MGMT4P96 – Business & Society

Asma Zafar| Assistant Professor | Goodman School of Business

Session 02 – The relevance of deep historical forces

January 12, 2023

Agenda
 Housekeeping
 Review of last class
 The (IA)3 framework of creating nonmarket strategy

 Deep historical forces

SESSION 2 - DEEP HISTORICAL FORCES 2

Welcome back, some housekeeping
 How to approach me?
 Email: azafar@brocku.ca
 Issue brief sign up sheet is now available, please sign up by day-end, today!
 Please remember to sign up by the end of the week at the following link:
 https://forms.gle/7aPLqcpinhoChMDu5
 Thanks to those who have already signed up!
 Groups for the class project
 Do some of you know your group members by now?

SESSION 2 - DEEP HISTORICAL FORCES 3

Review – last class
 Nonmarket environment comprises those forces that do no necessarily
enter into a direct economic exchange with an organization, but can deeply
influence the organization’s ability to enter into economic exchanges
 The Prius example
 Toyota gained soft power by pulling political and social levers
 A primary driver of the complexity of nonmarket environment is
globalization
 A multitude of audiences
 Multiple and complex regulations
 Constant monitoring by various actors
 Tougher competition
 Shocks like the Covid-19 pandemic!

SESSION 2 - DEEP HISTORICAL FORCES 4

Continuing from the last class…
 The (IA)3 Framework – information is at the heart of nonmarket strategy!

https://sloanreview.mit.edu/article/what-every-ceo-needs-to-
know-about-nonmarket-strategy/

WEEK 1 - INTRODUCTION TO NONMARKET STRATEGY 5

The (IA)3 framework: Six important questions
 What is the issue?
 Business should take a position on an issue if its resolution could significantly affect the
company’s ability to create and/or appropriate value
 Who are the actors?
 Identify the actors who care about the issue – their economic and/or ideological stakes
 Identify allies and adversaries
 What are their interests?
 What motivates the actors? What outcome(s) are they hoping for?
 In which arena do these actors meet?
 Courtroom or public domain/media, social media?
 What information will move the issue in this arena?
 Information is the currency of nonmarket environment
 What assets are needed to prevail in this arena?
 Reputation, political power, network, financial resources, information
SESSION 2 - DEEP HISTORICAL FORCES 6
The (IA)3 framework – an example
 Company Z is an international mining company that operates just outside a
small town in a rural region in Nigeria
 Half of the company’s employees come from the small town
 However, there are negligible medical facilities in the town and employees are
often missing work or less productive because of illness
 There is only one school in the town, an elementary school, and many
employees can barely read and write; while this is not mandatory for their job, it
does decrease productivity
 What should company Z do?
 What is the key issue?
 Who are the actors?
 What is the arena?
 Take 5 minutes to discuss in small groups
SESSION 2 - DEEP HISTORICAL FORCES 7
The (IA)3 framework – example debrief
 Company Z’s employees lack basic human rights such as access to medical
facilities and education. What should company Z do?

 Take action  what & why?  Do not take action

SESSION 2 - DEEP HISTORICAL FORCES 8

Today’s learning objective
 To understand the deep historical forces that have led to the need for
development of nonmarket strategy

SESSION 2 - DEEP HISTORICAL FORCES 9

Moving on – the corporation
 Based on the documentary ‘the corporation’ how did organizations emerge
as a dominant institution of our society?
 Did some information come as a surprise/shock?

SESSION 2 - DEEP HISTORICAL FORCES 10

The corporation - impacts
 The extent of the impact and power of organizations
 Legal person with limited liability
 The 14th amendment used to liberate the black people was used for
organizations
 Harms caused to people: meager wages (1% of the retail price), factory fires,
stringent working conditions, union busting, layoffs
 Harms caused to the environment: Irresponsible harvesting, pollution,
 Corporations as psychopathic  wealth usurpation (wealth created when the
commons are owned privately
 How far are organizations willing to go is scary!!
 Use of harmful chemicals is an example of that

SESSION 2 - DEEP HISTORICAL FORCES 11

The paradox of the corporation
 What do you understand by the term, ‘the paradox of the corporation?’
 Organizations are necessary but harmful members of the society
 They have shaped our society in two ways
 Immense benefits: health & medicines, easy and quick travel, access to information, a
tremendous variety of products, creation of jobs
 Great losses: shaping consumer’s choices and complexifying lifestyles, dependence,
climate change, inequality, mental health problems

SESSION 2 - DEEP HISTORICAL FORCES 12

Deep historical forces

Industrial
Revolution

Dominant Population
Ideologies Growth

Globalization

Technology Inequality

SESSION 2 - DEEP HISTORICAL FORCES 13

The industrial revolution
 An economic metamorphosis in England in
the 1700s
 Focus on productivity  fewer human hours
for each unit produced
 Frederick Taylor and Henry Ford
 Formation of assembly lines

 Preconditions for industrial growth

 Sufficiency of capital, labor, natural resources
and fuels
 Adequate transportation
 Strong markets
 Ideas and institutions that support the
productive blend of all the above ingredients Ford motor plan in 1930s:
https://www.britannica.com/topic/Ford-Motor-Company
(such as supportive government policy)
SESSION 2 - DEEP HISTORICAL FORCES 14
Inequality
 The basic political conflict in every nation, and often between nations, is
the antagonism between rich and poor
 The industrial revolution accelerated the accumulation of wealth and
widened the persistent problem of its uneven distribution
 Global income inequality is measured by the Gini index
 Gini index: A statistical measure of inequality
 zero is perfect equality (everyone has the same amount of wealth)
 100 is absolute inequality (a single person has all wealth)
 The Human Development Index (HDI) “is a summary measure of average
achievement in key dimensions of human development: a long and healthy life,
being knowledgeable and have a decent standard of living.” (
http://hdr.undp.org/en/content/human-development-index-hdi)
 World inequality database

