G202 Exam 1: Topic 1 Flashcards
What does P.E.S.T. stand for?
Political, Economic, Social, Technology
What are the metrics for non-market players?
Processes
What is corporate social strategy?
Integrating non-market forces (PEST) into your market strategy
How does corporate social strategy help a company’s bottom line?
Aware of upcoming trends that will later become requirements (i.e., clean emissions standards, recycled material) and obtain those resources before they become very expensive
What two acquisitions did BP make in early 21st century?
- ARCO (oil and gas)
- Solarex ( solar energy)
What was BP’s strategy in acquiring Solarex?
- Became largest solar energy company in world
- Launched “Beyond Petroleum” campaign to re-brand
- Differentiate - become attractive to SRI’s (socially responsible investors)
- Balance relationships with NGO’s
- Manage regulatory risks
What is a potential risk when companies use strategies like BP to acquire companies to improve image?
- Heightened public expectations (especially from NGO’s)
- Can attract too much attention/scrutinization from NGO’s and activists
- i.e., Greenpeace awarded BP the “Greenwash of the Year”
What are four major market inefficiencies?
Property rights, market power abuses, quality concerns, externalities (pollution, etc.)
How does public policy affect inefficiencies?
Can correct existing inefficiencies or be the cause of an inefficiency
What is the socially efficient production level?
Qe (Where demand and supply meet)
When markets fail, how do NGO’s respond?
More likely to have interactions with the government
What is demand based on?
Value to consumers
What is supply based on?
Cost to producers
What are the effects of taxes?
- Government revenue is collected
- Increased prices to buyers
- Decreased prices to sellers
- Reduced quantity bought and sold
What are the effects of subsidies?
- Increase supply
- Decrease prices to buyers
- Increased prices to sellers
- Increased quantity bought and sold
What is productive regulation?
Causes sellers to incur higher operating costs (compliance costs)
What are the results of productive regulation?
- Increased prices to buyers
- Decreased prices for sellers
- Reduced quantity bought and sold
How is productive regulation different from taxation?
- Does not raise revenue for government
- Government goal: decrease trade
Why are voters assumed to be rationally ignorant?
- It is costly to become informed on political issues (time, opportunity cost)
- Not likely an individual vote makes a difference
Why are politicians assumed to be vote maximizers?
- Ability of politicians to achieve goals depends on election/re-election
- Therefore, politicians provide info about themselves/rivals to voters at no charge
Why are bureaucrats assumed to be budget maximizers?
- Not elected
- Seek promotions, higher pay, prestige, etc. which comes with bigger budget
What is the Shortsightedness Effect?
Politicians support projects that have current benefits and deferred costs
Why does the public sector have so much operational inefficiency?
- Little incentive to lower costs or make profit
- Have to spend all of the budget to get the same amount the next year
Lobbying/Rent Seeking
Devoting resources to influence public policy formation in order to bring more income to your interests
What are the functions of lobbyists?
- Find political opportunities and threats
- Inform politicians and influence public opinion
- Form coalitions with other groups w/ similar interests
Special interest effect
Small group of people receive benefits at expense of large group (small groups gain political power because the costs of large groups taking action outweigh benefits)
Majoritarian Politics
- Widely dispersed opposition and support
- No special interest groups take action on either side
- i.e., social security
- Lobbying does not occur
Client Politics
- Widely dispersed costs, concentrated support
- One special interest group is active in favor of an issue
- i.e., USDA Foreign Advertising Fund
- Lobbying will likely be successful
Interest Group Politics
- Concentrated costs and benefits
- Active special interest groups on both sides of issue
- i.e., legalization of marijuana
- Successful lobbying will be costly
Entrepreneurial Politics
- Concentrated costs, widely dispersed benefits
- One special interest group is active against an issue
- i.e., nuclear waste dumps
- Successful lobbying will be costly
