Essay on The growth of the global value chains

The growth of the global value chains, through which Northern buyers, i.e. buyers from the EU, the US, and other well-developed nations, control a web of suppliers in the South, which is historically under-developed economically and technically[1]. Buyers or customers can influence policies of companies and their suppliers since customers’ loyalty is crucial for companies, while the negative attitude of customers to companies threaten to their competitive position. In such a situation, corporations cannot ignore the public opinion and attitude of customers to their policies[2]. Instead, they have to introduce self-regulation to prevent possible conflicts or issues that may lead to the customer dissatisfaction or negative attitude of customers to their brand. Customers in the UK are very concerned with the violation of human rights by large multinational corporations and their suppliers. For instance, some large multinational corporations may cooperate with suppliers, who use the child labour as they operate in Asian or African countries of the third world. However, such policy raises the customer dissatisfaction and undermines the brand reputation[3]. To prevent such problems, corporations introduce self-regulation[4]. As a result, they use self-regulation to minimise the risk of the misuse of power by large corporations and some of its employees or executives. In fact, self-regulation allows corporations to implement the same rules in any outlet, regardless of its location. Thus, self-regulation rules are applied in North and South, wherever corporations operate that leads to the prevention of problems with suppliers[5]. Therefore, the global value chains have become an important factor that stimulates corporations to self-regulation to prevent the rise of the negative public image of companies or deterioration of company-customer relationships[6]. In fact, self-regulation turns out to be capable to affect not only the performance of corporations and their policies but also the performance and policies of their suppliers.

3 The increased significance of brands and corporate reputation

The increased significance of brands and corporate reputation make companies vulnerable to the bad publicity. Hence, to prevent bad publicity, which may affect the company-customer relationships, companies introduce self-regulation[7]. In actuality, brands and corporate reputation are significant drivers of self-regulation because self-regulation is introduced to prevent possible deterioration of the brand and reputation of corporations[8]. Corporations introduce self-regulatory rules that aim at the promotion of the positive brand image and enhancement of their reputation. Self-regulation emerges as the demand for the efficient internal policies to maintain positive brand image and positive reputation[9]. The corporate reputation helps corporations to attract customers and breed their loyalty, while self-regulation helps corporations to monitor its internal business operations and company-customer relationships which affect consistently their reputation and brand image. Clear and comprehensible rules set in terms of self-regulation help corporations to enhance their public image and to improve their reputation.