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Geopolitics
How to harness the power of nonmarket strategy
Published June 26, 2025 in Geopolitics • 11 min read • 
Audio available
Forward-thinking leaders proactively shape their external environment, turn uncertainty into certainty, and create substantial value in the process. Here is a practical framework for developing effective nonmarket strategies.
Liberation Day, 2 April: Businesses worldwide grapple with the uncertainty triggered by President Donald Trump’s proposed tariffs; executives face sudden and daunting strategic challenges; supply chains, already strained by years of geopolitical tensions and economic volatility, are hit by renewed disruption and unpredictability; companies wonder whether to relocate manufacturing, increase inventory buffers, or lobby policymakers directly.
The uncertainty forced many business leaders to pay attention to nonmarket strategy, a crucial but often underutilized dimension of strategic leadership.
Now consider an earlier example: in 2022, as Europe struggled with its most severe energy crisis in decades following Russia’s invasion of Ukraine, the German chemical giant BASF faced an existential threat. Natural gas prices had increased tenfold, a resource the company relied heavily upon as a feedstock and energy source. Rather than focusing solely on market solutions like hedging or raising prices, the leadership deployed a sophisticated nonmarket strategy: coordinating with competitors across the chemical industry to jointly engage with policymakers, building coalitions with labor unions concerned about job losses, and working directly with German and EU officials to shape energy policies. The approach helped secure priority access to limited supplies and influenced the design of price caps and subsidy mechanisms, ensuring the industry weathered the crisis.
While most executives excel at competitive market strategy (pricing, positioning, and resource allocation), far fewer have mastered the art of nonmarket strategy: the deliberate shaping of the broader environment in which market competition occurs. In a world characterized by geopolitical tensions, regulatory shifts, and technological disruption, success increasingly depends on navigating the “uncertainty environment” that exists outside traditional market boundaries. The ability to address these uncertainties represents the most significant untapped source of competitive advantage available to leaders.
Here we present a framework for developing effective nonmarket strategies based on our research with global companies across sectors over many years. We show how forward-thinking leaders are moving beyond reactive approaches to proactively shape their external environment, turning uncertainty into certainty, and creating substantial value in the process.
From market to nonmarket: the evolution of strategic focus
Strategic management has evolved considerably over the past five decades, with each era introducing new frameworks to help companies secure a competitive advantage.
The 1970s and 80s emphasized competitive positioning, with Porter’s frameworks guiding companies to find defensible positions within industry structures. The 90s and early 2000s shifted focus to a resource-based view, emphasizing unique internal capabilities and core competencies. By the mid-2000s, value innovation and “blue ocean” thinking encouraged companies to create uncontested market spaces. More recently, digital platform strategies have dominated, emphasizing network effects and ecosystem orchestration.
In each phase, scholars and executives focused on the variables they believed were influential in impacting sustainable competitive advantage and which should be central to strategic planning.
Nonmarket strategy focuses on shaping the wider landscape in which market competition occurs. Earlier strategic frameworks treated regulatory, social, and political factors as external constraints to be navigated, but today’s most sophisticated companies view these nonmarket elements as strategic variables to be influenced.
Take the world’s largest chip maker, Taiwan Semiconductor Manufacturing Company (TSMC). Beyond its technological excellence, the company’s extraordinary success stems from masterful nonmarket strategy. The company has strategically positioned itself as indispensable to the US and China amid intensifying technological competition. It has balanced relationships with both powers while working to influence US policy on semiconductor manufacturing. The 2022 CHIPS and Science Act, which provides $52bn in subsidies for domestic semiconductor production, was shaped partly through TSMC’s strategic engagement with American policymakers. Simultaneously, the company has maintained vital access to the Chinese market through diplomacy.
This approach reflects a crucial insight: market strategy focuses on competition within a defined arena, but nonmarket strategy may include pre-competitive cooperation to shape the arena itself as well as competitive moves to shape the environment to your advantage relative to competitors. Most executives underinvest in this dimension, leaving significant value on the table.
The uncertainty challenge … and opportunity
Four primary types of uncertainty characterize the nonmarket environment:
- Technological: Which standards, designs, or frameworks will prevail?
- Regulatory: What rules will govern the market, and how will they be enforced?
- Commercial: Will supply and demand develop as predicted?
- Political: How will geopolitical tensions affect global operations and supply chains?
These uncertainties create significant strategic challenges for individual firms. These can include:
- Difficulty determining where, when, and how much to invest.
- Increased risk of making “wrong bets” on technologies or markets.
- Vulnerability to being left behind as markets evolve.
At the industry level, these uncertainties lead to broader negative consequences:
- Collective underinvestment in critical infrastructure and R&D.
- Inefficiencies across value chains.
- Suboptimal market growth.
- Vulnerability to substitute industries or technologies.
The 2021-2023 semiconductor shortage provides a telling example. Individual manufacturers hesitated to invest billions of dollars in new fabrication facilities due to uncertainty about future demand. This collective hesitation exacerbated shortages, causing estimated losses of over $200bn across automotive, electronics, and other sectors – far exceeding what rational investment would have cost.
