The business environment has both a market and a non-market component. Most courses in the MBA curriculum focus on the market component: they study firms’ interactions with customers, suppliers, and alliance partners in the form of mutually beneficial exchanges transacted in markets. In contrast, this course focuses on the non-market component. For example, businesses need to cope with laws and regulations, lobby for favorable legislation, ensure access to foreign markets, and deal with media coverage and activist pressures, to name just a few. Successful managers need to formulate strategies for their firms that take into account not only the market but also the regulatory, legal, political and social (e.g. non-market) environments in which they operate.
Markets and the non-market environment have become increasingly interrelated: regulation, laws, media coverage and activist organization pressures directly affect firms’ market performance. Conversely, the profit-maximizing activities of firms often give rise to issues that involve governments and the public. For example, the market strategies of some e-commerce firms have sparked debates ranging from intellectual property protection to privacy; recent development in the fast-food industry and financial markets have triggered intense discussions about new information disclosure and consumer protection rules.
The main purpose of this course is to better understand the non-market environment, and discuss firms’ strategies in light of regulatory, legal, political and social constraints that they face. We will discuss the rationales for economic regulation and describe the main tools of economic regulation (such as the industry conduct regulation of natural monopolies and industrial structure regulation imposed by antitrust laws). We also discuss firms’ strategies in light of environmental, safety, or intellectual property concerns.
A common thread throughout this course is that we will recognize that firms can also shape their non-market environment. In particular, we will discuss firms’ lobbying strategies and use tools from political science to guide our understanding of the lawmaking and rulemaking process. We will also discuss why and how firms may decide to self-regulate in response to activist or media pressures.
