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Protecting Brand Reputation
The founder and CEO of Amazon, Jeff Bezos, defined reputation as: “What people say about you when you have left the room.” Reputation is important to an individual – it is vital to a company.
Companies can invest millions in developing a positive reputation over the years but it can be destroyed in a matter of moments in this age of instant news and communication. When organisations get it wrong, the consequences can be catastrophic - just look at the impact Enron had on Arthur Andersen, one of the world’s largest auditors, and now just a memory.
Assessing Reputation
The global PR company Hill & Knowlton did some research in 2003 on the subject of reputation, concluding that 39 percent of a company’s reputation in the UK rests directly with the CEO, rising to 46 percent in the US. In other words, the CEO often personifies an organization – classic examples would be brand-owners like Richard Branson and Bill Gates.
However, this association with CEOs was only relevant for well-recognised companies – for below-the-line suppliers like Elcoteq, reputation, and its consequent brand equity, is tied up almost entirely in delivery of product or services. Performance is king and you are only as good as the fulfilment of your last contract.
When it comes to measuring brand/reputation, managers often rely too heavily on indicators of internal performance, such as inventory levels and cost savings. Accenture’s partner, Min Chang urges the adoption of measurements that are visible to the customer, such as on-time delivery and overall customer satisfaction. Elcoteq has placed customer satisfaction at the heart of its business philosophy and practises – whether in ensuring competitive pricing and speed-to-market or safeguarding good corporate governance and brand reputation.
Establishing industry recognition for your own reputation is the best, and least costly, means of ensuring that you are always on the preferred supplier list of existing customers and the short-list of potential new customers.
The electronics industry
In the electronics and telecommunications industries, price-competitiveness has created pressures for outsourcing product design and manufacture from areas with restrictive labour practises and high costs to those of a more open and competitive commercial culture.
In the electronics industry, worth an estimated $1,470 billion in 2007 - up 6.7% on the previous year, there is a variety of competing pressures on manufacturers in the different sectors with arguably the greatest number affecting the consumer electronics markets – on its own worth over $330 billion this year. Here, not only do brand-owners have to concern themselves with industry-wide issues such as avoidance of hazardous materials; incorporation of re-use and ease of recycling into product design; logistics and supply chain management, but there is also the need to maintain and enhance market share through regular product innovation and differentiation.
Add to this the challenge of additional demand from the emerging economies of countries like India and China and it becomes evident why many global IT and telecommunications brands have started to depend more heavily on outsourcing as a means of allowing them to improve their economies of scale while concentrating on business and brand development. Indeed, much of the growth attributed to the major telecoms infrastructure providers towards the end of 2006 came from their involvement in these emerging markets.
The benefits and risks of outsourcing
Outsourcing may help an organization to focus on its core competencies, but it also places the brand’s reputation partly in the hands of outsiders. The more partners that are involved, the more vigilant the company must be. John Beckett of Menlo Logistics speaks of a “cascading effect” that results from mistakes by one or more participants in the chain.
“It’s fairly black and white,” he says. “The supply chain either executes or it doesn’t. If it doesn’t, you’re not competitive.” It is actually worse than that, not only may you be uncompetitive but you could also lose your hard-won reputation with customers and stakeholders.
It is therefore vital that companies keep a close watch on outsourcing partners. These suppliers must be equal exemplars of best practice if the companies’ brands or reputations are to avoid potential or actual damage. This is why Elcoteq has at its heart an ethical, commercial approach to business, based in part on a mix of Corporate Responsibility (CR) best practice allied to a deep understanding of the customer’s business objectives.
By 2009, the worldwide revenue from EMS is expected to exceed $320 billion. Elcoteq is already the world’s 4th largest EMS provider to communications technology companies and regards its Brand Protection practises as a significant factor in retaining clients in an increasingly competitive market.
Corporate Responsibility
Shareholder and Customers pressure has resulted in a need for social reporting in Annual Reports, encompassing labour relations, environmental sustainability, community relations and cause-related marketing.
Working in tandem with this is a steady rise in ethical consumerism, especially in countries like the UK and Germany. Recent reports, such as those conducted by the UK-based Ethical Consumer Research Association (ECRA), into the manufacturing practices of hitherto respected global brands have contributed to increasing consumer awareness of CR issues and these are now beginning to influence purchasing decisions.
Commenting on this, Elcoteq’s Vesa Keränen, Senior Vice President, Sales and Business Development, states: “A brand owner can invest millions in earning a reputation for excellence but it can be lost in minutes through one bad news story.”
“With the rise in ethical consumerism, one criticism from a respected consumer organisation can jeopardise a brand, or indeed a company’s, reputation and thus sales. It can also affect share prices.”
