Introduction
In the market environment, some well-formulated competitive strategies may run into barriers or end up being opposed or challenged by the government functioning. In some other instances, business strategies often produce unintended consequences that often deviate from a business’ core values (De Wit and Meyer 6). Other strategies end up receiving criticism from the public. They may also be censured by government action. From the above scenarios, it is evident that many of these problems do not emanate from a company’s market environment but outside the market setting. According to Achrol and Kotler, many companies’ success is not just dependent on their commodities and services, the efficacy of their supply chains, their in-house organisation distribution channels, competence of their operations, or coalition networks (35).
Instead, outside forces within the company’s market environment, such as the administration, interest clusters, futuristic groups, and the public are central to the success of the businesses. These outside forces can hinder market entry, raise competition costs, or limit price adjustments. They can greatly affect a company’s growth strategies. On the other hand, when these forces are favourable, they can unlock competition, reduce, or eliminate some regulations, handicap rivals to the extent of leading to a company’s competitive advantage (Peng 18). These forces manifest themselves outside the market environment. They are referred to as non-market forces.
The environment outside the market environment where these forces emanate is referred to as non-market background. The non-market atmosphere is the domain of concerns that are problematic to address or remedy through a company’s market-based interactions. The setting comprises economic, social, regulatory, political, and legal elements that may affect a company’s strategies directly or indirectly, despite them emanating from outside the market environment (Lawton, Doh, and Rajwani 12).
Political forces form the first non-market environment issue. Political forces involve the government’s control over key economic aspects within a given jurisdiction. The control by government relates to the policies that touch on the levy, employment, the environment, duty, trade contracts, and political stability (Pehrsson 64). As will be discussed later, these forces are essential. They can affect an organisation positively or negatively in its market.
The second non-market environment issue is the social/cultural force, which relates to the communal factors that may influence an organisation’s business strategies and success in a given market. Such factors include buyer mindset, everyday life trends, belief, the reflection of the company, and spiritual or racial aspects (Usero and Fernandez 1140). These factors are beyond a company’s control. Hence, they appear in a non-market environment. Economic factors are also essential non-market environment issues that an organisation cannot control. Economic elements comprise the economic performance of a country as a whole, the status of employment, foreign exchange rates, interest rates, personal income taxes, price sensitivity, disposable household incomes, and economic agreements between countries among other factors (Pehrsson 65). These factors are central since they often affect the success of a business in a given country.
Legal considerations include the legal issues of the market in which an organisation operates. These laws include job laws, importation laws, anti-conviction rulings, equal opportunities, wellbeing and security laws, buyer privileges and laws, product safety laws among other relevant laws (Champ, Boyle, and Brown 3). These regulations are beyond an organisation’s control. They have significant consequences on the operations of a company. Other factors in the non-market environment include the environment and technological factors, which will be discussed in relation to the case study of a company that has been selected for this paper.
Non-Market Environment: Case Study of General Motors
General Motors, which is often referred to as GM, is an American automobile company whose main offices are in Detroit, Michigan. The company is one of the world’s largest manufacturers of vehicles and vehicle parts, which form the main segment of the company’s activities (Greene and Plotkin 23). In addition, the company also provides financial services through its subsidiary, namely the GM Financial. With operations in more than 120 countries across the world and thirteen brands, the company is truly a global corporation, and hence the reason why it is among the top five prominent automobile makers in the world in terms of a number of vehicles it produces, as well as revenues.
As a company whose operations spread across the world, the business has amassed a lot of experience concerning market environment forces, which have allowed it to remain a highly profitable company for the most part of its more than 100 years of existence (Greene and Plotkin 13). However, despite its enormous success, the company has to operate in a diverse environment where the non-market environment factors are of great importance in the company’s strategic plan of remaining competitive and successful in its operation around the world.
Firstly, one of the major non-environment forces, as previously discussed, is the government or political aspect that the company has to face in the local and international operations across the world. In this case, the company operates in areas that have diverse government regulations and bureaucracies, among other factors, which it must always consider for its business to succeed (Greene and Plotkin 43). For instance, at the local level in its US market, the company has found itself at the wrong end of the government regulations that touch on many areas, including the environment. For instance, the American environmental defence bureaus such as the EPA among other bodies have declared GM as a threat to the surroundings. They have pushed the company to adopt environment-friendly approaches, although the concerns have persisted up to date (Diamond 973).
