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Protecting Brand Reputation
At this time of economic downturn and reduced consumer confidence, the equity of a brand can be a critical factor in ensuring that sales and margins are maintained while lesser brands get squeezed. Brand equity is a function of many things – image, price, innovation, tradition – but at the end of the day, they all boil down to reputation.
As profit margins across the electronics and personal communications industries become tighter, the pressure is on to protect and enhance major, global brands in order to avoid having to compete solely on price. Indeed, as some of the world’s blue-chip consumer electronics brands – such as Bose or TAG McLaren – have invested heavily in deliberately positioning themselves above price-sensitive markets by creating huge equity in their brands, protecting their reputation and positioning is vital to their continued success.
Companies can invest huge sums in developing a positive reputation over the years, but everything can be destroyed in a matter of moments in this age of instant communication. When companies get it wrong, the consequences can be far-reaching. As an example, look at the impact Mattel’s production problems involving lead paint have had, not just on their brand or the US toy industry, but also on China’s reputation as a provider of top quality consumer goods.
Outsourcing
Maintaining brand reputation is at the heart of generating repeat business. To protect margins, the transfer of design and manufacturing functions to locations with lower capital and operating costs has become increasingly common. This trend has been especially strong in the telecommunications industry. With the additional challenge of increased demand from emerging economies in countries such as India and China, it’s not difficult to see why many global IT and telecommunications brands have started to depend more heavily on outsourcing as a way of improving their economies of scale while focusing on business and brand development. Much of the growth experienced by major providers of telecom infrastructure towards the end of 2006 came from their involvement in these emerging markets. With outsourcing, however, it is more essential than ever that adequate control be exercised by the brand owner to ensure that the hard-won equity in their brand is not at risk from a devolved production process.
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 involved, the more vigilant the brand owner must be. Mr. John Beckett of Menlo Logistics has described a “cascade effect” that can result from mistakes by one or more participants in the chain.
It is therefore vital that companies keep a close watch on their outsourcing partners. To avoid potential or actual damage to a company’s brands or reputation, such suppliers must be equal exemplars of best practice. This is why the core of Elcoteq’s approach to business is both ethical and commercial, based in part on a mix of Corporate Responsibility (CR) best practice allied to a deep understanding of each customer’s specific business objectives.
By 2009, global revenue from EMS is expected to exceed 320 billion USD. As the world’s fourth-largest EMS provider to the communications technology sector, Elcoteq considers its brand protection practices to be a significant factor in retaining customers in an increasingly competitive marketplace.
Corporate Responsibility
Corporate Responsibility has expanded to encompass social, environmental, and economic aspects, with community relations being one example.
Customer and consumer pressure have resulted in a need for additional reporting. Working in tandem with this trend is a steady rise in ethical consumerism. Consumers are increasingly aware of CR issues and these are now beginning to influence their purchasing decisions.
Indeed, there are now websites that in effect transfer control of a brand’s image to the consumer through the encouragement of personal reviews.
Amazon is a good example. End users not only review the quality of their purchase, but also comment on wider issues associated with the brand or the sector. With sites of this type growing in number and influence, brand values are being put under the microscope by both consumers and special interest groups. To mitigate any risk to their brand’s reputation, brand owners have to ensure that the highest social, environmental and quality standards are maintained in the design, manufacturing and logistics functions.
A brand owner can invest millions in earning a reputation for excellence, but this can be lost in minutes as a result of a single negative comment. Elcoteq views helping its customers to protect their brands from reputational risk as an important part of our function, and we achieve this through the quality of our operational processes and safeguards.
Elcoteq operates in Europe, Asia-Pacific and the Americas and employs around 24,000 people. Operating in a socially responsible manner in many different countries and cultures presents a huge challenge. Elcoteq has adopted the SA8000 standard in every territory in which it operates, complies with the OHSAS 18001 and ISO 14001 standards, and maintains additional guidance on workplace practices. The same standards of compliance are expected throughout the entire supply chain. An important element in brand protection is balancing issues relating to CR with supply chain and manufacturing efficiency.
