Corporate Identity, Ethics And Reputation

Ó Springer 2007

Journal of Business Ethics (2007) 76:69–82 DOI 10.1007/s10551-006-9273-4

Corporate Identity, Ethics and Reputation in Supplier–Buyer Relationships

ABSTRACT. Multi-national corporations (MNCs) have been criticised for not behaving ethically in some situations, which could have a negative effect on their reputation. This study examines the ethics of a large MNC in its relationship with its suppliers. A brief literature review of corporate identity, business ethics and buyer–supplier relationships is undertaken. The views and perceptions of the buying staff and the suppliers to a large South African MNC are obtained and discussed. The results indicate that this MNC has a good corporate reputation among both its suppliers (an important stakeholder) and its own buying department. The existence and implementation of formal codes of ethics was found to be a necessary, but not sufficient condition for good ethical practice. Candid relationships with suppliers emerged as a second and important factor. Ethical perceptions of buyers by suppliers are driven by the management of corporate identity, through the elements of ethical standards and candid relationships. We present a model of corporate identity/ reputation in Buyer–Supplier Relationships. KEY WORDS: corporate identity, business ethics, supplier–buyer relationships, reputation

Michael Bendixen is a Professor of Research Methodology and Statistics at the H. Wayne Huizenga School of Business at Nova Southeastern University, Florida. His research interests include business ethics, governance and culture. His articles have appeared in the European Journal of Marketing, Industrial Marketing Management, Journal of Business Research, Journal of International Business Studies and Journal of Marketing Management amongst others. Russell Abratt is a Professor of Marketing at the H. Wayne Huizenga School of Business at Nova Southeastern University, Florida. His research interests include corporate identity management and business ethics. His articles have appeared in the Journal of Business Ethics, Journal of Business and Psychology, European Journal of Marketing, Journal of Marketing Management, Industrial Marketing Management, and Business Horizons amongst others.

Michael Bendixen Russell Abratt

Introduction Executives today have to pay attention to the expressed needs and preferences of many interest groups. It is no longer appropriate for companies to behave as if their owners, shareholders and employees are the only important stakeholders. Within the company there are numerous stakeholders with different interests, but there are also stakeholders outside the company, including suppliers (Verkerk et al., 2001). For example, the use of local suppliers has been common for dominant employers and large corporations to maintain good community relations (Logsdon and Lewellyn, 2000). One of the stakeholders that has been neglected in the corporate identity management process and the corporate social responsibility (CSR) literature is suppliers. The scope of CSR is broad, and the supply chain is one of its important elements as it covers procurement policy, and purchasing guidelines (Fukukawa and Moon, 2004). Interest in supply chain policy appears as a relatively recent wave of CSR internationally, and reflects increased corporate responsibility for human rights, labour standards and environmental responsibility of their suppliers and business partners (Fukukawa and Moon, 2004; Moon, 2002). A company does not project a unique image through corporate identity management. Rather, it may possess various images which differ according to specific interest groups, such as customers, employees and shareholders, each of whom have different types of experiences and contexts with the company (Dowling, 1988). Corporate identity can be seen as the way in which a company makes itself known to the world. Behaviour, communication and symbols are its indicators (Korver and van Ruler, 2003). Corporate reputation indicates a value judgement about the companyÕs attributes and evolves over time

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as a result of consistent performance (Gray and Balmer, 1998). The current reputation of an organisation is determined by the signals that interest groups receive concerning its behaviours, whether directly or via other information channels (Fombrun and Shanley, 1990). In addition, the logic of transaction cost economics suggests that companies with good reputations are attractive business partners, since their reputation can substitute for expensive governance mechanisms (Williamson, 1996). In this article, we explore the consequences of the ongoing interaction between a companyÕs buying department and the salespersons representing its suppliers. This is examined through perceptions of ethical behaviour and its consequential impact on corporate reputation. This element of corporate identity management is critical because of the external nature of the interface between buyers and sellers. Purchasing departments are exposed to greater ethical pressures than individuals in many other jobs. They work with salespersons from supplier organisations; they are primarily responsible for very large budgets, and they are often evaluated on the discounts or ‘‘deals’’ they negotiate with the sellers. On the other hand, salespersons from supplier organisations work in relatively unsupervised settings; they are primarily responsible for generating sales, and they are often evaluated on the basis of short-term objectives (Futrell, 2002). Razzaque and Hwee (2002) reviewed the ethical issues in the purchasing environment. A salespersonÕs ethical behaviour can play a critical role in the formulation and maintenance of long-term buyer–seller relationships (Gunlach and Murphy, 1993). Despite the importance of ethics in buyer–seller relationships, very little empirical work has been published in this area. Multi-national Corporations (MNCs) have been subjected to intense public criticism because, in seeking new markets, they have ignored the oppressive working conditions and abuse of workersÕ basic human rights in those countries. MNCs cannot ignore criticism because it reflects a growing gap between societal expectations and corporate performance (Sethi, 2002). The aim of this article is to report on a case study in which the views of the buying staff and the suppliers to a large South African MNC rate and perceive its ethical behaviour.