Further, the company has been accused of bad safety record and its lack of concern for the safety of its customers where it has often overlooked problems that it has already discovered for the sake of realising a profit. For example, in 2014, the company was found guilty by the US government for its handling of faulty cars that had a defective ignition switch, which led to the death of more than 13 drivers across the world (Harvey 78). The company was fined US$35 million, which is the highest fine that a business can get for such a mistake. In this case, despite having recognised the problem with the ignition switches more than ten years, when such switches were approved in 2002, the company was fully aware that the switches would not meet quality standards according to government regulations.
Apart from the US$35 million fine, the company may face additional charges if the case filed against it on the defective ignition switches is ruled in favour of the Justice Department (Freyssenet 36). The fine, which may run into millions, will be a major drawback to the company’s profitability and reputation. It will hurt its future growth. In addition, the company faces a myriad of political issues that may significantly hurt or promote its success in other countries. For a very long time, the company had benefitted from many bilateral and multilateral trade agreements that the US had entered with numerous countries across the world.
For instance, the US entered into a Free Trade Agreement with South Korea. This move saw prominent companies benefit from such an agreement with General Motors investing significantly into the market through its purchase of Daewoo Motors, which is currently the GM Korea. Further, the company is actively engaged with government and non-government agencies in the United States, as well as across the world, to influence policies that relate to tariffs and other trade barriers, which significantly affect its expansion into specific markets (Peihong, Zhicheng, and Haihua 15).
For example, with China rising to dominance across the world, it has entered into trade agreements with many countries, especially in Africa, where many of the treaties include free trade agreements, which have made it easier for the Chinese goods to flood into the countries with little or no tariffs being applied. This strategy has seen many Chinese motor companies begin to establish a strong presence in the countries to the disadvantage of other motor companies whose countries of origin do not have such agreements in place. Indeed, as China increases its presence in many African countries and other developing countries, American companies such as the GM are going to be the main losers.
In addition to the above political issues in the local market, the company faces a myriad of government regulations that it must uphold to ensure that it can be allowed to operate in many internal markets. For instance, in many areas where the company has its assembly plants, it has to adhere to local policies that touch on employment, environment, and antagonism among others without which it would be difficult to operate. A good example is the company’s operations in Colombia, where it has been accused of violating workers’ civil liberties. In this case, the company was accused of not providing its workers with medical insurance cover.
It also fired over 200 workers unlawfully after they acquired injuries while working for the company (Greene and Plotkin 31). These accusations have caused much pressure on the company in Colombia. They have led to numerous lawsuits and agreements with workers’ union, which are not only costly but also have significant financial implications for the company and its success in general.
The Colombian case forms a small portion of the accusations that have been levelled against the company on violation of workers’ rights in its operations abroad. However, despite the above concerns, GM has made significant strides towards ensuring that its operations are above board and that they adhere to government regulations. The company has vowed to work closely with the government and the Department of Justice to ensure that the ongoing investigations on the faulty ignitions are completed satisfactorily. Further, the company has focused more efforts on ensuring environmental protection through its activities (Greene and Plotkin 43).
In the activities, it has majorly focused on ensuring that it puts in place safe industrial waste disposal approaches while at the same time improving technology towards the production of less gas emitting cars. Such cars are environmentally friendly. Indeed, the company has invested heavily in the manufacture of fuel-efficient cars. Apart from the reduced fuel consumption, the use of hybrid technology has also emerged significantly on the part of the company. It has adopted these new measures not just because of the concerns raised by the EPA but also based on other environmental agencies and regulators from across the world such as the European Environmental Agency (Greene and Plotkin 46).
From the above scenario, it is evident that indeed government or political factors can have far-reaching consequences on a business and hence the need for businesses to ensure that they closely work together with governments while ensuring that they adhere to the set regulations to avoid fines and other drawbacks that can seriously affect the business progress. Therefore, it is vital for the GM to ensure that it is well aware of the various political issues that may significantly affect its success in many countries around the world.
Social or cultural factors form the second non-market environment category that the company faces in its activities. These elements have a significant influence on the company’s business and success (Achrol and Kotler, 35). As previously identified, these factors include customer attitudes, lifestyle trends, judgment, the picture of the business, and spiritual or ethnic factors, among others. As a global corporation, GM operates in diverse social or cultural environments where it has to manoeuvre well to remain relevant. For instance, in the United States, consumers have a strong belief and patriotism towards American automobiles.
