G401: The Business Manager in the Economic Environment

December 17, 1998

Instructor: Professor Rasmusen (G401)
Section : 4688

Office Hours: BU-456, Tuesday and Wednesday, 11-12 or by appointment

Class meetings: G401: Tuesday and Thursday 2:30-3:45, BU 404

W402: Tuesday 5:30-6:45 p.m. , BU 321, Raymond Richie

This page's address: http://www.bus.indiana.edu/g570/_webg401/g401.htm.

OVERVIEW

In today's economy, successful business strategy entails more than outmaneuvering rival companies; managers must also devise strategies to cope with the global, outside forces that confront businesses and other forms of organization. This course provides managers and leaders with strategies that win against the economic, political, social, legal, cultural, and technological forces that make up our global business landscape.

Businesses are increasingly affected by interest groups which can impose their will on a corporation from the outside. Leaders and managers need to understand how public policy is made, and how interest groups, including business, can affect the policy process. Even business people who find government ideologically unpalatable need to understand the levers that make the system operate.

In our wired and interconnected world, with the media on location around the world 24 hours a day, business leaders like Disney's Michael Eisner and Microsoft's Bill Gates are becoming household names. For many business leaders who are primarily accustomed to devising strategies to fend off rival companies, this exposure is not entirely comfortable or welcome. When Jiang Zemin visited the U.S. in November 1997, for instance, Michael Eisner found himself in the awkward position of having to answer questions on television about Disney's ties to a regime responsible for killing more than a million Tibetan peasants and monks. In addition, China's "most-favored nation" status as a U.S. trading partner surely weighed heavily on the minds of Eisner, Gates, and a host of other CEOs. Tomorrow's executives must have a clear sense of their own principles as well as their company's mission, and they need to know which strategies to use in light of these global forces.

Contact Information

  • Professor Eric Rasmusen. Office phone: 855-9219. Office address: BU 456. Email: [email protected].
  • Mr. Raymond Richie [email protected].


    REQUIRED MATERIALS

    Goldsmith, Arthur A. Business, Government, Society: The Global Political Economy, Richard D. Irwin, 1996.

    Subscription to the Wall Street Journal.

    One spiral-bound notebook, 8.5" x 11".

    GRADING

    Your course grade is based on the following components:

    Journal 45%

    Final Project 25%

    Two Exams 20%

    Participation 10%

    Journal

    I want you to be successful in the business world, so I expect you to read the Wall Street Journal each day. The Journal component of your grade provides you an incentive to do so (your participation grade, discussed below, does as well). In particular, you are required to keep a journal based on your regular reading of the Wall Street Journal. At least twice each week make an entry related to that week's class topics. You should have twenty-four (24) journal entries by the end of the term-- the WSJ will not arrive for a couple of weeks after the start of class, and you can take a couple of weeks off from writing entry whenever that is most convenient for you. On two occasions you will hand in your journal to me for review. You will only be given 2-5 days advanced notice of the date your journal is due, which means it is important to make journal entries a regular part of your daily "To Do" list.

    You have plenty of latitude regarding journal entries, but the following elements are essential:

    1. Number each entry and identify the source or sources of the story.
    2. Summarize the point or issue of the story. Note conflicting sides or viewpoints involved and their corresponding interests.
    3. Describe the relevance to the material being developed in the course. Does the course help explain the issue or put it into perspective?
    4. State your views about the matters involved. This is an important part of the journal. I am interested in a cogent statement of your views, not whether you agree with me.
    5. Bonus: Compare and contrast coverage of the story in other places (e.g., Wall Street Journal vs. Business Week)

    Your journal is not a formal research paper; it is informal and should reflect your thoughts and reactions to important events. Make a point of thinking critically about things. Suppose, for example, you read a letter to the editor of the Journal on November 20, 1997, p. A22, entitled "Why Bill Gates is Wrong." You should summarize the main point of the letter, which has to do with why the government is right to be investigating Microsoft for potential antitrust abuses. You should also think about whether the letter is persuasive. You note that it is written by James F. Rill, former assistant attorney general for Antitrust at the Department of Justice, who now works as a lawyer in Washington representing software companies that compete with Microsoft. What light does this shed on the views he is putting forward? How does writing the letter aid the interests of his clients? What counter-arguments would you make if you were Bill Gates? How do you think Rill would respond to Gates' counter-arguments? Do you find Rill's argument convincing?

    Final Project

    The W402 component of this course consists of a final project. You will have the opportunity to choose any firm that has had to deal with important external non-market pressures. Most of these will come through government policy actions, but you may also consider situations where a stakeholder group has brought pressure on the firm through non-governmental means. The focus of the project is evaluating how well the firm handled (or is handling) the particular issue.