Literature review Corporate identity Originally, corporate identity was synonymous with organisational nomenclature, logos, and visual identification. Corporate identity is more than just an organisational mark or symbol of recognition (Balmer, 1995). Today, the role of symbolism has grown from its original purpose of increasing organisational visibility to a position where it is seen as having a role in communicating corporate strategy (van Riel and Balmer, 1997). Corporate identity has been studied by management and marketing academics since the 1990Õs as a strategic management tool. Today there is a generally accepted distinction between corporate identity (what the firm is) and corporate image (what the firm is perceived to be), even in the absence of a clear meaning of corporate identity itself (Abratt, 1989; Balmer and Soenen, 1997; Balmer, 1998). Corporate identity denotes the characteristic way in which an organisation goes about its business, how it thinks, feels, behaves and interfaces with the external world via its employees (Kiriakidou and Millward, 2000). A strong identity has a number of potential benefits to an organisation, including attracting quality personnel and breeding employee motivation (Balmer, 1995; van Riel and Balmer, 1997). Balmer and Soenen (1997) conducted a major review of the corporate identity literature. They stated there was a lack of effective models of corporate image formation. According to Balmer (2001: 280), ‘‘an organisationÕs identity is a summation of those tangible and intangible elements that make any corporate entity distinct. It is shaped by the actions of the corporate founders and leaders, by tradition and the environment. At the core is the mix of employeesÕ values which are expressed in terms of their affinities to corporate, professional, national and other identities. It is multidisciplinary in scope and is a melding of strategy, structure, communication and culture. It is manifested through multifarious communications channels encapsulating product and organisational performance, employee communication and behaviour, controlled communication and stakeholder

Corporate Identity, Ethics and Reputation in Supplier–buyer Relationships and network discourse.’’ Identity is the embodiment of the organisation. Every firm has a philosophy, whether tacit or codified (Abratt, 1989; Alessandri, 2001; Leuthesser and Kohli, 1997). This philosophy is personified through the behaviour of the firm as well as in the visual presentation of the firm. The corporate identity concept encompasses issues such as business scope and culture, among others (Balmer and Greyser, 2003). The importance of culture to the identity of an organisation has been recognized by identity researchers for the last decade (Balmer, 1998; Balmer and Wilson, 1998). Culture plays an important role in the development and enactment of corporate identity. Culture is defined by Kiriakidou and Millward (2000) as the corporate values that are held by staff and management and their concrete manifestation in organisational symbolism and behaviour, which frame the way that the organisation operates. The values held by personnel within the organisation are at the heart of its identity formation process (Abratt, 1989). The identity of an organisation encompasses a bundle of values that are derived from a federation of subcultures, which are found within and outside the organisation (Balmer and Wilson, 1998) they continually evolve and are amorphous. This mix of values, to a considerable degree, gives an organisation its distinctiveness (Balmer and Gray, 2003). Interaction or an experience with a corporate identity is what produces a corporate image in the minds of the public (Gray and Balmer, 1998).

Buyer–seller relationships Firms worldwide are faced with the challenge of becoming more attractive to their shareholders, their clients/customers, their suppliers, the environment and also to their employees. Stakeholder management really is a question of balancing the different stakeholder interests and creating added value. The stakeholder model assumes a partnership between management and stakeholders; this partnership is a real, dynamic and changing process of dialogue. Management can stimulate the involvement of the stakeholders by early stage participation and developing a culture of common responsibility with the focus on a clear corporate identity (Goodijk, 2003).

