Published: May 19, 2004 in Knowledge@Wharton As the main character in Mario Puzo’s novel The Godfather once put it, “The lawyer with his briefcase can steal more than a hundred men with guns.”  Perhaps this explains why many business schools require future business leaders to study legal and political strategy as well as marketing and finance.  Consider the following:

• Wal-Mart’s bid to enter the California grocery market has been blocked by coalitions of unions, small business lobby groups and anti-sprawl groups, who mobilized voters to turn away Wal-Mart ballot initiatives to bypass local planning boards.
• Medco Health Solutions, the largest pharmacy benefits management company in the United States, last week settled lawsuits brought by state and federal authorities by agreeing to stop switching patients over to more expensive drugs not prescribed by their doctors (these drugs were favored by Medco because of private “rebate” agreements with drug manufacturers). Medco also pledged to begin disclosing its rebate practices to employers, doctors and patients. 
• The hi-tech market has been roiled by several prominent legal battles, including SCO Group’s attempt to litigate its way into control of the Linux software market. Linux, the open-source alternative to Microsoft’s “Windows” operating system, is under threat because SCO claims that it owns the copyright to a key piece of Unix computer code embedded in Linux.

 

A new book by Wharton legal studies professor G. Richard Shell, called Make the Rules or Your Rivals Will, translates moves like these into the language of corporate strategy – explaining the 10% of law and politics that makes 90% of the difference to business decision makers.  Shell’s thesis centers on what he calls “competitive legal strategy” – the use of contracts, courts, regulation, and lobbying to secure competitive advantage in business.
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