    W402 sessions will be held on Tuesdays at 5:30pm to help you be effective and efficient in doing the project. These sessions will suggest methodologies and techniques you can use to (1) identify a good topic for your project; (2) conduct a preliminary "inside analysis"; (3) conduct a preliminary "outside analysis"; (4) obtain industry data; (5) obtain firm-level data; (6) obtain data on U.S. government policy (regulations, pending legislation, etc.); and (7) obtain international data.. Failure to attend these sessions will adversely affect your grade on the project.

    Your analysis should include the following:

    1. An overview of the industry in which the firm operates.
    2. The firm's position in the industry, e.g., is it a leader, a small niche player, a diversified but second-tier firm?
    3. The firm's overall corporate strategy. What is its "core competency?" What markets does it target? Does it have a sustainable advantage?
    4. A summary of the particular issue you are considering.
    5. What is the source of external pressure on the firm? Which interest groups have the biggest impacts? What strategies are they using to apply pressure?
    6. How is your firm responding to the external pressure? What strategic options does it have?
    7. How well is the firm responding? Is it being proactive? Does it have a clear sense of its corporate mission and priorities? Does it look for win/win opportunities in the public arena, or does it pursue confrontation with other interests? Does it truly understand the concerns of those groups pressuring it?


    Your final project must be typed and proofread for grammar and spelling. The overall length should be about 10 pages of double-spaced text (12 point fonts and one inch margins); anything less is probably not going to allow you to explore adequately the issues. Two copies of your final project are due at your last meeting of W402.

    Class Participation and Exams

    Much each class will be devoted to analyzing current business and public policy developments that relate to the assigned readings. Your participation grade will suffer if you are unable to suggest a topic for that day's current event, if you are unable to explain how readings from the text or lecture relate to the current event, or if you aren't present in class to participate. My goal is to wean you from a "cram for exam" way of thinking into one where learning about the current business environment becomes part of your daily ritual.

    In addition to your oral participation, two exams will be given during the semester to assess your ability to display your knowledge in a written format. Class participation is worth 10 percent of your grade, and written performance on the two exams makes up 20 percent. The exams will be weighted equally and will cover material from reading assignments as well as lectures and class discussions.

    IN-CLASS MATERIAL VS READING THE TEXT

    I would like to stress that attending class is not a substitute for reading the text, nor is reading the text a substitute for attending class. At your career-stage you should be able to process the material in the text on your own. My goal is to provide value-added during our time in class by providing a more in-depth treatment topics and by facilitating a discussion of current events that integrates what you have learned during your tenure at the Kelley School. I recognize that your time is valuable and will not waste it by regurgitating information contained in the textbook.

    COURSE OUTLINE

    A denotes your required "Reading in Advance of class".

    B denotes tentative "Business and Public Policy" topics to be covered in class (Actual topics will depend on current events).

    Week 1: Overview of Political Economy, Public Policy and the Market

    A. Chapter 1

    B. Choosing among institutions; Redistribution and justice

    Week 2: Markets

    A. Chapter 2

    B. Supply and demand; Price controls

    Week 3: Private vs. Public Incentives

    A. Chapters 3 and 4

    B. The prisoner's dilemma; public goods; free-riding; asymmetric information

    Week 4: The Rise of Capitalism: A Global Perspective

    A. Chapters 5 and 6

    B. Technology; Incentives; Agency Problems

    Weeks 5 and 6: Stakeholder Interests and the Economics of Politics

    A. Chapter 8 and 9

    B. Lobbying; Campaign spending limits; Labor unions; Forming coalitions

    Week 7: Catch-up, Review, and Exam

    Week 8: Institutions for Human Interaction

    A. Chapter 10

    B. Review of the exam; Collective decisions; Voting paradox; Agenda setting

    Week 9: How Global Markets Discipline Businesses

    A. Chapter 11

    B. Takeovers; CEO Compensation

    Week 10: Public Policy I: Worker's Rights

    A. Chapter 12

    B. Minimum Wage; Discrimination; Affirmative Action and Rawlsian Justice

    Week 11: Public Policy II: Public Safety

    A. Chapter 13

    B. Reputation; Legal Remedies�; Regulation

    Week 12: Public Policy III: Pollution and the Environment

    A. Chapter 14

    B. The Common Pool Problem; The Coase Theorem; Taxes vs. Permits vs. Quotas.

    Week 13: Antitrust Policy

    A. Chapter 15

    B. Monopoly Power; Collusion

    Week 14: Special Topics in Public Policy (To be determined by Current Events)

    Week 15: Foreign Trade and Investment

    A. Chapter 17

    B. Protectionism, Exchange Rates

    Week 16: Catchup and Review for Final Exam

    Final exam: 8:00-10:00 a.m., Tuesday, December 15.