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Journal of Business Ethics (2007) 76:69–82 Ó Springer 2007

DOI 10.1007/s10551-006-9273-4

Corporate Identity, Ethics and Reputation Michael Bendixen

in Supplier–Buyer Relationships Russell Abratt

ABSTRACT. Multi-national corporations (MNCs) have Introduction

been criticised for not behaving ethically in some situa-
tions, which could have a negative effect on their repu- Executives today have to pay attention to the
tation. This study examines the ethics of a large MNC in expressed needs and preferences of many interest
its relationship with its suppliers. A brief literature review
groups. It is no longer appropriate for companies to
of corporate identity, business ethics and buyer–supplier
behave as if their owners, shareholders and employ-
relationships is undertaken. The views and perceptions of
the buying staff and the suppliers to a large South African ees are the only important stakeholders. Within the
MNC are obtained and discussed. The results indicate company there are numerous stakeholders with dif-
that this MNC has a good corporate reputation among ferent interests, but there are also stakeholders outside
both its suppliers (an important stakeholder) and its own the company, including suppliers (Verkerk et al.,
buying department. The existence and implementation of 2001). For example, the use of local suppliers has
formal codes of ethics was found to be a necessary, but been common for dominant employers and large
not sufficient condition for good ethical practice. Candid corporations to maintain good community relations
relationships with suppliers emerged as a second and (Logsdon and Lewellyn, 2000). One of the stake-
important factor. Ethical perceptions of buyers by sup- holders that has been neglected in the corporate
pliers are driven by the management of corporate identity, identity management process and the corporate social
through the elements of ethical standards and candid
responsibility (CSR) literature is suppliers. The scope
relationships. We present a model of corporate identity/
of CSR is broad, and the supply chain is one of its
reputation in Buyer–Supplier Relationships.
important elements as it covers procurement policy,
KEY WORDS: corporate identity, business ethics, and purchasing guidelines (Fukukawa and Moon,
supplier–buyer relationships, reputation 2004). Interest in supply chain policy appears as a
relatively recent wave of CSR internationally, and
reflects increased corporate responsibility for human
Michael Bendixen is a Professor of Research Methodology and rights, labour standards and environmental responsi-
Statistics at the H. Wayne Huizenga School of Business at bility of their suppliers and business partners
Nova Southeastern University, Florida. His research interests (Fukukawa and Moon, 2004; Moon, 2002). A
include business ethics, governance and culture. His articles company does not project a unique image through
have appeared in the European Journal of Marketing, corporate identity management. Rather, it may
Industrial Marketing Management, Journal of Business possess various images which differ according to
Research, Journal of International Business Studies and specific interest groups, such as customers, employees
Journal of Marketing Management amongst others. and shareholders, each of whom have different types
Russell Abratt is a Professor of Marketing at the H. Wayne
of experiences and contexts with the company
Huizenga School of Business at Nova Southeastern Univer-
sity, Florida. His research interests include corporate identity
(Dowling, 1988). Corporate identity can be seen as
management and business ethics. His articles have appeared in the way in which a company makes itself known to
the Journal of Business Ethics, Journal of Business and the world. Behaviour, communication and symbols
Psychology, European Journal of Marketing, Journal of are its indicators (Korver and van Ruler, 2003).
Marketing Management, Industrial Marketing Man- Corporate reputation indicates a value judgement
agement, and Business Horizons amongst others. about the companyÕs attributes and evolves over time
70 Michael Bendixen and Russell Abratt

