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The Role of Community-Focused Strategies in Boosting Firm Performance

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Table of Contents

  • Communities
  • Community-Focus Strategies
  • Selection of Community-Focus Strategies
  • Implications of CFS

Communities are becoming increasingly important because they are giving people a sense of identity, they are providing them with ideals for which they fight for. For instance, people gathering around to defend human rights, sport fans, environmentalist amongst others. The purpose of this paper is to explain the importance of community-focus strategies, which are the specific activities that an organization engages in to meet social obligations, and which has become an issue of growing importance within the business community in order maintain competitive advantage. This paper will contribute to a key area in academic literature that concentrates in justifying community focus strategies initiatives to the corporate sector by illustrating a range of strategic benefits that a firm can achieve. Specifically, I am going to illustrate the strategic benefits that a football club can gain from the implementation of community focus strategies activities through a case study of Real Madrid Football Club.

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Community-focused strategies have become a very relevant topic now days in the business world. Big multinationals are aware of the importance of having a good reputation to have a healthy balance sheet, and community-focused strategies are a way to get there; some clear examples of leading companies fostering the implementation of these strategies are Nestlé with its Creating Shared Value and Unilever with its Sustainability Living Plan. But what exactly are community-focused strategies?

Communities

Community can be defined “as any social group in which perceived membership offers a sense of identity to the individuals who see themselves as a part of that community”. In addition to this, Fosfuri, Giarratana and Roca (2011) talk about the “propensity of people to come together in social groups or communities primarily to satisfy their needs for sense and identity”; within this social phenomenon we can identify sects such as surfers, football fans, vegans amongst others whose values become their religion. Communities provide a sense of belonging to their people, giving them ideas for they will stand for. Companies are now focusing, as part of their strategies, their attention on targeting specific communities of people (potential clients) that share their same values. This will help the firm to create a sense of belonging with the community, increasing customer loyalty and a higher willingness to pay from them. “Some authors narrow the definition further by arguing that the key feature of a community is attachment or a sense of belonging, because not all communities provide a sense of share identity”. When a person regards him- or herself as a part of a community, he or she derives self-esteem from that membership and adopts behaviours consistent with stereotypes associated with the community’s identity, through the processes of categorization, identification and comparison.

The first step, categorization occurs when a person decides to join a community with specific characteristics that help define his or her self-perception. Following this, Identification is the next step, which is the process of identity formation through active community participation, which shapes the boundaries between inside and outside the community. Lastly, through comparison, a person can compare and exploit his or her community membership to derive a form of social differentiation, which reinforces perceived similarities between in-group members and accentuates perceived differences with respect to out-group members. Community values and symbols are necessary constructs to understand the categorization– identification–comparison process, and they represent critical building blocks for the design of CFS. Because values are difficult to observe, people represent the defining and stereotypical values of a community in the form of symbols.

Community-Focus Strategies

‘Community Focus Strategies’ (CFS) is defined by Fosfuri, A. , Giarratana, M. S. , & Roca, E. (2011) as the actions, activities and policies that a focal firm undertakes to establish connections or relational links with one or more target communities of (potential) clients. Fosfuri et. al, (2011) proposed a taxonomy where they define CFS according to two dimensions that represent the ex-ante conditions of a strategic decision, that is, before deciding on the strategy approach and before the implications of this decision unfold. The first is the congruence between the focal firm’s supported values and those of the target community. The second dimension refers to the power of the focal firm to influence the identities of the target communities. Four forms of CFS emerge from this taxonomy: Signalling, Identity-enhancing, identity-creation and avoiding.

