Merlin Entertainment - the Reputational Issue

The reputational Issue

BBC News (2015) reported that on the 2th of June 2015, Alton Towers was involved in its most serious incident since it began. The smiler ride was swanked as the first 14-looped rollercoaster of its kind, however concerns over the rides safety were noted on various occasion before the major incident in January 2015. (SOURCE)

The incident involved 16 people being injured, 4 out of which were classified as serious. Those who were in a carriage were injured when it collided with an empty stationary carriage which was stopped ahead of them. (SOURCE)

After the incident an investigation revealed that no technical or mechanical issues were to blame for this incident (BBC News 2015). However it was due to human error, whereby misinterpretation of a shutdown message, led to it being ignored.

Effects and Consequences

Merlin Entertainment issued a statement a month after the Smiler crash, warning that sales had been significantly hit as a result (IBTimes). Immediately after the crash Merlin Entertainment were forced to temporarily shut the park for several days which caused them to lose around £500,000 per day in revenue (SOURCE). As well as Alton Towers the group were forced to halt their marketing activities for the park as well as closing rides at many of their other sites (BBC 2015).

• Shares fell as much as 8% in the first few minutes of trade, although they recovered to close down by 4.2% at 405.20p. The shares have risen by about 20% since Merlin floated in November 2013.http://www.bbc.co.uk/news/business-33672357

• Merlin Entertainments was the biggest faller on the FTSE 100 after the crash, with shares down 3%.

• As well as Alton Towers being closed, Merlin suspended advertising for its theme parks, and rides at other sites were also closed temporarily. (http://www.bbc.co.uk/news/business-33672357)

• Merlin said it had implemented additional safety protocols to prevent a similar accident in the future.

• The financial hit to the theme park division of Merlin is enormous. Operating profits of nearly £90m could be cut to half that.

What is Corporate Reputation?

The table of definitions of corporate reputation (Appendix 1) highlights how a variety of disciplines interpret corporate reputation. Fombrun (2000) has summarised these various definition with one that is applicable amongst the various disciplines. This has been defined as ‘a collective representation of a firms past actions and results that describes the firm’s ability to deliver valued outcomes to multiple stakeholders. It gauges a firms relative standing both internally with employees and externally with its stakeholders, in both its competitive and institutional environments’. For the purpose of this report this view will be taken forward as it’s takes in to account both internal and external viewpoints of corporate reputation.

Discipline

Definition

Economics

Reputations are traits or signals that describe a company’s probable behaviour in a particular situation

Strategy

Reputations are intangible assets that are difficult for rivals to imitate, acquire or substitute and so create mobility bar riers that provide their owners with a sustained competitive advantage

Accounting

Reputation is one of many types of intangible assets that are difficult to measure but create value for companies

Marketing

Reputation describes the corporate associations that individuals establish with the company name

Communication

Reputation are corporate traits that develop from relationships companies establish with their multiple constituents

Organisational theory

Reputations are cognitive representations of companies that develop as stakeholders make sense of corporate activities

Sociology

Reputational rankings are social constructions emanating from the relationships firms establish with stakeholders in their shared institutional environment

Appendix 1 : Definitions of Corporate Reputation. Source:Fombrun et al. (2000)

• Definitions/compare and contrast/ similarities and differences

Fombrun et al (2000) has argued that the definition of corporate reputation varies amongst disciplines. Within marketing corporate reputation has been described as ‘corporate associations that individuals establish with the brand name’.

……………………………

Comprises social image, financial image, product image and