SESSION 2 - DEEP HISTORICAL FORCES 15

 Inequality

https://data.oecd.org/inequality/income-inequality.htm
SESSION 2 - DEEP HISTORICAL FORCES 16
 World income inequality (1992 – 2018)

https://en.wikipedia.org/wiki/Gini_coefficient#/media/File:GINI_index_World_Bank_up_to_2018.png

SESSION 2 - DEEP HISTORICAL FORCES 17

World income inequality (2022)

SESSION 2 - DEEP HISTORICAL FORCES 18

Population growth
 Rapid growth now declining due to changing preferences and lifestyles,
declining fertility
 Implications of current population trends:
 Growth will continue to strain the earth’s ecosystems
 The West is in demographic decline compared with other peoples
 The wealth gap between high- and low-income countries will widen

SESSION 2 - DEEP HISTORICAL FORCES 19

Technology & innovation
 Throughout history new technologies and devices have fueled commerce
and reshaped societies
 Printing press
 Steam engine

 Innovation
 Foster the productivity gains that sustain long-term economic progress
 Promote human welfare
 Can agitate societies and spread inequality

SESSION 2 - DEEP HISTORICAL FORCES 20

Waves of innovation since the beginning of the
industrial revolution

SESSION 2 - DEEP HISTORICAL FORCES 21

Globalization and nation-states
 Globalization: The creation of networks of human interaction that span
worldwide distances
 Besides war for physical control also trade wars
 Transnational corporations are the central forces of current economic
globalization
 Sub-trends underlying economic growth
 Rising trade
 Major expansion of foreign direct investment by transnational corporations
 Consequences of globalization
 Increased economic activity
 Changed cultures….

SESSION 2 - DEEP HISTORICAL FORCES 22

Dominant ideologies
 The industrial revolution was facilitated by several ideologies:
 Capitalism – private ownership of the means of production
 Individualism – protection of individuals’ rights
 Progress – the idea that humanity was in upward motion toward betterment
 Darwinism – survival of the fittest
 Protestant ethic – hard work, saving, thrift and honesty lead to salvation

SESSION 2 - DEEP HISTORICAL FORCES 23

Implication of deep historical forces for
organizations?
 These forces have strengthened organizations
 Organizations are immensely powerful legal persons
 Limited liability toward externalities!!!
 On the flip side…
 There is a wide variety of issues, actors, their interests, arenas, information and
assets that organizations need to grapple with
 Given that all of these deep forces increase the uncertainty of the nonmarket
environment, organizations frequently engage with scenario planning

SESSION 2 - DEEP HISTORICAL FORCES 24

The shell example
 “We have been developing possible visions of the future since the 1970s,
helping generations of Shell leaders explore ways forward and make better
decisions. Shell Scenarios ask “what if?” questions encouraging leaders to
consider events that may only be remote possibilities, and stretch their
thinking. Our scenarios also help governments, academia and business in
understanding possibilities and uncertainties ahead.”

 https://www.shell.com/energy-and-innovation/the-energy-future/
scenarios.html

SESSION 2 - DEEP HISTORICAL FORCES 25

 The shell example… (continued)
 Scenario 1: Waves
 In response to the Covid-19
crisis policy makers pause
their attention to greening
of energy sources
 Global use of coal and oil
peaks in 2030s
 own short-term economic
The world faces long-term
consequences (rising
average temperatures)
 Decarbonization of fuels is
fast but starts late
https://www.shell.com/energy-and-innovation/the-energy-future/scenarios/the-
energy-transformation-scenarios.html#
SESSION 2 - DEEP HISTORICAL FORCES
 Scenario 2: Island
 “governments and
societies decide to focus on
their own security first,
with a new emphasis on
nationalism”
 “Nations focused on their
outcomes remain
dependent on cheap fossil
energy for a prolonged
period, and global
emissions decline only
slowly.”
 Scenario 3: Sky 1.5
 “responding to the
pandemic and related
challenges to public well-
being – health first”
 “There is rapid and deep
electrification of the global
economy, with growth
dominated by renewable
resources”
26
Key takeaways
 The nonmarket environment of organizations maybe more uncertain than
their market environment
 These uncertainties are fueled by the six deep historical forces at work
 But have also helped organizations become one of the most powerful
institutions of our times
 From the perspectives of organizations, scenario planning might be a useful
exercise to deal with the ever-shifting nonmarket environment

SESSION 2 - DEEP HISTORICAL FORCES 27

Sample exam question
 In 2008, Shell predicted two competing futures over the next 10 years with
the aim of being prepared to the uncertain future. Based on the assigned
activities and class discussion, Shell’s action best exemplifies:
 a) scenario planning
 b) contingency planning
 c) over preparedness
 d) regression modeling
 e) good corporate citizenship

SESSION 2 - DEEP HISTORICAL FORCES 28

Next class
 Read:
 Wikipedia’s page on Capitalism
 Bower et al., (2011). Introduction: The role of business in the future of market
capitalism (HBR)
 Think about arguments
 For capitalism
 Against capitalism

SESSION 2 - DEEP HISTORICAL FORCES 29