Critical Evaluation of the extent to which internal and external stakeholders

can impact and influence a firm’s brand equity

Contents
1. Executive Summary: ................................................................................................................................. 2
2. Introduction:.............................................................................................................................................. 3
2.1 What do we mean by Brand Equity? .................................................................................................. 3
2.2 Importance of brand equity in increasing a company’s value ............................................................. 3
2.3 Nature and concept of corporate brand equity .................................................................................... 4
2.4 Customer based brand equity model ................................................................................................... 5
2.5 Categories of stakeholders and their influence on Brand Equity ........................................................ 6
3. External stakeholders ................................................................................................................................ 7
3.1 Customers as external stakeholders .................................................................................................... 8
3.3 Customer as an external stakeholder ................................................................................................... 9
3.4 Government as external stakeholders ................................................................................................. 9
3.5 Society as external stakeholder ......................................................................................................... 10
4. Internal stakeholders ............................................................................................................................... 10
4.1 Employees are internal stakeholders ................................................................................................. 10
4.2 Managers and Owners as internal stakeholder .................................................................................. 11
6. References ............................................................................................................................................... 12

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Give examples less and explain and critically analyze more.

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1. Executive Summary:
Brands are at the heart of corporate world as they are the chief source of revenues for the
companies. This report aims to critically evaluate the role and impact of internal and external
stakeholders when building and developing service brands. In order to do that it’s important to
first look at the importance of brand equity in increasing company’s profits and how brands can
be built on Customer-based Brand Equity Model. The first section describes brand equity and
what value it lends to a company’s value. Intangible assets of a company in the form of brand
image and popularity with the customers have significant effect on revenues generated. After
developing this idea, then it is discussed that how various external and internal stakeholders can
influence brand equity. Both types of stakeholders are interdependent on each other while both
influence the brand equity. Customers, suppliers, communities, non-governmental organizations
and government fall under external stakeholder category, while employees, owners and suppliers
are among internal stakeholders and have an impact on brands reputation, popularity and the
ability to compete in market efficiently. The extent of the influence of stakeholders varies from
company to company and the factors affecting those are evaluated. Some of these stakeholders
like social media marketing and famous brand ambassadors are more important for consumer
brands, such as Coke, while these may not be much important for Boeing, to whom, government
and mechanical part suppliers are more important. In the next section role of customer service
experiences in brand formation is discussed and analyzed with various examples.

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2. Introduction:
Brands Equity has become one of the most important marketing elements for companies and
brands. According to Hutton (1997), Brand Equity is best understood in the form of an intangible
asset of a brand and is defined as the customer’s willingness to pay premium prices for their
favored brand. Thoughts (2006) identified that brands are not developed overnights. It takes a lot
of effort to build a brand and reap high profits after it’s developed. This is done by clear
marketing strategies, targeting the customers, acting ethically and showing a responsibility
towards community and environment, and producing high quality products.

2.1 Brand Equity? Analyze the definition

Brand equity forms the backbone of modern marketing employed by brands and companies. It is
best understood in the form of an intangible asset of a brand and is defined as the customer’s
willingness to pay premium price for their favored brand (Hutton, 1997; Saraniemi et al., 2010).
This is only possible when a company has built up recognizable, well-known and reputable
brand. This is done by clear marketing strategies, targeting the customers, acting ethically and
showing a responsibility towards community and environment, and producing high quality
products. Only then will the customers be willing to pay the premium price for a brand’s
products (Goutham’s Thoughts, 2006).

2.2 Importance of brand equity in increasing a company’s value

Brand equity is the most important factor in building a company’s reputation and financial
revenues. Lev (2001) stated that intangible assets of a company in the form of brand equity
would be the most important factor to judge its performance and value in next decade and this
has proven true in the present day financial market.

A specific example that supports my stance here is of Coca-Cola who spent two billion USD in
the form of marketing, promotions, sponsorships and community projects in order to create
brand equity. In this way, no matter how much it diversifies its business on global level, more
customers are attracting toward it, and thus increasing its branded image and value. So intangible
assets are difficult to measure but they are existent and vital to any company (Ambler, 2000).
Some examples of these assets are the well-being of employees, professional advisors, suppliers

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and distributors, customer-care services, the reputations of products and brands and the ability of
organization to react to challenges of competitive market (Hall, 1993).

2.3 Nature and concept of corporate brand equity

In past, businesses tend to focus only on consumer goods and products but now the focus has
shifted on corporate branding (Ahonen, 2008) which encompasses brand loyalty, brand
awareness, quality of products and tangible brand assets (Aaker, 1996). In a broad sense,
corporate brand equity can be defined as the sum of results formed by actions and activities
performed under the company and its brand. It is “the differential response by consumers,
customers, employees, actions, communications, products and services provided by a corporate
brand entity” (Keller, 2000).

