SCALE DEVELOPMENT AND VALIDATION FOR MEASURING CORPORATE BRAND ASSOCIATIONS

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1 CHAPTER 6 SCALE DEVELOPMENT AND VALIDATION FOR MEASURING CORPORATE BRAND ASSOCIATIONS Despite the importance of corporate branding, research on corporate branding has largely ignored the dimensional structure of corporate brand associations. Previous research has proceeded without a standardized, reliable and valid measure of the construct from consumer-based perspective. Further, no study has explored the complete range of corporate brand associations. Therefore, there is a dire need in the academic research for a reliable and valid scale for measuring various corporate brand associations. The scale is equally needed by marketing managers. To fully utilise corporate brand as an asset, managers should be cognisant of various corporate brand associations that should be communicated to consumers, and how consumers perceive their corporate brand associations. A better understanding of the consumer perception of corporate brand associations is critical for developing effective corporate branding strategies, and hence to be effective in the market place. The lack of a simple, straightforward scale for measuring corporate brand associations inhibits managers' abilities to differentiate and position their corporate brands. Thus, marketers need a scale that measures all relevant corporate brand associations, is reliable and valid, and at the same time is parsimonious and easy to administer. specific to a particular sector rather it should be flexible enough to be administered across sectors (durables, services and FMCG). Based on the empirical findings obtained using product brands in various product categories, Low and Lamb (2000) assert that, at the product brand level, brand associations differ across product categories, and therefore, customised scales are needed for different product categories. Therefore, a generic scale cannot be developed for measuring product brand associations that can be used across product categories. In contrast, a generic scale is needed for measuring corporate brand associations as most of the corporate brands are associated with

2 multiple sectors, for instance, Virgin, Tata, ITC etc. A product-category-specific scale is useful for only those companies which are operating in one sector. But for companies present in multiple sectors, it is not possible to segregate their corporate brand associations in different sectors. Therefore, for such companies, using a corporate brand a particular product category may do injustice to other product categories. On the other hand, using unique scale for each product category may lead to confusions as findings would not be applicable to and comparable across product categories. Therefore, for elaborate and efficient use, a generic corporate brand associations for multiple sectors. The purpose of this chapter is to bridge the above stated gaps existing in the literature by gaining more insight into the dimensionality of corporate brand associations. We develop a reliable, valid, short and easy to administer scale that captures complete dimensionality of corporate brand associations from a customer-based perspective. The scale is generalizable across different sectors namely durables, services and FMCG. This scale will allow researchers and marketers to gauge accurately the consumer perception of corporate brand associations. Next we develop our scale and then examine the psychometric properties of the scale using standard validation procedures. SCALE DEVELOPMENT We follow four steps for scale development: 1. Item generation, pre-testing and item refinement; 2. Data collection; 3. Scale purification using exploratory factor analysis and confirmatory factor analysis; and 4. Reliability and validity tests. An initial pool of items was drawn from relevant literatures. In order to provide a multivariate perspective on the variables related to corporate brand associations, a principal component factor analysis with varimax rotation was conducted on the combined data for the three sectors. All factors whose eigen value was greater than 1 were retained in the factor solution. The decision to include a variable in a factor was based on factor loadings greater than Varimax rotation is used to ensure that each factor is independent of other factors. To assess the internal consi 121

3 calculated for each extracted factor and coefficients greater than 0.70 were considered acceptable (Nunnally, 1967). In order to confirm the factor solution, confirmatory factor analysis was conducted, using LISREL 8.80, separately across the three sectors. Content, convergent and discriminant validity of the factors was assessed in all the three sectors independently. Next, the scale was assessed for measurement equivalency across the three sectors. Item Generation and Selection Based on existing literature and our definition of corporate brand associations, various corporate brand associations were identified that have the potential to impact consumer preferences for the company and for the products of the company. We considered an initial pool of 70 items referring to dimensions of dynamism, corporate ability, visual identity, corporate name, corporate communications, products and services, emotional benefits, symbolic benefits, workplace environment, ethical responsibility, corporate social responsibility, customer orientation, corporate reliability, corporate demographics, and external prestige. Items considered in the initial pool are given in Table 6.1, which also indicates the dimensions encompassing each item, and the names of authors who used or suggested the item (s) in their study. The items were evaluated for content/face validity. Content validity is concerned with the extent to which a specific set of items reflects a content domain (de Villis, 1991). Assessing content validity helps to ensure that the items used to operationalize the construct measure what they are supposed to measure (Churchill, 1979). Content validity has been established through the development of the items from an extensive literature survey. To further test the content validity, two scholars in the marketing field repetitive items were deleted and 56 items were retained and reworded, where required, for better relevance and clarity. The revised scale was then pretested with a sample of 50 respondents. Following the pilot survey, 7 items were eliminated as they were seen to be too product, sector or company specific or were repetitive. Remaining 49 items were used for the final survey. 122

