Alva Group. (2017) CEO Reputation vs. Corporate Reputation. Retrieved from: http

Question

Alva Group. (2017)  CEO Reputation vs. Corporate Reputation. Retrieved from:  http://www.alva-group.com/en/case-study/what-is-the-relationship-between-ceo-profile-and-corporate-reputation/

Consider and discuss the following:

How important is the reputation of a business?

Is it better to have the reputation of being powerful or of being fair/flexible? For example, do you want to be insured by a company that always wins, or by an insurance company that is willing to allow the benefit of any doubt?

How important is CEO's reputation to the reputation of the business itself?

Goodwill is the technical word for the asset of a company being worth more than the sum of its parts. How would you measure the Goodwill of a company in dollar figures?

Explanation / Answer

The reputation of a business is very important if the company is doing business in developed and developing markets in the world. People have to trust the company before they invest in it even when the pricing is slightly on the higher side. The same happens with Apple and its products with every single release. The company prices its products very high compared to other competitors in the market but people still invest in them because they trust Apple. People want to do business with a reputed company and even the employees look for a reputed company to work for. So the reputation of a business tells a lot about the company and how people in those companies work towards creating value for the customers. Most of the companies spend a lot of money on marketing activities just to create a good brand image in the market so that people trust them and buy their products.

I personally feel that having a good reputation will also cover the aspect of being fair. When someone calls a business reputed, he is considering different aspects of the business that makes it reputed. So having a good reputation is more important than being fair or flexible. The company will cover all these aspects and create a brand marketing strategy. They will create a customer-oriented approach so that the customers are satisfied and this makes the company a reputed one among the customers. Companies will have to keep changing their approach in the customer service domain and that makes a company flexible and develop a fair practice in the business.

The CEO of the company is the sailor of the ship and he should have a good reputation as well. This does not matter to the customers of the company but it definitely matters to the employees and all the stakeholders. CEO is the one who takes the company in the right direction and he makes all the strategic decisions. The CEO also needs to have a reputation of having good work ethics and it makes him the right candidate for the role. The top management of the company will look for someone in the company who has all these qualities and appoint him as the CEO. The CEO will be the face of the company at a global level so if the person is not a good fit then the image of the company is at risk.

The Goodwill of the company is calculated which is equal to the price paid for the acquired company minus the fair market value of its net identifiable assets. Let us take a look at the example below:

Assume your business pays $1 million for a company that has $0.8 million in identifiable assets and $100,000 in liabilities. The amount of net identifiable assets will be equal to $0.7 million, or $0.8 million minus $100,000. Goodwill equals $300,000, or $1 million minus $0.7 million. This means you paid a $300,000 premium above the company’s net identifiable assets to acquire its unidentifiable assets, which add to its earning power. You would report goodwill of $300,000 in the noncurrent assets section of your balance sheet.

Source: http://smallbusiness.chron.com/goodwill-calculation-business-68189.html

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