They also have a general perception of the reliability and quality of the homegrown makes, which have allowed the US to remain the company’s largest market for almost the whole period of its existence. However, following the recalls of more than three million vehicles from across the world because of ignition switch problems, the company’s reputation has been put to a great test. While the results of the injured reputation are not immediate, it stands to be seen whether the company will maintain its status as a respected automobile in the US (Shaout and Dusute 9). Further, the current globalised world means that any concerns on a major corporation such as GM may have spillover effects on the company’s reputation not only in the United States but also across the world. It is crucial to note that the recalls have been done worldwide. Hence, they may have far-reaching repercussions on the company’s standing across the world. In Asia, especially in many conservative nations, the company has to tailor its marketing strategies not to offend the society in these places.
For instance, in some countries where women are prohibited from driving, carrying out adverts with women driving would be a major blow. The company has to ensure that its advertising is tailored to reflect societal values and cultures (GumusluoÄźlu and Ilsev 268). In its overseas operations, the company’s reputation has been hurt by the accusations of poor employee relations and treatment. The case of Columbia is treated as a reference point against which the company’s reputation is put to the test. Such reputation may hurt the company’s success in many countries, especially in South America, where its rivals such as the Toyota and VW are seeking dominance (Shaout and Dusute 11). Concisely, it is evident that social and cultural factors have significant implications for GM’s success at the local and international front. As such, the company has to ensure that its strategies and approaches do not violate key social values where it operates. Above all, the company must work towards ensuring corporate social responsibility of its actions without focusing on profits while disregarding the people it serves (Diamond 978). For instance, the company’s inaction over more than ten years concerning the faulty ignition switches has reflected badly on the corporation.
The situation depicts the business as one that only focuses on the profits and misuse of its previous reputation and trust by the public on safety and reliability. Consequently, the company has a long way to ensuring that its tainted reputation is recovered to warrant future success in the highly competitive automobile industry where other companies, especially from Japan, Europe, and China, are threatening to take over leadership while burying the American dominance in the industry.
Economic factors need to be considered in a company’s non-market environment. As a multinational company, GM operates in a highly diverse environment. Its operations are spread across different countries where economic forces are likely to affect its success (Shaout and Dusute 11). These economic factors include foreign exchange rates, people’s employment status, personal income taxes, price sensitivity, economic agreements between countries, and disposable household incomes (Freyssenet 39). For instance, despite the increased profitability of its domestic market, the country has made losses that are totalling to more than US$300 million in its European operations and market. This loss can be attributed to the shrinking of the company’s market following the ongoing conflict between Russia and Ukraine. The market would have seen Russia surpass the UK market as its largest bazaar in Europe (Shaout and Dusute 12).
In other countries such as China and Japan where competition with local automobile firms prevails, the company has had to work in a high taxation environment since each country seeks to protect its firms from external competition. In such countries, GM still lags behind local automobile companies in terms of penetration due to the protection through taxes that are imposed in the local markets against foreign firms. Further, the company faced major economic hurdles following the 2007/08 financial crisis, which saw it file for Chapter 11 Bankruptcy Protection (Freyssenet 39). Following its financial problems, the government bailed out GM, where it invested a total of US$49.5 billion through the troubled asset relief programme (Shaout and Dusute 13). During the financial crisis of 2007/08, the world experienced a foremost economic breakdown.
Many companies, not only in the United States but also across the world, experienced a slowdown in their financial performances, which ultimately threatened their existence (Freyssenet 43). Prior to the financial problems, GM had a rough period that was characterised by poor performance. However, it was still not possible to imagine that such a company, which had been the world’s leading automobile manufacturer for 77 years, would ever file for bankruptcy protection. Consequently, from the above discussion, it is evident the economy is a central non-market environment factor. Without due consideration, this element can easily put an entity in serious jeopardy, which can threaten a company’s existence as evident in GM’s case (Pehrsson 72).
While the company has recovered from its financial problems, the filing of Chapter 11 Bankruptcy Protection is a desolate reminder to the company that the economy is a foremost force, which can have serious effects on its operations and success beyond its scope of influence. Another key influence on the economy on the company is evident through its various productions, which target different people of diverse economic classes across the world. For instance, the company has focused on developing more fuel-efficient and cheaper cars to target young people, as well as people in developing countries who do not have adequate resources to afford highly luxurious and expensive cars. For instance, the company’s Chevrolet Cruze is its most popular car model. This popularity can be attributed to its affordability and ease of maintenance (Shaout and Dusute 14).
