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31 Cards in this Set

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What is crisis management? (2)

- Anticipate the possibility of a crisis

- Be prepared to respond effectively if one develops

1) Anticipate

2) P to R

Components of Crisis Management (5)

and which is most important?

1) Avoidance (most important): reduce the probability that a crisis will occur (e.g. risk audits)

2) Preparedness: organization of resources to be mobilized in case of a crisis

3) Effective Communication/Appropriate Response: those involved, public, government

4) Root cause analysis: 2 steps: 1st analyze the crisis, 2nd identify the causes of the crisis.

5) Resolution/Action: to provide relief to those affected, to ensure that more are not affected

Avoidance, P, E, R, A

Effective Communication can involve (4)

1) Acceptance of responsibility

2) An apology to those affected

3) Expression of concern for those affected

4) Assurance that the problem is being addressed will not reoccur

How you respond to crisis

Acceptance, A, E, A

Government Agencies can play an important role (3)

1) Communicating with the public

2) Identifying source of the crisis

3) Help address its effects

How it responds to the crisis

Communicating, I, A

Once a crisis has been resolved...

Effects? (3)

...reassess crisis avoidance measures and preparedness.

Effects can continue in the form of:

1) Changes in management practices

2) New government regulations

3) Increased public scrutiny of the performance of firms


Changes, G, Inc...

Life cycle of a crisis (4)

1) Identification: A crisis may result from a single event or from a series of developments over time.

2) Escalation: Some crises explode as a result of media coverage, government actions, or company actions.

3) Intervention: Involves actions by the company or government to deal with the crisis and provide assistance to victims.

4) Resolution: involves turning the crisis into a manageable nonmarket issue.

Iden.., E, I, R

Public Politics and Nonmarket Action = outcomes through government institutions

What government institutions? (5)

1) Legislatures

2) Administrative Agencies

3) Regulatory Agencies

4) Courts

5) International Accords


Structured pluralism?

4 I's?

Outcome of this process is creation of a public policy to address the issue.

1) Issue

2) Interests: concerned with a non market issue; compete in the arena of government institutions

3) Institution: have structures and procedures, officeholders have preferences - their policy interests, interests of constituents

4) Information: 2 sources, 1st comes from research and public policy analysis provide technical information; 2nd comes from interests groups who provide politically relevant information


Public policy reflects... (3)

1) Private Interests

2) Institutional features

3) Information and policy interests of the officeholders


What is the necessary condition for formation of an Interest Group?

Is that the benefits from collective action exceed the costs of organization.

Benefits > Cost

Nonmarket action includes activities such as...(5)

1) Lobbying

2) Grassroots and other forms of constituent activity

3) Research and testimony

4) Electoral Support

5) Public advocacy


Demand for non market action (3 factors)


1) Aggregate benefits

2) Per capita benefits for individual interest (e.g. tax payer, firm, union)

3) Alternative means for achieving benefits (e.g. change market strategy, different institutional arena)

The demand for non market action is derived from the distributive consequences of an alternative. For firms, those consequences are reflected in sales, profits, and market value.


Supply of non market action (3 factors)


1) Costs of organizing for collective action

2) Direct cost of undertaking non market action (i.e. lobbying, preparing testimony)

3) Effectiveness of non market action (size of interest group, its coverage of legislative districts)


What are the 3 components of the non market strategy of a firm?

1) Increase benefits for interests on your side

2) Decrease benefits for opposing interests

3) Reduce cost for interests on your side (e.g. formation of interest group/coalition)

I, D, R

What is the cost of organizing? (2)

Higher if affected individuals are numerous and dispersed (e.g. taxpayers)

Costs of organization can be reduced by forming associations (e.g. labor unions)

What is the free-rider problem?

The higher the number of people in the group, the more serious the free-rider problem.

How do you overcome the free rider problem? (2 ways)

1) Bundle non market action and services for members

2) Address series of non market issues since they have longer run incentives.


What is effectiveness?

What are its factors? (3)

Effectiveness refers to the impact of a given level of non market action on the outcome of an issue.

1) Number of members of an interest group

2) Coverage of political jurisdictions (i.e. geographic location of interest group members)

3) Resources to finance research, lobbying, legal services, administrative staff, grassroots campaigns

#, C, R

The Distributive Politics Spreadsheet

1, Demand Side

- aggregate benefit

- per capita benefits (individual members of the interest group)

- available substitutes

2. Supply Side

- number of members

- their coverage of political jurisdiction

- their resources

- their costs of organizing nonmarket action, incl. any free rider problems

demand and supply sides

Benefit and Harm of Nonmarket Alternative (e.g. enactment of a bill) (4)

