Politics And Business
Politics is by and large an important factor that affects any kind of business. As per the legislative rules of a county, there are elections and by elections that happen to elect leaders who can lead the country or state. They bring in innovation that affects policies. Policymakers ensure that there is always an advantage for the treasury so they can bring in many more development work. Policies that rule businesses are given importance by business leaders as it has a spiralling effect on how a company functions. The business leaders and managers will have to study every policy to make informed decisions.
Companies study various factors that can affect a business environment. This is called pest analysis. That is the analysis of political, economic, social and technological factors that most affect the performance of a business or brand. Other factors that also affect the business are demographics, legal, environmental and ethical. As all businesses and organizations should follow law, political factors are given almost importance as it affects the operations of the business.
It is not easy to run a business without understanding the policies that could affect. It is a risk factor and if one does not have proper mitigation and contingency plans, it could lead to loss and business closure. It doesn’t matter if it is local politics or international politics, companies should have a plan in place to deal with any political change. It is all quite interrelated. Political decisions will affect the economy and influence the socio-cultural environment of the country. Policies will influence the rates and taxes and also applications of new business trends and technologies. Policies are different in each country and one must understand that before relocating or launching new projects and brands offshore.
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Political Factors That Affect Business
There are so many aspects of politics and government that affect how a business functions. This includes even the corruption of bureaucrats. Corruption is one main barrier that hinders economic development in many countries. It is easy to offer bribes to government officials to bypass certain laws. But, such companies offer much less to the country and are not valued based on customers. Laws that govern education, antitrust, employment, discrimination, environmental, intellectual property, data protection and health and safety affects most of the entities of a business organization.
Freedom of press, bureaucracy, regulation and deregulation are other political factors. Government stability and its involvement in trade union will bring changes in business processes. The government can increase or decrease the tax rates and incentives. The government can lay import restrictions on certain raw material or products. It could decide the quality and quantity of the import. Trade controllers, tariffs, consumer protection and ecommerce can be deciding factors for many business plans. Government policies affect the economy which will in turn affect the performance of the business. There will be major differences in the way two different political parties handle policies. Taxes, government spending directly aim at the economy.
Greater level of spending will boost the economy. Rules and regulations can be changed by every political party that conveys power. Making public companies more liable, or being more important to corporate compliance can all be part of regulations that can change from time to time. Business operations get easily affected by political instability. Political risks can in a way be mitigated by political risk insurance. This is mostly advantageous to companies that have International operations. This reduces risk exposure. Economic freedom indices of s country will give a fair idea about the risk exposure as it ranks the political impacts on businesses.
Importance Of Being Observant For Stable Business
It is a good idea that organizations have a team to track the political environment, stability rules and regulations of the current government. This will affect the business strategies you plan to implement. Some policies can be growth oriented that will affect the performance of certain products in the local or international market. International politics can determine the tax regulations, currency exchange that will affect the profit of a business. Transparency in the global value chain has also benefited companies. Instability in government can lead to aggressive takeover that can lead to riots and war. Sri Lanka, Syria and Egypt are examples of countries that had unstable government and business climates.
There are instances where governments view business organizations as a platform for social reform. Companies will have to be conscious about their value and the way they do business in order to inspire others. Some legislation passed by the government can impact the relationship between the company, its customers, suppliers and partners. Government has to protect public interest and hence will be in a situation to regulate policies. It will affect business in a way and also influence the economic environment. Any government initiatives that affect the development of the country will affect the business as well.