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In building relationships, any vision of corporate values whose aim is the creation of documents is usually stultified by a static and uniform vision of the corporate identity. Corporate values are relational values. They only express what an organisation is in as far as they express, among other concepts, how it expects to relate to stakeholders. Values do not express a fixed, de-contextual identity (Lozano, 2005). Working with values always describes what the company does and what the company wants to do, partly because corporations are what they do (Post et al., 2002). The shared values of an organisation are those that emerge from its ongoing self-reflexive, constitutive dialogue as to its identity, purpose and relationship to its stakeholders (Pruzan, 1998). The role of the purchasing function in the business has significantly increased in importance due to the emphasis on building and maintaining long-term relationships with external constituencies. Buyers are key linkages between the firm and many of its external environments (Turner et al., 1995). An ethical purchasing function is imperative if the organisation is to develop relationships with key constituents that are based upon mutual trust. Buyers and suppliers typically have competing goals and objectives. Thus, the ‘‘give and take’’ that occurs between these individuals can be a potential source of serious legal and ethical problems. Ethicality of the purchasing function has an impact on the bottom line of the organisation as bribes and kickbacks can be costly. Buyer–Seller or customer–supplier interdependence is an integral part of business marketing (Webster, 1992) and the effectiveness of business marketing is largely determined by long-term relationships between buyers and sellers. Wilson (1995), reviewing research on buyer–seller relationships, concludes that this domain appears to a large extent to share a common set of constructs: trust, commitment, adaptation, reputation and relationship history. Kalafatis (2000) states that there is a general realisation, and acceptance, that the development and management of relationships with both customers, and suppliers are central themes of current practice and research. Suppliers and customers need to be viewed as a partnership. The benefits of cooperation rather than conflict in buyer–supplier relationships include ongoing cost reductions, quality improvements,

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increased operating flexibility and more powerful competitive strategies (Peck et al., 2000). Customers who work more closely with suppliers will also be able to create a more responsive supply chain that can meet final demand in a timely manner. According to Gronroos (1994), relationship marketing is to identify and establish, maintain, enhance and when necessary, also to terminate relationships with customers and other stakeholders, at a profit, so that the objectives of all the parties are met, and that this is done by mutual exchange and fulfilment of promises. Supplier relations are recognised as important in developing a sustainable competitive advantage, yet most buyer–supplier relationships are characterised as being adversarial (Mudambi and Helper, 1998). As trust is relational, it is an ongoing process that must be initiated, maintained and sometimes restored. Certain conditions must exist for trust to develop and evolve. First, persons and organisations must interact for trust to develop. Second, parties must be willing to depend on one another and take risks. Third, trust is context dependent, such as the stakes involved, the balance of power in the relationship, and the perception of the level of risk (Bell et al., 2003). In a buyer–seller relationship, trust is built by the exchange performance, the negotiations and conflict resolution. Partnership is based upon commitment, trust and continuous improvement. Marketing attempts to create an impression of a personal relationship to customers even if the supplier does not know the customers or even meet them. It is a pseudopersonal relationship, but, all the same, it could be an efficient one (Gummesson, 2002). Several employees from both the supplier and buyers side are involved in the relationship. They are involved in negotiation, communication, bargaining, the transfer of goods, services and money. Ethical issues and personal values always influence such transactions and will have an influence on the reputation of the parties involved.

Buyer–supplier relationships and corporate identity A relationship deemed to be trustworthy is one in which a partner is more likely to make a long-term commitment. Trust creates the conditions under

which commitment develops and firms become willing to make relationship-specific investments capable of developing competitive advantage (Turnbull et al., 1996). Trust in a partner is likely to build slowly over time. Achrol (1997) notes that many business decisions superficially based on ‘‘trust’’ may in reality be judgements related to the reputation of an organisation. Reputation is an overall cognitive impression of an organisation that has been formed over time. This is based on its image, which is the immediate impression of an organisation, whilst reputation is a stakeholderÕs overall assessment of the ability of the organisation to meet defined criteria (set by the stakeholder), such as integrity (Bick et al., 2003). Thus, the image and reputation of an organisation is a reflection of its corporate identity. We contend that the buyer– supplier relationship, together with the ethical values behind that relationship, is key to corporate identity management, and forms part of the vital process of an organisationÕs reputation formation in the eyes of the various stakeholders.

Business ethics Ethics are concerned with doing good, or the right thing in a given human situation (Wilson, 1975). Business ethics are concerned with an evaluation of business practices in the light of some concept of human value, it looks at corporate profits not for their own sake but with respect to the achievement of some human good. Carroll (1981), while recognising that social responsibility issues do have ethical dimensions, distinguishes social responsibility and business ethics on the basis that the former is primarily an organisational or corporate concern, while the latter is the concern of the individual manager or business decision-maker. This distinction is, however, by no means universally accepted and debate still continues as to whether organisations, because they are artificial creations, can be said to have social responsibilities at all or whether the term is only applicable to individuals within the organisation. Bartels (1967), in developing his model for ethics in marketing, regards ethics as referring to a standard in terms of which business action can be judged ‘rightÕ or ‘wrongÕ – not in an absolute sense, but