as a result of consistent performance (Gray and Literature review

Balmer, 1998). The current reputation of an orga-
nisation is determined by the signals that interest Corporate identity
groups receive concerning its behaviours, whether
directly or via other information channels (Fombrun Originally, corporate identity was synonymous with
and Shanley, 1990). In addition, the logic of trans- organisational nomenclature, logos, and visual
action cost economics suggests that companies with identification. Corporate identity is more than just
good reputations are attractive business partners, an organisational mark or symbol of recognition
since their reputation can substitute for expensive (Balmer, 1995). Today, the role of symbolism has
governance mechanisms (Williamson, 1996). In this grown from its original purpose of increasing
article, we explore the consequences of the ongoing organisational visibility to a position where it is seen
interaction between a companyÕs buying department as having a role in communicating corporate strategy
and the salespersons representing its suppliers. This is (van Riel and Balmer, 1997).
examined through perceptions of ethical behaviour Corporate identity has been studied by manage-
and its consequential impact on corporate reputa- ment and marketing academics since the 1990Õs as a
tion. This element of corporate identity manage- strategic management tool. Today there is a gener-
ment is critical because of the external nature of the ally accepted distinction between corporate identity
interface between buyers and sellers. (what the firm is) and corporate image (what the
Purchasing departments are exposed to greater firm is perceived to be), even in the absence of a
ethical pressures than individuals in many other jobs. clear meaning of corporate identity itself (Abratt,
They work with salespersons from supplier organi- 1989; Balmer and Soenen, 1997; Balmer, 1998).
sations; they are primarily responsible for very large Corporate identity denotes the characteristic way in
budgets, and they are often evaluated on the dis- which an organisation goes about its business, how it
counts or ‘‘deals’’ they negotiate with the sellers. On thinks, feels, behaves and interfaces with the external
the other hand, salespersons from supplier organisa- world via its employees (Kiriakidou and Millward,
tions work in relatively unsupervised settings; they 2000).
are primarily responsible for generating sales, and A strong identity has a number of potential
they are often evaluated on the basis of short-term benefits to an organisation, including attracting
objectives (Futrell, 2002). Razzaque and Hwee quality personnel and breeding employee motivation
(2002) reviewed the ethical issues in the purchasing (Balmer, 1995; van Riel and Balmer, 1997). Balmer
environment. A salespersonÕs ethical behaviour can and Soenen (1997) conducted a major review of the
play a critical role in the formulation and mainte- corporate identity literature. They stated there was a
nance of long-term buyer–seller relationships lack of effective models of corporate image forma-
(Gunlach and Murphy, 1993). Despite the impor- tion. According to Balmer (2001: 280), ‘‘an orga-
tance of ethics in buyer–seller relationships, very nisationÕs identity is a summation of those tangible
little empirical work has been published in this area. and intangible elements that make any corporate
Multi-national Corporations (MNCs) have been entity distinct. It is shaped by the actions of the
subjected to intense public criticism because, in corporate founders and leaders, by tradition and the
seeking new markets, they have ignored the environment. At the core is the mix of employeesÕ
oppressive working conditions and abuse of workersÕ values which are expressed in terms of their affinities
basic human rights in those countries. MNCs cannot to corporate, professional, national and other iden-
ignore criticism because it reflects a growing gap tities. It is multidisciplinary in scope and is a melding
between societal expectations and corporate perfor- of strategy, structure, communication and culture. It
mance (Sethi, 2002). The aim of this article is to is manifested through multifarious communications
report on a case study in which the views of the channels encapsulating product and organisational
buying staff and the suppliers to a large South African performance, employee communication and behav-
MNC rate and perceive its ethical behaviour. iour, controlled communication and stakeholder
Corporate Identity, Ethics and Reputation in Supplier–buyer Relationships 71

and network discourse.’’ Identity is the embodiment In building relationships, any vision of corporate
of the organisation. values whose aim is the creation of documents is
Every firm has a philosophy, whether tacit or usually stultified by a static and uniform vision of the
codified (Abratt, 1989; Alessandri, 2001; Leuthesser corporate identity. Corporate values are relational
and Kohli, 1997). This philosophy is personified values. They only express what an organisation is in
through the behaviour of the firm as well as in the as far as they express, among other concepts, how it
visual presentation of the firm. The corporate expects to relate to stakeholders. Values do not ex-
identity concept encompasses issues such as business press a fixed, de-contextual identity (Lozano, 2005).
scope and culture, among others (Balmer and Working with values always describes what the
Greyser, 2003). The importance of culture to the company does and what the company wants to do,
identity of an organisation has been recognized by partly because corporations are what they do (Post
identity researchers for the last decade (Balmer, et al., 2002). The shared values of an organisation
1998; Balmer and Wilson, 1998). Culture plays an are those that emerge from its ongoing self-reflexive,
important role in the development and enactment of constitutive dialogue as to its identity, purpose and
corporate identity. Culture is defined by Kiriakidou relationship to its stakeholders (Pruzan, 1998).
and Millward (2000) as the corporate values that are The role of the purchasing function in the busi-
held by staff and management and their concrete ness has significantly increased in importance due to
manifestation in organisational symbolism and the emphasis on building and maintaining long-term
behaviour, which frame the way that the organisa- relationships with external constituencies. Buyers
tion operates. The values held by personnel within are key linkages between the firm and many of its
the organisation are at the heart of its identity external environments (Turner et al., 1995). An
formation process (Abratt, 1989). ethical purchasing function is imperative if the
The identity of an organisation encompasses a organisation is to develop relationships with key
bundle of values that are derived from a federation constituents that are based upon mutual trust. Buyers
of subcultures, which are found within and outside and suppliers typically have competing goals and
the organisation (Balmer and Wilson, 1998) they objectives. Thus, the ‘‘give and take’’ that occurs
continually evolve and are amorphous. This mix of between these individuals can be a potential source
values, to a considerable degree, gives an organisa- of serious legal and ethical problems. Ethicality of
tion its distinctiveness (Balmer and Gray, 2003). the purchasing function has an impact on the bottom
Interaction or an experience with a corporate line of the organisation as bribes and kickbacks can
identity is what produces a corporate image in the be costly.
minds of the public (Gray and Balmer, 1998). Buyer–Seller or customer–supplier interdepen-
dence is an integral part of business marketing
(Webster, 1992) and the effectiveness of business
Buyer–seller relationships marketing is largely determined by long-term rela-
tionships between buyers and sellers. Wilson (1995),
Firms worldwide are faced with the challenge of reviewing research on buyer–seller relationships,
becoming more attractive to their shareholders, their concludes that this domain appears to a large extent
clients/customers, their suppliers, the environment to share a common set of constructs: trust, com-
and also to their employees. Stakeholder manage- mitment, adaptation, reputation and relationship
ment really is a question of balancing the different history. Kalafatis (2000) states that there is a general
stakeholder interests and creating added value. The realisation, and acceptance, that the development
stakeholder model assumes a partnership between and management of relationships with both cus-
management and stakeholders; this partnership is a tomers, and suppliers are central themes of current
real, dynamic and changing process of dialogue. practice and research.
Management can stimulate the involvement of the Suppliers and customers need to be viewed as a
stakeholders by early stage participation and devel- partnership. The benefits of cooperation rather than
oping a culture of common responsibility with the conflict in buyer–supplier relationships include
focus on a clear corporate identity (Goodijk, 2003). ongoing cost reductions, quality improvements,
72 Michael Bendixen and Russell Abratt

