Non – market environment

• Non – market environment of a firm or

industry is characterized by 4 ‘I’s.
• Issues
• Interests
• Institutions
• Information
 Basic sources of non – market issues
• Scientific discovery and technological
advancement
• • New understandings
• • Institutional change
• • Interest group activity
• • Moral concerns
• Change in natural environment like health
issues
 Interests
• Interests include those who have a stake in an
issue and the organizations they form.
• US, Asian, and European automobile companies
have interests that are opposed on some issues,
such as the unionization of the auto plants, and
aligned on others such as the state regulation of
carbon dioxide emissions.
• Other interests with direct economic stakes in
these issues are car buyers and employees. Some
interests are well organized.
 institutions
• The principal government institutions are
legislatures, the executive branch, the
judiciary, administrative agencies, regulatory
agencies, and international institutions such
as the WTO.
• These institutions both establish rules and
serve as arenas in which interests compete to
influence those rules.
 Information
• Information refers to what interests and
institutional officeholders know about an issue,
the consequences of alternative courses of
action, and the preferences of those concerned
with the issue.
• Issues are often contested because interests have
conflicting preferences regarding their resolution,
as in the case of the proponents and opponents
of a CO2 emissions standard of 120 grams per
kilometre in the European Union.
 Approach to nonmarket issues
• The effectiveness with which a firm and its managers
address nonmarket issues depends on their approach
to the nonmarket environment.
• One approach is to respond to nonmarket issues only
when they are strong enough to force the firm to act.
• A second approach emphasizes limiting the extent of
the damage once the firm has been challenged by an
issue.
• A third approach is anticipatory and is intended to
prepare the firm to take advantage of opportunities as
they arise and address issues before they become
problems.
 Approach to Non – market issues
• A fourth approach is proactive with the firm and
its managers not only anticipating nonmarket
issues but also acting to affect which issues arise
and how they will be framed.
• This approach recognizes that nonmarket issues
and their development are affected by the way
business is conducted.
• The fourth approach is the most effective, but it
requires considerable sensitivity to the sources of
nonmarket issues and how they progress.
 Changes in non-market environment
• The non-market environment changes as
issues are resolved, current issues progress,
and new issues arise.
• It is necessary to focus on the origins of issues
and the forces that give rise to them.
• It is necessary to anticipate non-market issues
and their progression and resolution.
• Nonmarket issues originate from both
external forces and a firm’s own actions.
 Non – market issue life cycle
• The progression of nonmarket issues can be understood in terms of a life
cycle. The nonmarket
• issue life cycle relates the stage of development of an issue to its impact
on a firm.26 This is not a
• theory, since it does not provide an explanation for how or why an issue
develops or a basis for
• predicting its likely development. In particular, it does not identify the
causal factors that govern an
• issue’s progress. The life cycle concept is useful, however, because it
identifies a pattern and serves
• as a reminder that issues with simple origins can garner support,
propelling them through a series
• of stages and resulting in significant impacts. Issues do not, however, have
a life of their own.
• Instead, their progression is governed by the attention they receive from
interests and institutions.
 Non – market issue life cycle

• Impact on firm

• Time
• Issue identification Interest group formation Legislation Administration Enforcement