Business, Governance
& Sustainability

Uber is a platform company that connects riders with drivers via a smartphone app. It operates on a two-sided market model: drivers provide the supply, riders provide demand, and Uber extracts a commission (~20–25%) from each transaction without owning a single vehicle.

Its core competitive advantage was network effects: the more drivers on the platform, the shorter wait times; the more riders, the more earning opportunities for drivers. This created a winner-take-all dynamic that incentivised rapid geographic expansion before competitors could establish scale.

Uber’s pricing model (surge pricing) was efficient from a market perspective but generated public outrage – a classic nonmarket tension where what is economically rational is politically toxic.

The nonmarket environment is everything outside the direct buyer-seller relationship: governments, NGOs, regulators, activists, media, and citizens. For Uber, this environment was almost entirely hostile from day one.

Uber pursued a deliberate “smash and grab” strategy: enter markets as fast as possible, build user base, then dare governments to ban a service millions of people already loved. The logic was that political cost of removing Uber exceeded the cost of regulating it.

The deeper problem: Uber had no nonmarket strategy to accompany its aggressive market strategy. It treated regulatory opposition as a temporary obstacle to be overcome by market momentum, rather than a structural challenge requiring deliberate management.

This is a structural certainty, not a contingent outcome. Three mechanisms drive it:

1. Displacement losers organise: Disruptive technology displaces existing workers. Those workers are organised, have political relationships, and move quickly to the nonmarket. Taxi drivers are the perfect example.
2. Government responsibility for public goods: Safety, labour standards, tax collection – governments cannot ignore platforms operating in their jurisdiction without accountability.
3. Categorisation lag: Governments try to fit new products into old regulatory categories. Uber did not fit “taxi” or “software,” and different jurisdictions resolved this differently – creating a fragmented global regulatory landscape.

1. Uber’s critics argued it was a transportation company; Uber insisted it was a technology platform. What are the nonmarket stakes of each classification, and why does it matter strategically?
2. Apply the (ia)³ framework to Uber’s entry into a new city. What issues, actors, and arenas should it have mapped before launching?
3. Was Uber’s smash-and-grab strategy a rational nonmarket choice or a failure of nonmarket thinking? Use evidence from the case to support your answer.
4. What could Uber have done differently in its early years to reduce the severity of the nonmarket backlash it faced?
5. Compare Uber’s nonmarket position to that of a traditional taxi company. Who had better nonmarket assets, and why?

Political leaders play a key role in shaping public policies and the formal rules of the market. To understand what policies will be made, you need to understand what political leaders want and how they stay in power. This is what Selectorate Theory explains.

The insight: political leaders’ primary interest is political survival, not the public good. Policy – taxes, spending, and rules – is the primary tool for building and maintaining the winning coalition needed to stay in power. State structures (the rules of political competition) determine what kind of winning coalition is needed and therefore what policies leaders will deliver.

1. Keep W small – limits who must be satisfied with private goods
2. Keep S large – makes it harder for challengers to assemble a rival winning coalition from outside
3. Fill W with members who display high affinity for the incumbent (harder to bribe away)
4. Control revenue flows – whoever controls money controls loyalty
5. Implement policies that transfer enough resources to W to keep them loyal
6. Do not implement policies that transfer resources from W to the rest of the population

Issues move through a predictable lifecycle. The firm’s ability to influence an issue declines as it advances through stages, while the cost of not acting rises sharply.

Not all capitalist economies work the same way. The political economy of a country shapes what firms can do, how governments intervene, and what nonmarket strategies will be effective. Robert Gilpin’s Global Political Economy (Ch.7) identifies three dominant systems, each with a distinct logic – and a distinct nonmarket environment.

Gilpin identifies this as the fundamental tension in comparative capitalism. It directly shapes nonmarket environments because it determines who firms are accountable to and what counts as legitimate corporate behaviour.

The “Guide to Dominant Capitalist Systems” reading frames three global questions about how these systems interact – directly relevant to multinational nonmarket strategy:

By 2005 Wal-Mart – the second largest US employer after the federal government – faced a coordinated multi-front nonmarket campaign driven primarily by unions who had failed to organise its workforce.