increased operating flexibility and more powerful which commitment develops and firms become
competitive strategies (Peck et al., 2000). Customers willing to make relationship-specific investments
who work more closely with suppliers will also be capable of developing competitive advantage
able to create a more responsive supply chain that (Turnbull et al., 1996). Trust in a partner is likely to
can meet final demand in a timely manner. build slowly over time. Achrol (1997) notes that
According to Gronroos (1994), relationship mar- many business decisions superficially based on
keting is to identify and establish, maintain, enhance ‘‘trust’’ may in reality be judgements related to the
and when necessary, also to terminate relationships reputation of an organisation. Reputation is an
with customers and other stakeholders, at a profit, so overall cognitive impression of an organisation that
that the objectives of all the parties are met, and that has been formed over time. This is based on its
this is done by mutual exchange and fulfilment of image, which is the immediate impression of an
promises. organisation, whilst reputation is a stakeholderÕs
Supplier relations are recognised as important in overall assessment of the ability of the organisation to
developing a sustainable competitive advantage, yet meet defined criteria (set by the stakeholder), such as
most buyer–supplier relationships are characterised as integrity (Bick et al., 2003). Thus, the image and
being adversarial (Mudambi and Helper, 1998). As reputation of an organisation is a reflection of its
trust is relational, it is an ongoing process that must corporate identity. We contend that the buyer–
be initiated, maintained and sometimes restored. supplier relationship, together with the ethical values
Certain conditions must exist for trust to develop behind that relationship, is key to corporate identity
and evolve. First, persons and organisations must management, and forms part of the vital process of
interact for trust to develop. Second, parties must be an organisationÕs reputation formation in the eyes of
willing to depend on one another and take risks. the various stakeholders.
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., Business ethics
2003). In a buyer–seller relationship, trust is built by
the exchange performance, the negotiations and Ethics are concerned with doing good, or the right
conflict resolution. thing in a given human situation (Wilson, 1975).
Partnership is based upon commitment, trust and Business ethics are concerned with an evaluation of
continuous improvement. Marketing attempts to business practices in the light of some concept of
create an impression of a personal relationship to human value, it looks at corporate profits not for
customers even if the supplier does not know the their own sake but with respect to the achievement
customers or even meet them. It is a pseudo- of some human good.
personal relationship, but, all the same, it could be an Carroll (1981), while recognising that social
efficient one (Gummesson, 2002). Several employ- responsibility issues do have ethical dimensions,
ees from both the supplier and buyers side are distinguishes social responsibility and business ethics
involved in the relationship. They are involved in on the basis that the former is primarily an organi-
negotiation, communication, bargaining, the transfer sational or corporate concern, while the latter is the
of goods, services and money. Ethical issues and concern of the individual manager or business
personal values always influence such transactions decision-maker. This distinction is, however, by no
and will have an influence on the reputation of the means universally accepted and debate still continues
parties involved. as to whether organisations, because they are artifi-
cial creations, can be said to have social responsi-
bilities at all or whether the term is only applicable to
Buyer–supplier relationships and corporate identity individuals within the organisation.
Bartels (1967), in developing his model for ethics
A relationship deemed to be trustworthy is one in in marketing, regards ethics as referring to a standard
which a partner is more likely to make a long-term in terms of which business action can be judged
commitment. Trust creates the conditions under ‘rightÕ or ‘wrongÕ – not in an absolute sense, but
Corporate Identity, Ethics and Reputation in Supplier–buyer Relationships 73