4 Table 6.1 Corporate Brand Associations Considered in the Pre-test Dimension S. Statement No. Dynamism 1. This company has prospects for future growth. Corporate ability/ performance Source Heerden and Puth (1995); Sung and Yang (2008) 2. This company is always improving. Heerden and Puth (1995) 3. This company has a clear vision about its future. Schwaiger and Zhang (2009) 4. This is a successful company. Anisimova (2007); Souiden et al. (2006) 5. This company is the industry leader. Souiden et al. (2006) 6. This company is financially sound. Souiden et al. (2006) 7. This is an economically stable company. Schwaiger and Zhang (2009) 8. This company is innovative rather than Souiden et al. (2006); imitator. Schwaiger and Zhang (2009) 9. This company recognises and takes Caruana et al. (2006) advantages of market opportunities. 10. This company has strong management. Caruana et al. (2006) 11. This company is at the forefront of the Anisimova (2007) technology. 12. This company strongly supports research Anisimova (2007) into technology. 13. The company is pioneering in its industry. Souiden et al. (2006) 14. This company does not have much Newell and Goldsmith experience. (2001) 15. This company is skilled in what it does. Newell and Goldsmith (2001) Visual identity 16. This is an old fashioned company. Heerden and Puth (1995) 17. This is a stylish company. Heerden and Puth (1995) 18. I like the physical appearance of the company (company logo, buildings, branch offices etc.). Schwaiger and Zhang (2009) Corporate name 19. The name of this company is well known. Souiden et al. (2006) Company 20. The company uses the right amount of Spears et al. (2006) communications advertising. 21. It is difficult to get a clear idea of what this company stands for from its actions and communications. Bhattacharya and Sen (2003) 123

5 Products and services Emotional benefits Symbolic benefits Workplace environment 22. I have the impression that this company is forthright in giving information to the public. 23. This company communicates clearly what its products are. 24. This company offers innovative products and services. Schwaiger and Zhang (2009) Berens et al. (2005) Berens et al. (2005) 25. This company offers high quality products. Berens et al. (2005) 26. This company offers products with a good Berens et al. (2005) product quality ratio. 27. This company offers products/services at competitive rates. Nguyen and LeBlanc (1998) 28. Products and services offered by this company are very reliable. Bravo et al. (2010) 29. Products of this company give a feeling of Anisimova (2007) serenity (calmness). 30. Products of this company express youthful Anisimova (2007) spirit. 31. Products of this company depict feeling of Anisimova (2007) adventure. 32. If I purchase a product of this company, I Anisimova (2007) would feel that I made a smart choice. 33. If I purchase a product of this company, I Anisimova (2007) would feel that I stand out in a crowd. 34. If I purchase a product of this company, Anisimova (2007) this company would enhance my personal image. 35. Products of this company help to get social Anisimova (2007) approval. 36. If I purchase a product of this company, I Anisimova (2007) would be able to express my personality. 37. This company helps you to look Anisimova (2007) sophisticated. 38. This company helps to display your status Anisimova (2007) symbol. 39. This company is very well managed. Berens et al. (2005) 40. Employment with this company is highly Caruana et al. (2006) regarded. 41. This company is fair with its employees. Berens et al. (2005) 42. This company employs talented people as Berens et al. (2005) compared with its competitors. 43. Caruana et al. (2006); knowledgeable and well trained. da Silva and Alwi (2006) 44. This company Biehal and Sheinin compensated. (2007) 45. This is a good company to work for. Javalgi et al. (1994) Ethical 46. This company only wants to make money. Javalgi et al. (1994) 124