Corporate Identity, Ethics and Reputation in Supplier–buyer Relationships relative to another entity whose expectations have either been violated or fulfiled. These various explanations of the field of business ethics indicate that the distinction between social responsibility and business ethics is not easily made, certainly not insofar as their application to the societal marketing concept is concerned. Thus, while certain aspects of social responsibility may be discretionary – such as donations to charitable institutions – and therefore their non-fulfilment cannot be regarded as ‘wrongÕ or ‘unethicalÕ, other aspects of social responsibility are clearly based on obligatory standards of behaviour which, if isolated, can certainly be labelled as unethical (Carroll, 1981). Perhaps, ethical responsibilities are only one fact of a wider range of responsibilities known as ‘social responsibilitiesÕ. Whatever the precise distinction may be, business ethics and business social responsibility can both be said to constitute the philosophical foundation upon which the societal marketing concept is grounded. Murphy (1988) and Tsalikis and Fritzsche (1989) stated that codes of conduct represent the most effective way of implementing an ethical policy and reducing ethical conflict. It is further stated that the argument for instituting a code of conduct could be based on efficiency, with codes being a binding ideal for a profession, in the interest of the public, consistent with rational self-interest and an effective tool towards self-regulation. Globalisation of markets is pressuring companies to develop codes as public statements of core principles that are universally applicable (Carasco and Singh, 2003). We must note, however, that there are arguments for and against codes of ethics. Schlegelmilch and Houston (1990) discuss these arguments. The main reason why companies support such codes is that it is useful in defining and clarifying policy and it is part of a ‘‘total quality approach’’. The main argument for not having a code was that behaviour is more important than words, and that they tend to be too broad to be of any use. Schlegelmilch and Houston (1990) conclude that the limited value of codes of ethics as an isolated measure suggests that they need to be accompanied by ethical education and other processes that support their enforcement. It is not only strong leadership from above that ensures ethical standards; ethical business stems from an ethical corporate culture (Sinclair, 1993). Sinclair

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(1993) states that there are two approaches to moulding an organisationÕs culture towards ethical ends. The first is the approach of creating a unitary corporate culture around ethical values. In this approach, it is argued that management can and should actively manage organisational culture. The second approach fosters the coexistence and diversity within the organisation of underlying national and racial cultures as well as professional and occupational subcultures. Both approaches, according to Sinclair (1993), contain different risks for business ethics. In the first approach, the risks are that the ethics are those of the managerial elite. The risks in the second approach are that the plethora of competing values of subcultures allows deviant groups to flourish, leaving management unable to find a common basis on which to proceed. Sinclair (1993) concludes that, while the debate occurs in a broadly managed framework, it alternatively relies on individual, rather than institutional processes to produce better ethics. There is evidence that excellent companies appear to be more ethical, implying a relationship between excellence and ethics. Although excellence in companies seems to imply a strong presence of ethical behaviour in those companies, the reverse is not always true, as ethical companies are not necessarily excellent (van der Merwe et al., 2003).

Methodology The methodology used in this study was a single case study comprising a large South African MNC in the fast-moving consumer goods field. The study was conducted in the South African market and, while not quite a monopoly, this MNC has a dominant position in this market. As a consequence, it could take significant advantage of its suppliers, particularly those for which it is the largest customer. This raises questions as to the way in which the buying department of the MNC is perceived in terms of its ethical behaviour. The MNC is a significant player in the international market with operations in sub-Saharan Africa, western and central Europe, Russia, India, China and North America. The purpose of this research was to assess the perceptions that both the MNCÕs suppliers and the staff of their buying department have about the ethical behaviour of the company.

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The study was conducted in two phases. During the first phase, in-depth, open-ended interviews were conducted with a convenience sample of 20 representatives of suppliers to the MNC. These representatives qualified for selection if they interacted on an ongoing basis with the MNC in terms of the supply of goods and services. The purpose of this phase of the research was to identify constructs that may be used both to assess ethical behaviour and to distinguish between poor and excellent ethical behaviour. Two qualitative research techniques were used in this phase of the research. The critical incident technique (Flanagan, 1954; Bitner et al., 1990) was used to allow respondents to describe critically good and bad ethical incidents and the behaviour of the staff of the MNC that created these incidents. A Kelly repertory grid technique (Fransella and Bannister, 1977; Tan and Hunter, 2000) was used to allow respondents to express constructs that distinguished different organisations (in this case the MNC and two other major customers of the supplier) in terms of ethical behaviour. This phase of the research resulted in 30 statements that seemed to discriminate ethical behaviour in the supplier – customer relationship. In consultation with the management of the MNC, it was agreed that further five statements be added to this battery for use in the second phase of the research. During the second phase of the research, the 35 above-mentioned statements formed the items on ethical scale that respondents were asked to rate using a five-point Likert scale. Approximately onethird of the statements were phrased in the negative sense so as to facilitate the usage of all elements of the Likert scale. A complete list of the 35 statements is presented in Appendix I. This formed the main body of the questionnaire which was supplemented with demographic details of the respondents, two questions pertaining to the overall perceptions of ethical behaviour of the MNC and two open-ended questions where respondents could give examples of good and poor ethical behaviour by the MNC staff. The first of these questions required respondents to rate the MNCÕs ethical standards on a 10-point numeric scale, where 1 represented poor and 10 excellent. Respondents were then asked to rate the MNCÕs ethical standards relative to suppliersÕ other customers on a five-point