relative to another entity whose expectations have (1993) states that there are two approaches to
either been violated or fulfiled. moulding an organisationÕs culture towards ethical
These various explanations of the field of business ends. The first is the approach of creating a unitary
ethics indicate that the distinction between social corporate culture around ethical values. In this ap-
responsibility and business ethics is not easily made, proach, it is argued that management can and should
certainly not insofar as their application to the actively manage organisational culture. The second
societal marketing concept is concerned. Thus, approach fosters the coexistence and diversity within
while certain aspects of social responsibility may the organisation of underlying national and racial
be discretionary – such as donations to charitable cultures as well as professional and occupational
institutions – and therefore their non-fulfilment subcultures. Both approaches, according to Sinclair
cannot be regarded as ‘wrongÕ or ‘unethicalÕ, other (1993), contain different risks for business ethics. In
aspects of social responsibility are clearly based on the first approach, the risks are that the ethics are
obligatory standards of behaviour which, if isolated, those of the managerial elite. The risks in the second
can certainly be labelled as unethical (Carroll, 1981). approach are that the plethora of competing values
Perhaps, ethical responsibilities are only one fact of subcultures allows deviant groups to flourish,
of a wider range of responsibilities known as ‘social leaving management unable to find a common basis
responsibilitiesÕ. Whatever the precise distinction on which to proceed. Sinclair (1993) concludes that,
may be, business ethics and business social respon- while the debate occurs in a broadly managed
sibility can both be said to constitute the philo- framework, it alternatively relies on individual, ra-
sophical foundation upon which the societal ther than institutional processes to produce better
marketing concept is grounded. ethics.
Murphy (1988) and Tsalikis and Fritzsche (1989) There is evidence that excellent companies appear
stated that codes of conduct represent the most to be more ethical, implying a relationship between
effective way of implementing an ethical policy and excellence and ethics. Although excellence in
reducing ethical conflict. It is further stated that the companies seems to imply a strong presence of
argument for instituting a code of conduct could be ethical behaviour in those companies, the reverse is
based on efficiency, with codes being a binding ideal not always true, as ethical companies are not nec-
for a profession, in the interest of the public, con- essarily excellent (van der Merwe et al., 2003).
sistent with rational self-interest and an effective tool
towards self-regulation. Globalisation of markets is
pressuring companies to develop codes as public Methodology
statements of core principles that are universally
applicable (Carasco and Singh, 2003). The methodology used in this study was a single case
We must note, however, that there are arguments study comprising a large South African MNC in the
for and against codes of ethics. Schlegelmilch and fast-moving consumer goods field. The study was
Houston (1990) discuss these arguments. The main conducted in the South African market and, while not
reason why companies support such codes is that it is quite a monopoly, this MNC has a dominant position
useful in defining and clarifying policy and it is part in this market. As a consequence, it could take sig-
of a ‘‘total quality approach’’. The main argument nificant advantage of its suppliers, particularly those for
for not having a code was that behaviour is more which it is the largest customer. This raises questions as
important than words, and that they tend to be too to the way in which the buying department of the
broad to be of any use. Schlegelmilch and Houston MNC is perceived in terms of its ethical behaviour.
(1990) conclude that the limited value of codes of The MNC is a significant player in the international
ethics as an isolated measure suggests that they need market with operations in sub-Saharan Africa, western
to be accompanied by ethical education and other and central Europe, Russia, India, China and North
processes that support their enforcement. America. The purpose of this research was to assess the
It is not only strong leadership from above that perceptions that both the MNCÕs suppliers and the staff
ensures ethical standards; ethical business stems from of their buying department have about the ethical
an ethical corporate culture (Sinclair, 1993). Sinclair behaviour of the company.
74 Michael Bendixen and Russell Abratt

