Chapter 7:
Nonmarket Strategies for Government Arenas
True/False Questions:
1) The rules of the game for many firms and industries are established by legislation.
2) Strategy formulation in the nonmarket environment is similar to its counterpart in
the market environment..
3) Nonmarket issues attract a broader set of participants than those involved in
markets.
4) In the short run, a firm has influence over nonmarket issues to the extent that its
interests are aligned with those of citizens.
5) In market competition, a firm that faces weak competition has market power that
enables it to restrict output and obtain a price below its costs.
6) One criticism of nonmarket action by business is that it can be contrary to the
public interest.
7) Society cannot control the exercise of nonmarket power or require disclosure of
nonmarket actions.
8) One of the criticisms of the nonmarket activities of business is that in their quest
to make a profit, they support political alternatives which are in congruity with the
public interest.
9) Public interest cannot be advanced by business participation.
10) In First National Bank of Boston v. Bellotti (1978), the Supreme Court ruled that
the First Amendment protects the right of corporations to make expenditures and
participate in the political competition on a state ballot proposition.
11) In Pacific Gas & Electric Co. v. Public Utilities Commission of California, the
Supreme Court ruled that a company cannot be forced to include messages from
other groups in its billing envelopes.
12) The Supreme Court upheld a Michigan law that allowed corporations to make
independent expenditures on behalf of a candidate.
13) There are those who criticize business as having too little power and influence.
14) The nonmarket power of business is rarely controlled because it is naturally
divided.
15) The Supreme Court upheld a Michigan law that prohibits corporations from
making independent expenditures on behalf of a candidate.
16) Some criticize business for manipulating consumers. An example of this is Enron
that consistently misrepresented financial information..
17) Most managers are involved in nonmarket issues on a continual rather than
periodic basis.
18) Nonmarket strategies focus on both the initial institutional arena and on
subsequent delegation to administrative or regulatory agencies.
19) In a nonmarket analysis, motivation and the nature of the politics are important
factors.
20) Once the nonmarket analysis is completed, the firm can then implement the
strategy.
21) Analysis of supply and demand is a part of strategy formulation.
22) Nonmarket strategies are the link between objectives and the specific actions
taken to achieve them.
23) The nonmarket strategies available to firms are the same as those available to
other interest groups but their appropriateness and effectives can differ.
24) Firms and interest groups build their strategies on nonmarket assets.
25) When an industry seeks to defeat legislation, a unified position may be most
effective.
26) In the long-run, the rent of a firm equals its profit, but in the short-run a rent can
differ from profit because of sunk costs.
27) Implementation relates to the selection of specific actions and assignments of jobs
to organizational units and individual managers.
28) One generic strategy is representation where the focus is on developing the
needed votes in a legislature to enact or defeat a bill.
29) Toshiba’s problem, in terms of trade sanctions, was one of client politics.
30) The U.S. legislative process is very complicated with multiple pivots.
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Multiple Choice Questions:
31) Strategy formulation and its implementation in nonmarket environments differs
from strategies that are formulated and implemented in a market environment.
Which of the following is one of these differences?
a) Nonmarket issues attract the same participants as those involved in the markets
b) The logic of collective and political action is the same
c) Several of the important components of political strategies are implemented in
public view that can constrain the actions of the firm
d) Issues are resolved by voluntary agreements
32) Nonmarket activities of business have been criticized on a number of grounds.
These include which of the following?
a) Due to the for-profit goals of firms, business supports political alternatives that
are contrary to public interest
b) In reality, business does not have too much power
c) Business does not manipulate the political process
d) Business goals are always congruent with public interests
33) From the pluralist point of view, a policy to ban smoking cigarettes or imposing
high taxes on tobacco products should include considering the following interests,
except which?
a) The interests of smokers and their families
b) Cigarettes companies and their employees
c) Farmers who grow tobacco on marginal lands
d) The effect on the ozone level.
34) Firms have been granted rights to participate in political processes irrespective of
which of the following?
a) The interests they represent
b) When they incorporated
c) The number of shareholders
d) Their type of product
35) Which amendment protects the right of the corporation to make expenditures and
participate in the political competition on a state ballot proposition?
a) First
b) Second
c) Tenth
d) Sixteenth
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36) The Supreme Court ruled that collective corporate action, such as joint lobbying
for a political purpose:
a) Violates antitrust laws.
b) Does not violate antitrust laws.
c) The first Amendment of the Constitution of the USA does not extend to
corporations.
d) Firms do not have the right to participate in coalitions.