“We see an important part of our function as helping our customers to protect their brands from reputational risk through the quality of our operational processes and safeguards.”
Elcoteq’s Vesa Keränen, Senior Vice President, Sales and Business Development, continues: “Like any of the best suppliers we will help a client shorten a product’s time to market; liaise with materials producers and negotiate good prices; enhance the production facilities and foster good relations in the community – all these things we do but it is no longer enough for global brand-owners. They are all looking for even greater added value and that is where we come in. We take our Brand Protection practises to demonstrate to our customers our focus and understanding of their needs.”
Elcoteq operates in Europe, Asia-Pacific and the Americas, employing around 23,000 people. The company uses local intelligence to inform its process design and supply chain management to ensure that the work it undertakes on behalf of global brand-owners is compliant with the highest standards of social and environmental responsibility.
The company uses its local and regional knowledge to keep it ahead of the game. By being aware of planned legislative changes, additional compliance obligations and similar potential constraints on the manufacturing process, Elcoteq can help give its customers a competitive advantage by keeping them ahead of their competitors. This approach can also speed up new product entry.
Legislative compliance
The requirements of Europe’s WEEE Directive concerning extended product life and ease of recycling, along with the RoHS Directive, have had a significant impact on the IT, electronics, electrical goods and communications industries.
OEMs which have outsourced operations to companies like Elcoteq in the development of production techniques, design and supply chain management have reaped the reward of such foresight and continue to trade freely in some of the most competitive markets.
In fact, for Elcoteq simple compliance is not enough – differentiation from the competition is based on exceeding the obligations of the law and doing so in a way that bestows competitive advantage on their customers. Efficiencies in manufacturing and logistics can be modelled in advance of the legislative changes, allowing Elcoteq to work with the brand-owner to fine tune the design and manufacturing processes.
The impact of laws aimed at environmental best practise is straightforward to handle – reduced component redundancy; the use of safer, cleaner materials; in-built capability for ease of recycling – but of course, Corporate Responsibility is not limited to these aspects.
Labour issues
With increasing pressure from shareholders on Corporate Social Responsibility issues and continuing moves towards ethical investment, one of the major issues that will define good companies or brands is labour practices.
Even the most respected brands can get caught out by labour problems in their supply chains. Witness the report published in December by the UK’s Ethical Consumer Research Association on digital camera makers which criticised a number of top brands for failing to meet minimum standards in working conditions, supply chain policy and environmental reporting. These nearly all relate to sub-contracted production in China.
Remember Nike’s problems when it was revealed that child labour was being used to create high-value consumer products? It has taken years to claw back its reputation – and it is not yet fully recovered outside the US.
With emerging economies such as China, India and newly devolved production facilities across much of Asia where labour costs are low and regulation is lax, finding a partner with Elcoteq’s market-by-market knowledge and understanding becomes more important in ensuring long-term returns on investment while protecting corporate and brand reputation.
Once again, Elcoteq’s experience in all these areas can do much to protect global brands from the risk of a consumer backlash. Elcoteq’s CR policies are integrated into design and production criteria and form part of the company’s transparency in its supply chain operations. This approach designed to protect the brand and corporate reputation of Elcoteq’s customers.
“Our approach to protecting our customers’ brands is not rocket science,” says Minna Aila, Director, Corporate Responsibility and Corporate Relations “because any business should be able to understand the importance of reputation – and therefore reputation management.”
“We persuade our customers, based on our own business philosophy, to place their trust in us to deliver a product or component to market in the shortest reasonable time, at the lowest feasible cost, and with their corporate and brand reputations intact or even enhanced by the quality of service we offer.”
It is the ability to demonstrate that, in a world of developing ethical consumerism, being aware of corporate governance issues and then embracing them in the design and production process, has enabled Elcoteq to become a valued part of the supply chain for some of the world’s leading brands.
“It is simple,” concludes Minna Aila, Director, Corporate Responsibility and Corporate Relation, “we see protecting the customer’s brands and reputations as a critical part of our offer. It is Elcoteq’s ability to marry this with the more conventional EMS activities and deliver the entire, enhanced package to a budget that has helped us to build strong relationships with great global brands such as Nokia and Sony Ericsson. By treating our customers’ reputation with as much respect as our own, we’ve proven that they will come back for more. It’s a simple recipe for success – and we’re rather good at it!”
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Topics:
Brand, Brand Protection, Communication Technology, Electronics Manufacturing Services, Integrated EMS, Outsourcing
September 23rd, 2008 at 5:06 pm
Thats a great definition of reputation- “What people say about you when you have left the room.”