in motor vehicle industry. The headquarters are located in Detroit, Michigan. It usually designs, produces, markets, supplies and distributes vehicle parts and vehicles (General Motors, 2015). Over the years, the company has undergone numerous changes as part of restoring its reputation and competiveness in the market.  The corporation was established in 1908 and rebranded in 2009 after it filed for a bankruptcy (General Motors, 2015). In addition, the corporations’ revenue was $152.4 million in 2015 (General Motors, 2015).

 

Legal battles, massive recalls, and federal investigations put GM in the spotlight. The company is faced with credibility and reputational issues related to its products following the previous recalls. According to Vlastelica (2014), the company recalled three vehicles at the beginning of 2015 which were linked ignition switch crisis. This follows the recall of millions of vehicles in 2014. The company has year after year recalled its vehicles because of mechanical and automotive problems. Such recalls have damaged its corporate reputation as a reliable brand. Other than the recalls, GM has scared away its consumers and investors following its 2009 bankruptcy. As a result of the recent recalls, the share price declined by 14.6%, while that of its closer rivals such as Ford Motor Co. increased by 0.5% (Vlastelica 2014). In 2015 the company recalled 56 GMC Sierra HD pickup trucks and Chevrolet Silverado which had problems related to a faulty hose clamp. Thus, the company has faced both products quality and financial challenges have damaged the corporate reputation of the corporation. The corporation has lost brand values (trust and credibility), hence the need to rebuild its reputation. Over the last five years, the company has recalled more than 30 million cars (Vlastelica 2014). The recalls have cost GM over $billion, in addition to the brand reputation impairment and lost customer trust (Lowenstein, 2014).

 

 Ways for the Corporation to Re-Gain its Reputation

 

GM has severely damaged its brand, in addition to eroding shareholders and investors’ confidence, and consumer trust. The corporation needs to rebuild its reputation in order to gain its consumers’ trust, shareholders confidence, and restore its brand. Other than filing for bankruptcy, the corporation has also recalled more than 30 million cars in the last five years. Grebe (2013) has proposed the use of a reputation management strategy as the primary way which can be used by corporations to rebuild a damaged corporate reputation. Reputation management entails the creation of influencer strategies that build trust, deepen understanding, and alleviate risk in difficult, changing environments (Burke, Martin, & Cooper, 2011; Kitchen & Laurence, 2003). In this case, GM must adopt reputation management strategy in an effort to regain its reputation in the competitive and fragmented motor vehicle industry. Reputation management can restore the reputation of the GM Inc. in terms of improving trust, image, and confidence of investors and shareholders. The rationale for adopting corporate reputation is to manage the threats and opportunities by putting the interests of customers first (Burke & Martin, 2016).

 

The other way is for the corporation to communicate in an effective manner to the crisis it is facing to its customers and other stakeholders. Burke and Martin (2016) contended that “effective dealing with such crisis requires taking full responsibility for it, offering sincere apology, quickly disclosing details of the crisis, making progress or recovery visible, and analysing what went wrong so it will not happen again “(p.7). Thus, GM should have responded and taken full responsibility and deal with the crisis it was facing the moment it realized there was a problem. The company should therefore improve on its communication strategy so that the problems can be communicated in order to enhance the lost trust and confidence of the consumers (Murray & White 2004). For instance, GM can use different platforms to communicate with the public apart from the traditional communication channels such as newspapers, TV. By holding live TV interviews, using the social media and talk shows, GM’s management can help develop a better reputation for transparency and consistency, and ultimately regain trust. Although communication does not solve the problem, it can help GM management win back customers’ loyalty by creating empathy. Subsequently, the corporation can regain its market share.

 

A quick disclosure of any form of negative information deemed detrimental to the reputation of the company can improve the credibility of the company and restore the confidence of the stakeholders.  Educating the public on the potential crisis and acting in a transparent manner can help GM Inc. in understanding and resolving to fix the problems in the long-term (Burke et al., 2011; Wheeler, 2001). Argenti and Forman (2002) established that corporate communication enhances positive reputation by crafting a brand image. GM can therefore use corporate communication to make sure that information related to mechanical and automotive issues are reported to stakeholders, such creating a favourable point. Dalton (2013) pointed out that corporate communication promotes issue management, whereby a corporation can gain its legitimacy, thus reducing the gap between the GM’s performance and consumers’ expectation. The Chartered Institute of Management Accountants (2007) further added that communication of issues is a strategy that can rebuild the reputation of GM because its transparency is improved.

 

The other way that GM Inc. can used to rebuild its corporate reputation is through cultural change. Katzenbach, Steffen, and Kronley (2012) have described cultural change as a process whereby a company overhauls the process, structures, beliefs, and values by adopting shared goals for the welfare of the corporation. For instance, GM has developed a culture of developing vehicles with defaults and communicating the issues when accidents or deaths on its customers occur. Thus, as part of regaining its reputation, the top management can start with few interventions like increased quality management practices and acknowledgment of mechanical problems with its cars. These interventions can result into significant behavioural changes, and ultimately revitalize GM’s culture while preserving and promoting its strengths (Katzenbach et al., 2012). Cultural evolution in the long-term can make sure that GM regains its corporate reputation. A culture of quality and innovative solutions to the problems currently faced which have dented the corporate reputation can restore the corporations brand image to its loyal customers.

