Why do some well-formulated competitive strategies run into roadblocks or end up being stalled by government inaction? Why do some strategies produce unintended consequences inconsistent with a company’s core values? Why are strategies sometimes criticized by the public and threatened by government action? The causes of these problems are frequently found not in a company’s market environment but instead in forces outside its markets. Indeed, for many companies, market success depends not just on their products and services, the efficiency of their operations, their internal organization, and the organization of their supply chains, distribution channels, and alliance networks. Success also depends on how effectively they deal with governments, interest groups, activists, and the public. The forces these parties generate can foreclose entry into new markets, limit price increases, and raise the costs of competing. They can also unlock markets, reduce regulation, handicap rivals, and generate competitive advantage.
These forces are manifested outside of markets but often work in conjunction with them; I refer to them as nonmarket forces. The nonmarket environment consists of the social, political, and legal arrangements that structure interactions among companies and their public. For many companies, nonmarket forces have a major impact on performance; hence these forces warrant the same high level of attention in business strategy as do market forces. A business strategy must help a company navigate in both... To read the complete article, login or sign-up using the form below.
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