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Impact | Cushioning the shock

Volume 20, Number 1
January 2014

Kersi Antia’s research shows that what co-branded firms do before a crisis helps them to survive it.

antia-impact-14.jpgThe Terra Securities scandal threatened to ruin dozens of small, local Norwegian banks. The banks were part of a “co-branding alliance network.” The brand consisted of a suite of financial products that the banks sold through their branches. One of the products, a complex, high-risk investment, was purchased by eight municipalities with disastrous results. When the municipalities went bankrupt, a national outcry ensued. Although the banks in the alliance were not involved in the sale, they were stained by their association with the brand.

When the scandal broke in 2007, Ivey Professor Kersi Antia and his collaborator Kenneth Wathne had been following the Terra banking alliance for more than a year. With the support of the banks, they had already collected a large data set consisting of thousands of customer and employee surveys. The ensuing brand crisis and the response of the banks created what Antia describes as a “perfect storm of research opportunity.”

Antia studies inter-organizational relationships, particularly franchising and co-branding alliance networks.  He recently returned to Ivey after seven years at the University of Wisconsin. In earlier research he focused on breaches of franchise agreements. He found that what happens between the parties after the contract is signed – how relationships and conflicts are managed – is more important than the actual terms of the contract itself.

Co-branding alliance networks are becoming more common. Examples are the Star Alliance in the airline industry, and Best Western in hospitality. In the case of Terra, the alliance gave dozens of local Norwegian banks access to a wide range of financial products under one strong brand, increasing their competitiveness while retaining their independence.

Antia continued to gather data from the alliance during and after the crisis. The banks faced two big questions: what was the extent of the fallout from the crisis, and how would they emerge from it? These were the research questions that Antia sought to answer.

To determine the extent of the fallout, Antia turned to the burgeoning science of Geographic Information Systems. GIS is a technology that displays and correlates information by geographical location. It is used in areas as diverse as epidemiology, urban planning, and disaster preparedness, but this is the first time GIS has been applied to crisis response and brand management.

Using GIS, Antia pinpointed the location of every outlet in the network, and mapped all the information related to the crisis geographically. He then used a statistical tool called geographically weighted regression (GWR) to quantify the fallout from the crisis in dollar terms. Every possible impact was included in the analysis, from alienation of customers and bad press, to the possibility of complete failure. “The fallout of the crisis went way beyond those eight municipalities,” he says. “It became a national crisis in Norway.”

Antia also worked with the alliance to devise a plan to emerge from the crisis. In his ongoing analysis, he is finding that how the banks coordinated their relationships prior to the crisis helped them survive it. “Their response was driven not only by the crisis itself, but by what had happened years before during the course of the relationship,” he says.

For example, some banks in the alliance identified strongly with the brand. Those banks did whatever they could – much more than required by the contract - to help the alliance survive the scandal. On the other hand, some banks were less enamoured of the brand, and used the crisis to distance themselves. “If a critical mass of firms has good relationships in place before the crisis breaks out, that acts as a very effective buffer,” he says.

In related research, Antia is using the same techniques with franchising organizations. Recently an American franchise organization with some 1000 franchisees gave Antia access to all its data as part of a study to put in place systems that will help the organization respond to a future brand crisis.

Antia warns managers that crises are inevitable, whether they’re particular to your brand or general to the economy as a whole. It’s vital to respond as efficiently and effectively as possible, but firms shouldn’t think only in terms of a post-crisis response, he says. “There are a lot of things you can do before the crisis to cushion you from the worst of it.”

 

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