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Universiti Teknologi MARA Kelantan CSSR 2009
1
 The Impact of Company’s Corporate Reputation on its CompetitiveAdvantage in the Market
Zainudin Bin Hj Awang
*1
, Khairunisa Binti Hassan
2
 
1.
Faculty of Info. Tech. and Quantitative Sciences, MARA University of Technology, Kelantan
2.
Commerce International Merchant Bankers, Kota Bharu, Kelantan
*
zainudin888@kelantan.uitm.edu.my
ABSTRACT
The competition for customers is stiff when the rate of increase in the number of competitors offeringsimilar products to the market is faster than the demand from customers. Perhaps the positive impactof its corporate reputation could help the firm to survive and grow in this highly competitivemarketing environment. This study attempts to assess the influence of corporate reputation of thefirms on the customers’ perceived quality towards their products and their competitive edge in themarket. The study obtained 400 usable questionnaires from household respondents who wereshopping furniture for their newly completed bungalows. The data were collected using self-administered questionnaires and analyzed using Structural Equation Modeling (SEM) in AMOS 16.0.The study found the influence of firm’s corporate reputation on the perceived quality of its products ishighly significant. The study also found the influence of products’ perceived quality on thecompetitive advantage of the firms is highly significant. However, the direct influence of firm’scorporate reputation on the competitive advantage of its products is not significant at α = 0.05. Inother words, the favorable corporate image of a firm has an indirect effect on its competitiveadvantage in the open market competition through the perceived quality towards its products. Theresults indicate that the firm’s corporate reputation is only helpful in marketing only if it could trigger the perceived quality for their products in the eyes of their potential customers. The findings of thestudy provide important implications to the manufacturers of competitive products in their effort to push their output into the market and, more importantly, to ensure the survival of their business intothe future.
Keywords:
Corporate Reputation, Perceived Quality, Competitive Advantage
 
 
Universiti Teknologi MARA Kelantan CSSR 2009
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1. ITRODUCTIO
The market for household furniture in Kelantan has becoming competitive lately in the sense that therate of increase in the number of firms offering the products is higher than the rate of increase indemand for the products itself. As usual, in the highly competitive environment among thecompetitors, the customers are being exposed to almost similar range of products choices, aggressivesales promotion, and price war. The corporate reputation literatures revealed that the competing firmscould differentiate themselves from their competitors and achieve the competitive advantage bydeploying valuable resources and capabilities that are superior, scarce, and inimitable (Roberts andDowling, 2002). This study was interested to determine the influence of corporate reputation of thecompeting firms on the competitive advantage of that particular firm in term of customers’ purchasing behavior for household furniture.
2. LITERATURE REVIEW2.1 Definition of Corporate Reputation
Business literatures define corporate reputation as the stakeholders’ overall impression of anorganization overtime (Bailey, 2005), and it reflects the organization’s relative standing, internallywith its employees, and externally with its other stakeholders (Fombrum et al., 2000). The literaturesalso suggested the corporate reputation as the outcome of managers’ efforts to prove their success andexcellence in managing the organization. The firms could achieve favorable levels of corporatereputation through acting reliable, credible, trustworthy and responsible in the market in the eyes of their stakeholders. The prominent researcher in the area such as Fombrum (1996) defines corporatereputation as a perceptual representation of a company’s past action and future prospects that describethe firm’s appeal to all its key constituents when compared to other leading competitors. Other researchers in the area, Shenkar and Yuchtman-Yaar (1997) associated the concept of corporatereputation of a firm to the perceived image, perceived prestige, and perceived goodwill.However, still there are differences among the corporate reputation researchers themselvesconcerning the definition, and the issues are still on-going especially with regard to the reputationconstruct, the way in which the construct is operationalised and its contribution to the organizationsuccess.
 
Universiti Teknologi MARA Kelantan CSSR 2009
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2.2 Corporate Reputation and Competitive Advantage
The role of corporate reputation in marketplace is similar to brand equity, particularly when thecompany’s name is a part of brand identification (Yoon et al., 1993). Some sectors in the serviceindustry, especially banks, hotels, hospitals, consulting firms, and educational institutions rely heavilyon their corporate reputation to attract and retain their customers (Nguyen and Leblanc, 2001). In fact,this study believes that almost all retailers in the market today regardless of what products they areselling are interested to develop and preserve their respective corporate reputation. The study done by Nguyen and Leblanc (2001) found that the customers are more inclined to purchase the products or services from companies whom they perceived as having favorable reputation among their competitors.Fombrum (1996) stressed that a good corporate reputation would enhance profitability because goodreputation would attract customers to products, attract investors to securities, and attract employees todo their jobs properly. Thus, corporate reputation of a firm should be considered as an asset andwealth that gives that firm a competitive advantage because the firm will be regarded as reliable,credible, trustworthy and responsible for employees, customers, shareholders and financial markets.Gupta (2002) found the empirical evidence between corporate reputation and competitive advantagefor the firms by successfully differentiating it from competitors. Among the components of competitive advantage are willingness to purchase, willingness to pay premium price, customer satisfaction and customer loyalty. Meanwhile, the components of company’s reputation found byGupta (2002) are corporate ability and corporate social responsibility. This finding supports the popular view in business literature that when customers are faced with parity in price and quality of a product, they would prefer to choose products from the company that contributes to corporate socialresponsibility when making the consumption related decision.The corporate reputation researchers such as Robert & Dowling (2002) and Eberl & Schwaiger (2005) have highlighted the growing body of literature describing the corporate reputation as avaluable resource which could influence the favorable financial performance of a company. In other words, the companies scoring higher on the perceived corporate reputation are more likely to havehealthier financial accounts. Likewise, Shapiro (1983) revealed the significant influence of corporatereputation on the customers’ market retention and increased sales volume. Further, the researcher (Shapiro, 1983) stressed the benefits to the company that flow from having a good corporatereputation, which has been associated with increased financial performance, include providing
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