Even when organizations operate outside of these countries, corruption can play a major role in their decisions. For example, in mergers or acquisitions, it is important to look at a company`s history for signs of corruption. If it is determined that the success of a company could not have been achieved without corruption, it is a sign for the acquiring company to stay away. • The political environment plays an important role in business regulation. Companies should monitor their political environment. Changes in political factors can affect the company`s strategy for the following reasons: You have an idea for a new product or service. You want to start a business that combines your passion with your education. You need to develop a marketing plan for a business. In each of these cases, you need to research the industry. Business owners need to understand the industries in which they operate to ensure their success. The financial health of a company generally reflects the health of the industry.
Therefore, by conducting an industry analysis, entrepreneurs can develop a strategy that is more likely to help the business grow and succeed. Similarly, if you are interested in an industry and want to do an industry analysis, this is the place for you. If you want to learn more about how globalization and political activity affect your business, consider taking an online course like Global Business. This way, you can prepare for the reality of globalization and the impact of political decisions on your business. Here are two concrete examples of political influences that we have assessed as part of our business planning work for our clients: • The political environment refers to the business environment, including all rules and regulations, laws, and the role of government in the day-to-day operations of organizations. Public goods benefit businesses because they enable other businesses to create value through their use. For example, a government provides public education that produces qualified people who can hire businesses. Another challenge in conducting international business is encountering situations where investments are withdrawn from a country.
This can happen when governments take more power than they deserve. In these situations, doing business in such countries could become very dangerous. Because public goods are accessible and benefit everyone, companies often do not produce them because they do not generate profit. In addition, political factors affect not only directly, but also other factors that can have a significant impact on the company and its operating environment. There are certain factors that create links in various ways, such as: The political situation of a country influences its economic environment. The economic environment influences the development of enterprises. The tax system is very important in terms of the political environment. When a government balances taxes and budgets, businesses are incentivized to produce more and grow.
Conducting a macro-environmental analysis, a good example of how political factors have influenced a company, can be associated with Nike. Nike is a globally recognized sportswear, shoes, accessories and sports equipment. Nike has been very lucky because the U.S. government has formulated such guidelines that will promote business growth. The company benefits from a stable currency and low interest rate conditions, as well as highly competitive tax provisions that help the company drive growth. The U.S. government has taken initiatives regarding transparency in the global value chain, from which Nike has benefited greatly. However, Nike is facing tough times in its outsourced manufacturers in other regions such as Indonesia, Thailand and Vietnam, where political unrest is on the rise.
For example, an aggressive takeover could topple a government. This could lead to riots, looting and general environmental unrest. These disrupt business operations. Sri Lanka was in a similar state during a civil war. Egypt and Syria have also faced unrest. Raising or reducing taxes could be an example of a political element. Your government could raise taxes for some businesses and cut them for others. The decision has a direct impact on your business. So you should always keep abreast of these political factors. Government interventions such as changes in interest rates can have an impact on the demand behaviour of businesses. The main form of corruption that affects companies is capture. There are many cases where corrupt companies influence policy decisions to their advantage and give them a clear competitive advantage.
Although this type of corruption is illegal in many countries, it is an expected part of business in others. If you read this article in a few years, you will probably know the outcome of Brexit and the impact on the country and businesses in the country. Did the British government finally decide to leave the EU or did it stay? If they left, was it a hard Brexit or a soft landing? Politics can have a huge impact on the economy. For example, regional laws and regulations may determine how a company operates or whether it benefits from international expansion. For this reason, aspiring entrepreneurs, business leaders, and strategists in highly regulated industries should familiarize themselves with the impact of politics on the economy. Governments can raise or decrease corporate taxes, which affects profits. They can also affect businesses by increasing VAT on products or corporate tax rates. • In the absence of political stability, interruptions and uneven patterns of work can be observed again and again. Jimmy`s experience spans more than 40 years in international, commercial and investment banking, as well as nearly a decade as a major shareholder and CEO of a fast-growing manufacturing and distribution company in California. Today, Jimmy spends his time advising and advising entrepreneurs on business planning issues as well as capital markets and financing strategies.
Jimmy works with clients around the world in industries such as financial services, real estate, manufacturing and hospitality. See details. Here`s a look at the role politics plays in business – domestically and internationally – and why it`s important to understand it. Several international political factors influence business when a company grows globally. The same applies when international companies become competitors by expanding into national territories. Political factors can affect a company by making the market environment more or less favorable for that company. Typically, governments have a lot of power over companies and often there`s not much companies can do about it. Extensive corporate governance policies enable companies to operate globally where government plays a role. The government establishes various rules and regulations (EXIM policy, Forex policy, etc.) to enable the company to operate in the international market and maintain its competitiveness in the global market. Political and governmental factors affect all businesses in all countries. All companies need to be flexible enough to respond to changing rules and policies.
Companies are often unable to control the changes to rules and policies that will take place in the future. However, companies planning to move to a new country or expand into a new country are well advised to conduct a PESTEL analysis and pay close attention to the political issues of the new country. It is a question of how and to what extent a government intervenes in the economy or in a particular industry. Basically, all the influences a government has on your business could be categorized here. This can include government policy, political stability or instability, corruption, foreign trade policy, tax policy, labour law, environmental law and trade restrictions. In addition, government can have a profound impact on a country`s education system, infrastructure, and health regulations. These are all factors to take into account when assessing the attractiveness of a potential market. • The government continues to impose restrictions in various sectors, affecting large companies. The political environment can be of utmost importance for a company. How a government develops its policies and the economic measures it takes can determine the success or failure of a business.
Promoting a certain type of business may result in higher revenues for industries and players in that sector, but it may result in losses for others. The government also takes into account all these risks and impacts, as sudden or prolonged changes in the political environment can affect GDP and the economy as a whole [3]. This is a perfect example of the types of influences you need to consider when assessing political factors in a PESTEL analysis. You will remember that a PESTEL analysis takes into account external factors that can affect a company. As a reminder, the six factors are political, economic, social, technological, environmental and legal. This article takes a closer look at the political factors considered in a PESTEL and provides some interesting and concrete examples, including, of course, the one mentioned above. The following table lists some of the issues that can be analyzed when considering policy factors: Governments should adapt their regulations and policies. Conversely, it should have an impact on a business. After the accounting scandals of the early twenty-first century, the US SEC became aware of compliance with corporate regulations. The authorities brought with them the Sarbanes-Oxley compliance guidelines of 2002.