Non-market environment encompasses those interactions that take place among the firm and individuals, interest groups, government entities, local community, environment, media and the general public that are intermediated not by markets but by public and private institutions.
Nonmarket strategizing recognizes that a business is not only an economic agent but a social and political being as well. As companies create and distribute value within a society, many factors influence them- formally through laws, and informally through activism, societal pressure and reputation.
Nonmarket strategy has a simple two-fold premise- first that issues and actors outside the market affect the business, and second, that they can be managed just as strategically as the market factors.
Most companies have recognized this as an important stakeholder. In their stakeholder analysis one will often find society, and sometimes government as an important participant. Some progressive organisations are also recognizing these important stakeholders by directly engaging with them under corporate social responsibility requirements. However, even in these cases, the focus is still on the issue-based management rather than a strategic approach. Most companies are not addressing this important stakeholder at all. Even though in some cases it could turn out to be a survival issue.
To manage successfully beyond the market, companies must address the public on issues, communicate with the media, testify in regulatory proceedings, lobby government, participate in coalitions and associations, serve on government advisory panels, meet with activists, negotiate with interest groups, partner with NGOs, and build relationships with stakeholders.
Today, many people expect firms to integrate and balance the views of all stakeholders—not just conventional market-oriented ones—when making strategic decisions. Some even expect firms to prioritize nonmarket objectives such as urban revitalization, working conditions and “preserving the environment.” Handling them forms an important part in the growth of a company. Factors like a company’s reputation and favourability with the government can be game-changers in their relevance in the market.
Non-market strategies are subjective to the industry, size of the business and even geographic location. The Indian nonmarket context is especially multifaceted and complex. Business firms cannot simply pursue profits through market activity and ignore the impact of nonmarket factors. They must navigate a labyrinth of social problems, economic uncertainty, government regulations and an opinion common for many Indians that capitalism is a breeding ground for cronyism. Given below are couple of examples of successful non-market strategies in India.
Nestle developed a strategy to successfully combat its India specific non-market issues. The non-market issues were focused on industrial water use [where groundwater was the only source]; the affected people near the manufacturing area, and interest groups giving a backlash. Nestle studied the influence of the environment, activists, media, other interest groups and changing regulation and graphed the level of impact on the firm. Different solutions were devised for each factor, using techniques such as partnering, sponsoring, creating awareness and directing their CSR practices to these affected areas, by strategizing their non-market issues.
Second is the case of Novartis in India, where they provided Glivec at reduced cost to Indians to gain the population’s favour. Novartis was fighting a patent case for Glivec in the courtroom, with ministers and in the public using the media to show the Indians dependence on their drug. Its nonmarket strategy was strategically framed to support its market strategy of competing via patent-protected drugs.
[1]This thematic note was developed by Mr. Jayesh Parekh, who specialises in development on non-market strategies for companies.
