Novartis AG, the world’s fourth largest pharmaceutical company, has been engaged since 2002 in a high-profile public battle with the Indian government over Glivec, a popular cancer drug. (The drug is known as Gleevac in the United States.) India has denied Novartis a patent for Glivec, alleging it does not offer “improved efficacy” over its predecessor.1 Novartis, which has obtained patents for Glivec in more than 40 countries, including China, insists that India’s stringent requirements for novelty violate international intellectual property treaties. The company is waging its campaign in courtrooms and ministries, and with the public — its Web site features videos of Indian patients extolling the drug’s benefits and Indian experts detailing the dire consequences for patients deprived of Glivec.
Novartis, however, was not content simply to fight for its intellectual property rights. In a subtle and related thrust, the company offers Glivec to needy Indian patients at dramatically reduced prices. The program is featured among the company’s “corporate citizenship” initiatives, which also provide leprosy and tuberculosis drugs to millions of patients free of charge and malaria drugs to tens of millions more at cost. Novartis proudly trumpets that its billion-dollar “access-to-medicines” program has reached more than 80 million patients worldwide, many of them in India.2 In balancing assertive property rights and pharmaceutical philanthropy, Novartis is shaping the environment in which it competes. In short, it is pursuing a nonmarket strategy.3
The Leading Question
Why should companies pursue a nonmarket strategy?
Findings
- Companies face risk in nonmarkets, from government regulations, social campaigns and political movements.
- A nonmarket strategy allows a company to shape the environment in which it operates, creating opportunities.
- Managing key issues and actors is crucial to success in the nonmarket.
Nonmarket strategy recognizes that businesses are social and political beings, not just economic agents. Because companies create and distribute value, a plethora of actors seek to influence them — formally, through laws and regulation, and informally, through social pressure, activism and efforts to shape the public perception of business. Companies can’t escape this. Smart executives, therefore, engage with their social and political environment, helping shape the rules of the game and reducing the risk of being hemmed in by external actors. Yet, few companies are prepared to do the hard work and commit long term
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This was a great article and gave me insight into the field of non-market strategies.
The examples of corporations taking the right approaches and those that make mistakes really helped to clarify the ideas.
I appreciated this insightful analysis especially in the light of complex social and political environmemnts modern businesses find themselves.
The ia3 tool will be useful in many boardrooms and at executive level.
Mabuse Hlalele
Pretoria, South Africa
I found this article to be vrey insightful. The inclusion of (ia)3 model was a great benefit.
As I read this, and especially with the references to BP, I could help but speculate how today’s current problems in the gulf are an example of NOT recognizing and managing the nonmarket aspects- even for the current US administration.
Good job.
I call it a great revelation in modern business, it will surely be a reference piece in my business endeavor. Thank you.