1) If benefit and harm are both concentrated

- both sides have an incentive to act

- interest group politics

2) If benefit and harm are both widely distributed

- incentives to take nonmarket action are weak

- majoritarian politics

3) If benefits are concentrated and the harm is widely distributed

- those benefitting have an incentive to act

- favors alternative over status quo

- client politics = beneficiaries working to become clients of institutional officeholders, i.e. have officeholders serve their interest

4) If benefits are widely distributed and the harm is concentrated

- those bearing the harm have a stronger incentive to act

- favors status quo

- entrepreneurial politics = entrepreneur needed to mobilize/represent those with a widely

distributed benefit, e.g. member of Congress, activist, business leader

Process of Nonmarket Strategy Formulation (6)

1) Nonmarket Analysis

2) Specification of primary and contingent objectives

3) Selection of institutional arenas

4) Strategy formulation

5) Development and utilization of nonmarket assets, including the rent chain

6) Implementation

Analysis, SSSDI

Generic Nonmarket Strategies (3)

Representation Strategies
- based on consequences of alternatives for constituents of government officeholders, incl. the firm’s rent chain

Majority-building Strategies
- develop needed votes in a legislature to enact or defeat a bill

Informational Strategies
- provide information to officeholders

Rep, Maj, Inf

Majority-building Strategies

Legislation Required

- Vote trading and vote recruiting

- Aimed at pivotal voters and agenda setters

(pivotal voters = those most likely to switch the outcome)

Enact legislation:

-Majority required and in case of presidential veto two-thirds in the House AND the Senate

Defeat legislation:
-Majority required or in case of presidential veto one-third in the House OR Senate

It is easier to defeat legislation then to enact legislation!


Median Voter Theorem (4)

- Alternatives are one-dimensional,

- The legislative process is open so that all alternatives can be considered,

- Voters have a most-preferred alternative, or ideal point, and prefer alternatives closer to rather than farther away from the ideal point,

then the outcome is the median of the ideal points!
- Strategies can focus on the pivotal legislator who could change the median, and hence the outcome

1-D, Open, Preferred, Pivotal

Informational Strategies (3)

Strategic provision of information = principal component of:

1) lobbying

2) testimony in legislative or regulatory proceedings

3) public advocacy


Lobbying (2)

= strategic provision of two types of information:

1) Technical information
= likely consequences of alternatives

2) Political information
= effects of alternatives on the constituents of the officeholder

- Relatively Unregulated

T and P

Choice among strategies depends on...(2)

1. Relevant institutions
2. Other involved interests = nature of the politics

A) Institutions

- Politically responsive institutions, e.g. Congress and the presidency

o Representation strategies

- Less politically responsive institutions, e.g. courts, some regulatory and administrative agencies

o Provision of technical information

Rel, Other

Nature of Politics (4)

1) Client politics

- Firms face no direct opposition

- Typically prefer low profile strategies implemented through lobbying (straight forward majority building)

2) Interest group politics

- Firms face opposition

- May be forced to adopt higher profile strategy to counter opposition, e.g. public advocacy,

grassroots activities

- Take into account majority-building strategies on the other side of the issue

3) and 4) Entrepreneurial or majoritarian politics

- firm of the side of dispersed benefits

- identify pockets of interests that can be organized, i.e. transform to client politics

- identify other aligned interests

- seek nonmarket entrepreneur who can organize those with dispersed benefits or represent them from within the government institution

Client, Interest, Entrepreneurial

Nonmarket Assets (4)

- Access to institutional officeholders, e.g. members of Congress

- necessary for effective lobbying

- Reputation of the firm
-actions that are deceptive, manipulative, or represent an abuse of power can quickly

damage reputation
- means of lowering the cost of collective action, e.g. a trade association

Seek legislation
- common position beneficial
Defeat legislation
- fragmented position gives a wider set of opposition

Access, Rep, Seek, Defeat

Implementing Nonmarket Strategies (7)

1. Lobbying

2. Electoral support (campaign contribution)

3. Coalition building (forging a majority from a collection of minorities)

4. Grassroots and constituency campaigns (based on the rent chain)

5. Testimony (related to lobbying)

6. Public advocacy (communicate directly with the public, particularly in majoritarian politics)

7. Judicial actions (either as defendant or initiator of legal action)

Lobbying, E, C, G, T, P, J


- Legislative, regulatory or administrative arenas

- Involves demonstrating to officeholders that interests of their constituents or their own policy

interests are aligned with those of the firm and its stakeholders

- Provide politically relevant information that may be technical or political and is relevant to

constituents or the policy interest of the officeholder

- Often focuses on committees and their staff

- Testimony in hearings is related to lobbying and can be co-ordinated with it

- Access to policymakers is necessary for lobbying, and can be achieved through

o Constituency connection
o Personal relationships
o Former government officials
o In some cases campaign contributions

AA, Dem, Prov,