37) In Austin v. Michigan Chamber of Commerce (1990), the Supreme Court did what
concerning corporations making independent expenditures on behalf of a
candidate?
a) Upheld their right to do so
b) Denied them the right to make independent contributions
c) Sent the case back to the Michigan Supreme Court
d) None is correct
38) _______ can take two basic forms: one involves misrepresentation and the other
involves exploiting institutional features.
a) Cheating
b) Lobbying
c) Manipulation
d) Abusing
39) Which of the following industry cases represented the concern that business
political activity goes beyond interests and power and centers on manipulation?
a) The dairy industry
b) The fast food industry
c) The pharmaceutical industry
d) The fashion industry
40) Nonmarket analysis involves the following activities, except which of the
following?
a) Identifying the interests affected by an issue
b) Analyzing the demand for and the supply of political action
c) Identifying the institutional arenas in which the issue will be addressed
d) Analyzing the financial statements of the firm
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41) Nonmarket assets include which of the following?
a) Reputation of firm
b) Reputation of top management
c) Personal relationships with institutional officeholders
d) All are assets
42) The value chain includes all but which one of the following?
a) Inbound logistics
b) Marketing & sales
c) Suppliers
d) Operations
43) Analogous to the _____ chain for market strategies is the ____ chain for
nonmarket strategies?
a) Rent; value
b) Profit; nonprofit
c) Nonprofit; profit
d) Value; rent
44) Each of the following is seen as an asset to a firm except:
a) The firm’s reputation.
b) The firm’s access to institutional actors.
c) The experience of the firm.
d) The stakeholders’ views of the firm.
45) What type of strategy is based on the constituency connection between elected
officeholders and their constituents?
a) Client
b) Representation
c) Coalition
d) Entrepreneurial
46) What does a vote recruitment strategy focus on?
a) Voters who are registered
b) Voters in general
c) Voters who give to campaigns
d) Pivotal voters
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47) What two factors does the agenda-setting strategy focus on?
a) Recruiting the agenda setter and building support for an alternative
b) Recruiting the agenda setter and then lobbying other committee members
c) Supporting the current agenda and collecting votes for that agenda
d) Supporting the current agenda and supporting any action of the committee
48) What is the key to making an informational strategy is to be effective?
a) The legislator be more informed about the issue than anyone else
b) The interest group is more informed about the issue than are the government
officeholders
c) The paid lobbyists know the most
d) None are correct answers
49) Lobbying involves the strategic requirement of which of the following two types
of information?
a) Political and economic
b) Political and social
c) Political and technical
d) Political and international
50) Nonmarket strategies are ultimately directed to whom?
a) The public at large
b) The customer
c) The voters
d) The public officeholders
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Essay and Review Questions:
1) One of the basic criticisms of the nonmarket activities of business is that business
supports political alternatives that may be contrary to public interest. Discuss this
argument, giving examples. Do you think this criticism is justified? What could
be done about it? Should anything be done about it? Why or why not?
2) It has been argued that business has too much power that, once exercised, even in
a responsible manner, distorts the balance of political power in the country.
Discuss both sides of this issue. Where do you stand? Explain your position and
the reasoning behind it. Use the recent downfall of Enron and Arthur Anderson in
your analysis.
3) Many people believe that business manipulates the nonmarket process in an
unacceptable way. What are the bases for such a belief? What is the businesses’
point of view? What do you think of this criticism of business? Give examples of
both sides of the issue.
4) As the Vice President in charge of Political Strategy formulation and
implementation at Amanda International Corporation, you were asked to make a
presentation before the Board of Control in which you outline your specific
responsibilities, the process you are planning to use to formulate your strategies,
and the methods to implement such strategies. Write the outline of your
presentation.
5) APPROPRIATE FOR A TAKE HOME EXAMINATION OR CLASS
PROJECT:
The Issue: Cost of higher education.
The Perspective: Students’ and parents’ perspectives.
The Assignment: Using a checklist for nonmarket analysis and strategy
formulation, identify the issue, map your strategy, assess the potential nonmarket
action, identify the key institutions and individuals involved in the issue, the
strategy formulation and implementation as well as the ongoing activities.
6) Taking a controversial issues out of today’s headlines such as corporate reform,
gun control, genetic engineering or health care reform, write an analysis
formulating the nonmarket strategies that are being used by the significant actors
in the debates.
8) What nonmarket issues are present in the case of Federal Express and Labor
Organization? What basic strategies can the Federal Express adopt? What would
you do if you were the CEO?
9) What are the key issues in the Wal-Mart and its Urban Expansion Strategy case?
Formulate a plan for Wal-Mart’s urban expansion.
10) Identify the issues and discuss the complex factors in the Toshiba case on trade
sanctions. Describe the political strategies of Toshiba and evaluate how it
managed this situation. How might the handling of the situation differ between a
Japanese firm and an American one?