verbal scale ranging from much better to much worse. The database of contact details of people at supplier organisations with whom the MNC staff interact was updated and an e-mail was sent to each of these people (approximately 500 in total) advising them that a survey regarding the ethical behaviour of the MNC was to be undertaken and inviting them to participate. This letter was sent in the name of both the MNC management and one of the researchers. Respondents were assured of the absolute confidentiality of their responses. Shortly thereafter, a further e-mail was sent asking potential respondents to visit a website and complete the survey (surveymonkey.com). After 2 weeks, a reminder was sent to potential respondents encouraging them to complete the survey if they had not already done so. The staff of the MNCÕs buying department was also invited to participate in the survey. After the cut-off date, the data was downloaded from the website and sent to the researchers for analysis. This was done in the presence of the MNCÕs internal auditors so as to assure that the data was not tampered with in any way.

Results Sample details A total of 129 supplier representatives and 28 members of staff responded to the survey. The typical supplier respondent was: male, aged 35–49, a Director/Board Member or Sales Manager/Consultant, located in Gauteng province, interacts with the buying department, has been doing so for more than 3 years and with the MNC representing less than 10% of sales volume. The typical staff respondent was: female, located in Gauteng, works in the buying department and has worked for the MNC for more than 3 years.

Data analysis In order to conduct multivariate statistical analysis on the data, the 35 statements rated on the Likert scale were rescaled from ordinal to interval data using correspondence analysis (Bendixen and Sandler,

Corporate Identity, Ethics and Reputation in Supplier–buyer Relationships 1995). The result of the rescaling is as follows: strongly disagree 1.000; disagree 1.846; neither agree/disagree 3.122; agree 4.213; and strongly agree 5.000. The mean scores of the 35 statements are also presented in Appendix I.

Dimensions of perceived ethical behaviour In order to test the dimensionality and to identify any underlying dimensions of ethical behaviour, the rescaled responses to the 35 statements were subject to factor analysis. Although 2, 3, 4, 5 and 6 factor solutions were examined, a two-factor solution yielded the most meaningful results. Factor 1: Ethical Standards The primary dimension underlying the constructs of perceived ethical behaviour comprises the statements shown in Table I. The underlying theme in this factor seems to be perceived ethical standards. This factor embraces nepotism, the existence and adherence to a code of ethics, legal and moral principles, management attitude, respect for the confidentiality of suppliersÕ

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information, respect for suppliersÕ products, politeness of staff, justice (with respect to bribery) and product quality. The average score on this factor (on the same 5-point Likert scale with reverse scoring of statements with negative loadings) was 3.95. The only statistically significant difference on this score was over the length of time the respondents had interacted or worked for the MNC. For those that worked for less than a year the score is 4.23, between 1 and 3 years 3.81 and more than 3 years 3.93. It is apparent that respondents who have interacted/ worked for the MNC for less than a year agree more strongly that it has high-ethical standards than those who have interacted/worked for the MNC longer. Factor 2: Candid relationships The second dimension underlying the constructs of perceived ethical behaviour comprises the following statements shown in Table II. The underlying theme in this factor seems to be perceived candid relationships. This factor embraces the speedy resolution of problems, respect, transparency, clear communications and fair but firm negotiations. This latter aspect is of interest in that

TABLE I Ethical standards Statement

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(2.20) Family and friends are given preference when contracts are awarded. )0.705 (2.27) MNC is a large organisation so people can get away with unethical behaviour. )0.658 (2.21) Management turns a blind eye to unethical behaviour. )0.657 (2.18) MNC management and staff adhere to the code of ethics. 0.632 (2.29) MNC staff is professional in their conduct. 0.625 (2.26) MNC respects the confidentiality of supplier pricing and other information shared during negotiations. 0.599 (2.17) MNC has a strict code of ethics. 0.591 (2.19) MNC will discuss proposals with our competitors in an attempt to bring down the price. )0.579 (2.31) MNC staff often denigrate their competitorsÕ products. )0.530 (2.32) Some MNC employees spend far too much on entertainment. )0.529 (2.34) Management at the MNC have an open door policy. 0.516 (2.25) Everybody is given an equal opportunity to submit proposals for contracts. 0.506 (2.10) Staff members are often rude. )0.488 (2.5) MNC is not only concerned with what is legal, but also with what is morally right. 0.473 (2.24) MNC is socially responsible. 0.465 (2.13) Staff members who take bribes face penalties. 0.441 (2.30) MNC does not accept second-rate work. 0.435 The internal reliability of this factor, as measured by CronbachÕs co-efficient a, is 0.8800.