The study was conducted in two phases. During verbal scale ranging from much better to much
the first phase, in-depth, open-ended interviews worse.
were conducted with a convenience sample of The database of contact details of people at
20 representatives of suppliers to the MNC. These supplier organisations with whom the MNC staff
representatives qualified for selection if they inter- interact was updated and an e-mail was sent to each
acted on an ongoing basis with the MNC in terms of of these people (approximately 500 in total) advising
the supply of goods and services. The purpose of this them that a survey regarding the ethical behaviour of
phase of the research was to identify constructs that the MNC was to be undertaken and inviting them
may be used both to assess ethical behaviour and to to participate. This letter was sent in the name
distinguish between poor and excellent ethical of both the MNC management and one of
behaviour. the researchers. Respondents were assured of the
Two qualitative research techniques were used in absolute confidentiality of their responses. Shortly
this phase of the research. The critical incident thereafter, a further e-mail was sent asking potential
technique (Flanagan, 1954; Bitner et al., 1990) was respondents to visit a website and complete the
used to allow respondents to describe critically good survey (surveymonkey.com). After 2 weeks, a
and bad ethical incidents and the behaviour of the reminder was sent to potential respondents encour-
staff of the MNC that created these incidents. A aging them to complete the survey if they had not
Kelly repertory grid technique (Fransella and already done so. The staff of the MNCÕs buying
Bannister, 1977; Tan and Hunter, 2000) was used to department was also invited to participate in the
allow respondents to express constructs that distin- survey. After the cut-off date, the data was down-
guished different organisations (in this case the loaded from the website and sent to the researchers
MNC and two other major customers of the for analysis. This was done in the presence of the
supplier) in terms of ethical behaviour. MNCÕs internal auditors so as to assure that the data
This phase of the research resulted in 30 state- was not tampered with in any way.
ments that seemed to discriminate ethical behaviour
in the supplier – customer relationship. In consul-
tation with the management of the MNC, it was Results
agreed that further five statements be added to this
battery for use in the second phase of the research. Sample details
During the second phase of the research, the
35 above-mentioned statements formed the items on A total of 129 supplier representatives and 28 mem-
ethical scale that respondents were asked to rate bers of staff responded to the survey. The typical
using a five-point Likert scale. Approximately one- supplier respondent was: male, aged 35–49, a Dire-
third of the statements were phrased in the negative ctor/Board Member or Sales Manager/Consultant,
sense so as to facilitate the usage of all elements of the located in Gauteng province, interacts with the
Likert scale. A complete list of the 35 statements is buying department, has been doing so for more than
presented in Appendix I. 3 years and with the MNC representing less than
This formed the main body of the questionnaire 10% of sales volume. The typical staff respondent
which was supplemented with demographic details was: female, located in Gauteng, works in the buying
of the respondents, two questions pertaining to the department and has worked for the MNC for more
overall perceptions of ethical behaviour of the MNC than 3 years.
and two open-ended questions where respondents
could give examples of good and poor ethical
behaviour by the MNC staff. The first of these Data analysis
questions required respondents to rate the MNCÕs
ethical standards on a 10-point numeric scale, where In order to conduct multivariate statistical analysis on
1 represented poor and 10 excellent. Respondents the data, the 35 statements rated on the Likert scale
were then asked to rate the MNCÕs ethical standards were rescaled from ordinal to interval data using
relative to suppliersÕ other customers on a five-point correspondence analysis (Bendixen and Sandler,
Corporate Identity, Ethics and Reputation in Supplier–buyer Relationships 75

1995). The result of the rescaling is as follows: strongly information, respect for suppliersÕ products, polite-
disagree 1.000; disagree 1.846; neither agree/disagree ness of staff, justice (with respect to bribery) and
3.122; agree 4.213; and strongly agree 5.000. product quality.
The mean scores of the 35 statements are also The average score on this factor (on the same
presented in Appendix I. 5-point Likert scale with reverse scoring of state-
ments with negative loadings) was 3.95. The only
statistically significant difference on this score was
Dimensions of perceived ethical behaviour over the length of time the respondents had inter-
acted or worked for the MNC. For those that
In order to test the dimensionality and to identify worked for less than a year the score is 4.23, between
any underlying dimensions of ethical behaviour, the 1 and 3 years 3.81 and more than 3 years 3.93. It is
rescaled responses to the 35 statements were subject apparent that respondents who have interacted/
to factor analysis. Although 2, 3, 4, 5 and 6 factor worked for the MNC for less than a year agree more
solutions were examined, a two-factor solution strongly that it has high-ethical standards than those
yielded the most meaningful results. who have interacted/worked for the MNC longer.
Factor 1: Ethical Standards Factor 2: Candid relationships
The primary dimension underlying the constructs The second dimension underlying the constructs
of perceived ethical behaviour comprises the state- of perceived ethical behaviour comprises the
ments shown in Table I. following statements shown in Table II.
The underlying theme in this factor seems to be The underlying theme in this factor seems to be
perceived ethical standards. This factor embraces perceived candid relationships. This factor embraces
nepotism, the existence and adherence to a code of the speedy resolution of problems, respect, trans-
ethics, legal and moral principles, management atti- parency, clear communications and fair but firm
tude, respect for the confidentiality of suppliersÕ negotiations. This latter aspect is of interest in that