Unions redirected organising failure into a private politics assault. The SEIU funded Wal-Mart Watch ($1M initial pledge, 36-person DC staff). The UFCW launched WakeUpWalMart.com (160,000+ participants). Both campaigns were run by Democratic political operatives. Key tactic: manufactured “headline risk” – by 2004 Wal-Mart was the subject of 2,165 press articles per week, up from 950 in 2001.

1. Apply the (ia)³ framework to one of Wal-Mart’s nonmarket issues. What does the framework reveal about Wal-Mart’s strategic options?
2. Using Selectorate Theory, explain how a firm operating in an autocratic vs. democratic country should structure its nonmarket strategy differently.
3. The unions that attacked Wal-Mart were “organised, homogeneous, single-issue, and rich in resources.” Why does this profile make them highly effective in the nonmarket arena?
4. Was Wal-Mart’s nonmarket response (Case B) too little, too late? What should it have done earlier and when in the issue life cycle?
5. Compare Wal-Mart’s integrated strategy to that of Starbucks or Toyota. What does “integration” of market and nonmarket strategy actually mean in practice?

Australia’s mining sector had boomed through the 2000s, driven by Chinese demand. But because mining was taxed on volume (not profits), the government’s share of total mineral value had fallen from ~45% to less than 15% by 2008–09. The Henry Tax Review recommended replacing the royalty system with a 40% Resource Super Profit Tax (RSPT) on all profits above the 10-year bond rate.

Rudd’s genius: he framed it as ordinary Australians getting their fair share from resources they owned, linked to a lower corporate tax rate (30% to 28%) and higher pension contributions. As one commentator noted: “imposing a tax on multinational mining companies to increase superannuation savings for mums and dads – you don’t need a political science degree to see how that plays out in the electorate.”

The RSPT debate became a battle of competing economic models – a pure information war. Both sides used KPMG models that reached opposite conclusions based on different assumptions. The information war had a clear victor: the mining industry succeeded in shifting the frame from “fair share for Australians” to “sovereign risk and investment uncertainty.”

Baldwin & Robert-Nicoud (2001) solve a famous paradox in political economy: governments almost always protect declining industries (agriculture, textiles, steel, footwear) rather than growing ones. This seems irrational – why support losers? The answer has direct implications for how firms should time and design their lobbying campaigns.

The group report question for this case is: Why was Xstrata’s nonmarket strategy successful? Five factors explain it:

1. Speed: Xstrata engaged the government consultation panel on Day 8. The campaign launched May 9 – just 7 days after the announcement. Early engagement prevented a dominant government narrative from forming.
2. Coalition breadth: Miners coordinated through MCA; junior miners through AMEC; Opposition party through Abbott. The coalition widened from “big foreign miners” to “all Australian business.”
3. Credible threats: Project suspensions were real. A$55B in projects were genuinely put on hold, validated by independent analysis. The government could not dismiss them as bluster.
4. Arena selection: Mining companies understood that the real arena was not the consultation panel (limited mandate) but public opinion and electoral politics. They shifted the fight to the right arena.
5. Information dominance: The mining industry successfully reframed “fairness” as “sovereign risk.” Confusing the public (making them uncertain rather than opposed) was sufficient to damage the government politically.

1. Apply the (ia)³ framework to Xstrata’s situation when the RSPT was announced. What were the key issues, actors, interests, arenas, information battles, and assets?
2. Why was the MCA industry association a critical vehicle for Xstrata’s nonmarket strategy? What would have been different if Xstrata had lobbied alone?
3. The mining industry did not convert majority public opposition to the RSPT – only to confusion and uncertainty. Was this sufficient to achieve their goal? What does this tell us about lobbying objectives?
4. Should Xstrata accept Gillard’s offer to negotiate directly (excluding smaller miners)? What are the strategic trade-offs?
5. Compare Xstrata’s lobbying strategy to Wal-Mart’s nonmarket response. What principles of effective nonmarket strategy does Xstrata illustrate that Wal-Mart failed to apply?

The banana regime was economically absurd – it cost EU consumers $1.6B per year to transfer $300M to ACP producers (the rest went to European importers). Yet it survived for over a decade. Why?

