Competing with Government
Friday, March 19, 2010 at 11:58AM 
Big businesses, and sometimes small too, have to consider the role government may play in either improving or eroding their competitive advantages. The Fed’s involvement in the business environment specially steps up when the economy starts to falter. We’ve seen plenty of examples over the past few years of big brother interventions – stimulus packages, bailout money, increased import tariffs, immigration restrictions, higher taxes, unfavorable communications, unnecessary congressional hearings, and hurried-up conclusions. As a business, do you think this is fair and/or reasonable? Is it ok for the Fed to help fix the balance sheets of your competitors or to accuse you of charging excessively? Is it ok for them to tell the people that they must buy “American” goods and services only?
Unfortunately, in today’s environment, yes it is ok. Like it or not, the government has certain obligations to its people and when things start falling apart, rest assured they will use every trick in their bag to reduce the bleeding. So the question you ask is whether there is anything you can do about this? How, differently, should you strategize and/or plan to prepare for such unfavorable scenarios? Do you sit back and take it as it comes or do you fight it out? Do you need to make specific considerations in your operational strategy to mitigate risks presented by potential fed actions?
The best way to understand and answer the questions posed above is to analyze some of the recent business stories. These are stories that have been getting significant press coverage and are giving Fortune 500 CEOs sleepless nights. The first case is that of Healthcare and WellPoint. WellPoint is the largest health insurer by way number of people covered and the company has been the prime target of the Obama government. The government has decided to make an example of WellPoint and position it as the root-cause for the insurance premium hikes and the US healthcare mess. Now I would have a problem if the hikes were random or baseless but Angela Braly, WellPoint’s charismatic CEO, has decided to take the battle back to the government by trying to raise the awareness of the “cost drivers” behind these hikes. You see there are a number of stakeholders in this complex healthcare puzzle and solely blaming the insurance industry for the pain is unfair and incorrect. Braly correctly pointed out that the government ought to invite other parties to the table as well, like the drug companies, device makers, and hospital administrators. Once again, businesses need to anticipate and understand the government’s move and be ready to counter it with facts that can blow holes in the opponent’s logic. WellPoint/Braly’s strategy is courageous and right, but if you choose to pursue a similar tactic, just be sure that you have the data to back you up just like WellPoint did.
The other case worth considering is that of the Automotive industry and Toyota. The US government has come down hard on Toyota for the brake and sudden-acceleration problems in its models. Nothing wrong with that but you already have a regulatory/oversight body to handle precisely those kinds of issues - the NHTSA (National Highway Traffic Safety Administration). Poor Toyota! Mr. Toyoda (CEO) would never have imagined in his wildest dreams that he would one day be fighting the US government. Now is it fair for the government to step in where the job really belonged to DOT and/or NHTSA? Maybe yes, maybe not. The US Government does own 60% of GM, so maybe they saw this opportunity to help one of the companies in their portfolio. Regardless, until recently, Toyota’s response to this whole fiasco has been slow and slim. They undermined the political and social risks associated with the vehicle problems and are paying the price. I am sure if you go back in auto history, you will find plenty of recalls that would stack up real well in terms size/scope/severity for which Toyota got hammered. But all I have to say is that the timing of Toyota’s issues was real bad. Any other time, things wouldn’t have turned out the way did. From a strategy and planning perspective, the Toyota leadership failed their shareholders. But I am sure the rest of the auto industry has taken the time to internalize the lessons from Toyota’s experience and beefed up their quality/safety, legal, and communications teams.
In summary, competition comes in all kinds of shapes and forms, and the risk of banging heads with the government is most when times are tough for the masses. As part of competitive analyses due-diligence, businesses need to be realistic of this threat and prepare accordingly. You can either be quick like WellPoint or slow like Toyota – your choices are only limited by your imagination and resources at hand.
If you liked what you just read, Share It (link below). Thanks!
Reader Comments (2)
You state : Now is it fair for the government to step in where the job really belonged to DOT and/or NHTSA
Of course the answer is yes since those agencies are part of the Government! I think you are being conspiratorial if you think Toyota is being hit by the Governemtn (and not just in the US) because GM is part owned by the US Government. Toyota has been allowed to get away with large scale recalls for years. I don`t recall you thinking it was a conspiracy when the US Government came down on Ford Motor Company for their tire issues about 10 years ago.
Please stop being conspiratorial.
Mike: I appreciate your comments on my blog posting. By Government I meant "The White House". When you have agencies established with specific missions, those agencies need to do their job. I certainly think that maybe in this case the agencies did not respond adequately and hence the White House felt compelled to step in. Regardless, the US Govt. owning a significant piece of the world's #1 auto company does bring up the idea of "conflict of interest". When ever you are in that situation, your decisions/conclusions will be questioned.As for the Ford tire incident, I recall it being a lot more severe (~100 deaths) and that NHTSA handled it well without the White House stepping in. - Uday