Ethical standards

Statement Loading

(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.

76 Michael Bendixen and Russell Abratt

Candid relationships

Statement Loading

(2.14) A loyal and enduring relationship with suppliers of products and services is important to the MNC. 0.696
(2.7) When there is a problem or a query I know it will be sorted out quickly. 0.655
(2.4) When there is a problem or a query I know whom to contact. 0.588
(2.23) MNC treats its suppliers with respect. 0.565
(2.35) MNC is concerned with the long-term health/sustainability of the supply chain. 0.561
(2.33) MNC expect suppliers to be transparent, but are not transparent themselves. )0.558
(2.8) We have regular meetings with MNC, which helps to maintain a good working relationship. 0.534
(2.15) MNC is highly regarded as far as business ethics is concerned. 0.515
(2.2) Contracts are clear and precise everyone knows what is expected. 0.446
(2.16) MNC abuses its position of dominance. )0.441
(2.6) MNC are tough, but fair in their price negotiations. 0.432
(2.1) I can trust MNC; once a commitment has been made they will ensure that it is honoured. 0.421
(2.9) The staff is not well trained – it is difficult to find anyone who knows what is going on. )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. similar to better, the distribution is strongly skewed
The average score on this factor (on the same toward the positive as illustrated in Figure 2.
5-point Likert scale with reverse scoring of state- While 46.3% of respondents saw the MNC as
ments with negative loadings) was 3.97. The only similar to other customers, 52.9% saw the MNC as
statistically significant difference on this score was better or much better.
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 Relationship between the dimensions of ethical
candid relationships with suppliers than suppliers behaviour and perceived ethics ratings
themselves do.
Assuming a causal relationship between the two
dimensions of ethical behaviour and the rating of
Rating of ethics ethics, multiple regression analysis was performed
on the data yielding the following regression
Respondents were asked to rate the MNC on ethical equation:
standards on a 10-point numeric scale, where
1 = very poor and 10 = excellent. In addition, Rating ¼  0:622 þ 0:719 Ethical Standards
respondents were asked to assess the MNCÕs ethical þ 1:393 Candid Relationships
standards relative to their other customers using a
5-point verbal rating scale ranging from much worse the output of the multiple regression procedure is
to much better. presented in Table III.
The mean score achieved on the 10-point scale The regression yielded an R2 value of 0.483,
was 7.73; this is a high value with scores ranging i.e. 48.3% of the variance in the ratings of ethical
from 5 to 10 and a median score of 8. The distri- behaviour can be explained by the two dimensions
bution of ratings is illustrated in Figure 1. of ethics. It is interesting to note that the standar-
This good rating is also reflected in the rating of dised regression co-efficient for ‘‘Candid Relation-
the MNC relative to other customers of suppliers. ships’’ is nearly double that of ‘‘Ethical Standards’’.
While the median of these ratings is on the cusp of This implies that the former dimension plays a more
Corporate Identity, Ethics and Reputation in Supplier–buyer Relationships 77

40% At no point have we been played against our own

competitors. Discussions with regards to market
related offers have always been open and fair.
Relative Frequency

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

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

5% Poor ethical behaviour

No clear themes are apparent from the few examples
5 6 7 8 9 10 of poor ethical behaviour cited. The few direct
quotes presented below represent the diverse senti-
ments of suppliers.
Figure 1. Distribution of ratings on 10-point scale.
Had one instance some years ago (+)1999) where
50% I felt price negotiations extended beyond tough
45% and into the bullying of a small supplier. But this
40% is only instance in a 9 year relationship.
Relative Frequency

Much better 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
5% be competitive and remain in business.
2 3 4 5
Tend to ask for transparency from supplier but are
not willing to display the same transparency
Figure 2. Distribution of ratings of MNC relative to (pricing etc).
other customers.

