Here are two concrete examples of political influences that we have assessed as part of our business planning for our clients: You must have heard time and time again that an election year is an extremely important factor for the economy. For this reason, the type of government that governs in the center and in the state has a great influence on business. The government also decides on all fiscal policies, monetary policies and fiscal modules. Firms are less likely to invest new capital or enter foreign markets when the political situation is turbulent. Whenever you wear the decision-maker`s hat, you are reluctant to take risks. They do not want to enter a foreign market where there is political instability. The political environment is extremely important when doing business abroad. For example, it may be difficult to access the same resources as a domestic company due to restrictions on foreign companies. In addition, the legal framework could be very different from that of your country. 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. Because public goods are accessible and benefit everyone, companies often do not produce them because they do not generate profit. Labour laws are enacted and implemented by the government to ensure that workers` rights are protected. It covers all aspects of business relations between employers and employees. And labor law is considered very complicated, which has many pitfalls. If companies use the latest technologies and developments and implement them with the latest law, then they can move the business forward in the right way. There are many countries where the employment of premises when opening a foreign company is mandatory. If a company respects this consumer protection, it avoids legal problems or fines.
Compliance with consumer protection laws is necessary. Violating these rules could also seriously damage your brand reputation. Therefore, companies need to understand the impact in order to develop strategies that reap the benefits of this trade policy. For example, the recent communal unrest in New Delhi, which began during President Donald Trump`s visit to India. Although the two have no connection, India and the United States have signed many trade agreements and, ironically, companies have been affected by these unrest. Since political systems vary from one area to another, the policy implications differ. The people of the country democratically elect an open system of government. In totalitarian systems, the power of government comes from a select group. All these factors will shape the political and legal environment in which the firm must operate and be competitive. There are three main elements of a political-legal environment. Let`s take a look.
How governments fulfill this responsibility has a significant impact on businesses. For example, to protect the well-being of citizens and ensure a living wage, a government can introduce a basic wage requirement. The United States is an example of a federal minimum wage of $7.25 per hour. There are 4 main effects of these political factors on business organizations. Value creation in the economy refers to the process of creating goods and services that are worth more than the resources used to produce them. Governments can create value in the same way as businesses by buying resources such as labor and raw materials and using them to produce higher-value goods or services. Today, in May 2019, we don`t know, and it may be several months before we know. So when we run a business, how do we plan? Is it wise to expand now, or should we consider moving our operations to another country? If we are considering a loan or investment in a company in the UK, how will the effects of Brexit make the loan or investment better or worse? How this article will be published, we don`t know.
Businesses can be severely affected due to a lack of political stability. This could be problematic for companies operating globally. Such situations will lead to riots and looting, which can seriously affect businesses. The operation and regular operations of the business are directly affected due to these conditions, and it is difficult for businesses to operate. Community unrest is one example, from which businesses suffer greatly. The lack of political stability in a country affects business operations. This applies in particular to internationally active companies.