Paper no.33
Linking the relationship between brand portfolio structure and
corporate reputation: a customer perspective
Abstract
A substantial number of academic studies are devoted to study the determinants of
corporate reputation. However up to now, there has been a lack of research which
examines the relationship between corporate brand portfolio structure and corporate
reputation. This study will explore the significance of corporate brand portfolio
structure in determining corporate reputation. Laforet and Saunders’ framework will
be used to highlight the factors that contribute in shaping the corporate brand
portfolio structure. This study suggests that a coherent corporate brand portfolio
structure could enhance the corporate reputation.
1. Introduction
This study will investigate the significance of the relationship between corporate
brand portfolio structure and corporate reputation. Two basic corporate brand
portfolio structures have been identified by many authors (e.g. Aaker and
Joachimsthaler, 2000; Laforet and Saunders, 1994). First, individual product
branding; where each product within the portfolio has been given its own unique
brand name. This stand-alone status could facilitate positioning process. That means
all products could be positioned differently without making trade-offs. Second,
corporate branding; where the corporate name is used on all products and services
to rationalize market spending and to increase both cross selling relationship and
competitive advantage in products. Between the above two extremes many companies
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have developed a complex brand portfolio structure which consists of a hybrid options
(Aaker and Joachimsthaler, 2000).
Laforet and Saunders (1999) have improved that the influence of the corporate
reputation on the evaluation of company’s product depends to a certain degree on the
visibility of a corporate brand name in the communication of products.
2. Theoretical background
2.1. Brand portfolio structure
Brand portfolio is the set of all brands and brand lines offered by a particular firm for
sale (Keller, 2008), whereas brand portfolio structure refers to the firms’ approach in
the organizing and management of its brand portfolio (Aaker and Joachimsthaler,
2000). Laforet and Saunders (1994) revealed three general approaches concerning
brand structure: First, corporate-dominant, for which the corporate name appears as
the only brand identity; Second, product-dominant, where individual brands are
developed for every product; and third, mixed structure, in this approach both the
corporate brand and product brand are considered .
2.2. Determinants of corporate brand portfolio structure
Laforet and Saunders (1999) have identified six determinants of brand portfolio
structure. Surprisingly, a number of these determinants are not marketing issues.
2.2.1. Product range
Corporate-dominant structure is suitable for firms with a limited number of products
and limited resources, whereas product dominant structure is suitable for firms with a
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wide range of products. Douglas et al, (1999) argue that firms dealing with closely
interrelated product businesses that share a common technology, or rely on similar
core competencies, tend to use the corporate-dominant structure. Conversely, firms
engaging in unrelated product businesses with different associations and targeting
different customer segments choose to develop separate identities for individual
product business.
2.2.2. The importance of corporate identity
The relative importance placed by the firm on its corporate identity also influences
corporate brand portfolio structure. To many companies name is more than label; it
represents company’s philosophy, principles, and values. Moreover owner and
national pride can be reflected by the use of corporate name. Companies follow
different pricing strategies, however, in similar markets they feel they still have to be
furtive about the relationship between their brands. On the contrary, if prices are in
line and the market similar, there is no need to hide the identity or relationship
between brands (Saunders and Robert, 1993).
2.2.3. Company structure
Brand portfolio structure is affected by corporate structure. The essential concern
about corporate structure is the degree of centralization and decentralization.
Centralized companies have more chance of standardization, where, corporate
dominant structure is more implemented. However, a decentralized organizational
structure business unit will tend to develop their identity (Laforet and Saunders,
1999).
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2.2.4. History
Studying companies’ history can help to understand why companies present and
manage their brands in such a way. Rao et al , (2004) argued that brand portfolio is a
result not essentially of planned branding decision making but of other decisions that
the firm may have made. For instance, Muzellec and Lambkin (2007) stated that
changing the ownership structure may force companies to change their name and
adjust their brand portfolio structure. They added that the influence of mergers,
acquisitions, diversification and divestment on corporate brands portfolio is evident.
However, Aaker and Joachimsthaler (2000) have also posited that too often a name
change is stirred by ego or convenience of decision makers rather than an objective
analysis of brand portfolio structure.
2.2.5. Strategy
Strategic goals can influence corporate brand portfolio structure. For instance, in
order to increase the efficiency of promotional expenditures, and to transmit corporate
positive associations across many products, linkage between corporate name and its
products has to be perceived by customers. In this case the corporate-dominant
portfolio structure is used. In contrast, by using product-dominant structure,
corporations will be able to develop a number of distinct brands with different
associations competing in the same or different markets (Laforet and Saunders, 1999).
Muzellec and Lambkin (2006) argued that corporations could use a different name in
order to differentiate between the corporate brand and its constituent sub-units to
reduce the associations that would adversely affect its sub brands.
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2.2.6. Market segmentation
Laforet and Saunders (1999) have shown empirically that market segmentation is one
of the determinants of corporate brand portfolio structure.
In the case of
heterogeneous market segments with different needs, product-dominant portfolio
structure will be use as a means to differentiate between company’s products.
Whereas, homogeneous market segments with similar needs could lead to corporatedominant portfolio structure.
