Certain factors create links in many ways. Here are some examples: 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.
Here are two concrete examples of political influences that we have evaluated as part of our business planning work for our clients: In addition, political factors not only have a direct impact, but also other factors that can have a significant impact on the company and its operating environment. Certain factors create links in different ways, such as: As political systems vary in different areas, the political impact differs. The people of the country democratically elect an open system of government. In totalitarian systems, the power of government comes from a select group. There are 4 main effects of these political factors on business organizations. The political environment is perhaps one of the least predictable elements of the business environment. A cyclical political environment develops as democratic governments seek re-election every few years. This external element of the business includes stakeholder impact. Interest groups tend to change government policy. A country`s political factors and environment affect any business organization and can also introduce a risk factor that can result in losses for the company or affect its profit stream.
The political environment can change due to the policies and actions of the dominant government at all levels, from federal to local. It is very important for a company to consider the variability of government policies and regulations in order to maintain a stable business environment. 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. Understanding global politics is critical to the success of your business, whether you`re looking to expand internationally. It is always possible that an opportunity to globalize your business will arise. The political environment can affect business organizations in several ways.
This could add a risk factor and result in a significant loss. They need to understand that political factors have the power to change outcomes. It can also have an impact on government policies at the local and federal levels. Companies must be prepared to deal with the local and international results of the policy. Governments could change their rules and regulations. This, in turn, could affect a business. The lack of political stability in a country affects business operations. This applies in particular to internationally active companies. 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 particular attention to the political issues of the new country. 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. Political factors can influence companies in several ways. These external environmental factors can result in a risk factor that can lead to a significant loss of business. These factors can alter overall results and, therefore, companies should be able to cope with local and international policy outcomes. One of the biggest challenges for businesses is corruption. The ability to influence companies – whether or not it creates value – can enable public servants to use their power. Knowledge of global politics is also important because of international competition from foreign companies. However, the challenges of global politics can offer many opportunities.
An effective trade strategy takes into account both globalization and national factors. They can introduce new laws such as the national minimum wage, which affects workers` profits and rights. Governments can also introduce new health and safety laws, which means a company needs to change the way it works, for example by training its employees. 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. An additional challenge in international trade arises when international companies enter domestic markets. Consumers who buy from your business could turn to international competitors. This can be difficult because your competitors can offer similar products at a lower cost. To understand the role of government in the economy, it is important to recognize its place in a country. In the Global Business online course, Harvard Business School Professor Forest Reinhardt explains that the state has four basic functions: Politics can benefit companies through value creation, but it can also intervene in value creation. Whether through corruption, subsidizing domestic companies or the globalization of competitors, several challenges can arise that threaten the well-being of a company.
Compared to corporations, governments have more power. For example, governments can force individuals and businesses to pay taxes, whether or not it adds value. 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. 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. Some indicators give an idea of the risk exposure in some countries.
The Index of Economic Freedom is a good example. It assesses countries based on how policies affect trade decisions. Companies should monitor their political environment. Changes in political factors can affect the company`s strategy for the following reasons: This is a perfect example of the types of influences you need to consider when evaluating political factors in a PESTEL analysis. You will remember that a PESTEL analysis takes into account external factors that can affect a company.