978-1259315411 Chapter 7 Solution Manual

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CHAPTER 7

BUSINESS-GOVERNMENT RELATIONS

INTRODUCTION

Governments seek to protect and promote the public good and in these roles establish

rules under which business operates in society. Therefore, a government’s influence on

business through public policy and regulation is a vital concern for managers.

Government’s relationship with business can be either cooperative or adversarial.

Various economic or social assistance policies significantly affect society, in which

businesses must operate. Many government regulations also impact business directly.

Managers must understand the objectives and effects of government policy and

regulation, both at home and abroad, in order to conduct business in an ethical and legal

manner.

INTRODUCTORY CASES

Regulating Uber

Controlling the import of contaminated food

What prompted or compelled governments to become more involved in their citizens’

transportation options or the assurance of food safety? How do these government’s

actions affect businesses and what they are permitted to do? How did these actions affect

society and its safety? Did government’s involvement promote or harm companies or

allow other firms to maintain their competitive advantage? Were these efforts by the

governments necessary and effective, or can this only be answered in time?

Teaching Tip: Opening Cases

Both introductory cases, the regulation of Uber and the control over

the import of contaminated food, are ongoing issues. Students may

want to research recent updates to the cases or investigate how their

local, state or federal governments have handled these emerging cases.

There are numerous videos available through the Internet, such as

CNBC’s coverage of this topic, found at:

http://www.bing.com/videos/search?q=regulation+of+uber+videos&F

ORM=VIRE1#view=detail&mid=303554AD6AA515A820AC303554

AD6AA515A820AC

or how the City of New Orleans dealt with this issue, found at:

http://www.bing.com/videos/search?q=regulation+of+uber+videos&F

ORM=VIRE1#view=detail&mid=00FEBB144D135203181100FEBB1

44D1352031811.

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CHAPTER OUTLINE

I. HOW BUSINESS AND GOVERNMENT RELATE

A. Seeking a Collaborative Partnership

B. Working in Opposition to Government

C. Legitimacy Issues

II. GOVERNMENT’S PUBLIC POLICY ROLE

A. Elements of Public Policy

Teaching Tip: Opening Case – Contaminated Food

A highly critical CNN story on the import of contaminated food can be

found at:

http://www.bing.com/videos/search?q=import%20of%20contaminated

%20food%20videos&qs=n&form=QBVR&pq=import%20of%20conta

minated%20food%20videos&sc=0-16&sp=-

1&sk=#view=detail&mid=2095DF450D7BA16001372095DF450D7B

A1600137.

Teaching Tip: How Business-Government Relate

The proper role of government is always a matter of debate. Should

government take a pro-business (or collaborative partnership) or an

anti-business (or opposition to the government) role? A simple

exercise that can provoke some classroom enthusiasm is to split the

class into two teams – Pro-business Government and Anti-business

Government. Give one team thirty seconds to state one reason why its

approach is best. The other team can respond or offer its own point.

Allow the point/counterpoint to continue for several rounds. By

keeping a list on the board, this exercise will sharpen everyone’s sense

of what each approach offers.

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B. Types of Public Policy

 Economic policies

 Social assistance policies

III. GOVERNMENT REGULATION OF BUSINESS

A. Market Failure

Teaching Tip: Public Policy

New public policy issues abound frequently. This might afford an

opportunity to have students scan recent business periodicals or

magazines (e.g., BusinessWeek) to identify an emerging public policy

issue. There may be an issue that is relevant to your local community

or state. Students should be able to identify the various elements of

public policy in the issue they have discovered.

You might also challenge students to identify a public policy issue

emerging in another country. How is the public policy process

different across nations? Who are the major actors in the public policy

process in another country and how does this differ from the major

actors in your own country?

Teaching Tip: Social Assistance Policies

Social assistance policies, such as health care, are very important to

individuals and families. It is likely that the Obama Administration–

induced health care reform will remain an active controversial issue for

many years. Ask students to identify an elderly relative – such as a

grandparent or neighbor – or someone without health care insurance at

work. What is their opinion about health care reform, as compared to

someone who is covered through their employer?

Perhaps the issue of how much an employer should pay for an

employee’s health care will be a controversial issue for discussion or

debate. Or, is it acceptable that an employer hires a worker as a part-

time employee just to avoid paying for costly health care benefits

mandated by the U.S. federal government?

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D. Ethical Arguments

E. Types of Regulation

 Economic regulations

 Antitrust: A special kind of economic regulation

 Social regulations

F. The Effects of Regulation

 The costs and benefits of regulation

 Continuous regulatory reform

Teaching Tip: Natural Monopolies

Students should be able to easily recognize natural monopolies – cable

television, electricity, railroads. Identify another common product or

service and have the students debate whether this could or should be a

monopoly, protected by the government from free competition.