1. Proactive beats reactive: Chiquita was asleep while EU policy built for 5 years. Monitor your nonmarket environment constantly, especially in your largest markets.
2. Being right may not save you: Chiquita had a strong legal case. GATT and the WTO agreed. But the process was so slow and the EU so resistant that the company went bankrupt before justice arrived.
3. Influence from outside is harder than inside: As a US company trying to influence EU policy, Chiquita had no allies, no staff, no reputation, and no relationships inside Brussels. The policy was designed to benefit European actors.
4. Market and nonmarket options must be integrated: Dole and Del Monte used market strategies (acquiring EU distributors, buying ACP production) while Chiquita exhausted itself on the legal/political route. The market options would have reduced the nonmarket exposure.
5. International institutions have limits: Even WTO rulings require political will to enforce. When US domestic interests don’t align (Clinton didn’t want to damage Colombia relations), even powerful instruments become blunt.

1. Using the issue life cycle, at what stage should Chiquita have started acting on the EU banana policy? What could it have done at each stage?
2. Why is protectionism economically irrational but politically rational? Use the concentrated/dispersed benefits framework to explain why the EU banana regime survived for so long.
3. Apply the (ia)³ framework to Chiquita’s situation in 1994. Who were its allies and adversaries? What arenas were available? What assets did it lack?
4. Compare Chiquita’s strategy to Dole’s. What market options did Dole pursue that Chiquita ignored? What does this tell us about integrated strategy?
5. If you were advising Chiquita in 1991 (before the EU policy took effect), what would your nonmarket strategy have been? Be specific about timing, arenas, and allies.

The group report question: Name the main reason Aguas failed in Tucumán. What could Aguas have done to improve their chances of success?

The root cause was a catastrophic pricing and political miscalculation: Aguas implemented an immediate 104% water price increase (including new regulatory body levy) in one of Argentina’s poorest provinces, without having delivered any service improvements first. The timing could not have been worse – provincial elections were months away.

Vernon’s original Obsolescing Bargain Model (OBM) was developed in the 1970s, primarily for natural resource MNCs in developing countries. Two important readings update and extend it: Ramamurti (2001) argues the OBM needs revision for the modern era, while Eden, Lenway & Schuler (AIB 2004) propose replacing it with a richer Political Bargaining Model (PBM).

When local political solutions failed, Aguas turned to international arbitration. The case illustrates both the power and limits of the ICSID framework for investor protection.

1. Apply the Obsolescing Bargain model to the Aguas case. At what point did CGE’s bargaining power peak? When and why did it shift to the government?
2. What was the main reason Aguas failed in Tucumán? Was it primarily a market failure, a political failure, or a management failure? Justify your answer.
3. Using the political risk framework (Risk = Probability x Expected Loss), assess the risk Aguas faced before signing the concession. Were these risks identifiable in advance?
4. What could CGE have done differently at the contract design stage to reduce its vulnerability? Consider the concession terms, pricing structure, partner selection, and government guarantees.
5. Compare the Aguas case to Xstrata (Session 4). Both faced hostile governments. Why was Xstrata’s nonmarket response more effective than Aguas’s?

Nike’s strategy was elegant: outsource all manufacturing to low-cost Asian contractors, pour savings into celebrity marketing, build an invincible brand. This worked brilliantly in the market – 40% US market share, $9B in revenues by the late 1990s. But it created two fatal nonmarket vulnerabilities:

Private politics refers to NGO and activist campaigns that attempt to change corporate behaviour directly – without passing through government or legislation. The goal is to make the cost of continued behaviour exceed the cost of change. The Nike campaign is the textbook model.

The article “Turning Gadflies into Allies” (HBS R0402J) offers the strategic antidote to the defensive posture Nike initially took. The core argument: NGO critics are a source of valuable intelligence and can be converted from adversaries to strategic partners if engaged proactively.

The Nike case gave the business world a new concept: the “Nike moment” – the tipping point when accumulated negative publicity around supply chain practices reaches critical mass and forces strategic rethinking. An FLA auditor described Apple’s Foxconn crisis (2012) as Apple’s “Nike moment.”

1. Apply the (ia)³ framework to Nike in 1994. Who were the key actors? What arenas were available to them? What information shaped the campaign? What assets did Nike have – and which were actually liabilities?
2. How does the Nike case illustrate the concept of “private politics”? What distinguishes private politics from public politics?
3. What is the “visibility-liability paradox”? Can you think of other companies (besides Apple/Foxconn) that have experienced their “Nike moment”?
4. Was Nike’s outsourcing model inherently incompatible with responsible labour practices? Or was it a management failure rather than a structural one?
5. Using the “Turning Gadflies into Allies” framework, what should Nike have done in 1991 when Jeff Ballinger published his first report? Be specific about stakeholder engagement, monitoring design, and public communications.