2.3. Corporate reputation
To date, there has been no overall agreement over the basic meaning and building
blocks of corporate reputation; however, an agreement about the importance and
variety of positive outcome that results from favourable reputation could be founded.
To the purpose of this study Fombrun’s (1996:72) reputation definition will be
adopted as he defined it as
“A perceptual representation of a company’s past actions and future prospects that
describes the firm’s overall appeal to all of its key constituents when compared with
other leading rivals”
2.4. The determinants of corporate reputation
A literature review has revealed that corporate reputation is determined by the
following factors;
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2.4.1. Capabilities and competences
Empirical studies have shown a positive relationship between capability and
competence with company’s reputation. The term “capability” is being used to
describe a company's ability to deal with different combinations of competitive
environments, whereas competence refers to skills, knowledge, attitudes, and knowhow that are central to create value to the company’s stakeholders (Long and VickersKoch, 1995). A wide range of capabilities and competences could be found in extant
literature. The relative importance of every capability or competence is varied among
companies, and within the same company.
2.4.2 Financial performance
A firm’s reputation is heavily influenced by its financial performance for example
Fombrun and Shanely (1990) showed that profitability (measured by market to book
value ratio and return on invested capital (ROIC) ) is positively correlated with the
companies’ reputation across industries, whereas the level of accounting risk
(measured by coefficient of variation) is negatively correlated with reputation
2.4.3. Corporate social responsibility
Traditionally the ultimate goal for business is to maximize wealth for its shareholder,
whilst this idea may still be true; company needs to secure an acceptance and
cooperative from several groups of constituents in order to achieve its short and long
run goals. Waddock and Grave (1997) showed empirically a positive linkage between
financial and social performance. They argued that a high degree of social
responsibility may there for necessitate a various range of activities.
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Illegal activity is found to be negatively correlated with firm’s reputation; whereas
charitable giving could be a means by which firm may to some extent restores its
reputation following committed an illegal acts (Williams and Barrett, 2000).
2.4.4. Media presence and media relations
Media presence and relations refers to the frequency of a company’s appearances in
the mass media and how the media portrays the company to the audiences, whereas
media relation refers to the relationship that the company has nurtured with all forms
of mass media. The media themselves act not only as a vehicle for advertising and as
a manifestation of reality about a company’s activities but also as an agent who
subjectively manipulates audiences’ impression and information understanding
(Fombrun and Abrahamson, 1988 cited in Fombrun and Shanley, 1990)
2.4.5. Product and services quality
A substantial number of empirical studies have suggested that product and services
quality has strong impact on a company’s reputation. Fombrun (1996) argues that
because of the intangibility nature of the product in services sector, perceived quality
plays a significant role in determining the provider’s reputation.
3. Research question and objectives
Despite the disagreement between scholars and practitioners about the basic meaning
and building blocks of corporate reputation, it is possible to find an agreement about
the importance and variety of positive outcomes that result from a favourable
reputation. For instance, Fombrun and Shanley (1990) have shown that favourable
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reputation can help firms to charge premium prices, recruit well-qualified employees,
enhance firms’ access to capital markets, and attract institutional and individual
investors.
More recently, research has also focussed on brand portfolio structure (e.g. Laforet
and Saunders, 1994, 1999; Aaker and Joachimsthaler, 2000; Douglas et al. 2001)
although it seems obvious that corporate portfolio structure will have an effect on
corporate reputation, this link has not yet been fully explored. Laforet and Saunders
(1999) have shown empirically that corporate-dominant structure helps to share
reputation across product class. Whereas by using a mixed brands approach, corporate
reputation can be enhanced by relating its name with a well-established brand name.
Thus, this research has two main research objectives. First, to develop a process
model to explain the antecedents and consequences of the relationship between
corporate brand portfolio structure and corporate reputation, and second, it intends to
empirically test the model in non-western countries to examine the applicability of
western-developed theories in other contexts. In particular this research is aiming to
answer the following question: How does brand portfolio structure affect corporate
reputation from the customer perspective?
4. Methodology
This research is mainly quantitative in nature, but the study will employ both
quantitative and qualitative (triangulation) methods to provide better understanding of
the research problem and similarly to collect primary data and test relevant theories.
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In particular, the semi-structured interview and survey methods will be used in the
data collection process respectively.
In order to test the applicability of western-developed theories, this research will
collect the data from non-western country. Jordan has been chosen to achieve this
research objective for two reasons: First, its national culture is significantly different
from the western culture. Second, Islam, which is the main religion in Jordan, helps
differentiate Jordanian customers from those in western countries. Thus conducting
this research in Jordan will facilitate the assessment of applicability of theories.
Fast moving consumer goods (FMCG) producers have been chosen as single industry
to conduct the research for the following reasons: First, the single industry provides a
better control over market and environmental issues. Second, a variety of corporate
brand portfolio structures can be found within this industry, which will enable the
researcher to experiment with the effect of different brand portfolio structure on
corporate reputation. Nvivo software will be used to code and extract information
from interview data. Exploratory factor analysis (EFA), confirmatory factor analysis
(CFA), and multiple regression analysis will be used to validate measurement scales
and test hypotheses.
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