The strategy of reputation



  • Costs and differentiation have long been considered to be sources of competitive advantage in firms. Reputation is also considered to be a potential source of competitive advantage in the Corporate Social Responsibility (CSR) literature, which seeks to promote social responsibility in the business community.

  • In this paper we argue that many firms aspire towards good company-wide CSR, and that poor CSR practices can damage reputation and competitiveness. However, our analysis, based upon the Faulkner and Bowman ‘customer matrix’, shows that although many firms have every economic incentive to take CSR issues seriously, commodity producers do not. For almost every other type of manufacture identified in the customer matrix, cost or differentiation advantages can be seen to ultimately accrue from the pursuit of CSR policy.

  • On the other hand, for commodity producers there are no obvious cost or differentiation advantages to be gained by developing and maintaining a good reputation. We suggest that these are the circumstances in which it is necessary to resort to legislation.

Copyright © 2005 John Wiley & Sons, Ltd.