Marketing Assets, Marketing Actions, and Firms' Response Strategies to Exogenous Shocks

Description

The terrorist attack of 9/11, the Southeast Asian tsunami, and the earthquake in Sichuan and Japan are but a few prominent examples of exogenous shocks—sudden changes induced by external factors outside of any business firm’s control. Given the high frequency and accompanying significant impact (e.g., Toyota’s overnight loss of more than 70% of its sales pursuant to the recent earthquake in Japan) however, it is surprising to see that marketing research on exogenous shocks is still in its infancy. Few insights have been provided regarding the impact of, and firms’ response strategies to, exogenous shocks. This project seeks to help fill this gap.Specifically, this project revolves around the role of marketing assets (e.g., brand equity and customer equity) and marketing actions (e.g., advertising, promotional activities) in helping firms handle exogenous shocks. Integrating insights from studies of regional economic development, the resource-based view, and the marketing-finance interface, I develop a conceptual framework linking the occurrence of shocks and firms’ responses to their subsequent short- and long-term financial consequences. I expect the proximity to the shock to have significant impact on the short-term financial performance of a firm; however, this relationship is moderated by ex ante marketing assets the firm possesses. Short-term financial consequences, together with other firm-specific characteristics, determine a firm’s relative reliance on marketing actions in its strategic responses to the shock, in turn leading to differential long-term financial performance.I will then test the hypothesized linkages within the context of the terrorist attack against the United States on September 11, 2001, and its repercussions for the global airline industry. This context is chosen because 9/11 represents a prototypical exogenous shock that was beyond a firm’s control and significantly affected airline business across the globe. Due to its widespread impact, airline firms in different regions rely on a broad array of marketing and non-marketing actions to gain and maintain competitive advantages. The findings of this project will inform researchers and business practitioners about the role of marketing assets and marketing actions in helping firms respond to exogenous shocks and meaningfully advance the research on “shock management” in the marketing field.