Crucially, where most executives see only risks in this uncertainty, strategic leaders recognize extraordinary opportunity. Nonmarket strategy provides tools to transform uncertainty into certainty, not by predicting the future, but by collaboratively shaping it.
In practical terms, this means:
- Replacing insufficient R&D with coordinated, joint research initiatives.
- Developing clear standards rather than competing with incompatible technologies.
- Creating regulatory certainty through industry-led frameworks.
- Aligning investments across supply chains to reduce boom-bust cycles.
This approach creates value at both firm and industry levels. Individual companies benefit from better investment decisions, reduced risk, and access to best practices. Industries gain optimal value chains, accelerated market growth, superior technologies, and stronger positions relative to substitute products.
A practical framework for nonmarket strategy
Developing an effective nonmarket strategy requires answering six key questions:
1. What are your market goals?
An effective nonmarket strategy explicitly supports market objectives. Common goals include:
- Increasing demand: Nestlé led industry efforts to establish food safety standards in developing markets, expanding the overall market for packaged foods while building consumer trust.
- Reducing costs: The pharmaceutical industry has coordinated to streamline regulatory approval processes globally, significantly reducing compliance costs and time-to-market.
- Increasing willingness to pay: The Wi-Fi Alliance’s certification programs increased consumer confidence in compatible products, supporting premium pricing for certified devices.
- Managing competitive dynamics: Apple has advocated for stringent privacy regulations that disproportionately impact advertising-dependent competitors like Meta while aligning with Apple’s hardware-focused business model.
- Supporting brand and reputation: The outdoor clothing company Patagonia’s environmental advocacy reinforces its brand positioning while influencing regulations that affect its industry.
A clear understanding of these goals should guide all of your nonmarket activities.
2. What is the issue context?
Nonmarket strategy requires an understanding of the broader context of the issues you’re seeking to address:
- What stage of evolution is the issue in? Early-stage issues offer more opportunity for shaping, while later-stage issues may require adaptation.
- Who are the active stakeholders, what is their relative power, and what are the dynamics among them? Map the key players, their influence, and how they might respond to different approaches.
- What tactics are available or excluded? Consider formal constraints (laws and regulations) and informal norms that affect available strategies.
The rapidly evolving regulatory landscape for artificial intelligence illustrates the importance of this analysis. In 2023, as the EU finalized its AI Act, companies that had engaged early in the standard-setting process gained significant advantages. Microsoft’s proactive approach helped ensure its responsible AI framework aligned with emerging regulations, reducing future compliance costs. In contrast, companies that remained passive faced greater uncertainty and potential competitive disadvantages.
3. Who are the key stakeholders?
Successful nonmarket strategy requires detailed stakeholder mapping:
- What are stakeholders’ ideologies, goals, and priorities? Understanding motivations beyond immediate policy positions is crucial.
- What is their ability to influence and their susceptibility to being influenced? Some stakeholders have formal authority but may be constrained, while others lack formal power but wield significant influence.
- What are their strategic approaches and tactics? Anticipating how stakeholders operate helps in planning engagement. It is essential to understand that nonmarket dynamics are much more complicated than market dynamics and often involve long chains of indirect influence across a range of stakeholders.
- What is their intensity of interest in the issue? Highly motivated stakeholders with focused interests may exert outsized influence.
For example, when Volkswagen faced its diesel emissions crisis, it deployed a sophisticated stakeholder strategy. The company identified that German labor unions could serve as powerful allies with their deep political connections and shared interest in the company’s survival. By engaging unions early and ensuring worker protections, VW mobilized significant political support that helped moderate regulatory responses and provide time for the company to address environmental concerns.
4. What strategy will you pursue?
Nonmarket strategies typically focus on three goals:
- Creating, supporting, or blocking laws and regulations: This involves direct engagement with legislative and regulatory processes.
- Influencing regulatory interpretations: Even when laws are established, their implementation often involves significant discretion.
- Developing voluntary industry standards or practices: Industry self-regulation can preempt or shape formal regulation.
In the aftermath of the 2008 financial crisis, JPMorgan Chase pursued a two-pronged nonmarket strategy. Publicly, the bank accepted the necessity of increased regulation while actively shaping its form. Behind the scenes, it worked to influence technical implementation details that would affect competitive dynamics. This nuanced approach helped the bank maintain regulatory relationships while securing operational advantages within the new framework.
5. What methods, coalitions, and tactics will you employ?
Implementing a nonmarket strategy requires careful consideration of the following:
- Resources: What financial, organizational, and reputational resources will you commit?
- Coalitions: Will you work with competitors, supply chain partners, or cross-sector allies? How will roles and responsibilities be allocated?
- Influence paths: Will you engage stakeholders directly or work through intermediaries?
- Tactics: Will you focus on lobbying, public campaigns, participation in standards bodies, or some combination?
