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Why Reputation Is An Important Issue For Business To Consider

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Reputation is an important issue for business in the 21st century. In fact, reputation is considered much more important nowadays when compare to any given point of time in the human business history. This essay begins by defining the business reputation, then review the business environment in the 21st century, finally discussed the reasons that reputation is important in this era by using the car manufacturing industry as an example.

Reputation is important because it provides alternative regulations to the business. A business can be either rewarded or punished according to their corporate reputation. For a business to invest on maintaining a good reputation, many stakeholders of the business, such as the owner, managers, employees, shareholders, suppliers, and customers will be benefited. These benefits extend on many aspects, for example, financial, social, and psychological. (Barnett and Pollock, 2012) Nowadays, most corporate companies invest a lot of effort in marketing and public relationship to maintain a good reputation.

The business environment in 21st century has many differences when compare to the old era. Even the most sophisticated businessperson from the past would be surprised by the high complexity, large scale, and fast paced nature of the modern world. The business must pay attention to not only their product and service quality, but also consider the effects of political and ethical issues due to the globalization, internationalization, and a long list of environmental issues in this century. (Morey, N. C. and Morey R. V. 1992)

Fossil fuel vehicles are an important part of the modern life. I found that the automotive industry is a very good example to be reviewed in terms of the relationship of the corporate reputation to the stakeholders and the impact on the environment.


Understand the nature of business reputation will help us to evaluate further on why it is important. This essay mainly considered opinions from Rindova and Martins (Jul 2012) that corporate reputation is formed by many impressions of different stakeholders to that company. These impressions about the company are specific. Once the reputation is formed, it becomes the strategic intangible asset of the company.

Barnett and Pollock (Jul 2012) suggested that reputation is an intangible asset to a company as well as multidimensional. (Barnett and Pollock 2012) is dynamic and interactive, is a long-term investment.

To start with the discussion, I would like to give an example of a typical American car, the Ford Mustang with a 5.0 Litre V8 engine. It seems that powerful and muscular are the general impression over the US car. That impression is formed for a long time through movies, media, and customer experience.

On the other side, however, there are different opinions regarding US cars. A lot of people believe that US cars are generally with low fuel efficiency and low reliability when compared to their main competitors from Japan. Barber and Darrough (1996) compared the data of product recalls between 1973 – 1992 to measure the reliability of the vehicles made by US and Japanese manufacturers. It is concluded that the Japanese cars were significantly more reliable than the US cars. By providing the higher quality and reliable products on the market, Japanese car manufactures increased their market share, as a result, benefit their business owners, shareholders, and consumers.

In addition to the product reliability, environmental awareness is believed to be another factor that would contribute to the increase of market share of Japanese cars in US. The positive reputation of smaller and more fuel-efficient Japanese cars became more popular to the commuter and domestic users, suggested by Barber and Darrough (1996). This change in purchasing preference matched to the phenomenon, which was observed by Ramey and Vine (2011). They suggested that after a permanent gasoline prices increase, in the short run, US household tend to reduce vehicle travel in the short run. In the long run, however, consumers start to replace their car with better fuel-efficiency design.

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Let us learn from the American car industry in the late 20th Century and try to predict what would happen in the future. The American cars have a specific reputation of powerful engine, muscular, and high-performance design. These features are highly regarded by the US car manufacturers and the car enthusiast for decades. On the contrary, the US branded cars also come with a bad reputation of low fuel efficiency and low reliability.

The “Oil Crisis” in the late 20th century greatly impacted the vehicle manufacturing industry. Many stakeholders of the car business may begin to think differently. On the other hand, their rival car manufactures, Japanese cars, are well known of producing economic and reliable to run commuter’s car.

The direct impact of sharp increase in the gasoline prices towards the consumer’s tastes and choices on car purchasing is subject to debate, however, an eco-friendly lifestyle is more popular in 21st Century. Of course, the fall and rise of American car industry would be much more complicated. This essay will focus on the reputation of the car manufacturing on major stakeholders and the effect of Sustainable Development Goals (SDG) related to the industry.

A powerful muscular Ford Mustang is still a very admirable product to the car enthusiast, though, most family consumers may prefer a 2.5 Litre Toyota Camry for their daily use. Furthermore, a greenish reputation is increasingly important to a business, especially to the car industry. It is because the use of fossil fuel is the main reason for environmental issues, such as, global warming, climate change and ocean acidification. Take the US as an example, the use of fossil fuel engine vehicles responsible for 30% of total carbon dioxide emission in the country. (DeLuchi, 1991)

A direct rise on the gasoline impacted by environmental-friendly awareness, hybrid, or pure electric cars to meet the requirement of low carbon emission. “By the middle of the 21st century, US may have completely transitioned from gasoline to electric vehicles.” (Horn and Docksai, 2010)

“Reputation is cited as an example of a strategic asset precisely because the development of good reputation takes considerable time, and depends on a firm making stable and consistent investments over time” (Dierickx and Cool 1989)

“A corporate reputation is an important strategic asset that contributes to firm-level persistent profitability” (Roberts and Dowling 2002) Brown (2013) in an article published in 2013 expected to see a 200% growth in the electric vehicle market in US.

Now, the US based electric car manufacture, Tesla Motors Inc. is one of the leading companies in producing electric vehicles. The mission of Tesla is clearly stated in their website as: “Tesla’s mission is to accelerate the world’s transition to sustainable energy.” (Tesla Inc., 2020). This environmental-friendly reputation seems to be well accepted by the public. Tesla raised over $225 million in 2010 in their initial public offering at $17 USD per share (Hoffman 2011). As of 18th Sep 2020, it was priced at $423 USD per share. (Yahoo! Finance, 2020). It seems that Tesla had found a success formula by combining the good quality product and eco-friendly features.


Conclude that reputation is very important to a business success in 21st. Suggest that the reputation is so important that not only in 21st but in the future as well.

Corporate Reputation needs to be carefully planned, executed, reviewed periodically, and improved over time. Different stakeholders’ opinion needs to be considered and reflected by the business reputation. Especially from the top management level to With a bad reputation, a business will struggle to survive, is far away from being successful.

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