6 responsibility 47. I have the impression that this company has fair attitude towards competitors. Corporate social responsibility Customer orientation Corporate reliability Corporate demographics External prestige Schwaiger and Zhang (2009) 48. This company does not mislead people. Mulky and Nargundkar (2005) 49. This company is an honest entity. Bravo et al. (2010) 50. Sound principles seem to guide the behaviour of this company. Mulky and Nargundkar (2005) 51. This company is a good corporate citizen. Anisimova (2007) 52. This company does its business in ethical way. Souiden et al. (2006) 53. This company supports good causes. Berens et al. (2005) 54. This company sponsors worthy social Anisimova (2007) activities. 55. This company behaves responsibly Berens et al. (2005) regarding the environment. 56. The company is doing a lot of things for the welfare of society. 57. This company is very responsive to consumers, that is, provides customer specific products. 58. This company fulfils the promises that it makes to its customers. 59. If a customer encounters a problem, this company shows sincere interest in solving his/her problem. 60. This company maintains high standards in the way it treats customers. 61. Customer concerns are held in high regards at this company. 62. Customers feel safe in their transactions with this company. Anisimova (2007); Mulky and Nargundkar (2005) Souiden et al. (2006) Souiden et al. (2006) da Silva and Alwi (2006) Caruana et al. (2006) Schwaiger and Zhang (2009) da Silva and Alwi (2006) 63. This company is recognised world-wide. Spears et al. (2006); Schwaiger and Zhang (2009) 64. This is a large company. Spears et al. (2006) 65. Products of this company are good because Spears et al. (2006) this is a foreign company. 66. This company is well established in India. Bravo et al. (2010) 67. This company is looked upon as a Sung and Yang (2008) prestigious company in society overall. 68. I think my acquaintances think highly of Sung and Yang (2008) this company. 69. This company successfully retains a Sung and Yang (2008) prestigious place in various rankings. 70. Media coverage about this company is very Sung and Yang (2008) positive. 125

7 Data Collection Questionnaire based data were gathered from consumers regarding 49 variables representing different types of corporate brand associations. Further, consumers responded for the three sectors namely durables, services and FMCG. Automobiles, life insurance services and personal care products such as soaps, shampoos and toothpastes were selected to represent durables, services and FMCG sectors respectively. Each respondent was asked to indicate their level of agreement or disagreement on a 5-point Likert scale that ranged from strongly agree to strongly disagree. A total of 665 responses were obtained. Of these, the 588 questionnaires complete in all respects were used for the purpose of analysis. Further among total 588 respondents, 204 responded for automobiles, 185 for insurance services and 199 for personal care products. Scale Purification: Exploratory Factor Analysis and Internal Consistency Churchill (1979) suggests that in the absence of a sufficiently detailed theoretical basis, exploratory factor analysis (EFA) is a useful preliminary technique. Therefore, using combined data for the three sectors, the initial 49 items are factor analyzed with principle axis factoring and varimax rotation. The purpose of EFA is to summarise the information contained in the 49 original variables into a smaller set of new composite dimensions or factors that attempt to define the fundamental constructs assumed to underlie the original variables (Hair et al., 2009). The initial rotated factor pattern obtained consisted of eight factors. The eight-factor solution accounted for 62.52% of variance. Careful inspection indicated that twelve items were either intermixed within various factors or had factor loading below.50. We proceeded to drop these items successively and repeat EFA. The rotated factor pattern gives seven factors and the total variance explained increases to 63.11% and all the items have clear loadings on seven factors. As a result, a seven-factor, 37-item solution reveals the most distinct and meaningful components (KMO =.948, factor 1, seven items on factor 2, seven items on factor 3, six items on factor 4, three items on factor 5, three items on factor 6, and two items on factor 7. We use SPSS

