The Relationship between Brand Image Strategy and Financial Performance:

An Analysis of the Role of Corporate Reputation

Brunel Doctoral Colloquium

Paper no. 13

May 2008

The Relationship between Brand Image Strategy and Financial Performance:

An Analysis of the Role of Corporate Reputation

ABSTRACT Research on brand equity and brand image management (e.g. Aaker and Keller, 1990; Keller, 1993; Park,

Jaworski, and MacInnis, 1986; Park, Milber, and Lawson, 1991; Roth, 1992, 1995) suggests that marketers

should develop brand image strategies before focusing on tactical marketing mix issues. In general, when the

name of a brand is mentioned, the first idea that comes to the consumer’s mind is the corporate image associated

with it. Thus, a brand image not only implies an actual brand meaning, which is set up in the beginning, and

managed over time, but also is reflected by a consumer’s perception of the producing company reputation.

Therefore, the image of a brand is mainly determined by corporate reputation, which means that corporate

reputation can influence the performance of a branded product. Therefore, this study will investigate instances

where brand image strategy and performance are moderated by corporate reputation.

At the same time, many researchers have investigated on strategic-performance relationship. The

literature on strategic-performance dates back to the beginning of the 1970s. For many years, marketing and

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advertising managers and researchers have wrestled with the issue of brand image strategy applications.

However, significant differences between consumers, corporate cultures, and market structures, probably justify

some additional problems over brand image strategy (Park, Jaworski, and Maclnnis, 1986; Roth, 1995).

As stated above, brand image in consumer’s mind reflects a series association of the corporation it

belongs to. Thus it is important to discover brand image concepts in this study. Brand image has been

acknowledged as an important area of research. This is because companies can increase their market share and

growth rates by establishing a strong brand image in the minds of their customers (Roth, 1995). In this way, a

good brand image can increase brand loyalty. Brand image is defined as perceptions about a brand as reflected

by the brand’s associations held in the consumer’s memory (Herzog, 1963; Newman, 1957); it is constituted by a

series of pictures and ideas in people’s minds that sum up their knowledge of a brand (Levy, 1978), that, taken

together, imply certain expectations of the customers (Gensch, 1978). However, Park, Jaworski, and Maclnnis

(1986) propose brand image as a strategic device for helping the brand concept to be implemented by means of

an exercise in brand management.

In most previous studies, performance has usually been seen as a direct and objective phenomenon

(Matsuno and Mentzer, 2000; Smith and Wright, 2004; Roberts and Dowling, 2002) that can be assessed by

simply measuring the outcome of a company’s revenue and sales volume. It can be divided into two parts:

financial and non-financial. Financial performance is usually used as a general measure of a firm's overall

financial health over a given period of time, and can be used to compare similar firms across the same industry

or in order to compare industries or sectors in aggregation. Non-financial performances are those such as ‘value’,

‘success’, and ‘significance’ (Amir and Lev, 1996). This study will use financial performance, such as market

share to measure the outcome of this research. As stated by Roth (1995), the success of brand image strategies is

contingent on their ‘fit’ with local market conditions.

Corporate reputation has been tested as an influential factor of a company’s financial performance

(Dunbar and Schwalbach, 2000; Roberts and Dowling, 2002). It is a representation of corporate history and

serves as a means of conveying strategic information about the quality of a firm’s products or services in

comparison with those of its competitors (Yoon et al., 1993). Herbig and Milewicz (1993) defined it as the

totality of a firm’s consistent attributes over a period of time. Similarly, Wartick (1992) argued that corporate

reputation is the summation of a single stockholder’s impression of corporate performance. As mentioned

previously, there is evidence that similarly constructed aggregated measures of reputation speak most directly of

a firm’s reputation as an investment.

The review of existing literature indicates that these disciplines have been addressed as distinct areas in

the study and are independent of one another. Consequently, very little is known regarding the relationship that

brings these concepts together. Therefore, it is apparent that there is insufficient research in this area of study. As

such, this study attempts to bridge this gap by bringing branding issues into the strategic-performance literature,

and developing a theoretical framework that binds these concepts together. Internal organizational factors and

external environmental factors will be examined with strategic brand image management theory (Park, Jaworski,

and Maclnnis, 1986) which specifies brand image as a condition and a company’s financial performance of a

company (e.g. market share) as a consequence. This study aims to investigate the relationship between a

company’s brand image strategy and its financial performance, and to investigate how brand image strategy

influences the corporate financial performance, and the precise role that corporate reputation plays in moderating

the relationship between brand image strategy and corporate financial performance.

This study is conducted in order to address two research questions. First, how do managers make their

strategic decision regarding a product’s brand image in a company? How do they develop their brand image

strategy? A conceptual framework (See Figure1) will be prescribed to help managers determine the degree to

which they apply brand image strategy across generic markets. This study empirically explores whether

corporate reputation relates to brand image strategy selection by the managers. Second, how does corporate

reputation mediate/moderate the effects of a brand image strategy on performance? The study identifies the issue

related to corporate reputation that managers should consider when making brand image strategy decisions. This

implies that reputation which is related to strategy selection will also relate to brand performance. If these

matters are found to be of significance, managers should identify the kind of corporate reputation that moderates

brand performance and use it as a basis for strategy selection.

These questions will be examined empirically by combining survey data from local marketing managers

with secondary data on corporate reputations. A hybrid methodology will be employed to investigate the

relationships between the study’s constructs. Two methodological approaches will be adopted in order to collect

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data for the development of the measurement scales to be used: quantitative and qualitative research methods,

such as the semi-structured interview and the focus group.

Newly developed medicine products are internationally regularized and protected by patents for 10~20

years. Generic medicine may only be manufactured legally in the rest of the world when the patent has expired.

Therefore, after the patent expires, generic drugs become much cheaper due to both competition and the fact that

research and marketing costs do not need to be factored in. The reason these are called “generic” is to distinguish

them from those products produced by the original producer (i.e. the company that invented or developed them);

as such they are not easily differentiated from other generic products, and should be given their own brand

names. Since medicine product are very similar in function and attributes, generic medicine much more

influenced by the reputation of the company that the product belongs to.

In addition, this study will examine the applicability of theories about strategy performance developed in

the West to a non-Western context (specifically Eastern in this study). Therefore, the research setting will be the

pharmaceutical industry in Taiwan, which employs 12,000 people (out of a total population of 22 million

people). The sales volume of this industry reached 2.1 billion US dollars in 2007 which contributed 5.76 percent

to the GDP of the Taiwan (Sun, 2007), a figure which, compared with those of most advanced countries, are

relatively low. This means there is still huge growth potential in this market.

The value of this research will extend the existing literature on the relationship between corporate

reputation and brand image. In general, the present study will add to the existing branding and strategy-

performance literature. It will also offer practitioners a causal model, as well as acting as a guide to enhance the

brand image of the product of a company.

This study will be divided into four main sections. The first section provides an introduction to the study

and gives an insight into the issues being investigated. The second section presents a comprehensive review of

the existing literature in relation to corporate reputation, the issues that bind the concepts of brand image

strategy, corporate reputation, and financial performance. A theoretical framework highlighting the relationship

that brings these concepts together will be presented. A discussion is followed with the implications of the

study –in theory and in practice, which identifies areas for future research and makes a call for the pursuit of

research in these areas. A summary of issues discussed is provided at the end of this paper.

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Herbig, P. and Milewicz, J. (1993) The relationship of reputation and credibility to brand success. Journal of

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Figure1. Proposed Conceptual Framework