CHAPTER ONE
INTRODUCTION
- BACKGROUND OF STUDY
In a competitive market environment firms not just compete for customers, they also vie for reputational status across their relevant constituent groups (Henard and Dacin, 2010). To be successful, firms must effectively interact with a number of constituents such as customers as they are one of the most important stakeholder groups for firms because they create revenue streams. Reputation of a firm in view of customers is becoming ever more important because it exerts an influence on both commercial outcomes like profits and non-commercial outcomes like customer trust (Fombrun, 1996; Davies et al., 2002). Reputable companies are expected to behave well and are less likely to engage in negative behaviors, which strengthen customers' trust in their integrity and reliability (Keh and Xie, 2009).
Corporate reputation is not a newborn issue neither in academic world nor practice. The term has evolved with the passage of time to become a strategic and intangible corporate asset and it has been used in daily life, business, and politics, etc. for a very long time. Reputation matters and it explain why customers choose company product or service in preference to competitors offering. It makes the difference between success and failure. Nevertheless, the events of the past decade – reputational crisis of well-known organizations (for instance, the fall of Arthur Andersen in 2002), the demise of huge corporations, such as Enron, due to fraudulent practices, rising sophistication of stakeholders, globalization and information flows, changing business and competitive environment, growing demand for corporate transparency and social responsibility, etc. – encouraged renaissance of caring and striving for good reputation.
The first fundamental academic book on corporate reputation was published by Fombrum, in 1996 and can be considered to be a starting point in the development of reputation management as a separate academic discipline and research field (Fombrum, 1996). Corporate reputation is a concept with exceptional multidisciplinary richness, which brought about increase in the number of scholars researching corporate reputation as well as growing sophistication in definition of corporate reputation. Corporate reputation essentially relate to – competition or comparing a company (its past actions, performance results, etc.) with its rivals. In order word, corporate reputation represents a company„s status among employees and external stakeholders compared to its rivals (Fombrum, 1996, 2001). Corporate reputation directly affect the strategic behavior patterns of a firm and the observable characteristics of the manner in which an organization performs decision-making and planning function with regard to issues that are of strategic importance to its survival, growth and profitability (Oghojafor, 2007). Corporate reputation is directly related to the corporate identity of company and it is interpreted as an organization’s ethos, goals and values that create a sense of belonging among company‟s stakeholders (George et al., 2012).
Reputation is a word much used today as a perception of past actions and future behavior of an individual or organization viewed not in isolation but in the context of what others are doing in the marketplace. This relativity is important and a good one is earned through hard work yet can be quickly lost through misfortune or incompetence. Apart from the dynamics of reputation, the quality depends on the relative values of the sector or its stakeholders. A bank might be judged to have a good reputation on service quality, but deposit security is likewise a business-critical success factor. Corporate reputation has long been recognized as a critical success factor in marketing a service (Eunsang, et al., 1993; Thomas, 1978). A good reputation is considered as an asset that can enhance the buyer‟s expectation regarding the company’s offerings (Eunsang, et al., 1993; Schmalensee, 1978; Shapiro, 1983). The reputation of a marketer’s enhances communication effectiveness; for example, pricing and advertising serve as a communicator of product quality (Shapior, 1973; McGinnies, 1973; Tellis and Fornell, 1988; Eunsang, et al., 1993). Within the past few years, the importance of intangible assets in general and the significance of corporate reputation in particular have grown rapidly. To create market entry barriers, to foster customer retention, and thus to strengthen competitive advantages, intangible assets are vitally important. Creating and exploiting them allows companies to drive markets, rather than to be market driven.
Trust is defined as the level of reliability ensured by one party to another within a given exchange relationship. In a marketing context, trust is usually linked to consumer expectations concerning the firm’s capacity to assume its obligations and keep its promises. These expectations are based on the firm’s competence, honesty, and benevolence. Competence is expertise; and, for customers, it reflects the firm’s capacity to carry out transactions and to live up to their expectations. Honesty is associated with fulfilling promises made by the firm, and benevolence represents the firm’s willingness to take into consideration consumer interests when making decisions and when planning for engagement in customer relationship activities. The role of trust in forming behavioural intentions is well defined in the literature. For example, trust enables a firm to develop and to maintain customer loyalty. Consumers who trust a firm expect promises to be respected as advertised. They also expect the firm to act based upon their interests.