8 to assess the internal consistency reliability (coeffici dimensions of corporate brand associations. All the factors have reliability coefficients greater than 0.7 and thus are within acceptable limits (Carmine and Zeller, 1979; Peterson, 1994). Scale Purification: Confirmatory Factor Analysis Further, Confirmatory Factor Analysis (CFA) is conducted on the factor solution resulting from EFA. The covariance matrix has been used as input for CFA. We perform CFA by running factor models separately for the three sectors -- durables (automobiles), services (life insurance) and FMCG (personal care products) sectors. Initially, our factor model included 37 items. However, nine items had low loadings and overall model fit results were less than the recommended minimum requirement. Given the loadings were low for these items, we successively deleted these nine items and ran a modified CFA model with seven constructs and 28 items. As a result, 28- item seven-factor model (see Figure 6.1) is found to fit in every sector. Fit indices are shown in Table 6.2. Factors, their corresponding items and factor loadings of items obtained in CFA for the three sectors are given in Table 6.3. All the fit indices are acceptable, RMSEA is close to.1 and CFI, IFI, NFI and NNFI are greater than.85 in each sector (Browne and Cudeck, 1993). All the factor loadings for the three sectors are greater than.60 (except five items in the FMCG sector). Based on the composition of each of the seven factors, we name them as corporate ability and growth, symbolic benefits, perceived external prestige, corporate ethics, corporate social responsibility, visual identity, and corporate communications. Factor 1, corporate ability and growth, consists of variables that describe success, dynamism and growth of companies. This association measures the extent to which consumers perceive a company as successful and as having abilities and potential for growth in future. We did not get a separate product and service quality related dimension. This infers that consumers conjecture product/service quality from corporate ability associations only. 127

9 Figure 6.1 Scale Development for Measuring Corporate Brand Associations: Conceptual Model of Confirmatory Factor Analysis 128

10 Table 6.2 Confirmatory Factor Analysis for Corporate Brand Associations Scale: Fit Indices in the Three Sectors Durables Services FMCG Chi Square (df=329) Root Mean Square Error of Approximation (RMSEA) Comparative Fit Index (CFI) Incremental Fit Index (IFI) Normed Fit Index (NFI) Non-Normed Fit Index (NNFI) Table 6.3 Confirmatory Factor Analysis for Corporate Brand Associations Scale: Factors and Factor Loadings Factors and Key Variables F1: Corporate Ability and Growth (CA&G) 1. This company has potential for future growth. CFA Factor Loadings Durables Services FMCG This company is always improving This company has a clear vision about its future This is a successful company This company recognises and takes advantage of market opportunities. F2: Symbolic Benefits (SB) 1. Products of this company express youthful spirit. 2. If I purchase a product of this company, I would feel that I made a smart choice. 3. If I purchase a product of this company, I would feel that I stand out in the crowd.. 4. Products of this company help to get admiration in society

11 5. If I purchase a product of this company, I would be able to express my personality. 6. This company helps to display status symbol. F3: Perceived External Prestige (PEP) This company is recognised world-wide This company is well established in India This company is looked upon as a prestigious company in society overall. 4. This company successfully retains a prestigious place in various rankings. F4: Corporate Ethics (CE) This is a good company to work for This company has fair attitude towards its competitors This company does not mislead people This company is very honest This company does its business in ethical way. 6. If a customer encounters a problem, this company shows sincere interest in solving his/her problem. F5: Corporate Social Responsibility (CSR) 1. The company is doing a lot for the welfare of society This company supports good causes F6: Visual Identity (VI) 1. This company is an old fashioned company. * I like the physical appearance of this company (logo, colour, buildings, branch offices etc.) This is a stylish company F7: Corporate Communications (CC) 1. This company always provides the required information to the public. 2. This company communicates clearly about its products. *Item is reverse coded

12 Factor 2, symbolic benefits, is linked to variables that describe the intangible benefits such as personal meanings (self-fulfilment) and social meanings (status signalling) that consumers seek from a product or service beyond the tangible functional benefits. Factor 3, perceived external prestige reflects what people outside the organisation in high esteem by external audiences, is large enough, projects good image in the market place and is well known across the globe. Factor 4, corporate ethics, involves dimensions that describe ethical behaviour of the company towards its stakeholders including employees, customers, community at large and competitors. It is associated with the ability and interest of the company to honestly treat its stakeholders and to empathize with them. Factor 5, corporate social responsibility, reflects the extent to which a company is concern for society and community; examples include community involvement, sponsorship of cultural activities and corporate philanthropy. Factor 6, visual identity includes the variables that describe physical attractiveness of slogan, colour, buildings, etc. Factor 7, corporate communications company honestly provides the required information to public about its behaviour, activities and products/services. These seven factors adequately and parsimoniously measure all relevant corporate brand associations in the three sectors. We posit that these seven types of associations behave as separate dimensions, and represent both functional and emotional facets. Further, associations regarding company expertise and social responsibility have been considered in most previous works (Brown and Dacin, 1997; Newell and Goldsmith, 2001; Gurhan-Canli and Batra, 2004; Berens et al., 2005). In addition to these 131

