All the Firms' Interactions with Communities
Firms increasingly recognize the potential opportunities from interacting with communities. Patagonia, a California-based company focused mainly on outdoor clothing, is a member of and major contributor to several environmental communities. Kiehl's a US cosmetic producer, supports the Heritage of Pride, a nonprofit group that organizes activities to support equality in human rights. Inspired by these observations Andrea Fosfuri and Marco Giarratana (Department of Management and Technology) jointly with Esther Roca (Universidad Carlos III de Madrid), in their paper Community-Focused Strategies (Strategic Organization, volume 9, issue 3, pages 222-239, doi: 10.1177/1476127011415248) published on), seek to understand better this phenomenon from a strategy viewpoint.
Do firm-community interactions create or enhance competitive advantage? To answer these questions Fosfuri, Giarratana, and Roca create the notion of 'Community-focused Strategies' (CFS), which are defined as the actions that a focal firm undertakes to establish connections with one or more target communities of (potential) customers. The authors elaborate a taxonomy of these strategies and then, illustrate if and how they might lead to a competitive advantage. The authors classify four types of CFS labeled as signaling, identity-enhancing, identity-creation and avoiding.
Signaling CFS indicate alignment of corporate values with the ones of the target community but with a weak commitment to community values. It happens in the case of Shell Oil, which often undertakes several well-advertised initiatives that reflect the congruence between its supported values and those of target communities, even if the company does not have any control over the pre-existing identities of those communities. Signaling CFS creates reputational assets for the firm, but they are easily replicable and the firm cannot expect to gain a sizable differentiation advantage.
Identity-enhancing CFS display a much stronger commitment of the focal company with community values, manifested through meetings and social events organized by the firm. For instance, O'Neill does regularly sponsor surf contests and beach-cleaning days. Thus, the firm and the community co-create values and identity, influencing each other in this process. Through identity-enhancing CFS, the focal firm obtains relationship-based intangible assets which are difficult to imitate and that are exploited to attach symbolic meaning (and thus greater willingness to pay) to its products.
Differently, identity-creation CFS require a more active engagement of the focal firm with the target community. It is the firm that provides through a set of well-synchronized actions new modified identities to its customers becoming the focal element of the community that would stop to exist if the firm withdrew. This is, for instance, the well-known example of brand communities such as Ducati, Harley-Davidson and Piaggio.
Finally, avoiding CFS occur when the firm differentiate itself from some communities in terms of values and identity. In conclusion, this is one of the first papers that systematize the different approaches that firms have to interact with communities and investigate how these different approaches can lead to a competitive advantage. The paper highlights several managerial implications on how to choose the best fitted CFS, the key resources to control, and the potential constraints that CFS could generate.