Many external factors can affect your business. It is already a habit for managers to evaluate each of these factors closely. The goal is to always make better decisions for the firm’s progress.
Some common factors are economical, social, technological, and political. But political factors that affect businesses are given much importance. Various aspects of government policy can influence companies because they must follow the law.
Many political factors have an impact on the business industry, coming from the theory of the governing party to the political feedback to economic trends.
When government agencies and leaders set policies, they start movements that have a great impact on the legal structure in which firms either thrive or start to decline, and also financial market conditions that influence customers attitudes and the level of support that the government offers to companies and businesses.
The political environment can affect business institutions in many ways. It could increase the risk factor and might lead to a significant loss.
You should recognize that the political factors have the ability to change results, and can also influence government policies from local to the federal level.
If the administration policy changes, these makeup political factors. The changes can be economic, social or legal, but it could be these factors:
- Increasing or decreasing tax could be an example of a political component. The government might raise the tax for some businesses and companies, and have it lower for some. The decision will have a straight effect on your business. That’s why you need to remain up-to-date with such political factors.
- The political environment is possibly the least likely components in the business industry. Repeating political situation progress, as democratic governments have to proceed re-election every few years. Some firms survive by offering bribes to government officials. However, the success and development of these companies are not basing on what they offer to the consumers.
List of political factors that affect businesses:
- Corruption level
- Trade control
- Freedom of the press
- Competition regulation
- Regulation and deregulation
- Education law
- Discrimination law
- Antitrust law
- Data protection law
- Employment law
- Health and safety law
- Environmental law
- Tax policy
- Government stability and changes
- Government participation in trade unions
- Import limitations on quantity and quality of the product
- Legislation that manages environment pollution
- Consumer e-commerce and protection
- Intellectual property law
Effects of political factors on businesses
- Government changes in their rules and regulations could have an impact on business.
- The political condition of a country affects its commercial setting. The economic environment affects business presentation.
- The absence of political stability affects business operations, most especially for those companies who operate internationally.
- Obtaining political risk insurance is a method to manage political risk. Firms that have international operations use this kind of protection to decrease exposure to risk.
Importance of discerning political environment
Businesses should check their political environment. The changes in political factors can impact company strategies because of these reasons:
- Government view business as a crucial vehicle for social improvement.
- The government is responsible for protecting the public interest.
- A stable political system can affect the petition of a particular local market.
- Governments pass legislation, that can also influence the relationship between the firm and the suppliers, customers, and other companies.
- The government is the primary consumer of products and services.
- Government actions impact the economic environment.
There is one area in which political parties mostly varies is the level of regulation that the business industry needs to face.
When the party permits the more hands-off method to regulate companies is in power, then firms don’t have to worry about failures in the environmental protection and safety, as much as what they do when the party that approves more regulation is in the majority.
Political factors affecting businesses are likely related to legal factors influencing companies. A steady political environment develops confidence in consumers and corporations investing, or still planning to spend in a particular country. That’s why they have a profound influence on the economy and the development of businesses. Political resolutions also have a significant impact on a cultural and social environment in a country.
Susan Culp is a business blogger who writes on behalf of Moneybanker.com. She likes to read about any updates in the stock market and business revolution happening around the world. Susan loves to share her ideas about new business strategies to her readers. During her leisure time, she loves to travel and learn more about various cultures and policies about developing and growing businesses.