Few businesses do a good job of integrating government relations with business strategy. Government policy has an impact on business in so many ways — from taxes and labor laws to antitrust intervention, patent rulings, securities regulation and tax incentives — that it is easy for even the best managers to get confused. Government intervention is sometimes a threat, sometimes an opportunity. It sometimes impacts a company’s core strategies and sometimes merely imposes routine reporting requirements. A change in public policy may affect just one company, every firm in a particular industry or geographic area, or the entire international business community.

In a post-Enron world, where the role of government in regulating business is likely to increase, businesses must consider the impact of government as part of their strategy formulation and implementation processes. This means companies need to diagnose the ways that government can help or hinder business objectives. It also means crafting hybrid strategies that explicitly include a component that focuses on shaping the rules. Above all, it means having a common language for talking about the games businesses play and the roles of government in making and enforcing the rules.

Even if we limit the focus to strategic impacts, the array of ways in which governments can influence companies remains bewildering. How do you determine what is crucial and what is not? The place to start is to focus on the strategic games that businesses play and the role that government rule makers (creators of laws and regulations) and referees (interpreters and enforcers of laws and regulations) can play in those games. To illustrate, consider the high-profile antitrust lawsuit against Microsoft. How did the U.S. Department of Justice come to file suit against the company? Customers and competitors of Microsoft helped trigger government intervention by filing their own lawsuits, lodging complaints with federal and state agencies and providing key data to support the case. Customers, including such companies as Apple and IBM, came forward to complain about Microsoft’s tactics. Competitors, like the browser developer Netscape, also sought to play the government-intervention card. In 1996, Netscape lodged a formal complaint with the Justice Department, accusing Microsoft of providing subsidies to manufacturers who refused to install competing browsers and offering some customers financial incentives to replace Netscape Navigator with Internet Explorer. Microsoft called Netscape’s actions “a calculated attempt … to enlist government and media in its marketing campaigns.”1 Microsoft’s opponents subsequently formed and