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The Impact of Downsizing on the Corporate Reputation

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The Impact of Downsizing on the Corporate Reputation
FACTA UNIVERSITATIS Series: Economics and Organization Vol. 5, No 1, 2008, pp. 51 - 62

THE IMPACT OF DOWNSIZING ON THE CORPORATE REPUTATION UDC 005.32



Biljana Djordjević, Suzana Djukić
Faculty of Economics, University of Niš, Serbia
Abstract. This paper deals with the downsizing influences on the corporate reputation. In this paper we stress the importance of the corporate reputation as one of the most important firm 's intangible assets. This kind of resources could be a significant source of the firm 's competitive advantage. After the presentation of a brief review of downsizing literature, we investigate the downsizing influence on the corporate reputation. More precisely, we investigate how downsizing influences the eight dimensions that determine corporate reputation index. Our discussion is based mainly on the findings of a number of referent studies that investigate downsizing outcomes. Since we have found that there is a great possibility for downsizing to be an unsuccessful firm 's strategy and therefore to decrease the corporate reputation, it is important before making the decision about downsizing to reconsider the necessity of such a decision. Key Words: downsizing, corporate reputation, corporate reputation index, employee.

INTRODUCTION Under the conditions of intensified competition and demanding consumers, corporate reputation is becoming a source of competitive advantage. Selection in purchasing on the part of consumers on the basis of brand, image and other intangible product characteristics is becoming dominant, thus inducing companies to invest more in the creation of reputation that will reflect the business of the enterprise. Favorable reputation which is a result of the long lasting favorable public perception of the enterprise can be transformed into added value and become valuable assets of the enterprise which are hard to copy. In today 's competitive business environment, organizations are forced to realize different kind



References: 1. Black, E.L., Carnes, T. A.: "The Market Valuation of Corporate Reputation", Corporate Reputation Review, 2000, Vol. 3, No. 1, pp. 31-42. 2. Stanković, Lj., Radenković-Jocić, D., Djukić, S.: "Unapredjenje poslovne konkurentnosti", Ekonomski fakultet, Niš, 2007. 3. De Pelsmacker, P., Geuens, M., Van den Bergh, J.: "Marketing Communication, A European Perspective", second edition, Pearson Education, Prentice Hall, 2004. 4. Fombrun, C.: "Reputation: Realising Value from the Corporate Image", Harvard: Harvard Business School Press, 1996. 5. Caruana, A., Cohen, Ch., Krentler, A. K., "Corporate reputation and shareholders intention: An attitudinal perspective", Brand Management, 2006, Vol. 13, No. 6, pp. 429-440. 62 B. DJORDJEVIĆ, S. DJUKIĆ 6. Baines, P., Egan, J., and Jefkins, F.: "Public Relations: Conteporary, Issues and Techniques", Oxford: Elsevier Butterworth-Heinemann, 2004. 7. Djukić, S.: "Integrisanje komunikacionih aktivnosti preduzeća u cilju povećanja poslovne efikasnosti", Ekonomske teme 2/2007, str. 89-99. 8. Egan, J.: "Marketing Communications", Thomson Learning, 2007. 9. Djukić, S., Stanković, Lj.: "Uloga internog marketinga u procesu ponovnog osvajanja izgubljenih potrošača", Tematski zbornik, Razvijanje konkurentske prednosti u Srbiji u procesu evropskih integracija, Ekonomski fakultet Niš, 2007, str. 159-172. 10. Zeina A. Karake: "An examination of the impact of organizational downsizing and discrimination activities on corporate social responsibility as measured by a company 's reputation index", Management Decision, 36/3, 1998. 11. Stelios C. Zyglidopoulos: "The Impact of Downsizing on Corporate Reputation", British Journal of Management, Vol. 16, 2005. 12. C Freeman, J. S., Cameron, S. K.: "Organizational Downsizing: a Convergence and Reorientation Framework", Organization Science, Vol. 4, No. 1, February, 1993. 13. Janićijević, N.: "Organizational changes and developement", The Faculty of Economics, Belgrade, 2002. 14. Burke, J. R., Nelson D.: "Mergers and Acquisitions, Downsizing, and Privatization: A North American Perspective", in The New Organizational Realty – Downsizing, Restructuring and Privatization, American Psychological Association, Washington, DC, 1998. 15. Djordjevic B.: "Managing human resource during downsizing process", Doctoral thesis, The Economic Faculty of Belgrade, 2007. 16. Appelbaum, H. S., Lavigne-Schmidt, S.: "Downsizing: Measuring the Costs of Failure", Journal of Management Development, Vol. 18 Issue 5/6, 1999. 17. Stelios C. Zyglidopoulos: "The impact of downsizing on the corporate reputation for social performances", Journal of Public Affairs, Vol. 4, No. 1, 2004. 18. E. Geoffrey Love, Matthew Kraatz: "How do firms ' actions influence corporate reputation? The case of downsizing at large U.S. firms", Academy of Management Best Conference Paper, 2005. 19. Vincent, A. M., Roger, W. S.: "Assessing the roller coaster of downsizing", Business Horizons, Jul/Aug, Vol. 40 Issue 4, 1997. 20. Farrell, A. M.: "The Effect of Downsizing on Market Orientation: The Role of Trust and Commitment", ANZMAC, Visionary Marketing for the 21 Century: Facing the Challenge, 2000. 21. Dougherty, Bowman, H. E. (1995): "The Effects of Organizational Downsizing on Product Innovation", California Management Review, Vol. 37, No. 4, Summer. 22. Mirabal Neil, De Young Robert: "Downsizing as a Strategic Intervention", The Journal of American Academy of Business, cambridge, March, 2005. 23. Noer, D.: "Leading Organizations through Survivor Sickness: A Framework for the New Millennium", in The Organization in Crisis - Downsizing, Restructuring, and Privatization, Blaskwell Business, 2000. UTICAJ DOWNSIZING - A NA KORPORATIVNU REPUTACIJU Biljana Djordjević, Suzana Djukić U radu se razmatra uticaj downsizing-a na korporativnu reputaciju. Ukazano je na važnost korporativne reputacije kao jednog od najvažnijijeg dela neopipljive imovine preduzeća. Ova vrsta imovine može biti značajan izvor konkurentske prednosti preduzeća. Nakon prezentiranja literature o downsizing-u, autori istražuju uticaj downsinzing-a na korporativnu reputaciju. Preciznije, istražuje se uticaj downsinzing-a na šest dimenzija koje determinišu indeks korporativne reputacije. Naše razmatranje je najvećim delom zasnovano na brojnim referentnim studijama koje istražuju rezultate downsinzing-a. Zaključile smo da je veća verovatnoća da je downsinzing može biti neuspešna strategija preduzeća i da smanjuje korporativnu reputaciju veća. Zbog toga je važno da se pre donošenja odluke o downsinzing-u razmotri njena neophodnost. Ključne reči: downsizing, korporativna reputacija, indeks korporativne reputacije, employee.

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