 

            Changing the expectations and beliefs of stakeholders addresses reputational risks (Eccles, Newquist & Schatz, 2007; Podnar 2014). The customers expect GM to report problems as they arise and communicate the possible solutions to the problems. Burke et al. (2011) pointed out that when the expectations of the consumers are realized, a favourable reputation is build. Understanding the human behavior and their roles is important in building the image and brand of a company. This is because human behavior is closely related to brand reputation, credibility of a company, and consumer loyalty.

 

Conclusion

 

Corporate reputation is one of the primary assets that an organization must keep in order to remain profitable and competitive. In addition, corporate reputation promotes the realization of strategic objectives such as profitable growth, consumers’ trust, investor’s confidence, and value creation. The report has explored GM an American care manufacturer corporation that has experienced corporate reputation issues revolving around its brand and financial wellbeing. The first way to ensure that the corporation regains its reputation is by adopting reputation management strategy, which can be used to rebuild trust, deepen understanding, and alleviate risks. Moreover, it can rebuild GM‘s reputation, restoring its lost brand image to customers and confidence of shareholders. The other way is for GM’s management to take full responsibility for the crisis, offer sincere apology, disclose details of the issues immediately they happen, make recovery visible, and analyse the cause roots of the problems. Corporate communication can also be applied to reduce the gap between the GM’s performance and consumers’ expectation. This can encourage transparency and credibility of the company. Lastly, cultural change can encourage GM to rebuild its brand image.

 

 

 

 

 

 

 

References List

 

Argenti, P., & J. Forman (2002). The power of Corporate Communications: Crafting the Voice And Image Of Your Business, McGraw-Hill, New York

 

Burke, R. J., Martin, G., & Cooper, C. L. (2011). Corporate reputation: Managing opportunities and threats. Farnham, Surrey: Gower.

 

Burke, R. J.,&  Martin, G (2016). Corporate reputation: Managing opportunities and threats. Farnham, Surrey, CRC Press.

 

Chartered Institute of Management Accountants (2007) Corporate Reputation: Perspectives of Measuring and Managing a Principal Risk [Online] Available at: < http://www.cimaglobal.com/Documents/Thought_leadership_docs/Corporate%20reputation%20perspectives%20of%20measuring%20and%20managing%20a%20principal%20risk.pdf> (Accessed 16 July 2016).

 

Dalton, J (2013) Reputation and Strategic Issue Management [Online] Available at: < http://www.id.uw.edu.pl/zasoby/profile/42/Dalton_v1.pdf> (Accessed 16 July 2016).

de Marcellis-Warin, N & Teodoresco, S (2012) Corporate Reputation: Is Your Most Strategic Asset at Risk? [Online] Available at: < http://www.cirano.qc.ca/pdf/publication/2012RB-01.pdf> (Accessed 16 July 2016).

Eccles, R G., Newquist, S C & Schatz, R (2007) ‘Reputation and Its Risks’, Harvard Business Review, [Online] Available at: < https://hbr.org/2007/02/reputation-and-its-risks> (Accessed 16 July 2016).

 

General Motors. (2015) GM-Our Company [Online] Available at: < http://www.gm.com/company/about-gm.html> (Accessed 16 July 2016).

 

Grebe, S. K. (2013) ‘Re-Building a Damaged Corporate Reputation: How the Australian Wheat Board (AWB) Overcame the Damage of the UN ‘Oil For Food’ Scandal to Successfully Reintegrate into the Australian Wheat Marketing Regulatory Regime’, Corporate Reputation Review, Vol. 16, no. 2, pp 118-130

 

Griffin, A (2009) New Strategies for Reputation Management: Gaining Control of Issues, Crises, and Corporate Social Responsibility. Kogan Page Limited.

Katzenbach, J R, Steffen, I& Kronley, C (2012), ‘Cultural Change That Sticks’, Harvard Business Review, [Online] Available at: <https://hbr.org/2012/07/cultural-change-that-sticks/> (Accessed 16 July 2016).

 

Kitchen, P. J & Laurence, A (2003). ‘Corporate reputation: an eight-country analysis,’ Corporate Reputation Review, vol. 6, no.2, pp. 103-117

 

Lowenstein, M (2014), ‘What Target Is Doing to Regain Consumer Trust – – And One of The Most Effective Things They (and GM) Could/Should Do’, Customer Think, [Online] Available at: <http://customerthink.com/what-target-is-doing-to-regain-consumer-trust-and-one-of-the-most-effective-things-they-and-gm-couldshould-do/> (Accessed 16 July 2016).

Murray, K & White, J (2004). CEO Views on reputation management, Chimes Communications, London.

 

Podnar, K (2014) Corporate Communication: A Marketing Viewpoint, Routledge, Washington, DC.

 

Serrat, O. (2010). Managing corporate reputation. Washington, DC: Asian Development Bank.

 

Vlastelica, R (2014) ‘General Motors issues three new recalls, cites ignition systems’ The Reuters. [Online] Available at: < http://www.reuters.com/article/us-gm-recalls-reports-idUSKBN0KA1RZ20150102> (Accessed 16 July 2016).

 

Wheeler, A. (2001). ‘What makes a Good Corporate Reputation?’ in Jolly, A. (Ed.), Managing Corporate Reputations, Kogan Page, London.

 

 

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