DBA 7035, Business, Government and Society 1 Course Learning Outcomes for Unit III Upon completion of this unit, students should be able to: 1. Distinguish between the market and nonmarket environment of business by explaining the four Is of the nonmarket environment. 1.1 Articulate the need for appropriate regulatory oversight of business. 1.2 Explain the impact of government on business. 4. Summarize the three broad classes of political strategy, and compare their cost. 4.1 Identify the classes of political strategy. 4.2 Illustrate the application of political strategies and their importance to business. 5. Assess the effectiveness and propriety of grassroots lobbying strategies by political action committees that represent business. 5.1 Summarize how corporations influence government decision-making. 5.2 Evaluate how a specific firm uses lobbying strategies. Reading Assignment Chapter 4: Legal, Regulatory, and Political Issues Unit Lesson Introduction Of course, businesses do not operate in a vacuum. Businesses are subject to the environment within which they operate. This environment includes the legal, regulatory, and political framework. These factors are dynamic and subject to considerable variance. Organizations must be cognizant of these changes and adapt as appropriate. Legal, Regulatory, and Political Issues In Chapter 4, we examine the influence of various stakeholders on public officials who regulate business. Governmental policies, public sentiment, and ethical dilemmas serve as principal factors restricting market opportunities, but they also serve as catalysts for value-creating opportunities. Of course, a key to our discussion in this unit is that the legal, regulatory, and political framework is subject to change. In that regard, businesses must monitor their environment and respond to change as it occurs. For example, the U.S. Food and Drug Administration (FDA) prevents food manufacturers from taking advantage of consumers with false and misleading advertising by allowing only FDA-approved nutrient and health claims to appear on food labels (FDA, n.d.). Meanwhile, health-conscious consumers are demanding more food choices that support healthy dietary practices. Food manufacturers and retailers can capitalize on the opportunity to meet the dietary needs of consumers by providing healthier food selections and enticing consumer purchases with informative labeling that not only meets FDA approval, but also serves as promotional advertising. Once held responsible for obesity and other dietary concerns, fast food businesses are expanding their menus to offer healthier choices and are becoming more transparent about the content of the foods served. An emerging issue of interest in this area is the regulation of sugar in drinks. For example, the City of New York has moved to regulate the sugar content of drinks because sugary drinks are viewed as driving obesit ...

1. DBA 7035, Business, Government and Society 1
Course Learning Outcomes for Unit III
Upon completion of this unit, students should be able to:
1. Distinguish between the market and nonmarket environment
of business by explaining the four Is of
the nonmarket environment.
1.1 Articulate the need for appropriate regulatory oversight of
business.
1.2 Explain the impact of government on business.
4. Summarize the three broad classes of political strategy, and
compare their cost.
4.1 Identify the classes of political strategy.
4.2 Illustrate the application of political strategies and their
importance to business.
5. Assess the effectiveness and propriety of grassroots lobbying
strategies by political action
committees that represent business.
5.1 Summarize how corporations influence government
decision-making.
5.2 Evaluate how a specific firm uses lobbying strategies.

2. Reading Assignment
Chapter 4: Legal, Regulatory, and Political Issues
Unit Lesson
Introduction
Of course, businesses do not operate in a vacuum. Businesses
are subject to the environment within which
they operate. This environment includes the legal, regulatory,
and political framework. These factors are
dynamic and subject to considerable variance. Organizations
must be cognizant of these changes and adapt
as appropriate.
Legal, Regulatory, and Political Issues
In Chapter 4, we examine the influence of various stakeholders
on public officials who regulate business.
Governmental policies, public sentiment, and ethical dilemmas
serve as principal factors restricting market
opportunities, but they also serve as catalysts for value-creating
opportunities. Of course, a key to our
discussion in this unit is that the legal, regulatory, and political
framework is subject to change. In that regard,
businesses must monitor their environment and respond to
change as it occurs. For example, the U.S. Food
and Drug Administration (FDA) prevents food manufacturers
from taking advantage of consumers with false
and misleading advertising by allowing only FDA-approved
nutrient and health claims to appear on food

3. labels (FDA, n.d.). Meanwhile, health-conscious consumers are
demanding more food choices that support
healthy dietary practices.
Food manufacturers and retailers can capitalize on the
opportunity to meet the dietary needs of consumers by
providing healthier food selections and enticing consumer
purchases with informative labeling that not only
meets FDA approval, but also serves as promotional advertising.
Once held responsible for obesity and other
dietary concerns, fast food businesses are expanding their
menus to offer healthier choices and are becoming
more transparent about the content of the foods served. An
emerging issue of interest in this area is the
regulation of sugar in drinks. For example, the City of New
York has moved to regulate the sugar content of
drinks because sugary drinks are viewed as driving obesity in
many individuals ( n.d.).
UNIT III STUDY GUIDE
Legal, Regulatory, and Political Issues
DBA 7035, Business, Government and Society 2
One important legislative response to framing the activities of
business is evident in the Sarbanes-Oxley Act
(SOX) adopted in 2002. Essentially, SOX established a set of
standards to enhance internal control that
would require reporting and transparency in light of a number
of high-profile corporate malfeasance cases

