Non-Market Forces and the Limits of Competitive Strategy in Emerging Markets
The frameworks that dominate corporate strategy — Porter's five forces, the resource-based view, dynamic capabilities — were developed in and for contexts where markets are the primary arena of competition. They are not wrong. But they are incomplete in a way that becomes consequential when applied to emerging markets, where the boundary between market and non-market competition is more porous than the frameworks assume.
In South Africa, as in most of sub-Saharan Africa, a firm's competitive position is shaped as much by its capacity to navigate political institutions, regulatory bodies, and state-owned enterprise relationships as by its market strategy. This is not a deficiency to be corrected. It is a structural feature to be understood.
Non-market strategy as a first-order variable
The concept of non-market strategy — addressing the political, regulatory, and social environments that affect firm performance — has been present in the strategy literature since David Baron's work in the 1990s. In practice, it is too often treated as a secondary consideration: something managed by the government relations team while the "real" strategy work happens elsewhere.
In emerging markets, this sequencing is wrong. The non-market environment is not an overlay on the competitive landscape. It is, in many respects, the competitive landscape. Firms that understand this — and build genuinely integrated strategies that treat regulatory positioning, stakeholder management, and political risk as first-order strategic questions — consistently outperform those that do not.
What this looks like in South Africa
South Africa's economy is characterized by a high degree of state participation — through regulation, procurement, state-owned enterprises, and increasingly, through industrial policy frameworks like the Auto Investment Scheme, the Mining Charter, and the energy transition compact. For firms operating in these sectors, the strategic question is not only how to compete against market rivals. It is how to position relative to the state as a rule-setter, customer, and competitor simultaneously.
The firms that have navigated this environment most effectively share certain characteristics. They invest in sustained, substantive engagement with regulatory and policy processes — not as a defensive measure, but as a source of strategic intelligence and positioning advantage. They understand that the regulatory environment is not a fixed constraint but a contested terrain, and that participation in its formation is a legitimate and consequential strategic activity.
They also understand the limits of this approach. Non-market strategy is not a substitute for market competitiveness. Firms that rely primarily on regulatory capture or political relationships to sustain their positions are exposed to the inevitable shifts in political settlements that characterize emerging markets. The most durable competitive positions are those built on genuine capability — and reinforced by non-market positioning.
The analytical implication
Strategy analysis in emerging markets requires an expanded frame. The question is not only "what is our competitive advantage relative to market rivals?" but also "what is our position in the non-market environment, and how does that position affect our ability to create and sustain value?"
These questions require different analytical tools — political economy analysis, stakeholder mapping, regulatory trajectory assessment — that are not typically found in standard strategy methodologies. They also require a different kind of organizational capability: the capacity to engage seriously and credibly with governments, regulators, and civil society as a core strategic function, not an afterthought.
Building that capability is not easy. In most emerging markets, it is also unavoidable.
Lelo Skosana is Managing Director and Head of Public Affairs for South Africa at FTI Consulting.