1 THE NONMARKET ENVIRONMENT OF MANAGEMENT Introduction

2 Sources of Market Power Effective product-market strategies and tactics Effective product-market strategies and tactics Special knowledge about product or production techniques that enables you to make a better product that other firms cannot imitate or to make it at a lower cost Special knowledge about product or production techniques that enables you to make a better product that other firms cannot imitate or to make it at a lower cost

3 Collusion with other organizations in the market Collusion with other organizations in the market Government protection Government protection

4 Success in games of strategy = market power Market management is concerned primarily with the product-market arena Market management is concerned primarily with the product-market arena Nonmarket management is concerned with getting and defeating government protection, creating and overcoming government imposed handicap, collusion and overcoming collusion Nonmarket management is concerned with getting and defeating government protection, creating and overcoming government imposed handicap, collusion and overcoming collusion

5 Managers are responsible for the formulation and execution of nonmarket as well as market strategies.

6 Effects of Government Function are PERVASIVE EVERY ACTION of GOVERNMENT affects the LEVEL and DISTRIBUTION of WEALTH in SOCIETY POLITICAL PARTICIPATION is driven primarily by SELF INTEREST SELF INTEREST is driven primarily by DISTRIBUTIONAL concerns

7 Individuals & Organizations exchange assets for political influence Knowledge/InformationKnowledge/Information Organization/TimeOrganization/Time Personal relationshipsPersonal relationships MoneyMoney

8 Individuals & Organizations often exchange political influence for other assets

9 2 of the 4 Is. INSTITUTIONS and INTERESTS

10 We can talk about Institutions three ways: StructureStructure FunctionFunction ProcessProcess

11 Structure Government/Nongovernment Level of Government –Subnational –National –Transnational Branch of Government –Legislatures –Regulatory and Administrative Agencies –Judiciaries

12 Functions –Spending –Taxing –Regulating

13 How Government Affects the INTERESTS of ORGANIZATIONS SPECIFICALLYSPECIFICALLY by CHANGING their COMPETITIVE POSITIONby CHANGING their COMPETITIVE POSITION (the tax code specifies nominal incidence, supply and demand real incidence)

14 Processes – –Decision-Making Processes Voting ProceduresVoting Procedures Adversarial Due ProcessAdversarial Due Process Administrative Due ProcessAdministrative Due Process Administrative DiscretionAdministrative Discretion

15 Voting Majority Rule has a distinctive equilibrium Majority Rule has a distinctive equilibrium MEDIAN VOTER Preferences must be “single peaked” Preferences must be “single peaked” single dimensionsingle dimension coherent preferencescoherent preferences

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18 Agenda Control Reversion point (Status Quo?) Reversion point (Status Quo?) Voting rule Voting rule Pairwise comparison, plurality, or unanimity?Pairwise comparison, plurality, or unanimity? Order in which alternatives are consideredOrder in which alternatives are considered Sidepayments?Sidepayments? Single site or multiple sites?Single site or multiple sites?

19 Committee and Individual Power Committee Power Committee Power Policy JurisdictionPolicy Jurisdiction ExpertiseExpertise Agenda ControlAgenda Control Bargaining, Vote Trading, Coalition BuildingBargaining, Vote Trading, Coalition Building Individual Individual