The Importance of Trust in Companies

Trust in a company set up can be grouped into two categories; internal trust and external trust. A company’s reputation rests on comparative analysis to its competitors (Kim 2014, pp.838-840). Trust determines how stakeholders behave towards a company. Consumers prefer spending more on brands they consider trustworthy (Sohn, and Lariscy 2015, pp.242).

This simply means that the competitors get an upper hand when compared to your product. Customers shift to products from competing brand because of the feeling of betrayal (Fennis, and Stroebe 2014, pp.109-120). Talents may also withdraw and opt to work for competing brands so as to safeguard their ‘personal’ reputation (Sohn, and Lariscy 2015, pp.237-259). The total effect of all this is bad business to the company.

If a company loses skilled manpower, investors and customer loyalty, the enterprise is doomed to die from Bad business which is ideally characterized by poor sales and huge loses to the company. Danone is currently contemplating cutting down its costs by $1.1 billion for the following three years because its turnaround is taking longer than expected (Vidalon, 2017). In the same note, the company is experiencing hard times in china because customers no longer trust the organization. This loss of trust is likely to continue hurting the organization considering the sensitivity of formula milk.

Company’s reputation is used by companies when evaluating their overall performance. Having a strong brand image gives an organization an upper hand when compared to their competitors. On the contrary, bad reputation leads to compromises that costs the company huge loses.

As per Fennis, and Stroebe (2014, pp.112), consumers prefer spending more on brands they consider trustworthy compared to products of a company making frequent headlines on fraud cases. For this reason, a company’s finance performance directly relates to its corporate reputation. The exposure of the company and the consequent tarnishing of its reputation was of positive impact among its competitors, including Nestle.