important role in determining perceived ratings of
ethical behaviour. 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
Examples of ethical behaviour the MNC was rated 7.7 on a 10-point scale and the
fact that 52.9% of respondents saw it as better or
Open-ended questions were used to ask respondents much better than suppliersÕ other customers and
for examples of both good and poor ethical behav- 46.3% saw it as similar. It is thus fair to say that this
iour by the MNC. MNC has a very good reputation among these
stakeholders. What is of interest in this case is what
Good ethical behaviour the research reveals as to how this was achieved.
The major theme emerging from the cited examples There appear to be two dimensions of ethical
of good ethical behaviour by the MNC is the behaviour driving perceptions. First there are ethical
fairness and professional way in which the tender standards embracing the existence and adherence to a
process is handled. The following direct quotations code of ethics, legal and moral principles as well as
illustrate the sentiment of suppliers. confidentiality of supplier information. The findings
78 Michael Bendixen and Russell Abratt

Multiple regression analysis

Independent variable Regression coefficient Standard error T-Value (Ho: B=0) Prob level Decision (5%)

Regression equation section

Intercept )0.6219838 0.786815 )0.7905 0.430753 Accept Ho
Ethic 0.7185847 0.2207199 3.2556 0.001462 Reject Ho
Relat 1.392772 0.2345084 5.9391 0.000000 Reject Ho
R2 0.482552
Independent variable Regression coefficient Standard error Standardized coefficient
Regression coefficient section
Intercept )0.6219838 0.786815 0.0000
Ethic 0.7185847 0.2207199 0.2703
Relat 1.392772 0.2345084 0.4931
T-Critical 1.979439
Source DF Sum of squares Mean square F-Ratio Prob level
Analysis of variance section
Intercept 1 7544.643 7544.643
Model 2 98.61304 49.30652 57.3526 0.000000
Error 123 105.7441 0.8597081
Total (Adjusted) 125 204.3571 1.634857
Root mean square error 0.9272045 R2 0.4826
Mean of dependent 7.738095 Adj R2 0.4741
Coefficient of variation 0.1198233 Press value 111.0044
Sum |Press residuals| 88.3975 Press R2 0.4568

indicate that the MNC is not only concerned with relationship, confirming previous studies (Turnbull
what is legal, but also with what is morally right. et al., 1996). Once the MNC makes a commit-
Staff members who take bribes face penalties and the ment, they make sure that it is honoured. This
MNC is highly regarded as far as business ethics is reduces both partiesÕ perception of risk, and it also
concerned. In addition, it has a strict code of ethics decreases the search and transaction costs in the
to which management and staff adhere. This suggests relationship. Respondents also stated that when
that the MNCÕs values have been communicated to there is a problem or a query, they know whom to
their suppliers. This supports the notion that cor- contact. In addition they have regular meetings
porate values are a relational issue (Lozano, 2005). with the MNC, which helps to maintain a good
The second dimension involves candid relation- working relationship. Open lines of communica-
ships that enable the MNC to be firm but fair in tion are an important part of corporate identity
negotiations while having sound and open rela- management, because the values of the MNC can
tionships with suppliers and the rapid resolution of become known, and its image and reputation can
any problems. In this case, the second dimension is be formed and enhanced. All this highlights the
more important than the first as a predictor of need for greater transparency by both the suppliers
perceived ethical behaviour. Suppliers often cited and the buyers. The buyers are building a trusting
the fair and professional tender process as an relationship with their suppliers by maintaining
example of good ethical behaviour by the MNC good ethical values, which in turn leads to greater
staff. There were few and disparate examples of commitment to the relationship.
poor ethical behaviour. The results suggest that This case illustrates the importance of the existence
trust is an important factor in the buyer–supplier and implementation of formal codes of ethics within
Corporate Identity, Ethics and Reputation in Supplier–buyer Relationships 79