13 associations, we have identified associations that have not been directly and empirically studied in the past literature like associations related to symbolic benefits, perceived external prestige, corporate ethics, visual identity and corporate communications. In consequence, we have identified all relevant corporate brand associations. Reliability and Validity Measures After establishing unidimensionality of seven constructs related to corporate brand associations, next we test reliability of these constructs. Reliability is defined as the relative absence of measurement errors in a measuring instrument and is associated with random or chance errors. It is also defined as the proportion of true variance in a test, that is, it is equal to unity minus the proportion of error variance (Edris and Meidan, 1989). Thus, reliability of the scale shows the extent to which measures are free from random error (Malhotra, 2004). We test reliability of the seven constructs using Coefficient Alpha, Construct Reliability (CR) and Average Variance Extracted (AVE). CR and AVE are estimated using the formulae specified by Fornell and Larcker (1981) as given below: The values of reliability measures such as Coefficient Alpha, Construct Reliability (CR) and Average Variance Extracted (AVE) are given in Table 6.4. The Table 6.4 also reports the means and standard deviation (SD) values of the seven factors. Further, from columns 7 to 13, diagonal values are square root of AVE and the values in the lower half of the matrix are the Phi-coefficients between the constructs. 132

14 Table 6.4 Durables Sector Construct Mean SD Alpha CR AVE F1 F2 F3 F4 F5 F6 F7 F1. CA&G F2. SB F3. PEP F4. CE F5. CSR F6. VI F7. CC Services Sector Construct Mean SD Alpha CR AVE F1 F2 F3 F4 F5 F6 F7 F1. CA&G F2. SB F3. PEP F4. CE F5. CSR F6. VI F7. CC FMCG Sector Construct Mean SD Alpha CR AVE F1 F2 F3 F4 F5 F6 F7 F1. CA&G F2. SB F3. PEP F4. CE F5. CSR F6. VI F7. CC As shown by Table 6.4, all the alpha reliability measures are above.70 (except in three cases where it is above.60) and thus are acceptable. Further, both the construct reliability and average variance extracted values for the three sectors are above the recommended minimum levels of.70 (except in two cases where it is above.60) and.50 (except in one case where it is.39), respectively, thus establishing reliability of the measurement scales. After testing reliability, construct validity is assessed. Construct validity is viewed as the extent to which an operational measure truly reflects the concept being investigated or the extent to which operational variables used to observe covariation between 133

15 constructs can be interpreted in terms of theoretical constructs (Calder et al., 1982). A measure is construct valid to the degree that it assesses the magnitude and direction of a representative sample of the characteristics of the construct, and to the degree that the measure is not contaminated with elements from the domain of other constructs or error (Peter, 1981). Three types of validity -- content, convergent and discriminant are assessed. Content validity procedure is undertaken prior to the instrument reliability and item analysis and is given in item generation section of the chapter. Convergent Validity Convergent validity measures the extent to which the items in a single scale measure the same construct. It was established through the use of exploratory and confirmatory factor analyses. An eigen value of 1 and factor loading of 0.5 was taken as a criterion for significance of a factor and an item in a factor respectively in EFA. Further, convergent validity is established if all item loadings are equal to or above the recommended cut off level of.60 in CFA. As shown in Table 6.3, of a total of 84 loadings in the three sectors, all the factor loadings are above.60 except in five cases, thus confirming convergent validity of the seven constructs in the three sectors. Convergent validity can also be gauged by measuring Bentler-Bonett coefficient. As shown by Table 6.2, the values of NFI are equal to or above 0.85 in all the three sectors and hence represent strong evidence of convergent validity (Bentler and Bonett, 1980). Discriminat Validity Establishing discriminant validity proves that there is no collinearity among the explanatory variables. A high degree of multicollinearity can cause misleading results in further analyses like regression since the standard error of parameter estimates is increased (Peter and Tarpey, 1975). According to the method suggested by Fornell and Larcker (1981), two constructs are said to have discriminant validity if square root of the Average Variance Extracted (AVE) is larger than the correlation coefficient (Phi coefficient) between two constructs. AVE, square root of AVE and Phi coefficient values are as shown in Table 6.4. Diagonal values in bold are square root of AVE and 134