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Michael Bendixen and Russell Abratt TABLE II Candid relationships

Statement

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(2.14) A loyal and enduring relationship with suppliers of products and services is important to the MNC. (2.7) When there is a problem or a query I know it will be sorted out quickly. (2.4) When there is a problem or a query I know whom to contact. (2.23) MNC treats its suppliers with respect. (2.35) MNC is concerned with the long-term health/sustainability of the supply chain. (2.33) MNC expect suppliers to be transparent, but are not transparent themselves. (2.8) We have regular meetings with MNC, which helps to maintain a good working relationship. (2.15) MNC is highly regarded as far as business ethics is concerned. (2.2) Contracts are clear and precise everyone knows what is expected. (2.16) MNC abuses its position of dominance. (2.6) MNC are tough, but fair in their price negotiations. (2.1) I can trust MNC; once a commitment has been made they will ensure that it is honoured. (2.9) The staff is not well trained – it is difficult to find anyone who knows what is going on.

0.696 0.655 0.588 0.565 0.561 )0.558 0.534 0.515 0.446 )0.441 0.432 0.421 )0.404

The internal reliability of this factor, as measured by CronbachÕs co-efficient a, is 0.8491. Statement 2.12 (MNC always pays accounts on time) was removed from this factor as its inclusion reduced internal reliability.

good ethics allow for fair but firm negotiations. The average score on this factor (on the same 5-point Likert scale with reverse scoring of statements with negative loadings) was 3.97. The only statistically significant difference on this score was between suppliers and staff. For staff, it was 4.18 and for suppliers it was 3.93. It would seem that staff is more prone to agree that the MNC has candid relationships with suppliers than suppliers themselves do.

Rating of ethics Respondents were asked to rate the MNC on ethical standards on a 10-point numeric scale, where 1 = very poor and 10 = excellent. In addition, respondents were asked to assess the MNCÕs ethical standards relative to their other customers using a 5-point verbal rating scale ranging from much worse to much better. The mean score achieved on the 10-point scale was 7.73; this is a high value with scores ranging from 5 to 10 and a median score of 8. The distribution of ratings is illustrated in Figure 1. This good rating is also reflected in the rating of the MNC relative to other customers of suppliers. While the median of these ratings is on the cusp of

similar to better, the distribution is strongly skewed toward the positive as illustrated in Figure 2. While 46.3% of respondents saw the MNC as similar to other customers, 52.9% saw the MNC as better or much better.

Relationship between the dimensions of ethical behaviour and perceived ethics ratings Assuming a causal relationship between the two dimensions of ethical behaviour and the rating of ethics, multiple regression analysis was performed on the data yielding the following regression equation: Rating ¼
0:622 þ 0:719 Ethical Standards þ 1:393 Candid Relationships the output of the multiple regression procedure is presented in Table III. The regression yielded an R2 value of 0.483, i.e. 48.3% of the variance in the ratings of ethical behaviour can be explained by the two dimensions of ethics. It is interesting to note that the standardised regression co-efficient for ‘‘Candid Relationships’’ is nearly double that of ‘‘Ethical Standards’’. This implies that the former dimension plays a more

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At no point have we been played against our own competitors. Discussions with regards to market related offers have always been open and fair.

40% 35%

Relative Frequency

30%

Prices submitted are dealt with confidentially and competitors are never shown each others pricing.

25% 20%

In contract negotiations to date, there is always an open forum but agreements are kept confidential.

15% 10% 5% 0% 5

6

7

8

9

10

Figure 1. Distribution of ratings on 10-point scale.

Had one instance some years ago (+)1999) where I felt price negotiations extended beyond tough and into the bullying of a small supplier. But this is only instance in a 9 year relationship.

50%

Similar

45%

Relative Frequency

40% 35%

Better

30%

Much better

25% 20% 15% 10% 5%

Poor ethical behaviour No clear themes are apparent from the few examples of poor ethical behaviour cited. The few direct quotes presented below represent the diverse sentiments of suppliers.

Worse

When new suppliers are found at much lower pricing orders are sometimes placed not taking all aspects of quality into consideration. We are left reducing the quality of our products in order to be competitive and remain in business.

0%

2

3

4

5

Figure 2. Distribution of ratings of MNC relative to other customers.

