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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

 PublicGoods.
 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  Simplicity
 Accountability  Periodic Review
 Transparency  Consistency
 Clarity  Commitment
 Speed  Fairness
 Appeals Procedure  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.