Strategic Management in Nonmarket Environments - MGMT 450
Class Materials
Professor Daniel Diermeier
Section 62 and 71
Fall 2004-05
|
Section |
Class Time |
Class Room |
Office Room |
Office Hours |
Phone |
Fax |
|
|
62 |
|
Jacobs 1246 |
Jacobs 554 |
Th 3-4 |
847-491-5177 |
847-467-1220 |
d-diermeier@kellogg.northwestern.edu |
|
71 |
6-9 M |
Wieboldt 250 |
Wieboldt
278 |
Th
5-6 |
847-491-5177 |
847-467-1220 |
d-diermeier@kellogg.northwestern.edu |
Course Description and Objectives
All economies are defined by formal and informal norms and regulations that
structure market competition. These “rules of the game” vary significantly
across countries. Many barriers to imitation and entry, for example, originate
from specific legal rules or government policies that favor some capabilities
over others. These rules, and in many cases
their enforcement, are not fixed, well-defined constraints, but are determined,
implemented, and interpreted by legislatures, government administrative
agencies, judicial institutions, public sentiment, and ethical consensus. The
resolution of ambiguity and direction of change is neither exogenous nor
divorced from strategic considerations. Rather, the process involves interest
groups interacting within a system of institutions that includes but is not
limited to the various branches of government, the media, and nongovernmental
organizations. Both competitive
advantage and industry profitability are affected by this interaction.
Therefore, business strategies often must include actions to influence the
outcome of the process. The analysis and development of successful strategies
to shape the rules of the game to an organization’s advantage constitute the
domain of non-market strategy.
Successful non-market strategies can establish, sustain, or erode a company’s competitive advantage. For example, the rules governing protection of intellectual property impact the advantages to “innovating” firms versus firms that are “fast followers,” whereas trade restrictions, antitrust regulations or rules governing mergers and acquisitions may prevent the execution of a well thought-out growth strategy. Non-market issues are also important in determining the profitability of an entire industry. Regulatory costs or public subsidies, for example, may also hurt or help all players, creating common non-market interests among market rivals. Navigating between competing and common interests frequently creates challenging strategic problems for managers and consultants that cannot be successfully analyzed with the traditional concepts of competitive strategy. This is particularly relevant when a firm implements an innovative strategy, operates in a rapidly evolving industry, or targets new markets in the global economy. Such is the case in deregulating industries (telecommunications or energy) where one set of rules is effectively being substituted for another, in e-commerce where important rules (e.g., on the protection of intellectual property and on domestic and international rules with respect to privacy or sales practices) appear open to change, or within the biotech and pharmaceutical industry where rapid innovation may clash with ethical concerns, questions about patients’ well-being, or about a certain technology or its distribution.
This class focuses on non-market strategy from the point of view of managers and consultants. Its primary objectives are to examine typical non-market issues, to develop a set of conceptual frameworks for analyzing non-market threats and opportunities, and to practice forming effective strategies for managing in non-market environments. The concepts, skills, and analytical tools that students will learn in the course rest upon a foundation of economic principles, political analysis, and, to a lesser extent, social psychology and law. They identify patterns of behavior and outcomes, ways of thinking about those patterns and outcomes, methods of analysis that facilitate understanding and prediction, and, ultimately, the shaping of strategies to improve business performance.
The class is structured around three broad topics:
· Business and Society
· Business and Politics
· Integrated Strategy
Business
and Society.
As businesses
become the dominant source of social and cultural change, they are in turn
increasingly being held accountable by social and political constituencies.
Many of these “stakeholders” are not part of a contractual relationship with
the company and base their decisions on values other than the maximization of
shareholder value. The presence of these
constituencies presents both challenges and opportunities for business leaders.
This segment of the course will take a strategic approach to help students
anticipate and analyze these challenges and incorporate their insights into
successful business strategies.
Business and Politics. Legal constraints and government regulations significantly shape the rules of market competition. Much of non-market interaction thus consists of interests competing in public institutions such as legislatures, regulatory bodies, or courts. This segment of the course will introduce students to the politics of business. You will learn to appreciate the importance of formulating political strategies, analyze non-market competition in public arenas, and develop successful political strategies of your own.
Integrated Strategy. In this segment you will learn how market and
non-market strategies interact and to develop strategies that integrate both
components. We will anticipate some key concepts of competitive analysis, such
as industry analysis, competitive advantage, market entry, price and non-price
competition, and the identification of their non-market dimension. Our main
goal will be to practice designing integrated strategies in both domestic and
international business environments.
Teaching Approach
We will use
case discussions, general discussions and lectures to achieve the goals of the
course. Your charge is to apply the frameworks, methods and tools introduced
and contained in the readings to the cases discussed. The goal of each
session is to augment your ability to evaluate, formulate or implement some
facet of a business's nonmarket strategy. In
addition, we will have three in-class simulations that count as an
additional component of your group work. The specific group tasks will be
announced in class. In the sample course syllabus
you find a detailed description of each class session, the teaching approach,
course requirements, grading, and the readings and cases for each class.