Corporate brand equity (CBE) or in other words, intangible assets of a brand are influenced by
different types of stakeholders. There are several internal and external aspects of a company (in
the form of stakeholders) which influence corporate brand equity (Abimbola and vallaster. 2007;
Balmer and Liao, 2007; Balmer and Gray, 2003).

In order to access how internal and external stakeholders affect the corporate brand equity,
consider example of Tesco Plc, which is the largest food retailer in the UK. Its employees work
in a healthy work environment. They are satisfied with their assigned roles. Thus they perform
well and produce best products and services for consumers. This ultimately strengthens the brand
equity of the company. Similarly, Tesco aims to satisfy its customers. It offer high quality
products and lacks behind in providing online shopping facility for them. In this way,
many of its customers has switched to its rivals such as Sainsbury. This has affected its
corporate brand equity and resulted into decline in sales and profits. Likewise, its top
shareholders include Norges Bank and Berkshire Hathaway Inc. Both of its shareholders expect
that Tesco makes profit and offer them good returns. But recent decline in sales has made them
less satisfied with services of Tesco. This also affects its corporate brand equity. The
communities expect from Tesco to deliver services by establishing its retail centers in areas
which does not disturb society and environment. Moreover, they expect that its retail stores
provide ample job opportunities, and also support for local causes and initiatives. Tesco has
satisfied in this regard the community in which it operates. This also strengthens its CBE image.

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Additionally, Tesco provides its suppliers large number of growth opportunities and shared
customer insight (Stakeholder engagement, 2008). In this way, suppliers supply quality products
and raw materials to Tesco within given time duration. In this way, products are manufactured,
delivered and presented to consumers on time, thus enhancing its corporate brand equity. Lastly,
the governments and regulators expect that Tesco comply with them legally; provide family-
friendly employment opportunities and facilitate with delivery of good quality training.
Moreover, it is expected that the company pays all of its taxes timely (Stakeholder engagement,
2008). Tesco has also excelled in this regard. It has recently signed a Carbon-free environment
provision contract. In this way, government supports it and issues legal permission to operate in
any area it wants. This eventually upgrades its corporate brand equity.

2.4 Customer based brand equity model

To build a strong, well known band with loyal customers is the primary goal of all companies. A
recognizable brand provides financial revenues to a company and makes it more stable in the
competitive market with greater opportunities for expansion and growth. In order to build such a
brand, customer-based brand equity (CBBE) model is most suitable and provides a unique
perspective to build and manage a brand (Keller, 2001).

This model is based on the idea that strength of a brand lies with the customers and what have
they learned, felt, seen and heard about the brand. The first building block in the CBBE pyramid
is how the customers identify a brand (brand establishment). For example customers identify
Alexander McQueen, Burberry and Channel as clothing brands which offer luxury apparel to its
customers. Next block defines the meaning of a brand (brand associations). For example,
customers can say that all these three brands offer durable, high quality clothes which have
unique designs and elegant styles. The third step in the pyramid is the responses which customers
have after buying the products of these brands (brand responses). If the response is positive, and
customers can say that they “feel confident or sexy” and they gain a seal of social approval after
wearing these clothes, then at the last step, customers will buy their clothes or products regularly,
creating brand loyalty (brand resonance). Brand resonance, the most valuable building block, is
built when all other building blocks have been established.

All of these stages of customer-based brand equity (CBBE) model influence the brand to a great
extent. For example, in 1st stage, when the customers perceive the brand, this means that brand

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has got eye of its target market. It will gain popularity as more customers talk about it or share
with others. In 2nd stage, when customers define the brand, it means the brand has proved to be
attractive for the customers, that’s why they are keen to know more about its features and offered
services. In 3rd stage, when customers offer positive or negative response, they affect brand in
opposite ways. Positive responses attract more consumers and sales and profits levels of the
branded company rises. Whereas, negative responses result into customers shifting away from
the brand. Today, many websites like Amazon and eBay sales products online and post users’
reviews. When viewers read a negative response about a branded product user, they eventually
stay away from buying or using it. Lastly, when brand resonance is achieved, then the brand is
acknowledged and renowned on both national and global levels successfully.

2.5 Categories of stakeholders and their influence on Brand Equity

Corporate organizations are made synonymous with stakeholders, who can be defined as groups
or individuals with whom the organization interacts or has interdependencies (Carrol, 1993;
Wilson and Fan, 2010) or stakeholders are any individual or group that may be affected by the
company’s activities. These stakeholders can be categorized into external and internal
stakeholders.

