Discussion of the relation between environmental regulations and corporate strategy

Changes in the business environment affect strategic decisions sustainably. The problem firms are facing is that due to the ongoing globalization and cross-linking of companies around the globe, strategic decisions are influenced by both our own environmental changes and those happening to business partners. Hence, decision making has become more complex over the last few decades. The business environment is affected by several factors. Ward et. al. (1995) identified four different variables: business costs, labor availability, market hostility and dynamism.
In this paper the focus is on changing environmental regulations and their effects on corporate strategies. As Larsson et. al. (1996) showed legislative changes have a major effect on strategic decisions and can be decided before long. This makes legislative changes a general concern for change management. Moreover, environmental standards differ from country to country or at least from region to region. Environmental regulations have to be kept in mind if investment decisions are to be made.
In this paper it will be discussed how environmental regulations affect company’s strategies on the basis of Rugman’s and Verbeke’s framework. Before introducing this framework two frequently discussed effects in economic research will also be looked at to point out what variables influence companies’ decisions concerning their strategic environmental decisions.