Teaching Tip: Anti-trust – Microsoft in Europe

The “Microsoft anti–trust case in Europe” was explained in a video

found at:

http://www.bing.com/videos/search?q=antitrust%20action%20against

%20Microsoft%20in%20Europe%20videos&qs=n&form=QBVR&pq=

antitrust%20action%20against%20microsoft%20in%20europe%20vide

os&sc=0-0&sp=-

1&sk=#view=detail&mid=6139F32528628A06476C6139F32528628A

06476C.

This may be a good summary of the major issues in the case from a

variety of viewpoints.

Teaching Tip: How Much Regulation?

The issue of the costs of regulation is often a political one. Student

may locate political positions that favor or oppose large government.

Do the costs of regulation outweigh the benefits? Take a single

regulation and try to conduct a cost-benefit analysis to answer this

question.

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IV. REGULATION IN A GLOBAL CONTEXT

GETTING STARTED

KEY LEARNING OBJECTIVES

LO 7-1: Understanding why sometimes governments and business collaborate and

other times work in opposition to each other.

LO 7-2: Defining public policy and the elements of the public policy process.

LO 7-3: Explaining the reasons for regulation.

LO 7-4: Knowing the major types of government regulation of business.

Teaching Tip: “De–” or “Re–” Regulate?

The United States has experienced a cycle of deregulation, then

reregulation. Which part of this cycle are we current in, and are there

signs of moving into the next phase of this cycle? Which part of the

cycle is good for business – deregulation or reregulation? Is the answer

to this question industry-specific: “it depends on which industry is

being analyzed”?

Teaching Tip: International Regulatory Control

It seems reasonable to assume that some sort of regulatory control is

necessary. What happens when trade involves more than one country?

Can there be an international regulatory body? Does it already exist?

Students could discover and then investigate the organizations that

attempt to control international trade and then assess its achievements

as well as weaknesses.

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Regulation can take the form of laws affecting an organization’s economic operations

protection).

LO 7-5: Identifying the purpose of antitrust laws and the remedies that may be

imposed.

LO 7-6: Comparing the costs and benefits of regulation for business and society.

LO 7-7: Examining the conditions that affect the regulation of business in a global

context.

KEY TERMS AND CONCEPTS USED IN THE CHAPTER

antitrust laws

cost-benefit analysis

deregulation

Dodd-Frank Act

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INTERNET RESOURCES

DISCUSSION CASE

SHOULD E-CIGARETTES BY REGULATED?

Teaching Tip: The Regulation of E-cigarettes

Many news agencies have covered the story of the emergence of e-

cigarettes and governments’ attempts to regulate this product. One

example can be found at:

http://www.bing.com/videos/search?q=regulation%20of%20e-

cigarettes%20videos&qs=n&form=QBVR&pq=regulation%20of%20e

-cigarettes%20videos&sc=0-21&sp=-

1&sk=#view=detail&mid=B335C3A4CD8FAD67E5E4B335C3A4CD

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Discussion Questions

1. Should the U.S. and other national governments ban or more severely regulate the

manufacture, sale and use of e-cigarettes, why or why not?

At the core of this issue is what goes into the product, the control over the sale of e-cigarettes

approach at the regulation of e-cigarettes.

2. Which stakeholders are most affected by the sale and regulation of e-cigarettes?

But, some people worry that there may be serious health consequences to others, similar to

the issue of second-hand smoke associated with smoking tobacco cigarettes.

2015.

3. Is the tobacco industry demonstrating a strategy of working in a collaborative

partnership with the FDA by its voluntary warning labels on e-cigarettes?

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But, as the case also points out, some people, such as Senator Durbin of Illinois, do not

4. Using the elements of public policy, presented earlier in this chapter, identify the inputs,

goals, tools, and effects of the FDA’s effort to regulate e-cigarettes.

Inputs: The World Health Organization appears at the forefront in providing the FDA with

external pressure to encourage regulatory action. The FDA is also interested in on-going

process.

Goals: The FDA’s primary goal is to protect society from harmful effects from food and drug

products, including e-cigarettes. As shown in the past, the agency needs to balance the

potential harms with the benefits that the sale of the product brings to the economy. Like

Tools: As mentioned above, if e-cigarettes are allowed to be manufactured and sold to the

old.

5. What reasons, discussed earlier in this chapter, could the FDA or other national

regulatory agencies use to justify greater regulatory control of e-cigarettes?

Likely the FDA or other national regulatory agencies would focus on social or health issues

surrounding the sale of e-cigarettes as the grounds for regulatory control. The potential for