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Damiano Pietroni

Degree:

EMBA

Location:

United Kingdom

Industry:

Consulting

Year:

Sep 2018 - May 2020

By Damiano Pietroni

Non-Market Forces

The third module on the Oxford Executive MBA covers non-market forces, defined as those forces impacting an organization outside of market forces such as competitors, suppliers, and substitutes.

The first point we learnt is that although every organization interacts with a plethora of non-market forces, these can be organized in a number of categories. The first category is regulators, who may impose significant penalties or impart advantages depending on their actions. An example of a regulator imposing a penalty is that of the French Autorité des Marchés Financiers (AMF), which in 2015 fined the trading firm Virtu Financial over a misunderstanding related to how Virtu created markets for commodities. On the opposite spectrum is the example of the Italian regulator for road transportation, which circa fifteen years ago passed regulation allowing fourteen-year olds to drive mini-cars. This created a thriving mini-car industry in Italy, with mini car manufacturers such as Aixam, Ligier, and Chatenet benefitting.

The second category is the general public, which voluntarily or involuntarily may impact organizations. An example of where the general public negatively impacted an organization is that of United Airlines, where the video of a person being forcibly removed from a plane caused such a backlash that the organization lost ~$1BN in market value.

The third category is activists, which having strong views on a matter seek to affect or limit the operations of organizations in that sector, and in the process at times create new industries altogether. For example, activism focusing on ethically aware supply chains has imposed a significant brand penalty on organizations that do not have ethically aware supply chains, but at the same time has created an entire green-washing industry focused on providing consulting, training, and certifications related to ethical supply chains.

The fourth category is politicians, who through their actions impact organizations across sectors. For example, when in the seventies and eighties Italian politicians implemented policies allowing the Italian state to co-own private enterprises, this created significant opportunities for firms that did not have the burden of reporting back to politicians, allowing Italian privately-owned champions to grow and thrive.

The last category is everyone else – namely those non-market players relevant to an organization who are not regulators, the general public, activists, and politicians. Examples, are members of the judiciary, the military, NGOs, the media, and supra-national organizations, each of which will have its own set of interests and priorities potentially impacting organizations.

The second point we were exposed to is that having identified which non-market forces may be relevant, organizations should pro-actively plan how each should be addressed. For example, an oil organization recognizing that the general public is increasingly opposed to non-renewable energy should focus on developing a renewable energy programme. Whether the organization’s response to the non-market force addresses the issue or merely portrays steps in the right direction may be secondary; Shell’s marketing materials are strongly focused on its investments in renewable energies, yet of its capital expenditure of ~$30BN a year only ~$2BN is related to renewable energies.

Overall, the course highlighted the pressing need that organizations have for managers and leaders who know how to identify, understand, and address non-market forces, and it is realistic to think our cohort has learnt enough to allow us to at least partly fit that description.

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