an MNC, but the bi-dimensional factor solution logically a part of the corporate image of the organi-
indicates that this is but one side of the coin with sation. Literature in the field clearly links this corpo-
respect to good ethical practice i.e. codes are a nec- rate image of the organisation to its reputation. What
essary but not a sufficient condition. In addition to is less obvious, and a new finding of this research, is the
such codes and standards, sound and candid relation- role of the dimensions of ethical perceptions.
ships are the linchpin that enable such good practice. The conceptual frameworks of corporate identity
This places an interesting and different perspective on of both Kiriakidou and Millward (2000) and Balmer
relationship marketing as an important strategy for (2001) include the way the organisation behaves as
improving corporate reputation. While suppliers well as interfaces with its external world. These as-
would inevitably be involved in relationship mar- pects are strongly reflected in the dimensions of
keting in order maximise their sales, they need to take ethical perceptions. Ethical standards and justice
into consideration the fact that customers themselves being seen to be done in terms of their implemen-
are involved in relationship management with a view tation become key tasks for corporate communica-
to optimising ethical perceptions of their supply tions (Korver and van Ruler, 2003). The building
chains. It seems imperative that these relationship and maintenance of open relationships with suppliers
activities are aligned so that both parties may achieve that are based on trust and mutual respect become
their goals. This finding confirms the link with pre- key management tasks, particularly for employees in
vious research stating that the relationship between the buying department (Kalafatis, 2000). These ele-
buyers and sellers is crucial (Kalafatis, 2000). ments of corporate communication and relationship
marketing are thus components of the corporate
identity management process. This addresses the
Conclusion often-neglected area of influence of the interrela-
tionships between the internal staff of an organisa-
The empirical results identify ethical standards and tion with external stakeholders. This is schematically
candid relationships as the underlying dimensions of represented in Figure 3.
the ethical perceptions in the buying department of an Our model suggests that an organisation must,
organisation by its suppliers. These perceptions are first, have high ethical standards. Elements that

Corporate Identity Corporate Reputation of Buyer

Management Process

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

Candid Relationships: of Buyer
Speedy resolution of problems by Suppliers
Clear communications
Fair but firm negotiations

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

80 Michael Bendixen and Russell Abratt

may be included here include the existence and relationships. Elements that may lead to good
adherence to a code of ethics; legal and moral relationships include speedy resolution of problems;
principles; respect for the confidentiality of suppliersÕ respect for the partner; transparency in its dealings,
information and products; product quality; jus- which include information sharing; clear commu-
tice with respect to bribery; nepotism and the nications; and fair, but firm negotiations. The
politeness of staff. This will clearly and unambigu- reputation of the buyer will be enhanced as a result.
ously help to establish who the organisation is and This model needs to be confirmed by way of
what it stands for and therefore establishes its iden- future research into other organisations and
tity. Second, the organization must have candid contexts.

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. 4.290
(2.2) Contracts are clear and precise everyone knows what is expected. 4.132
(2.3) Giving and receiving gifts/incentives is part and parcel of doing business with the MNC. 1.766
(2.4) When there is a problem or a query I know whom to contact. 4.283
(2.5) MNC is not only concerned with what is legal, but also with what is morally right. 4.180
(2.6) MNC are tough, but fair in their price negotiations. 3.870
(2.7) When there is a problem or a query I know it will be sorted out quickly. 3.790
(2.8) We have regular meetings with the MNC, which helps to maintain a good working relationship. 4.139
(2.9) The staff is not well trained – it is difficult to find anyone who knows what is going on. 1.842
(2.10) Staff members are often rude. 1.864
(2.11) MNC is concerned with protection of the environment. 3.915
(2.12) MNC always pays accounts on time. 3.567
(2.13) Staff members who take bribes face penalties. 4.192
(2.14) A loyal and enduring relationship with suppliers of products and services is important to MNC. 4.173
(2.15) MNC is highly regarded as far as business ethics is concerned. 4.144
(2.16) MNC abuses its position of dominance. 2.788
(2.17) MNC has strict code of ethics. 4.246
(2.18) MNC management and staff adhere to the code of ethics. 4.145
(2.19) MNC will discuss proposals with our competitors in an attempt to bring down the price. 3.161
(2.20) Family and friends are given preference when contracts are awarded. 2.090
(2.21) Management turns a blind eye to unethical behaviour. 1.869
(2.22) Documentation is often vague, which leads to problems. 2.034
(2.23) MNC treats its suppliers with respect. 4.125
(2.24) MNC is socially responsible. 4.190
(2.25) Everybody is given an equal opportunity to submit proposals for contracts. 4.075
(2.26) MNC respects the confidentiality of supplier pricing and other information shared during negotiations. 4.038
(2.27) MNC is a large organisation, so people can get away with unethical behaviour. 2.134
(2.28) MNC is very concerned with safety issues. 4.224
(2.29) MNC staff is professional in their conduct. 4.232
(2.30) MNC does not accept second-rate work. 4.394
(2.31) MNC staff often denigrate their competitorsÕ products. 2.352
(2.32) Some MNC employees spend far too much on entertainment. 2.410
(2.33) MNC expect suppliers to be transparent, but are not transparent themselves. 2.980
(2.34) Management at MNC have an open door policy. 3.857
(2.35) MNC is concerned with the long-term health/sustainability of the supply chain. 4.000
Corporate Identity, Ethics and Reputation in Supplier–buyer Relationships 81

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