The group report question: Critically evaluate the non-market risks PepsiCo faces. Are they large or small? With this evaluation, assess PepsiCo’s non-market strategy as a means to solve these risks.

1. Critically evaluate the non-market risks PepsiCo faces. Using Risk = Probability x Expected Loss, rank them from most to least severe. Is the “tobacco scenario” a realistic threat?
2. Is PepsiCo’s “Performance with Purpose” strategy genuine CSV or sophisticated CSR? Use the Porter & Kramer framework to support your argument.
3. What is “nutriwashing”? Identify two specific PepsiCo initiatives that could be characterised this way. What makes them vulnerable to this criticism?
4. Can a company whose core product contributes to a societal problem ever have a genuinely credible CSR strategy? Under what conditions could PepsiCo build authentic credibility?
5. What should PepsiCo’s CEO do? Evaluate all three strategic options (do nothing, slow change, bold pivot) and make a recommendation with supporting rationale.

The group report question: Assess the failure of BP’s “beyond petroleum” campaign. Was it a good idea and bad execution or a bad idea and doomed to fail? Why?

BP’s story is a perfect illustration of the visibility-liability paradox we first saw with Nike – but applied to ESG strategy rather than labour practices.

The BP case should not be read as evidence that ESG strategy is always wrong. It is evidence that disconnected ESG strategy is dangerous. Comparing BP to the integrated strategy cases from earlier sessions:

1. Was BP’s “Beyond Petroleum” campaign a good idea with bad execution, or a bad idea doomed to fail? Build a structured argument for one position, anticipating the strongest counterargument.
2. Explain the visibility-liability paradox. How does it apply to BP? Can you identify one other company (not from this course) where a similar dynamic played out?
3. Dick Olver said the strategy was “a cold hard way of getting competitive advantage.” If BP’s goal was purely competitive (not ethical), does that change your evaluation of the strategy’s failure?
4. Compare BP’s ESG strategy to Toyota’s Prius strategy. What made Toyota’s nonmarket positioning sustainable while BP’s was not?
5. What should Tony Hayward have done when he became CEO in 2007, given the Baker Panel’s findings? Outline a specific nonmarket strategy to address the emerging credibility gap before Deepwater Horizon.

Before ranking anything, get a full picture of the firm’s situation using the (ia)³ framework. Read the case once through. Then systematically ask:

For each issue you identified in Step 1, apply the severity formula. Then rank issues from highest to lowest. This is the explicit answer to Part 1 of the exam prompt.

Each type of nonmarket issue calls for a specific analytical lens from the course. Matching issue to lens makes your analysis rigorous rather than generic.

Having ranked the issues, now build an integrated strategy to address the most severe. A great strategy has three qualities: it addresses the root cause of the risk (not just symptoms), it is operationally feasible, and it coordinates market and nonmarket moves together.

The exam is testing whether you can apply course frameworks to a new case. Referencing real cases from the course (by name, with specific details) shows mastery. Each case transfers a specific lesson.

Garrett Hardin (1968) identified a fundamental market failure: when a resource is held in common, rational individual decisions lead collectively to its destruction. Each person extracting from the commons captures the full benefit of their extraction, while sharing the cost of depletion with all others. The result is over-exploitation.

Ostrom studied hundreds of real-world commons that did not collapse. She identified eight design principles that distinguished them from those that failed:

The Lake Simulation is not just an environmental lesson. It demonstrates a fundamental logic that runs through the entire course:

1. Explain the Tragedy of the Commons using the Lake Simulation as your example. Why is it a market failure and not a moral failure?
2. Compare the three solutions to the tragedy of the commons (privatisation, regulation, self-governance). Under what conditions does each work best?
3. Apply Ostrom’s design principles to evaluate a real-world commons governance system of your choice (e.g., a fishery, a city park, an industry code of conduct).
4. How does the commons problem help explain why governments inevitably intervene in markets? Link to at least two cases from the course.
5. Is carbon emissions a commons problem? Who are the relevant actors? What governance solutions have been tried, and why have they been only partially successful?

