How Are Nonmarket Forces Affecting Your Business?
Understanding Nonmarket Forces Can Be a Game-Changer for Executives
Organizations exist in a complex ecosystem at the intersection of business, globalization, and public policy. Those executives who better understand the ways business are shaped by non-market factors – regulatory, legal, political, cultural and social forces and the relationships and interactions among firms, government, and the public – are better positioned to lead their organizations in a rapidly changing world.
For more than 25 years, the Executive MBA (EMBA) program at Georgetown University’s McDonough School of Business has leveraged the school’s location in the global capital city of Washington, D.C., to provide students with knowledge, information, and experiences at the nexus of international business and public policy.
Georgetown McDonough Professors Jeffrey Macher, John Mayo, and Stephen Weymouth examine a host of economic and political issues in the nonmarket environment and bring this research into their respective EMBA program courses. Here, they confront four myths around market and nonmarket strategy that executives must consider to maintain success.
Four Myths about Market and Nonmarket Strategy
1. Market Strategies are Sufficient for Success
Most executives engaged in market strategy recognize the importance of creating and sustaining competitive advantage in their respective markets via competitive positioning and resource and capability creation. But in many industries, nonmarket strategies – especially those around laws, regulations, institutions, and societal norms – are important elements for creating and sustaining competitive advantage. Firms’ strategies geared for success can fail without sufficient understanding of the domestic and global forces shaping the nonmarket environment.
2. Smartly Crafting Market Strategies is More Important than Smartly Crafting Nonmarket Strategies
Firms often focus on “the business of business” to drive organizational success. To be sure, developing an effective marketing plan, an accurate pricing plan, and an efficient supply chain are important for success. But today, larger forces loom in the regulatory, policymaking, and geopolitical spheres that can cause the organizations’ financials to flounder or soar. Identifying and managing these “external” matters can be every bit as – or even more – important than traditional market strategies for the success of organizations.
3. Nonmarket Strategy is Best “Outsourced” to Lobbying Firms and Trade Associations
In a world in which managers’ time is stretched thin, it is natural to think about outsourcing the management of nonmarket strategies to public relations (lobbying) firms or trade associations. While these organizations can provide important components of a well-crafted nonmarket strategy, they are rarely sufficient. For one thing, successful leaders need to develop their own knowledge and frameworks for understanding how nonmarket forces can affect their bottom line. Furthermore, when nonmarket strategies are needed, nonmarket actors – for instance, regulators, legislators, activists, or media – are often more receptive to direct input and information from firms themselves. As such, trade associations and lobbying firms should be utilized as a complement to, rather than a substitute for, a smartly crafted nonmarket strategy.
4. Nonmarket Strategy is Simply Repackaged Market Strategy
Strategic interactions in the market environment generally occur between firms and customers or suppliers intermediated by competition and/or private agreements. But a market-based emphasis fails to consider interactions in the nonmarket environment. These are generally more complex and myriad, and occur between firms and government organizations, non-government organizations, the media, the public, and social activists, among others. These external audiences introduce new determinants to the outcome of business issues. For instance, affecting nonmarket strategy often involves a broader set of participants and a public decision-making, unlike the conduct of market strategies. Successful nonmarket engagements often require navigating policy uncertainty and building coalitions with similar interests. These different elements require a tailored rather than off-the-shelf approach to nonmarket strategy formation.
To learn more about how Georgetown’s EMBA program prepares students as leaders who understand the existing complexities of today’s business challenges at the nexus of commerce, government, and policy, visit: msb.georgetown.edu/emba.
John Mayo is the Elsa Carlson McDonough Chair of Business Administration and executive director, Center for Business and Public Policy; Jeffrey Macher is professor and academic director, Center for Business and Public Policy; and Stephen Weymouth is associate professor and Dewey Awad Fellow, all of Georgetown University’s McDonough School of Business.