W1 - LITERATURE Flashcards
What is a nonmarket strategy?
A nonmarket strategy allows a company to shape the environment in which it operates, creating opportunities.
What types of risks do companies face in nonmarkets?
- Government regulations
- Social campaigns
- Political movements
What significant legal battle has Novartis been involved in since 2002?
A public battle with the Indian government over the patent for Glivec.
What does Novartis do to support needy Indian patients?
Offers Glivec at dramatically reduced prices as part of its corporate citizenship initiatives.
What is the (ia)3-framework used for?
To design competitive nonmarket strategies by mapping a company’s specific nonmarket environment.
What are the components of the (ia)3-framework?
- Issues
- Actors
- Interests
- Arenas
- Information
- Assets
True or False: Nonmarket strategy only concerns economic factors.
False
What is the primary focus of nonmarket strategy?
On issues that affect a company’s ability to create and appropriate value.
What is the first step in developing a nonmarket strategy according to the (ia)3 framework?
Identify the issue that could significantly affect the company’s ability to create and/or appropriate value.
What role do actors play in nonmarket strategy?
Actors are individuals or groups with an economic or ideological stake in a nonmarket issue.
What is essential for a company to influence an issue in the public domain?
A company’s reputation and perceived trustworthiness.
Fill in the blank: Nonmarket issues can play out in multiple settings, including _______.
[courtrooms, regulatory proceedings, parliamentary committee hearings, industry forums, news media, public domain, blogosphere]
What did Shell fail to recognize in its battle over the Brent Spar oil rig?
That Greenpeace shifted the arena into the public domain.
What did Toyota achieve through nonmarket strategy regarding the Prius?
Gained access to carpool lanes for low-emissions vehicles.
How did Vodafone respond to the European Commission’s quest to lower roaming charges?
Created Vodafone Passport as an opt-in program and launched a lobbying campaign.
What is the key to turning perceived non-business issues into strategic opportunities?
An integrated, coherent and strategic approach to both market and nonmarket environments.
What is increasingly affecting a company’s bottom line?
Issues and actors beyond the market.
What type of management does performing an (ia)3 analysis set the stage for?
Proactive nonmarket management.
What is the importance of identifying the interests of actors in nonmarket strategy?
To draw up a strategic map that identifies potential allies and key adversaries.
What does the success of Novartis, Toyota, and Vodafone illustrate about nonmarket strategy?
That effective nonmarket strategies can lead to sustainable competitive advantage.
What was the initial response of Vodafone to the regulation challenge?
Vodafone used the program’s popularity as the basis for a targeted lobbying campaign arguing that binding regulation was unnecessary
The campaign proved futile as the European Parliament enacted binding rules two years later.
Which companies are mentioned as managing beyond the market?
Novartis, Toyota, Vodafone
These companies employ nonmarket strategies to create business opportunities.
What are the four factors driving the investment in nonmarket strategy?
- Multiple audiences
- Globalization of NGOs
- New regulatory hurdles
- Competitive edge
What incident exemplified the conflict between local laws and corporate ethics?
Yahoo! Inc.’s passing on of e-mail files from a Chinese dissident to Chinese authorities in 2004
How did Greenpeace International impact Royal Dutch Shell’s plans?
Greenpeace’s multimedia coverage spoiled Shell’s plans to sink the Brent Spar oil storage buoy
What paradox does globalization present for businesses?
While it creates more market opportunities, it also introduces new nonmarket challenges
What did BP plc do to achieve a competitive advantage?
Launched the ‘beyond petroleum’ initiative acknowledging global warming and diversifying into renewable energy
What is the primary currency in nonmarket environments?
Information
In contrast to money as the currency in traditional markets.
What is a key difference between market and nonmarket environments?
Markets are predictable with straightforward cause-and-effect relationships; nonmarkets are less uniform and predictable
What is essential for nonmarket management to be effective?
Consistency and long-term commitment
What does successful lobbying require in the nonmarket environment?
Superior information about policy alternatives and the preferences of key players
True or False: In nonmarket strategies, flexibility is more important than consistency.
False
What is the relationship between market value and nonmarket values?
Management beyond the market is ultimately about values, not just creating value
What example illustrates integrated market and nonmarket strategy?
Accor Services’ collaboration with NGOs to fight hunger and promote healthful eating
Fill in the blank: Corporations are _______ actors in the social and political environment.
social and political
What significant shift is required in corporate strategy regarding nonmarket environments?
Deliberately shaping the nonmarket environment to create new market opportunities
What impact can failing to engage in nonmarket strategies have on corporations?
They risk having new rules imposed on them by external actors like politicians and NGOs
What did Accor Services aim to reconcile with its nonmarket strategy?
The right balance between professional and private life
What role does public perception play in nonmarket strategy?
Public skepticism of intentions necessitates a focus on consistent behavior
What did Toyota achieve with its hybrid vehicle strategy?