External stakeholders of a brand include customers, shareholders, suppliers, government,

competitors and trade unions. While the internal stakeholders consists of employees, core values,
organizational structure and office environment (ICAB tutorial, 2014). Figure 1 portrays the
inter-relationship between these various internal and external stakeholders.

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 Environment,
social
responcibility,
community
care
Customers,
shareholders,
Media,
Government
Owners,
Employees,
Core Values,
Organization
culture

Brand Equity

Figure 1: Inter-dependencies of external and internal stakeholders on brand equity

All stakeholders do not have the same intensity or magnitude. Sometimes, a brand’s equity may
depend on only one stakeholder, ignoring some of the rest. For example, consumer companies
like Tesco Plc offers products aimed at wider population. Thus, its essential stakeholders include
its employees, consumers, suppliers and government. Employees reflect better performance,
consumers builds brand image, suppliers provide quality raw materials and government grants
permission for operating. In the same way a company that offers specialized services and
products aimed at enterprise customers such as PTCL, which is land-line service provider. It
depends mainly on its employees, customers, suppliers and trade unions. Trade unions have great
role in supporting employees’ rights within the company. When PTCL satisfies its trade unions
and employees, they perform well, produce better services and thus maintains brand of the
company.

Their influence on brand equity is explained in sections below.

3. External stakeholders
The following sections evaluated how customers, society, government and celebrities act as
external stakeholders and how they influence the brand equity.

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3.1 Customers as external stakeholders
If we look at external stakeholders first, customers are the most important stakeholders and have
a huge impact on the sustainability of a brand. Their satisfaction is the main goal for every brand,
according to which they manufacture and market their products. Apple dominates the
international Smartphone market despite high price of products. For example, IPhone costs about
630 USD while Android phone produced by Samsung cost about 250USD. Even then customers
opt for iPhone because they know that Apple have premium prices but their products are high
quality and user-friendly. Similarly, the nature of feedbacks given on products also affect the
buying behavior of the consumers.

Similarly, Hewlett Packard account for a major share of laptops and notebooks (14.6%) at
international level as compared with Lenovo (6.9%), Acer (4.6%) and Toshiba (3.3%) because
HP provide their customers with, latest, high quality products. Customers buy their high-priced
products because they know they will be satisfied after using those, rather than opting for low-
price products with un-satisfactory results (Gartner Press Release, 2007). Moreover, the positive
online reviews of users of HP laptops and products also attract consumers toward buying them.

If brands target regional traditions, and market their products keeping in mind the local norms,
they can create a niche for themselves in the highly competitive market. For example, L’Oreal
introduced a modern version of Kohl for Indian women, which respects their traditions as well as
provides a fashionable alternative to traditional kajal. All these strategies which show that brands
care for people and social norms show the power of customers as external stakeholders.

3.2 Celebrities as external stakeholder

Brand’s reputation in the eyes of their customers is an important aspect effecting brand equity.
Often brands use famous movies stars or sports personalities to represent their products. If those
people generate negative publicity, brand’s reputation also gets deteriorated. This was the case
when Tiger Woods’ marriage broke down due to extra-marital affairs. Accenture, AT&T and
Gatorade chose not to renew their contracts as brand ambassador with him because public do not
associate well with a famous personality, whose personal life has a lot of issues. Similarly, brand
equities have a major boost when famous people are seen promoting or using eco-friendly
products. Natalie Portman has a preference towards organically produced cosmetics products,

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while Leonardo DiCaprio and Orlando bloom use Prius hybrid cars manufactured by Toyota.
This way, when famous star and celebrities promote specific brands, the foremost customers of
those products include the fans of those celebrities. People love to brag when they use products
and services promoted by celebrities. In this way, the sales increase due to upgraded brand
equity. Moreover, celebrities are known world-wide. So, when companies tend to diversify their
brands on global arena, they do so by getting that brand promoted by celebrity which is highly
known in that specific state.

3.3 Customer as an external stakeholder

Customers are the vital users of branded products and services. The company earns sales and
profits only when consumers buy and use its products and services, respectively. Whenever
customers buy any branded product, they discuss it with other face-to-face, through phone calls
and through social media. Social online marketing has experienced an exponential increase over
the last decade. Consumers post comments and reviews on websites such as Amazon, eBay,
Facebook, Twitter etc. Millions of customers use social media 24/7 and remain in contact with
brands’ latest reviews and promotions. This way, consumers act as external stakeholders. Their
positive response uplift the brand equity and vice versa.