16 in the lower half of the matrix are the Phi coefficients. Every diagonal value which is square root of AVE is compared across all the values in its column and row in the lower half of the Table. As shown by Table 6.4, all the square root of AVE values are greater than the corresponding Phi coefficients (except in one case: F6 in FMCG sector). Given the size of the correlation matrix (21 estimates in each sector), one violation in one sector can occur by chance. Thus, we conclude that the seven constructs possess discriminant validity in all the three sectors. For the one violation, we check discriminant validity by examining whether a correlation between two the constructs (F1 and F6) in the FMCG sector is significantly different from unity. We freely estimate the correlation of the two constructs in the FMCG sector in the first model but set it to 1 in the second constrained model. We examine a chi-square difference to determine whether the two constructs are significantly different. The result shows that the two constructs have significant difference at p<.01 (difference in chi-square (df=1)=8.02), thus supporting discriminant validity of the two constructs. MEASUREMENT EQUIVALENCY ACROSS THE THREE SECTORS We find that the scale developed is reliable and valid in each of the three sectors. We further test the measurement equivalency of the scale across the three sectors. We limit measurement invariance to metric invariance (that is, invariance of factor loadings across sectors), which indicates that respondents responding to questions with respect to different sectors interpret and respond to measures in an identical manner (Bagozzi and Yi, 1988; Steenkamp and Baumgartner, 1998). We measure measurement equivalence by conducting two separate analyses: unconstrained and constrained models. In case of unconstrained model, separate models are estimated for each sample and the factor loadings of the models for the three sectors are not constrained to be equal. In case of constrained model, factor loadings of the three sectors are constrained to be equal. The goodness of fit indices of the two models (unconstrained and constrained), and the difference between the goodness of fit indices across the unconstrained and constrained models are given in Table

17 Table 6.5 Measurement Equivalency across the Three Sectors: Multigroup Analysis Results for Testing Factor Structure for the Three Sectors Fit Statistic Constrained Model (1) Unconstrained Model (2) Difference (1-2) Chi Square Df RMSEA CFI IFI NFI NNFI The increase in Chi square between the two models is significant: Difference in Chi square (42) = 809 (p<.001). However, the remaining goodness of fit indices, which are less sensitive to sample size, show very considerably less marked decrease in fit (ranging between.01 and.02). Hence, the across sector analysis indicates a high level of cross sector measurement equivalence. DISCUSSION In this chapter, we develop and test a parsimonious and practical scale that adequately measures the relevant corporate brand associations from a customer-based perspective. Based on data from a total of 588 respondents, a 28-item Likert-type scale is developed that is short and easy to administer. Psychometrically, the scale is internally consistent, reliable and valid, that too across the three sectors, that is, durables, services and FMCG. Hence, the scale has the value of generic measurement as it can be used for a wide range of companies in any of the three sectors, and also for the conglomerates that operate in multiple sectors. The scale captures seven dimensions of corporate brand associations: corporate ability and growth, symbolic benefits, perceived external prestige, corporate ethics, corporate social responsibility, visual identity, and corporate communications. These seven corporate brand associations behave as separate dimensions and represent both functional and emotional facets. Thus, we confirm the multidimensional nature of the construct of corporate brand associations, as also claimed by Brown and Dacin (1997). Further, associations regarding company expertise and social responsibility have 136

18 been considered in most previous studies (Brown and Dacin, 1997; Newell and Goldsmith, 2001; Gurhan-Canli and Batra, 2004; Berens et al., 2005). In addition to these associations, we have identified certain other associations that lack thorough empirical investigation in the past literature; such as symbolic benefits, perceived external prestige, corporate ethics, visual identity and corporate communications, which are nevertheless very crucial. The present scale differs from previous research in at least two ways. First, in previous measures, different types of corporate brand associations are often pooled into one scale or subscale in which some facets are underrepresented while others are over represented, and psychometric properties of the scale have not been tested. The scale we have developed in this chapter measures seven different corporate brand associations and possesses the necessary psychometric properties. Second, it tests measurement invariance across the three sectors to ensure that the same scale can be used in different sectors. To conclude, this scale would go a long way in advancing academic research in the field of corporate branding, and in fine tuning the corporate communication strategies of the companies at large. 137