Topic 1 Flashcards
Competition in the marketplace forces managers to think in terms of what?
Outcomes (profits, sales, market share, etc.)
What factors are more important to non-market players?
Oversights, quality assurance, and social welfare all gain importance
What does the PEST Framework stand for?
Political, Economic, Social, and Technological
What is Corporate Social Strategy?
The opportunities and risks that companies face and how they operate in an ever-changing social environment
What were BP’s two strategic acquisitions?
ARCO (an oil and gas company) for $26.5B and Solarex for $45M
Greenpeace gave who the Greenwash of the Year Award?
BP (British Petroleum)
What did BP do to rebrand itself?
Create a new logo and advertising campaign which represented rebirth and the Helios logo (sun God)
What did NGOs find when looking at BP?
While BP spent much of its time advertising its involvement in the solar energy market, its oil industry is 588 times larger than its solar industry
Why did Greanpeace accuse BP of pretending to be green?
BP spent $45M to acquire Solarex, but spent $26B to acquire ARCO and $207M to implement Helios re-branding
What was BP’s Corporate Social Strategy?
Selective expression of its positive effects
What do NGOs do when market inefficiencies exist?
Take political or direct action (e.g. when companies lack property rights, abuse market power, cause pollution or externalities, etc)
Public policy changes can do what?
Both cause inefficiencies and correct existing inefficiencies
What occurs at a socially efficient production level (Qe)?
Production and sale of a product that consumers value more than the costs of production
When consumers value a product more than the costs of production, what occurs?
Socially efficient production levels (Qe)
What two factors capture all the metrics needed to gauge social efficiency?
Demand and supply
Demand represents what?
Value to customers (Consumer valuation)
What is consumer surplus?
The difference between what customers are willing to pay and the price they have to pay
Supply represents what?
The cost to producers (Cost of production)
What is producer surplus?
The difference between the price sellers receive and the minimum supply price needed to cover costs
Social efficiency occurs when?
At market equilibrium (When all costs and value are accounted for in demand and supply curves)
Taxes imposed on sellers cause what?
An inward shift of the supply curve (decreased supply) while raising costs of production
What are the general results of taxation?
Government collects revenue, prices are increased to buyers, prices are decreased to sellers, and lower quantities are both bought and sold
Taxes do what to surpluses?
Consumer and producer surpluses decrease
Productive regulation on sellers causes what?
An inward shift of the supply curve (decreased supply)
Subsidies given to sellers cause what?
An outward shift of the supply curve (increased supply) and effectively lower the costs of production
Renewable Portfolio Standard (RPS)
A regulation that requires the increased production of energy from renewable energy sources such as wind, solar energy, etc.
Taxes are efficiently enhancing in markets that are what?
Over-producing relative to Qe
What are the general results of subsidies?
Decreased prices to buyers, increased prices to sellers, and increased quantity bought and sold
What do subsidies do to surpluses?
Consumer and producer surpluses increase
Subsidies are efficiently enhancing in markets that are what?
Under-producing relative to Qe
What are the general results of productive regulation?
Increased prices to buyers, decreased prices to sellers, and reduced quantity bought and sold
What does productive regulation do to surpluses?
Consumer and producer surpluses decrease
Productive regulations are efficiently enhancing in markets that are what?
Over-producing (at a level above Qe)
Voters are assumed to be what?
Rationally ignorant because it’s costly for you to become informed and it isn’t likely that an individual vote will make a difference
Politicians (elected officials) are assumed to be what?
Vote-maximizers because, regardless of their ultimate motivation, the ability to achieve goals depends upon re-election
Bureaucrats (civil servants) are assumed to be what?
Budget-maximizers; because they seek promotions, higher pay, prestige, and job security, which all become possible with a bigger budget
Politicians support projects that have what?
Clearly defined current events and future costs that are difficult to identify
What is a local example of the shortsightedness effect?
Lucas Oil Stadium (Indianapolis, IN) was (a) built using increased taxes on gambling, while there’s no gambling around the city, and (b) estimated to cost $2M+ less in operation costs annually
Why do politicians maximize influence on current voters if it’s inefficient?
Essentially, politicians want to please the current general public at expense of future generations, because future generations wont affect re-election
Why don’t politicians attempt to keep costs lower?
The public sector has no profit motive, bureaucrats are rarely in a position to personally gain from cutting costs, and they’re spending other people’s money
What is lobbying?
The devotion of resources to influence public policy formation in order to bring more income to your interests
What is the special interest effect?
Small group of people receive benefits at the expense of a large group
What does a majoritarian political action qualify as?
Widely dispersed benefits and widely dispersed costs
What does an entrepreneurial political action qualify as?
Widely dispersed benefits and concentrated costs
What does a client political action qualify as?
Concentrated benefits and widely dispersed costs
What does an interest group political action qualify as?
Concentrated benefits and concentrated costs
Majoritarian politics represent what?
No special interest group action on either side (e.g. Social security)
Client politics represent what?
One special interest group is active in favor of an issue (e.g. USDA Foreign Advertising Funds)
Interest group politics represent what?
Active special interest groups are on both sides of the issue (e.g. Legalization of marijuana)
Entrepreneurial politics represent what?
One special interest group is active against an issue (e.g. Nuclear waste dumps)
Where did Ventria attempt to move in 2004?
Ventria partnered with Northwest Missouri State University and tried to begin production in the state
Who threatened to stop buy Missouri rice if Ventria was granted access to the state?
Anheuser-Busch, which is based in St. Louis, MO
Where did Ventria finally end up?
Ventria eventually moved to Kansas, and proposed 3,200 acre production in Geary County
What helped stop Ventria from producing in rice states?
Activists’ arguments from the heart and traditional rice’s arguments from the state economy
By locating in a non-rice state, Ventria did what?
Ventria gained political leverage by removing the threat to the state economy, promising to inject jobs, and removing the worry of contamination
Who were Ventria’s allies?
Ventria investors and employees, the bio technology and pharmaceutical industries, UC Davis, Infant Formula Industry, Military, Activist groups (Unicef, Redcross, WHO), and the California Rice Commision
Who were the neutral parties in the Ventria case?
The federal government (FDA, USDA, EPA) and the state government
Who were Ventria’s adversaries?
Coalition of activists (Friends of the Earth, Consumer Food Safety Groups, Nutritional Groups), Traditional Rice Producers (Millers and farmers), Japan Rice Retailer Association, and the California Secretary of Agriculture
Ventria’s case qualifies as what type of politics?
Interest group politics