FIJI Water in 2010 faced two completely distinct nonmarket crises simultaneously. This is why it is the “applying what we’ve learned” case – it requires deploying multiple frameworks at once.

FIJI Water’s carbon-negative claim illustrates a broader spectrum of green marketing credibility. Where a company sits on this spectrum determines its vulnerability to legal and reputational challenge.

The Fijian government’s tax hike is a textbook Obsolescing Bargain (from Session 6). The pattern is identical to Aguas del Aconquija:

1. Apply the Obsolescing Bargain model to FIJI Water’s relationship with the Fijian government. At what point did the company’s bargaining power peak? What should it have done differently?
2. Is FIJI Water’s “carbon negative” claim greenwashing? Use the greenwashing spectrum to evaluate the claim. What specific elements make it vulnerable to legal challenge?
3. FIJI Water faced two simultaneous crises in 2010. Which is more severe? Use Risk = Probability x Expected Loss to justify your ranking.
4. Compare FIJI Water’s situation to BP. What do these two cases have in common in terms of the gap between brand promise and operational reality?
5. If you were advising FIJI Water’s CEO in November 2010, what strategy would you recommend for (a) the Fijian government tax dispute and (b) the California class action lawsuit?

Chapek’s initial instinct – stay apolitical, let the stories speak – was strategically coherent for a company serving broadly diverse customers. But for Disney specifically, it failed for one reason: Disney’s brand identity had been built on inclusion, diversity, and protection of marginalised communities through its “Reimagine Tomorrow” campaign and content strategy.

The Disney case raises the fundamental question of this session: how far does a corporation’s social responsibility extend? Does it include taking public positions on contested social and political issues unrelated to its core business?

The most dramatic nonmarket consequence was DeSantis’s move to dissolve the Reedy Creek Improvement District – a special government structure established in 1967 that gave Disney extraordinary self-governance in Florida.

Disney’s experience illustrates a critical new dynamic in corporate political activism: governments can and will use regulatory power to retaliate against companies that take political positions they oppose. This raises the stakes of corporate activism dramatically – and changes the calculus for firms with significant regulatory dependencies.

1. Was Chapek’s initial decision to stay silent on HB 1557 the right one? Evaluate it using the Corporate Political Activism framework. What were the nonmarket costs of silence vs. speaking?
2. Apply the (ia)³ framework to Disney’s situation. Who were the key actors? What were their interests? Which arenas mattered? What assets did Disney have and lack?
3. DeSantis’s Reedy Creek retaliation represents a new form of nonmarket risk for companies that engage in political activism. How should companies factor this into their decision-making?
4. Bob Iger said the issue was “right and wrong, not politics.” The polling data suggests 51–64% of Americans supported HB 1557. Can a contested issue be both “right and wrong” and politically contested simultaneously? What does this mean for corporate activism?
5. Compare the Disney case to Wal-Mart (Session 2-3). Both companies faced pressure to take positions on controversial social issues. How do their situations differ, and what different strategies do those differences suggest?

The EU DMA forces Apple to open its platforms to third-party app stores and payment systems – directly threatening Apple’s closed-ecosystem model and App Store revenue. Non-compliance fines can reach 10% of global revenue, with repeat offences at 20%. The DSA adds transparency requirements on content moderation and advertising, with fines up to 6% of global revenue. Additionally, the EU has mandated USB-C ports, displacing Apple’s Lightning connector.

Trump has threatened tariffs, penalties, and regulatory action against companies that manufacture overseas rather than in the US. Apple’s supply chain is deeply embedded in China (and parts of Asia). Shifting production to the US would dramatically increase costs and take years.

Apple has been one of the largest H-1B visa beneficiaries. Trump has signalled a crackdown, arguing the programme takes jobs from American workers. Apple argues these visas are essential for software engineering, machine learning, and chip design talent.

Trump has declared war on corporate DEI initiatives, threatening fines, lawsuits, and penalties. Conservative activist shareholders have pressured Apple to scale back DEI, arguing it creates legal and financial risks.

The Apple case is explicitly designed to force prioritisation and integrated strategy. The four issues are entangled: Apple’s ability to address Issue 1 (EU/DMA) depends critically on its relationship with Trump, which in turn depends on what concessions it makes on Issues 2–4.