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    The Non-Market Business Environment

    Business students often focus on how businesses compete in their market environment. They focus on factors such as saving costs through quality management, and how prices and marketing efforts affect sales. But businesses also compete in what Baron calls the non-market environment.1 That is, non-market issues such as regulation and litigation will have a significant impact on the success of the firm's marketing strategy.

    Companies expend a huge amount of effort lobbying, doing public relations, and suing each other when they step into each others' market space. Recent examples include the battle over Proposition 37 (the genetically modified foods bill), the PR efforts that followed NIKE and others for child labour issues, and how Apple received an injunction blocking the sale of the Samsung Tab 10.1 across Europe (after submitting documents to the courts that altered the look of the Samsung Tab to look more like the Apple iPad).

    These are all examples of how a firm's overall strategy must include a market and a non-market strategy. In a world where business is becoming increasingly international, non-market strategies have become even more important. This is because there exist so many non-market barriers to entry into foreign markets, such as tarrifs. Only a government, not a business, can enter into a bilateral trade agreement with another country under the General Agreement on Tariffs and Trade (GATT). However, these bilateral agreements usually include trade-offs that benefit some industries and hurt others (for example, think of how new box stores that sell cheap imports in a community may hurt local businesses). As a result, businesses have a huge stake in the decisions made by their government. This provides an incentive to make sure these decisions go their way, and leads to a battle against other stakeholders over political capital.

     

     

    Reference:
    1. Baron, D. P. (1995). Integrated strategy: Market and non-market components. California Management Review, 37(2), 47 - 65.

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