The success of the car model is a key indicator of the number of ways that the company can respond to economic issues that may affect its success. In this case, it has responded to the issue of personal returns and disposable incomes by making cars where people who have limited resources can afford a decent car. This strategy has driven the company to high success. Concisely, the company recognises the importance of responding to economic problems, which can determine the success or failure of its operations.
Technology is also a primary non-market environment force that GM has had to consider in its operations to ensure that it remains relevant in its activities. In the current world where globalisation and technology have become integral parts of the society, it is detrimental for a company to lag behind in its operations and adoption of technology to reflect the changing needs of the society (Achrol and Kotler 39). While technology may be viewed as a market environment factor, it goes beyond such a narrow viewpoint to reflect the foremost trends that it is causing not only in the motor vehicle industry but also across all industries. One of the core technologies, which are revolutionising the world, is the mobile communication expertise. In this case, it has become essential for automobile makers to incorporate such technologies in their products to ensure that they can resonate with customer needs and the changing trends in the world (Husted and Allen 351). Other technologies are also emerging. It will be imperative for GM to ensure that it progressively incorporates such technologies in its activities to reverberate with the changing world and customer needs.
Lastly, environmental issues are primary non-market environment forces that can significantly affect a company’s success in its market. As previously discussed, numerous concerns have been raised on the environmental sensitivity of GM’s operations in the past (Freyssenet 49). Indeed, the company has been previously named as a bad environmental polluter. This exposure has had a negative impact on its reputation not only in the US but also across the world (Harvey 81). However, with the increased research on fuel efficiency, as well as reduced car emissions in its motor vehicles, the company is on the right track towards being an environmentally corporate entity.
The company has increased its collaboration and partnership with environmental agencies across the world to ensure that its products meet the environmental regulations and benchmark that have been set by such agencies, hence ensuring the victory of its business (Tian and Twite 414). Without such approaches, GM may run into many problems with environmental agencies. Such problems may lead to fines or closure of some of the plants, which may be accused of violating environmental laws and regulations. Concisely, environmental factors are central elements, especially in the light of the current increased sensitisation concerning the environment that is becoming popular across the world. Therefore, GM must ensure that its operations are above board and environmentally friendly to avoid different problems that can derail or slow down the success of its operations.
Appropriate Theories in Non-Market Environment
Several theories and approaches have been established to explain various dynamics in the market and non-market environments of any business. Some of the most popular theories and strategies include the PESTEL analysis, Marketing Mix, SWOT analysis, and Porter’s five forces. These approaches can be used to guide market and non-market environment analysis for a company as it will be discussed below.
The PESTEL analysis represents a primary model that businesses use to determine the various external or non-market environment factors that can affect a company’s success. PESTEL is indeed an acronym for Political, Economic, Social, Technological, Environmental, and Legal factors that can affect a company, although they are external to its market. Firstly, in PESTEL analysis, a company can identify major political factors that can affect the success of its operations in one way or another. As previously discussed, the political factors form a primary aspect of the non-market environment (Greene and Plotkin 29).
Hence, they are crucial for any business. Political factors relate to the degree at which a government intervenes in the economy through various approaches such as foreign trade policies, labour laws, trade restrictions, tax policy, foreign trade policies, and environmental laws among other approaches (Peihong, Zhicheng, and Haihua 17). In this case, such government interventions have far-reaching consequences on how businesses carry out their deals. This government participation has been evident in the case study of General Motors. In response to the political factors, GM has been in the forefront working closely with various governments where it has operations to ensure compliance with the prevailing legislation for the best outcomes of the business. Consequently, organisations must be ready and flexible to respond and anticipate current and future legislation, which will ensure that the company is not adversely affected by government and political factors that are common in the business sector.
The second aspect of the PESTEL analysis has an economic bearing. While businesses from central parts of the economy, they have little influence on external economic influences that may seriously affect their operations (Usero and Fernandez 1141). These economic factors include interest rates, customers’ disposable income, inflation, and economic growth, among other factors. The economic factors are further broken down into macro-economical and micro-economical elements, which seriously affect how a company functions in its market. Macro-economical aspects relate to the regulation of demand in a country.