  1. Signalling CFS: Occurs when the congruence between the values supported by the focal firm and the community is high. But, the power of the firm over the targeted community is still low, meaning they barely don´t have any influence over the community. The firm can be seen as a member of the community, or at least is not excluded from it.
  2. Identity-enhancing CFS: This happens when there is a high congruence between the values supported by the community and the focal group, as a high power of influence from the firm to the community. Firms at this stage invest and perform and participate in activities supporting the values in order to increase the engagement with the community.
  3. Identity-creation CFS: differ from identity-enhancing CFS because they require the focal firm to provide, through a set of well-synchronized actions, new or largely modified identities to its customers. This is present when there is a low congruence from the values of the community and the firm, but it still has a high influence over the community.
  4. Avoiding CFS: This means no CFS at all. The focal firm does not have any congruence between the values of the community, and no influence over them.

Selection of Community-Focus Strategies

Deciding which community-focused approach to execute or apply is complex job. It depends on multiple things, such as the firm profile, their customer´s community size, the sector of the firm, etc. Fosfuri (2011) analize the identities of the focal firm’s customer base along two dimensions: the level of identity heterogeneity and the level of identity salience.

Identity Heterogeneity (IH): This is basically the level of dispersion in the values of communities to which the focal firm’s customer belongs. Therefore, there will be a high level of identity heterogeneity when most customers have different values and come from diverse communities. And it will be low when customers share same type of values and come from one or few communities. Identity Heterogeneity is strongly correlated with size, big and multinational firms will tend to have a high IH.

Identity Salience (IS): It refers to the relative importance of the meaning derived from a community participation for each member’s self-structure. A high level of I. S. is present when the customer base is part of communities that add positively to the formation of their member’s identity. While low IS indicates that a small part of the personal identity of the firm’s customers is attributable to their community participation. I. S. should be associated with the size of the community; very large communities usually provide less identification for their members.

When firms try to conform to several identities that normally do not align, they cannot credibly commit to all the different values on which their target communities anchor their identities.

Implications of CFS

CFS could be seriously affected if the community perceives incongruence between the allegedly supported values and the values reflected in or imputed to any of the focal firm’s actions. Fosfuri, A. , Giarratana, M. S. , & Roca, E. (2013) state that firms pursuing a CFS have a more limited set of strategic tools with which to compete. Some actions and decisions are simply off limits, because they would contradict the values of their target communities. For example, firms that cultivate a strict link with environmental communities must find suppliers that guarantee their use of nonpolluting, environmentally friendly raw materials. It is relevant to take in consideration the type of community being selected for a relation. A focal firm that chooses to attach itself to various heterogeneous communities of customers could end up in a mess because of the value conflicts between the communities.

Accessing Customers’ Information to Improve NPD Strategies Getting to increase a customer’s willingness to pay for the firm’s products, means they get a relevant differentiation advantage. A way to do this is by implementing techniques involving gaining access to customer’s relevant information that will help the firm improve New Product Development (NPD). A process known as customer knowledge development is used to improve the NPD success rates. Firms will know more precisely with details the necessities of its customers and the outcome will be seen by their customers become more loyal because products will be perceived as well as symbolic content. Recent marketing literature also describes the notion of customer co-creation, defined as “collaborative NPD activity in which consumers actively contribute and select various elements of a new product offering”. Firms passes to its customers the job of creating customized products features to meet their specific necessities. A Fosfuri et al, 2013 introduced the four-step model of customer knowledge development is basically a model that shows how a firm can move the arrangement of information from customers to the production unit by investing in values that provide identity to community members and leveraging their reciprocal behavior. With this, the firm obtains loyalty and greater WTP, because products assume symbolic content.

The model introduced by Fosfuri et al (2011) explains the way firms gain legitimacy with their communities through Community-Focused strategies and then in turn receive collaboration and unpaid effort from their consumers to improve firm’s operations. To gain legitimacy firms invest in undertaking strategic actions such as sponsoring events, campaigns amongst others, to show potential customers that their values are aligned with those of their community. When the person feels identified, then they will be more willing to give back to the company. For instance, through answering surveys and questionnaires to express their needs, giving feedback and ideas about new products.

In essence, what this process does is that it moves the bulk of information from customers to the production site at a cheaper price because customers are willing to help the company to continue building their ideals through different product features.

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