Successful lobbying for carpool access, aligned with its values and overall strategy
What is the role of companies as economic agents?
Managing accordingly leaves the non-market environment to others.
Who are the active participants in the non-market environment?
Politicians, regulators, nongovernmental organizations and activists.
What happens if companies do not engage in the non-market environment?
New rules of the game may be imposed on the industry.
What does the saying ‘In politics, if you are not at the table, you are on the menu!’ imply?
If companies do not participate in politics, they may be adversely affected.
What are leading corporations starting to do regarding social and political issues?
Stretch the competitive playing field beyond the market.
What is the purpose of the managerial framework provided in the article?
For effective nonmarket management.
What strategic risk is deemed the number one facing companies according to a survey by Ernst & Young?
Regulation & compliance.
What risk do executives consider the most significant according to Aon’s survey?
Damage to the firm’s reputation.
Fill in the blank: According to the article, _____ issues are turning from mere nuisance to strategic opportunity.
Social and political
True or False: The article suggests that corporations should ignore the non-market environment.
False
What are the two main environments of business?
Market environment and nonmarket environment
The market environment consists of relationships mediated by markets, while the nonmarket environment includes relationships not mediated by markets.
What does the market environment consist of?
Relationships between a firm and stakeholders mediated by markets, including:
* Customers
* Suppliers
* Competitors
These relationships are governed by the laws of supply and demand.
What is the (ia)3-framework used for?
Analyzing a firm’s nonmarket environment
It focuses on issues, actors, interests, arenas, information, and assets.
What are the six questions in the (ia)3-framework?
- What is the issue?
- Who are the actors that care about this issue?
- What are the various actors’ interests?
- In which arena do the actors meet to settle the issue?
- What information moves the issue in this arena?
- What assets do the actors need to prevail in this arena?
Each question leads to the next in understanding the nonmarket environment.
What defines an ‘issue’ in the nonmarket environment?
A point in controversy on which interested parties take affirmative or negative positions
Issues imply a degree of conflict or disagreement among actors.
What is the ‘issue life cycle’?
The process through which issues progress from identification to enforcement
Stages include issue identification, interest group formation, legislation, administration, and enforcement.
What factors determine the power of political actors?
Organization and degree of interest homogeneity
Organized and homogeneous groups tend to have more political power.
What types of arenas can nonmarket issues play out in?
Courtrooms, regulatory proceedings, parliamentary committee hearings, industry forums, news media, public domain, blogosphere
The rules and dynamics vary significantly across these settings.
True or False: The impact of an issue on a firm is greatest during the issue identification phase.
False
Impact is close to nul during identification but grows substantially during enforcement.
Fill in the blank: A firm should take a position on an issue if its resolution could significantly affect the firm’s ability to _______.
create and/or appropriate value
This includes both potential threats and opportunities.
Who are typically the actors that care about a nonmarket issue?
Actors with an economic, political, or ideological stake in the issue
Examples include businesses, interest groups, and community organizations.
What is meant by ‘interest homogeneity’ among actors?
The degree to which members of a group share similar interests
High homogeneity can enhance political power.
What can significantly enhance a firm’s ability to influence an issue?
Proactive engagement during the issue identification and interest group formation phases
Engaging stakeholders early can shape future developments.
What happens to issues that get ‘stuck’ in the issue life cycle?
They may not progress to the legislation phase
Firms may deliberately strategize to prevent progression.
Why must managers understand the arena in which an issue plays out?
To develop a strategy accordingly
The effectiveness of lobbying efforts can depend significantly on the structure of the relevant arena.
What is a challenge of managing nonmarket issues across borders?
Different rules and dispute resolution processes
For example, firms cannot sue other firms through the WTO; only states have standing.
What advantage do firms seek in the context of nonmarket issues?
To move an issue to a more favorable arena
For instance, Endesa attempted to shift merger approval to the European Commission.
What is the role of information in the nonmarket environment?
Information is the currency of the nonmarket environment
Unlike money, information is context-specific and varies greatly across different arenas.
How does public opinion data serve in lobbying efforts?
It is more effective in influencing congressional or parliamentary committees
This is particularly true for members concerned about reelection.
What is essential for a firm to influence an issue in the public domain?
A firm’s reputation and perceived trustworthiness
Knowledge of decision-making procedures and key members’ concerns is also important.
What can association with the wrong actors lead to?
A major nonmarket liability
A firm’s past conduct can significantly impact its ability to partner with others.
What is a paradox regarding money as a nonmarket asset?
Money can be both an asset and a liability
While it allows investment in nonmarket issues, it can also attract negative attention from activist groups.
What does a rigorous industry analysis ensure?
It is essential for success in the market but does not guarantee it
A strategic analysis of the nonmarket environment is crucial for proactive management.
What does the (IA) analytic journey involve?
Identifying issues, actors, interests, arenas, information, and assets
This framework helps firms shape the evolution of critical issues in favor of their business interests.