They are primarily controlled through government action such as interest management, government expenses, and taxation procedures (Usero and Fernandez 1142). On the other hand, macro-economic elements relate to how individual people spend their incomes. In this case, organisations need to understand the prevailing macro-economic factors that are in place through close monitoring of government actions, as well people’s spending habits, to ensure that products are tailored to maximise the spending behaviours of customers. As clearly discussed, GM has put in place measures towards ensuring that it is responsive to the economic changes (Zhou and Zue 18). Its goal is to be successful in its operations. Its move towards more fuel-efficient and affordable models is a good indicator of the company’s response to customers’ spending behaviours and disposable incomes. Through such approaches, GM will record the victory in its activities.
The third central factor in the PESTEL analysis constitutes social aspects. Such factors include population expansion, age allotment, professional position, and health awareness, among other factors (Champ, Boyle, and Brown 3). Companies should understand these social factors, which allow marketers to comprehend their customers and/or map the way for interaction. It is evident that through its various approaches that have been discussed on the non-market environment factors, GM has been at the forefront in ensuring that it responds to various forces in the social-cultural realm where it operates across different markets in the world.
As identified in the PESTEL analysis, businesses need to consider technological factors. According to Champ, Boyle, and Brown, technological factors influence the marketing and management of a company’s activities in three ways (7). These ways include fresh strategies of producing commodities and services, fresh methods of communicating with target markets, and innovative plans for distributing goods and services. It is vital for businesses to ensure that they are at the forefront identifying various technological trends in the market to remain competitive (Diamond 978). For instance, GM has adopted new technologies of producing more fuel-efficient and less polluting cars in response to the changing technological field where many automobile manufacturers are gearing towards producing fuel-saving and environment-friendly cars.
The other crucial factor for consideration according to the PESTEL analysis model comprises legal factors. Legal aspects related to “healthy and safety, equal opportunities, consumer rights and laws, and product safety” (Peng 27). For instance, in the case of GM, the company has faced many legal hurdles concerning its environmental record of accomplishment, as well as health and safety matters, for its employees in overseas operations. This situation has greatly affected the company’s reputation. Therefore, companies should ensure that they are aware of what is legal and what is not to avoid unnecessary legal problems that can cost their status and finances.
Lastly, environmental factors are critical additions to the PESTEL analysis model. In the current world, there has been an increased concern about the impact of industrial activities on the economy (Lawton, Doh, and Rajwani 12). These industrial activities have been linked to climate change and global warming. The need for environmental responsibility from companies across the world has become more evident. In response to the environmental concerns of the 21st century, many countries have passed many legislations and environmental regulations, which are geared towards ensuring accountability for all activities that companies undertake (Peng 19).
For instance, GM has run into many environmental concerns and problems in the past, which have cost the company finances and standing as a bad polluter. These issues have had a negative impact on the company’s growth process. However, in response to these concerns, GM has adopted more environmentally friendly industrial processes, as well as ensuring the production of more fuel-efficient and less polluting cars, which resonate well with the changing trends in the world.
Apart from the PESTEL analysis, the SWOT analysis is an essential model and approach through which a company can determine its Strengths, Weaknesses, Opportunities, and Threats for both market and non-market environments (De Wit and Meyer 16). For instance, in the case of GM, the company has the experience and widespread operations across the world. It has acquired knowledge to ensure that it can effectively deal with issues concerning political, social, and technological factors, among other elements that have been identified in the non-market environment factors for GM. The identified technological factors and environmental issues indicate significant areas of threats that the company must be at the forefront in addressing before they affect its profitability and reputation even further (De Wit and Meyer 6). On the other hand, its financial muscles offer it a great opportunity to move towards better environmental outcomes and responsiveness to customer needs according to trends in the industry to open even more growth avenues.
Conclusion
Non-market environment factors form a central part of the business environment. Hence, they require consideration in the business strategy of any company. The non-market environment is concerned about the factors that have a significant influence on business, yet they are not within the control of a business. Such elements have a political, social, economic, legal/regulatory, technological, and environment bearing. As discussed, the General Motors Company represents an elaborate case study of how the non-market environment affects a company’s success. The company has undertaken major steps to respond to non-market environment issues that it faces both in the domestic and in the international market where it has operations. The analysis of non-market environment draws from various theories of marketing such as the PESTEL and SWOT examination tools, which have been identified and discussed in depth in the paper.
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