Tend to ask for transparency from supplier but are not willing to display the same transparency (pricing etc). Discussion

important role in determining perceived ratings of ethical behaviour.

Examples of ethical behaviour Open-ended questions were used to ask respondents for examples of both good and poor ethical behaviour by the MNC. Good ethical behaviour The major theme emerging from the cited examples of good ethical behaviour by the MNC is the fairness and professional way in which the tender process is handled. The following direct quotations illustrate the sentiment of suppliers.

The buying department of the MNC is clearly well perceived by both suppliers and staff in terms of ethical behaviour. This is illustrated by the fact that the MNC was rated 7.7 on a 10-point scale and the fact that 52.9% of respondents saw it as better or much better than suppliersÕ other customers and 46.3% saw it as similar. It is thus fair to say that this MNC has a very good reputation among these stakeholders. What is of interest in this case is what the research reveals as to how this was achieved. There appear to be two dimensions of ethical behaviour driving perceptions. First there are ethical standards embracing the existence and adherence to a code of ethics, legal and moral principles as well as confidentiality of supplier information. The findings

Michael Bendixen and Russell Abratt

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TABLE III Multiple regression analysis Independent variable Regression equation section Intercept Ethic Relat R2 Independent variable

Regression coefficient Standard error )0.6219838 0.7185847 1.392772 0.482552

)0.7905 3.2556 5.9391

0.786815 0.2207199 0.2345084

Regression coefficient Standard error

Regression coefficient section Intercept )0.6219838 Ethic 0.7185847 Relat 1.392772 T-Critical 1.979439 Source DF Analysis of variance section Intercept 1 Model 2 Error 123 Total (Adjusted) 125 Root mean square error Mean of dependent Coefficient of variation Sum |Press residuals|

0.786815 0.2207199 0.2345084

T-Value (Ho: B=0)

indicate that the MNC is not only concerned with what is legal, but also with what is morally right. Staff members who take bribes face penalties and the MNC is highly regarded as far as business ethics is concerned. In addition, it has a strict code of ethics to which management and staff adhere. This suggests that the MNCÕs values have been communicated to their suppliers. This supports the notion that corporate values are a relational issue (Lozano, 2005). The second dimension involves candid relationships that enable the MNC to be firm but fair in negotiations while having sound and open relationships with suppliers and the rapid resolution of any problems. In this case, the second dimension is more important than the first as a predictor of perceived ethical behaviour. Suppliers often cited the fair and professional tender process as an example of good ethical behaviour by the MNC staff. There were few and disparate examples of poor ethical behaviour. The results suggest that trust is an important factor in the buyer–supplier

0.430753 0.001462 0.000000

Accept Ho Reject Ho Reject Ho

F-Ratio

Prob level

57.3526

0.000000

Standardized coefficient 0.0000 0.2703 0.4931

Sum of squares Mean square 7544.643 98.61304 105.7441 204.3571 0.9272045 7.738095 0.1198233 88.3975

Prob level Decision (5%)

7544.643 49.30652 0.8597081 1.634857 R2 Adj R2 Press value Press R2

0.4826 0.4741 111.0044 0.4568

relationship, confirming previous studies (Turnbull et al., 1996). Once the MNC makes a commitment, they make sure that it is honoured. This reduces both partiesÕ perception of risk, and it also decreases the search and transaction costs in the relationship. Respondents also stated that when there is a problem or a query, they know whom to contact. In addition they have regular meetings with the MNC, which helps to maintain a good working relationship. Open lines of communication are an important part of corporate identity management, because the values of the MNC can become known, and its image and reputation can be formed and enhanced. All this highlights the need for greater transparency by both the suppliers and the buyers. The buyers are building a trusting relationship with their suppliers by maintaining good ethical values, which in turn leads to greater commitment to the relationship. This case illustrates the importance of the existence and implementation of formal codes of ethics within

Corporate Identity, Ethics and Reputation in Supplier–buyer Relationships an MNC, but the bi-dimensional factor solution indicates that this is but one side of the coin with respect to good ethical practice i.e. codes are a necessary but not a sufficient condition. In addition to such codes and standards, sound and candid relationships are the linchpin that enable such good practice. This places an interesting and different perspective on relationship marketing as an important strategy for improving corporate reputation. While suppliers would inevitably be involved in relationship marketing in order maximise their sales, they need to take into consideration the fact that customers themselves are involved in relationship management with a view to optimising ethical perceptions of their supply chains. It seems imperative that these relationship activities are aligned so that both parties may achieve their goals. This finding confirms the link with previous research stating that the relationship between buyers and sellers is crucial (Kalafatis, 2000).

