A corporation by any other name

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Companies that trade under the family name of their founder have become increasingly rare in recent years, but firms are still concerned with their brand name. It has important functions and sends signals to customers and investors about the firm’s reputation.

“What’s in a name?” Rather more than Shakespeare ever imagined. If the Bard were alive today, he would discover that the best rate per word is earned by inventing new names for corporations. The pace of change is now so fast that it is hard for the observer of modern business to follow.. Accenture and Consignia are still in the news, having changed their names from Andersen Consulting and the Post Office respectively, but congratulations to anyone who can successfully identify Delphi, Innogy, Invensys, Lattice, Visteon and Viridian without repetition or hesitation.

In the Old Economy, some businesses took the names of their founders – Marks and Spencer, Siemens, the Ford Motor Company. Other names – the Great Western Railway and the Peninsular and Oriental Steam Navigation Company – described what the company did. Both these approaches are out of fashion. When Brent Hoberman and Martha Lane Fox went into virtual retailing they did not follow the tradition of John Lewis and Gordon Selfridge. This is not because modern entrepreneurs wish to shun the limelight. Whatever reason Sir Richard had for calling his empire Virgin rather than Branson, it was not shyness or modesty.

And – as with Virgin – the relationship of the names of New Economy companies to what they do is tenuous or non-existent. Amazon and Yahoo! say nothing to us about the business of the corporations which bear their names. There is a connection between the names of Autonomy and Netscape and their activities but you need to have it explained.

The use of the wordsmith is another business fad. It will end when we run out of combinations of six to ten letters which sound as if they could be English words, such as Diageo and Novartis but are not.. This is not to say it is a waste of time for companies to think about their names. Some companies sell their products under the corporate label, others do not. The two largest car companies in the world have chosen opposite strategies. Ford attaches its name to its vehicles. But most of General Motors’ customers are probably unaware that they are buying a GM product. And there are arguments either way. When I graduate from a Fiesta to a Granada, do I want the reassurance of knowing that it is still a Ford? Or would I prefer the prestige of shifting my allegiance from Chevrolet to Cadillac?

The closest rival to Ford and GM has a mixed strategy. Most of its cars are Toyotas, but its top of range models are badged Lexus. And the newest car giant, DaimlerChrysler, faces the issue starkly. It could call its vehicles as Mercedes: but the loss of premium on its luxury vehicles would likely outweigh the gains on its other products.

And this seems to be the way the argument increasingly goes. Brands and reputations are relevant for products and operating businesses, but not for corporations. The strategy of Unilever – which decentralises brand management to product groups – is now common. The Swiss follow a more old-fashioned approach. Kit Kat bars are ever less Rowntree and ever more Nestlé. But we shouldn’t be surprised that Ford didn’t rebadge Jaguar – or even Kwik Fit – when it bought the company.

Still, brands and reputations are not only important in consumer markets. The corporate reputation may be relevant to other stakeholders. The shopper may not know that Fairy Liquid is a Procter and Gamble product. But the new graduate knows that P & G provides matchless training in marketing management. And the investor knows that P & G is usually involved in whatever is currently selling well in fast moving consumer goods markets.

Sometimes, companies which change their names are trying to disguise the nature of their activities. Conglomerates are unfashionable, so names like Associated Stores, Assorted Utilities and Amalgamated Industrials are unfashionable too. The companies would rather be known as Storehouse, Hyder or Caradon; but investors ultimately (though in none of these cases quickly) see through to the disappointing reality of the businesses behind the names.

More often, the name change is an attempt to disown history. Sometimes, this is necessary. It is easy to see why British Leyland wanted to be called Rover, why British American Tobacco became BAT, and why managers and employees of Yorkshire Water preferred to tell their friends they worked for Kelda. And Accenture came into being because Andersen Consulting was legally obliged to distinguish itself from Arthur Andersen.

But Accenture is nonetheless derived from Andersen Consulting. Firms in accountancy or legal services mergers have wanted to emphasise continuity. That is how we end up with unwieldy constructions such as KPMG and PricewaterhouseCoopers. And these firms are right to think this. Strong businesses do not want to break with the past, because their past is an essential part of their current competitive position. When British Telecommunications and the Post Office look for names that distance themselves for their origins, they raise questions about the nature of their competitive advantage. They may not want to draw attention to their history, but it is in the legacy of that history that we find both the strengths and weaknesses of these organisations.

Look at the most successful business of our times – General Electric. GE has changed its business activities many times, but not its name. That name is now a seriously misleading description of what the company does. But that doesn’t seem to do it much harm. Operating units, like Pratt and Whitney, which benefit from the record of their past achievements, trade under that name. Where operating units benefit more from the skills and balance sheet of their parent – as GE Capital does – that is how they present themselves. “A rose by any other name would smell as sweet”. And weeds do not.

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