Strategy and Regulatory Frameworks Kevin Hinde

Introduction “The history of regulation is one of shifting emphasis and focus of government activities. As policy objectives change, so do regulatory institutions and the particular markets subject to regulation. ... Thus, while specific regulatory policies may come and go, the form and structure of regulation may be expected to retain familiar characteristics” Spulber 1989

Introduction Regulations dominate all aspects of our private and organisational lives and we have to work with regulatory environments and the policies that shape future rules, laws and regulatory institutions. The world is constantly changing and organisations need to understand regulatory frameworks in order to formulate and implement strategies.

Strategy, Policy and Regulation Strategy is concerned with organisational policy to achieve a given end. Political strategy is concerned with a Government policy to achieve a given end. Regulation represents rules and laws associated with the aggregation of past and current policies at the industry, sector and/or spatial level that is monitored by some agency.

A Definition of Regulation “any government measure or intervention that seeks to change the behaviour of individuals or groups. Government regulation can both promote the rights and liberties of citizens, and impose restrictions on their behaviour.” UK Better Regulation Unit, 2000 “refers to the various instruments (both formal legal instruments and such informal tools as ‘guidance’) used by government to control some aspect of the behaviour of a private economic actor. Regulation can also include rules issued by non-governmental bodies (e.g. self-regulatory bodies) to which governments may have delegated regulatory powers. All regulations are supported by the explicit threat of punishment for non-compliance.” OECD, 2001.

Types of regulations Economic (Structural) Regulation Social (Conduct) Regulation Administrative Regulation

Why might we regulate? Planning Natural Monopoly Distributive and Social Justice Market Failure

Types of Market Failure Public Goods. Externalities. Information Asymmetries. Market Dominance and the Abuse of a Dominant Position.

How much regulation? should occur as long as the marginal benefits equal the marginal costs of intervention, but the data problems involved are enormous. ‘Competition where possible, regulation where necessary’. A political Judgement? It should look to improve allocative, productive and dynamic economic efficiency. Does this always require the state? How about self-regulation? What of other regulatory strategies?

Principles of good regulation Independence Accountability Transparency Clarity Speed Appeals Procedure Simplicity Periodic Review Consistency Commitment Fairness Targeted

Some potential benefits of good regulation Overall Consumer Gains In Japan, efficiency gains from reform are boosting consumer income by about 0.3 per cent per year, or $36 billion. In the United States, reform in several sectors provides annual benefits to consumers and producers of an estimated $42 billion to $54 billion.

Why should organisations bother about regulation? It provides environmental context in which to formulate strategy. It can be a source of advantage in strategic positioning. It can be a barrier to development which needs addressing via lobbying. It can be an opportunity to shape the future environment.