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Political Factor: Increase or Decrease in Tax Could Be An Example of A Political Element. Your

Political factors can significantly impact businesses in many ways. Changes in government policy around areas like taxes, interest rates, regulations and laws directly affect companies. Political decisions also influence broader economic and social conditions. Managers must closely monitor upcoming legislation and how different political environments in local and international markets could change business results or opportunities. Political stability, corruption levels, and a government's relationship with groups that shape policy are all important political considerations for companies.

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121 views2 pages

Political Factor: Increase or Decrease in Tax Could Be An Example of A Political Element. Your

Political factors can significantly impact businesses in many ways. Changes in government policy around areas like taxes, interest rates, regulations and laws directly affect companies. Political decisions also influence broader economic and social conditions. Managers must closely monitor upcoming legislation and how different political environments in local and international markets could change business results or opportunities. Political stability, corruption levels, and a government's relationship with groups that shape policy are all important political considerations for companies.

Uploaded by

pilot
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Political factor

There are many external environmental factors that can affect business. It is


common for managers to assess each of these factors closely. The aim is always
to take better decisions for the firm’s progress. Some common factors are
political, economic, social and technological (known as PEST analysis).
Companies also study environmental, legal, ethical and demographical factors.
The political factors affecting business are often given a lot of importance.
Several aspects of government policy can affect business. All firms must follow
the law. Managers must find how upcoming legislations can affect their
activities.

The political environment can impact business organizations in many ways. It


could add a risk factor and lead to a major loss.  You should understand that
the political factors have the power to change results. It can also affect
government policies at local to federal level. Companies should be ready to deal
with the local and international outcomes of politics.
Changes in the government policy make up the political factors. The change can
be economic, legal or social. It could also be a mix of these factors.

Increase or decrease in tax could be an example of a political element. Your


government might increase taxes for some companies and lower it for others.
The decision will have a direct effect on your businesses. So, you must always
stay up-to-date with such political factors. Government interventions like shifts
in interest rate can have an effect on the demand patterns of company.
Certain factors create Inter-linkages in many ways. Some examples are:

 Political decisions affect the economic environment.


 Political decisions influence the country’s socio-cultural environment.
 Politicians can influence the rate of emergence of new technologies.
 Politicians can influence acceptance of new technologies.
The political environment is perhaps among the least predictable
elements in the business environment. A cyclical political environment
develops, as democratic governments have to pursue re-election every few
years. This external element of business includes the effects of pressure groups.
Pressure groups tend to change government policies.
As political systems in different areas vary, the political impact differs. The
country’s population democratically elects open government system. In
totalitarian systems, government’s power derives from a select group.

Corruption is a barrier to economic development for many countries. Some


firms survive and grow by offering bribes to government officials. The success
and growth of these companies are not based on the value they offer to
consumers.

Below, is a list of political factors affecting business:


 Bureaucracy
 Corruption level
 Freedom of the press
 Tariffs
 Trade control
 Education Law
 Anti-trust law
 Employment law
 Discrimination law
 Data protection law
 Environmental Law
 Health and safety law
 Competition regulation
 Regulation and deregulation
 Tax policy (tax rates and incentives)
 Government stability and related changes
 Government involvement in trade unions and agreements
 Import restrictions on quality and quantity of product
 Intellectual property law (Copyright, patents)
 Consumer protection and e-commerce
 Laws that regulate environment pollution

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