3.4 Government as external stakeholders

Public awareness about environmental issues has increased due to media and if companies tend
to ignore such points, they lose their customers trust. A brand’s reputation is also at stake when
they a company engage in exercises which are harmful to environment. Thus, government easily
issues grant for operation only to those brand companies who involves in environment-caring
activities. It gains its customers trust and enhance its reputation, ultimately consolidating the
brand image. But if any brand chooses to disregard environmental degrading practices, then the
government hinders its operations. It results in lowered sales, decreased brand equity and
tarnished reputation ultimately losing the customer’s trust. For example, BP oil spill in Gulf of
Mexico and the resulting decreased brand equity and shares are the evidence that if brands are
causing damage to nature, customers will lose their trust in a brand (Falkenberg, 2004).
Similarly, lead paint found in toys from Mattel also caused a considerable loss of brand equity
and buyers trust. These examples show that huge loss of revenues may come from non-satisfied
customers who have lost their trust in a well-known brand (Bent, 2005).

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3.5 Society as external stakeholder
If any brand tends to ignore the social responsibility they have towards the society and take
advantage of loopholes in law, they may pollute environment or market substandard products.
But in doing so, they risk their brand credibility. Even in developed countries these instances are
there. Ford decided not to install a device which would protect the Fort Pinto burst into flames in
case of rear end collisions (Shaw and Berry, 1992) and this strategy backfired in the form of
public outrage. Ford not only lost its customers trust, but also managed to lose its credibility and
brand loyalty by dis-regarding the public stakeholders and perusing their own monetary gains.

When Nestle marketed a sub-standard infant milk formula in third world countries in 1977, it
experienced wide spread condemnation in the form of a global boycott that was active for more
than twenty-seven years (IBFAN, 2004). To counter-act the damage done by reduced brand
equity, Nestle spent 40 million USD to fight the boycott. In the end, it agreed to sign a code for
marketing infant milk formulations adopted by World Health Organization to avoid further
degradation of its brand equity.

4. Internal stakeholders
Internal stakeholders are equally important in terms of brand equity as compared to external
stakeholders. This section evaluates three most significant internal stakeholders, namely
employees, managers and organizational owners and assesses their influence on brand equity.

4.1 Employees as internal stakeholders

The personnel of a brand are of paramount importance for brand equity as they are the ones who
epitomize brand performance. Personnel communicate the ideas and philosophy behind the
brand. The employees already have a good idea of the brand and they can effectively
communicate it to customers (Jevnaker, 2004). So, staff is an important internal stakeholder and
if they are over worked with low wages, then it would directly affect the performance of the
brand in terms of public image, sales and marketing, ultimately the brand equity (Hatch and
Schultz, 2003). For example, the decentralization within Tesco’s structure encourages its
employees to enhance their skills in their field-relative department. This results in positive and
enhanced collaboration and efficiency within the business.

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4.2 Managers and Owners as internal stakeholder
The manager or director of the organization is another internal factor which influences the
corporate brand equity, as he is responsible for managing the staff and brand. He/she is in charge
of the brand performance and in contact with various stakeholders, and can be considered as the
face of the brand (Leitch and Richardson, 2003; Krake, 2005; Berthon et al., n.d.). Moreover,
when managers will follow a democratic style, it will result in increased motivation among the
employees as they will be equally invited to discuss present problems and proposing possible
solutions. They will employ their skills toward betterment of the brand. For example, Tesco’s
managers involve lower staff members in discussions and offer them full opportunity to take an
active part in decision making. This results in enhanced production and better corporate brand
equity through fully motivated workforce.

5. Conclusion

Brand equity is the impression in the consumer’s mind of the brand’s total personality. It is a
complex and subjective combination of a company’s image, the services it offers, how customer
feel towards the brand and the experiences shared between the brand and consumers. This report
takes a look at the various stakeholders, both internal and external, that are linked with brand
equity. By using various companies as an example, it evaluates the extent to which each of these
factors may affect the brand equity. Since all these factors may not necessarily contribute equally
to a brand’s equity, the relationship between a company’s area of expertise and the factors
important for its brand equity is explored as well. Moreover, the advent of technology has
changed the landscape of corporate culture and hence, an online social media presence plays a
vital role too. Some of the stakeholders can negatively impact equity; this point is illustrated with
the example of using celebrity endorsements for promoting brand equity. Not only customers,
society, government and suppliers, but also internal stakeholders such as employees’ well-being
and the role of managers and owners influence the corporate brand equity. In a nutshell, brand
equity is a complex mixture of various dynamically changing factors and to build a financially
and commercially strong brand, companies should emphasize on efficient marketing strategies
targeting customers and productive organizational culture.

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