Conclusion The empirical results identify ethical standards and candid relationships as the underlying dimensions of the ethical perceptions in the buying department of an organisation by its suppliers. These perceptions are

Corporate Identity Management Process

logically a part of the corporate image of the organisation. Literature in the field clearly links this corporate image of the organisation to its reputation. What is less obvious, and a new finding of this research, is the role of the dimensions of ethical perceptions. The conceptual frameworks of corporate identity of both Kiriakidou and Millward (2000) and Balmer (2001) include the way the organisation behaves as well as interfaces with its external world. These aspects are strongly reflected in the dimensions of ethical perceptions. Ethical standards and justice being seen to be done in terms of their implementation become key tasks for corporate communications (Korver and van Ruler, 2003). The building and maintenance of open relationships with suppliers that are based on trust and mutual respect become key management tasks, particularly for employees in the buying department (Kalafatis, 2000). These elements of corporate communication and relationship marketing are thus components of the corporate identity management process. This addresses the often-neglected area of influence of the interrelationships between the internal staff of an organisation with external stakeholders. This is schematically represented in Figure 3. Our model suggests that an organisation must, first, have high ethical standards. Elements that Corporate Reputation of Buyer

Ethical Standards: Existence and adherence to code of ethics Legal and moral principles Respect for confidentiality of suppliers’ information and products Product quality Justice (wrt bribery) Nepotism Politeness of staff

Candid Relationships: Speedy resolution of problems Respect Transparency Clear communications Fair but firm negotiations

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Corporate Image of Buyer

Ethical Perceptions of Buyer by Suppliers

Figure 3. Corporate identity/reputation model in buyer–supplier relationships.

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may be included here include the existence and adherence to a code of ethics; legal and moral principles; respect for the confidentiality of suppliersÕ information and products; product quality; justice with respect to bribery; nepotism and the politeness of staff. This will clearly and unambiguously help to establish who the organisation is and what it stands for and therefore establishes its identity. Second, the organization must have candid

relationships. Elements that may lead to good relationships include speedy resolution of problems; respect for the partner; transparency in its dealings, which include information sharing; clear communications; and fair, but firm negotiations. The reputation of the buyer will be enhanced as a result. This model needs to be confirmed by way of future research into other organisations and contexts.

APPENDIX List of statements Statement

Mean

(2.1) I can trust the MNC; once a commitment has been made they will ensure that it is honoured. (2.2) Contracts are clear and precise everyone knows what is expected. (2.3) Giving and receiving gifts/incentives is part and parcel of doing business with the MNC. (2.4) When there is a problem or a query I know whom to contact. (2.5) MNC is not only concerned with what is legal, but also with what is morally right. (2.6) MNC are tough, but fair in their price negotiations. (2.7) When there is a problem or a query I know it will be sorted out quickly. (2.8) We have regular meetings with the MNC, which helps to maintain a good working relationship. (2.9) The staff is not well trained – it is difficult to find anyone who knows what is going on. (2.10) Staff members are often rude. (2.11) MNC is concerned with protection of the environment. (2.12) MNC always pays accounts on time. (2.13) Staff members who take bribes face penalties. (2.14) A loyal and enduring relationship with suppliers of products and services is important to MNC. (2.15) MNC is highly regarded as far as business ethics is concerned. (2.16) MNC abuses its position of dominance. (2.17) MNC has strict code of ethics. (2.18) MNC management and staff adhere to the code of ethics. (2.19) MNC will discuss proposals with our competitors in an attempt to bring down the price. (2.20) Family and friends are given preference when contracts are awarded. (2.21) Management turns a blind eye to unethical behaviour. (2.22) Documentation is often vague, which leads to problems. (2.23) MNC treats its suppliers with respect. (2.24) MNC is socially responsible. (2.25) Everybody is given an equal opportunity to submit proposals for contracts. (2.26) MNC respects the confidentiality of supplier pricing and other information shared during negotiations. (2.27) MNC is a large organisation, so people can get away with unethical behaviour. (2.28) MNC is very concerned with safety issues. (2.29) MNC staff is professional in their conduct. (2.30) MNC does not accept second-rate work. (2.31) MNC staff often denigrate their competitorsÕ products. (2.32) Some MNC employees spend far too much on entertainment. (2.33) MNC expect suppliers to be transparent, but are not transparent themselves. (2.34) Management at MNC have an open door policy. (2.35) MNC is concerned with the long-term health/sustainability of the supply chain.

4.290 4.132 1.766 4.283 4.180 3.870 3.790 4.139 1.842 1.864 3.915 3.567 4.192 4.173 4.144 2.788 4.246 4.145 3.161 2.090 1.869 2.034 4.125 4.190 4.075 4.038 2.134 4.224 4.232 4.394 2.352 2.410 2.980 3.857 4.000

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