Market and Nonmarket Environments
Market environment includes those interactions (which involve voluntary economic transactions and the exchange of property) between firms, suppliers and customers that are governed by Markets and Contracts. Nonmarket environment is composed of the social, political and legal arrangements that structure interactions (between the firm and individuals, interest groups, govt. entities, and the public which are intermediated not by markets but by public and private institutions) outside of, but in conjunction with, markets and contracts. Public institutions differ from markets because of characteristics such as majority rule, due process, broad enfranchisement, collective action, and publicness. Activities in the non market environment
are Voluntary when,
firm cooperates with govt. officials or an environment group and are Involuntary in the case of,
govt. regulation or a boycott of a firm’s product led by an activist group.
Nonmarket issues high on firms agenda include :
Health & Safety
Regulation & Deregulation,
Intellectual Property Protection
International Trade Policy
Regulation & Anti-trust
Media Coverage of Business
Corporate Social Responsibility &
Management & Managers is both responsible for formulating and implementing nonmarket as well as market strategies.
Market Environment determines significance of nonmarket issues to the firm. Nonmarket Environment shapes opportunities in the marketplace.
Performance is determined by competition among firms as directed by their market or competitive strategies.
Legislation, regulation, administrative decisions, and public pressure are the result of competition involving individuals, activist and interest groups, and firms. c)
Strategies are intermediated by Markets.
Strategies are intermediated by public and private institutions including legislatures, courts, regulatory agencies and public sentiment. d)
Of business changes and competitive advantage evolves
Changes and the issues on a firm’s nonmarket agenda evolve.
Nonmarket issues have five basic sources:
Scientific Discovery & Technological Advancement
Interest Groups Activity
Nonmarket issues can arise from
New Technology & Scientific Uncertainty
Changes in Understandings
Heightened Moral Concerns
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. 4.
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.
The fourth approach is the most effective but it requires considerable sensitivity to the sources of nonmarket issues and how they progress.
A fundamental step in anticipating nonmarket issues is to view the potential issue or business practice from the perspective of others who might be concerned about it. For e.g. The Graduation Cards.
Five Stages of Nonmarket Issue Life Cycle:
Interest Group Formation
The life cycle is useful because it identifies a pattern and serves as a reminder that issues with simple origins can garner support, propelling them though a...
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