Apple’s privacy campaign illustrates this approach. The company has deployed significant resources toward positioning privacy as a fundamental right; built coalitions with privacy advocates and select policymakers; created direct influence paths through executive engagement and indirect paths through marketing to consumers; and combined tactics such as product design changes, policy advocacy, and public messaging. This coordinated approach has shifted the competitive landscape in Apple’s favor while advancing legitimate privacy concerns.
6. How will you evaluate success?
Effective nonmarket strategies include clear evaluation criteria:
- Ethical considerations: Does the strategy align with your organization’s values? What are its broader social and environmental impacts?
- Feasibility: What is the probability of success given stakeholder dynamics? One challenge in measuring the feasibility of nonmarket strategy is that firms often have less direct control over outcomes.
- Return on investment: What are the expected benefits relative to costs, considering financial and non-financial returns?
- Strategic alignment: How well does the nonmarket strategy complement your market strategy?
Organizations can develop coherent nonmarket strategies that create substantial value by systematically addressing these six questions.
Reducing uncertainty
Companies that successfully implement nonmarket strategies employ several key mechanisms to reduce uncertainty and gain a competitive advantage.
Joint R&D initiatives
When technological uncertainty threatens market development, collaborative R&D can accelerate progress and reduce risk. The Bluetooth Special Interest Group demonstrates this approach. Rather than competing with proprietary wireless standards, companies including Ericsson, Intel, and Nokia collaborated to develop an open standard. This cooperation created certainty around technological direction, enabling the entire ecosystem to invest confidently in compatible products.
Collaborative approaches to early-stage research have become increasingly common in the pharmaceutical industry. Initiatives like the Innovative Medicines Initiative in Europe bring together competing companies to address fundamental scientific challenges, allowing participants to share risk while accelerating innovation.
Standards development and adoption
Standards reduce market fragmentation and create certainty for producers and consumers. The USB Implementers Forum exemplifies this approach, bringing together competitor companies to establish uniform standards for connectors and protocols. This collaboration has created billions of dollars in value by facilitating interoperability and reducing duplication of effort.
Matter, the smart home connectivity standard launched in 2022, is another example. Amazon, Apple, Google, and Samsung, all of which are fierce competitors in the smart home market,
collaborated to address consumer confusion and market fragmentation. By reducing technological uncertainty, they collectively expanded the market for connected devices.
Regulatory engagement
Proactive regulatory engagement can transform unpredictable regulatory environments into sources of competitive advantage. The automotive industry’s engagement with safety regulations is an example. Through organizations like the European New Car Assessment Program (Euro NCAP), manufacturers have helped develop standardized safety requirements that provide certainty for product development while raising barriers to entry for less sophisticated competitors.
Similarly, when autonomous vehicle technology emerged, companies like Waymo and General Motors didn’t wait for regulators to act. They proactively engaged with transportation authorities to develop frameworks for testing and deployment. Companies participating in these discussions gained valuable insights to guide their development efforts while helping create regulatory certainty that encouraged investment.
Supply chain alignment
Nonmarket strategies often focus on aligning investments across supply chains to reduce uncertainty about future capacity and demand. The semiconductor industry offers a strong illustration. Leading manufacturers like TSMC work closely with key customers, equipment suppliers, and even competitors to coordinate capacity expansions and technology development roadmaps. This coordination reduces boom-bust cycles while ensuring that complementary technologies evolve in tandem.
In the electric vehicle space, automakers are taking a similar approach to battery supply chains. Companies like Ford and Volkswagen have established joint ventures with battery manufacturers and raw material suppliers to create certainty around critical inputs. These arrangements go beyond traditional supplier relationships to include shared investments, technology development, and risk management.
The leader’s role in nonmarket strategy
For executives accustomed to competitive market thinking, nonmarket strategy requires a significant mental shift from competition to cooperation, either with competitors to improve the industry context (often over substitute industries) or with other nonmarket players, such as NGOs, to develop standards or regulations that favor their own company. Leaders must recognize that in many cases, the greatest value comes not from outperforming rivals within existing markets, but from shaping the broader environment in which they operate.
This shift demands several key capabilities:
- Systems thinking: Understanding how market and nonmarket factors interact within complex systems.
- Stakeholder empathy: Seeing issues from diverse perspectives to identify collaboration opportunities.
- Long-term orientation: A willingness to invest in activities with extended payback periods.
- Diplomatic skills: The ability to build coalitions with competitors, regulators, and other stakeholders.
- Ethical judgment: Ensuring that nonmarket strategies serve not only corporate interests but broader societal needs.
The uncertain global environment makes nonmarket strategy more important than ever. Trade tensions, supply chain disruptions, technological change, and regulatory evolution create risks and opportunities. Leaders who develop sophisticated approaches to these challenges can create substantial competitive advantage while helping navigate today’s most pressing business challenges.
Rather than viewing nonmarket factors as constraints to be managed, forward-thinking executives see them as strategic variables to be shaped. In doing so, they reduce uncertainty and create value for their organizations and society. Nonmarket strategy represents the next frontier of strategic management, and perhaps its most powerful frontier yet.
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