Local knowledge in each territory is used to provide process-design and supply-chain management with information and ensure that all work undertaken on behalf of global brand owners is delivered to the highest standards. As Elcoteq is fully engaged in its customers’ design and manufacturing processes, problems of component specification and production – such as those experienced by Microsoft which led to the Xbox 360 product recall – are more easily avoided.
Elcoteq also uses its local and regional knowledge to stay ahead of the game. By being aware of planned legislative changes, additional compliance obligations and similar potential constraints on manufacturing processes, we offer our customers a competitive advantage.
Legislative Compliance
The requirements of Europe’s WEEE directive concerning extended product life and ease of recycling, along with the RoHS directive, have now been in effect for several years and have had a significant impact on the IT, electronics, electrical goods and communications industries. These EU initiatives set the standard worldwide, and China enacted its own RoHS legislation in 2007. REACH is another on-going initiative that must be monitored. Design for the environment has become an important consideration together with design for tear-down, reuse, and end of life. Elcoteq is following developments closely, ensuring compliance for our customers.
Companies such as Research in Motion (RIM) and Nokia that have partnered with organizations such as Elcoteq in the development of production techniques, in product design or supply-chain management have reaped the rewards of such foresight and continue to trade freely in some of the world’s most competitive markets.
Manufacturers that failed to take notice are now in “catch-up” mode, attempting to comply with regulations while losing valuable time and money in the process. The consequences of failing to anticipate and adapt can be severe, as witnessed in the photographic industry. Because they employed lead in both solder and for coatings on the glass in their best lenses, some manufacturers had to abandon many of their most popular models when leadfree compliance was put into effect.
For Elcoteq, though, simple compliance is not enough. Differentiation from the competition is based on both exceeding legal obligations and doing so in ways that bestow competitive advantage on our customers. Effiency in manufacturing and logistics can be modeled in advance of legislative changes, allowing Elcoteq to work with brand owners on fine-tuning design and manufacturing processes and improving time to market.
Handling the impact of laws aimed at environmental best practice is straightforward: reduced component redundancy; the use of safer, cleaner materials; and building-in the capability for ease of recycling. Corporate Responsibility, of course, is not limited to just these aspects.
Labor Issues
With increasing pressure from shareholders regarding CR issues and continuing moves towards ethical investment, one of the major factors that will define good companies or brands is labor practices. SA8000 lies at the heart of Elcoteq’s processes in this area. Even the most highly-respected brands can get caught out by labor problems in their supply chains. Witness the report on digital camera makers published in December, 2007 by the UK’s Ethical Consumer Research Association, in which a number of top brands were criticized for failing to meet minimum standards in working conditions, supply chain policy and environmental reporting.
With emerging economies such as China and India and newly developed production facilities across much of Asia, where labor costs are low and regulation is lax, linking up with a partner such as Elcoteq that has market-by-market knowledge and understanding is an important element in ensuring long-term returns on investment while also protecting both corporate and brand reputations.
Elcoteq’s CR policies are integrated into our design and production criteria and represent part of the transparency we offer in our supply chain operations. In part, our strength lies in our close ties with the communities in which we operate. Local management ensures that supply chain management complies with our best practice – an approach that helps to safeguard our customers’ reputations.
Elcoteq handles its customers’ reputations with as much respect as its own. Repeat business shows that this practice works. Elcoteq’s ability to marry this approach with conventional EMS activities and deliver the entire, enhanced package has helped the company build strong relationships with great global brands such as Research in Motion (RIM), Sony Ericsson and others. It’s a simple recipe for success – and we’re very good at it!
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Topics:
"world mobile congress", Brand, Brand Protection, Communication, Corporate Responsibility, CR, ems, environment, environmental, environmental friendly, environmental responsibility, green, IEMS, Integrated EMS, labor, labor issues, legislation, Outsourcing