4. such as Enron (Ferrell, Thorne, & Ferrell, 2016). Table 4.10 on
p. 141 of the textbook includes the key
aspects of SOX, and the benefits of SOX are highlighted in
Table 4.11 on p. 143 of the textbook.
One example of the impact of SOX has been the introduction of
whistleblower protections. These are
designed to prevent an employer from retaliating in the event
that an employee discloses wrongdoing by a
private company. SOX represents a far-reaching effort by
government to rein in the actions of business.
Essentially, SOX requires that business decision-making be
more open and transparent. Additionally, it
requires that records, including electronic records, be
maintained by the firm. SOX imposes significant
financial and criminal penalties for noncompliance.
Another key piece of legislation is the Dodd-Frank Act of 2010
that was designed as a sweeping overhaul of
the financial regulatory system. Again, the purpose of the act is
aimed at developing rules to protect
consumers and preventing a future financial crisis by creating
added financial regulations and rules that
enforce transparency and accountability on companies.
Some products are more vulnerable than others in that the
product receives more political attention
and, therefore, creates more risk for the firm. For example, in
times of rising prices, oil becomes a
politically sensitive product. This can lead to social and labor
agitation, import quotas, expropriation, and
nationalization. Indeed, the attitudes to politically vulnerable
and sensitive products are subject to change
with very short notice.
Since political risk increases if the product is politically

5. sensitive, marketers must find out or detect the degree
of vulnerability by addressing the questions below.
critical to the economic debate in the foreign
market?
market?
in the country?
r output?
foreign market?
t or firm drain foreign exchange?
In terms of the application of these types of guidelines, Table
4.8 on p. 138 of the textbook includes seven
steps that can assist a firm with respect to compliance and
ethics.
Businesses also operate in a political environment. Governments
are responsible for crafting and
implementing the rules by which society, including businesses,
must operate. Adding rules and regulations
adds costs to the conduct of business. These costs are listed in

6. Table 4.5 on p. 129 of the textbook. Of
course, as governments change, there may be changes in the
laws and regulations that impact businesses.
Hence, businesses monitor the political process carefully.
Often, we see that there are coordinated efforts by
business groups, such as the U.S. Chamber of Commerce, to
encourage deregulation in an effort to improve
the business climate. For an example of the deregulation
initiative, see the article “Getting Out of the Way” in
the suggested reading section of this unit. In fact, it is
interesting to note that the Chamber of Commerce is an
example of a lobby group.
As a result of government oversight, many businesses have been
increasingly active in the political process
to achieve their goals. For example, there has been a rise in
political action committees (PACs) and special
interest groups that are interested in achieving their agenda. In
Table 4.7 on p. 135 of the textbook, a list of
organizations that engage in lobbying are listed, illustrating the
range of business sectors that are engaged in
this function. A concern related to the increasing importance of
these types of groups is that they reflect the
concept that money buys power. It is critically important that
the average citizen has a role to play in the
political process.
Lobbying is a specific process by which an organization
(business) aims to influence and persuade
governments and public officials to make decisions that are
favorable to its interests. Also, there are many

7. DBA 7035, Business, Government and Society 3
more lobbyists that often work on behalf of the political elite.
Increasingly, there have been efforts undertaken
to develop laws and regulations that manage the roles of those
lobbying on behalf of business (and others).
An example of a lobbying group is the American Association of
Retired Persons (AARP). The AARP is a
nonprofit organization that is nonpartisan, serves more than 38
million people, and lobbies all levels of
government on issues such as healthcare and pensions that are
important to its members (AARP, n.d.)
Legislative, social, and ethical concerns are also primary factors
that influence an organization’s ability to
capitalize on opportunities. Activists throughout the world are
dedicated to making the business environment
transparent as well as increasing the expectations of many
business practices. Ecological, health, and social
issues create opportunities and motivate managers to make
necessary changes inside of their existing
organizations to design more appealing products to consumers.
Thus, pressures from the nonmarket entice
opportunities from businesses within the market to make
products with more sustainable value—a win-win for
all. As technology changes, there are many impacts on the ways
in which special interest groups can interact
with governments. An example is the increasing use of social
media as a way to influence governments.
There are costs and benefits with respect to the regulatory
framework guiding business. Fundamentally, there
are three classes of political strategies available to businesses
that we must understand. These strategies
include 1) an information strategy as firms seek to provide
government policymakers and decision makers

8. with information that is designed to influence their actions and
decisions, 2) a financial-incentives strategy in
which businesses provide incentives that are designed to
influence policymakers, and 3) a constituency-
building strategy in which businesses look to develop alliances
and gain from similarly affected organizations
and to influence policymakers cooperatively. Often, we do see
that the political framework is driven by events
that arise as opposed to a strategic effort to manage business. In
that regard, changes are to be expected in
the environment that frames the operation of business.
References
American Association of Retired Persons. (n.d.). About AARP.
Retrieved from http://www.aarp.org/about-
aarp/
City of New York. (n.d.). Healthy beverages. Retrieved from
http://www1.nyc.gov/site/doh/health/health-
topics/sugary-drinks.page
Ferrell, O.C., Thorne, D., & Ferrell, L. (2016). Business and
society: A strategic approach to social
responsibility and ethics (5th ed.). Chicago, IL: Chicago
Business Press.
U.S. Food and Drug Administration. (n.d.). Label claims for
conventional foods and dietary supplements.
Retrieved from

9. http://www.fda.gov/Food/IngredientsPackagingLabeling/Labelin
gNutrition/ucm111447.htm
Suggested Reading
In order to access the following resource, click the link below:
This article was referenced in the Unit III Lesson. It provides an
example of deregulation in the trucking
industry.
Kinkade, D. (2014). Getting out of the way: How regulatory
reform remade the trucking industry. Retrieved
from https://www.uschamber.com/above-the-fold/getting-out-
the-way-how-regulatory-reform-remade-
the-trucking-industry
https://www.uschamber.com/above-the-fold/getting-out-the-
way-how-regulatory-reform-remade-the-trucking-industry
https://www.uschamber.com/above-the-fold/getting-out-the-
way-how-regulatory-reform-remade-the-trucking-industry