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Strategy and RegulatoryFrameworks

Kevin Hinde

http://www.kevinhinde.com/

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Introduction

The history of regulation is one of shiftingemphasis and focus of government activities.As policy objectives change, so do regulatoryinstitutions and the particular marketssubject to regulation. ... Thus, while specificregulatory policies may come and go, the

form and structure of regulation may beexpected to retain familiar characteristicsSpulber 1989

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Introduction

Regulations dominate all aspects of ourprivate and organisational lives and wehave to work with regulatory environmentsand the policies that shape future rules,laws and regulatory institutions.

The world is constantly changing andorganisations need to understandregulatory frameworks in order to formulateand implement strategies.

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Strategy, Policy and Regulation

Strategy is concerned with organisationalpolicy to achieve a given end.

Political strategy is concerned with aGovernment policy to achieve a given end.

Regulation represents rules and laws

associated with the aggregation of past andcurrent policies at the industry, sectorand/or spatial level that is monitored bysome agency.

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A Definition of Regulation

any government measure or intervention that seeks to changethe behaviour of individuals or groups. Government regulationcan 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 instrumentsand such informal tools as guidance) used by government tocontrol some aspect of the behaviour of a private economicactor. Regulation can also include rules issued by non-

governmental bodies (e.g. self-regulatory bodies) to whichgovernments may have delegated regulatory powers. Allregulations are supported by the explicit threat of punishment fornon-compliance. OECD, 2001.

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Types of regulations

Economic (Structural) Regulation

Social (Conduct) RegulationAdministrative Regulation

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Why might we regulate?

Planning

Natural MonopolyDistributive and Social Justice

Market Failure

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Types of Market Failure

Public Goods.

Externalities. Information Asymmetries.

Market Dominance and the Abuse of aDominant Position.

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How much regulation?

should occur as long as the marginal benefitsequal 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?

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Principles of good regulation

Independence

Accountability

Transparency

Clarity

Speed

Appeals Procedure

Simplicity

Periodic Review

Consistency

Commitment

Fairness

Targeted

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Some potential benefits of good

regulation

Overall Consumer Gains

In Japan, efficiency gains from reform areboosting consumer income by about 0.3 percent per year, or $36 billion.

In the United States, reform in several

sectors provides annual benefits toconsumers and producers of an estimated$42 billion to $54 billion.

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Why should organisations bother

about regulation?

It provides environmental context in which toformulate strategy.

It can be a source of advantage in strategicpositioning.

It can be a barrier to development which needsaddressing via lobbying.

It can be an opportunity to shape the futureenvironment.