Module 9

Question 1

Goal of a firm in the market

Answer 1

market transactions executed to reduce transaction
costs and increase overall performance

Question 2

Transactions are:

Answer 2

bilateral and consensual

Question 3

Market strategies can:

Answer 3

harm or advance the resilience of a community

Question 4

How can increasing profitability and growth impact a community’s resilience?

Answer 4

Balancing act:
- Community needs
- Firms assets/capabilities
- Firms performance/market strategy

Question 5

Examples of market strategies that build resilience

Answer 5

• Vaccines (Pfizer/J&J/Moderna etc): Solved a huge global health crisis, opened up new markets, made money from intellectual property (IP) like patents and royalties
• EV (Tesla): Helps the world shift to cleaner energy by creating cars that reduce pollution and sharing its tech with other companies to speed up the clean energy transition
• Sustainable fashion (Reformation, Nike): Using recycled materials, speaking out about unfair labor practices, launching fewer collections to cut waste

Question 6

2 main types of non-market strategies

Answer 6

CSR (corporate social responsibility) and CPA (corporate political activity)

Question 7

Non-market environment actors and challenges

Answer 7

Actors: government, social activists, civil society, NGOs, etc.
Challenges: : identify who are these actors and implement strategy that can address ALL of their diverging demands

Question 8

What are the two main types of non-market strategies firms can use, and how do they differ?

Answer 8

• Strategies implemented to improve the competitive environment, so firms are better prepared to compete. Examples: Change regulations, promote new policies, improve educational attainment or reduce water pollution
• Strategies targeted at the nonmarket environment of a firm might or might not affect profitability.
  Strategic vs. philanthropic

Question 9

Issues and actors “________ ___ _______”
increasingly affect the bottom line and
they can be managed just as
strategically as conventional “____ __________” activities within markets

Answer 9

beyond the market, core business

Question 10

What is CSR?

Answer 10

How businesses negotiate their role in society and act to benefit society beyond legal or financial obligations.

Question 11

How do firms implement CSR in practice?

Answer 11

By integrating social and environmental concerns into business and engaging with stakeholders voluntarily

Question 12

List CSR tactics

Answer 12

• Create product/service markets to match community needs
• Investment in markets that are otherwise underserved
• Innovation of products/services that have both monetary and social value
• Build Reputation and legitimacy to become trusted members in the community
• Talent attraction/retention/motivation

Question 13

What was the Novartis CSR case in India about?

Answer 13

Novartis couldn’t get a patent for its cancer drug Glivec in India, so it chose to distribute the drug at reduced cost and donate treatments for other diseases as a strategic non-market move.

Question 14

Why was Novartis’ response considered a strategic non-market strategy, not philanthropy?

Answer 14

Because it improved Novartis’ image and weakened critics while still defending its patent rights—serving both social and business goals.

Question 15

Goal of CPA

Answer 15

to decrease threats while creating and maintaining a competitive edge.

Question 16

CPA what is it?

Answer 16

Corporate attempts to shape government policy in ways favorable to the firm

Question 17

When does CPA work?

Answer 17

When a company is able to identify what the
organization wants, what the government wants, and what the
organization can do. Thinking about all stakeholders!

Question 18

Risks of CPA

Answer 18

• Reputational risks
• Legitimacy risks
• Other legal, regulatory, and compliance considerations associated with corporate direct or indirect political spending and lobbying activities

Question 19

Types of CPA

Answer 19

Financial
Informational
Constituency

Question 20

Two ways of financial CPA

Answer 20

1. PAC Campaign Contributions
2. Independent Expenditures

Question 21

Two ways of informational CPA

Answer 21

1. Lobbying
2. Revolving Door Directors

Question 22

Two ways of constituency CPA

Answer 22

1. Grassroots/ ”Astroturfing”
2. Hire Professionals/Shell NGOs

Question 23

What Do We Expect From Firms? and its risk

Answer 23

Benefits of pro-social performance
Risk: potential conflicts of interest politically

Question 24

Recent Updates in theUS

Answer 24

90% of Americans think to much corporate money in politics
80% of Americans think disclosure laws need to be strengthened

Question 25

Examples of regulations where it gets complicated

Answer 25

minimum wage, anti-trust and tax policy

Question 26

Example of company that decoupled CSR and CPA and failed

Answer 26

Target

Question 27

Another example of complication in CPA and CSR practices

Answer 27

ALEC (American Legislative Exchange Council) funded by Coca-Cola, Google, GE, etc.

Question 28

How can CPA be done effectively?

Answer 28

- Connect CSR to CPA (consistency) - Keep CPA voluntary and well-disclosed - Support stronger national and global disclosure regulations

Question 29

How can CPA efforts go wrong for a company?

Answer 29

- Irresponsible or inconsistent actions - Political or social backlash - Internal conflicts (agency problems) - Public scandals - Overpromising with unrealistic sustainability goals ("green wishing")

Question 30

What do company scandals teach us about corporate responsibility? Examples

Answer 30

They show the importance of ethical practices, transparency, and accountability. - Nike faced backlash for child labor and poor factory conditions. - Walmart was exposed for international bribery and corruption cover-ups. - Samsung suffered reputational damage due to high-level bribery and leadership issues. - Nestlé was criticized for unsustainable palm oil use harming the environment.

Question 31

How to avoid malpractices? 3 ways

Answer 31

1. Strong internal governance (e.g., strong boards, separate CEO and chair roles, and clear internal policies on things like diversity and ethics.) 2. Follow global standards and audits (e.g., GRI, ISO) 3. Engage in international transparency initiatives (e.g., UN Global Compact)