In the corporate world, reputation is seen as a major element of an organization’s provenance alongside and included in financial performance and innovation. The academic-practitioner team of Paul Argenti and Bob Druckenmiller suggest that it is a “collective representation of multiple constituencies‟ images of a company built up over time” (Argenti and Druckenmiller, 2004, p. 369). It is also linked to the organization’s identity, performance and the way others respond to its behavior. The Merriam Webster dictionary define it, as the overall quality or character as seen or judged by people in general . . . a place in public esteem or regard: good name. Brown et al., (2006) defines corporate reputation as the set of corporate associations that individuals outside attribute to the organization.
The quest for being an exclusive, best, and responsive company indicates necessity for acknowledging corporate reputation to be an important source of competitive advantage. Good corporate reputations are critical not only because of their potential for value creation, but also because their intangible character makes replication by competing firms considerably more difficult. Thus, corporate reputation can be a key contributor to an organization’s success and it can just as easily be a contributing factor to an organization’s failure. Researches focusing on stakeholders illustrate that managing reputation is not such an easy thing to plan and do, because of two critical factors: lack of evidence on how a company‟s action influence stakeholders‟ perception (Mahon, 2002) and stakeholders‟ critical interpretation of a company‟s endeavors to manipulate its reputation (Ferris et al., 2003). Fombrun and van Riel (1997,2003) identified several distinct views of reputation elements to include: economic, strategic, marketing, organizational, sociological and accounting, each with its own tradition of defining the concept and conducting research.
- STATEMENT OF THE PROBLEM
As Jin, Park and Kim (2008) suggested, the negative consequences of untrustworthy behavior is perceived to be more harmful for firms that already have a good reputation, so the customers are more likely to trust a firm with a good reputation rather than a firm with a poor or no reputation. Consequently, reputation is expected to positively affect trust to the operators of Dana Air this is what this study seeks to find out.
Furthermore, researchers have mainly focused on the effects of corporate reputation on financial performance (Eberl and Schwaiger, 2005). Also, the effects of corporate reputation on customer behavior are discussed in many studies (Keh and Xie, 2009;). Corporate reputation research generally found out that personal experience has the greatest impact on the reputation formation (Ragas et al., 2014). Of all these researches carried on none researched on the effect of customers trust on corporate reputation.
- AIMS AND OBJECTIVES
The main aim of this research is to examine the effect of customer trust on corporate reputation. Other specific objectives include:
1. to determine the relationship between customer trust and corporate reputation in Dana Air.
2. to access the impacts of customer trust on corporate reputation in Dana Air.
3. to examine the effect of customer trust on corporate reputation in Dana Air.
4. to examine the importance of customer trust on corporate reputation in Dana Air.
5. to identify factors that develops customers trust in Dana Air.
6. to examine the challenges that impedes on corporate reputation in Dana Air.
7. to proffer solutions to the challenges that impedes on corporate reputation in Dana Air.
- RESEARCH QUESTIONS
1. what is the relationship between customer trust and corporate reputation in Dana Air?
2. what are the impacts of customer trust on corporate reputation in Dana Air?
3. what is the effect of customer trust on corporate reputation in Dana Air?
4. what is the importance of customer trust on corporate reputation in Dana Air?
5. what are the factors that develops customers trust in Dana Air?
6. what are the challenges that impedes on corporate reputation in Dana Air.?
7. what are the solutions to the challenges that impedes on corporate reputation in Dana Air?
- STATEMENT OF RESEARCH HYPOTHESIS
1. H0: customers trust has no significant effect on corporate reputation.
2. H1: customers trust has a significant effect on corporate reputation.
- SIGNIFICANCE OF STUDY
This study will be of significant benefit to firms and organisations and especially to the management of Dana Air to understand that in order to gain customers’ trust, companies must assure that they are strong and reliable companies which stand behind their offers.
Form the findings of this study; firms will get to know that Customers also evaluate the companies as strong and reliable which provide innovative services at fair prices. In addition, customer orientation makes a substantive contribution to the variance in customer trust. Customers are likely to believe that highly regarded companies act fairly to their customers and consider rights of their customers seriously. Dana Air customers give importance to being treated courteously and equally by employees of companies. The findings of this study suggest that companies seeking to have a good corporate reputation should note how important to concern customers’ and their needs in achieving that goal.
More so, this research of this study offers new insights to companies in building effective customer-based corporate reputation for gaining customer trust.
- SCOPE OF STUDY
The scope of the study will cover the effect of customers trust on corporate reputation (a study of Dana Air)
- LIMITATION OF STUDY
1. Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
2. Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work
