This is a non-market factor, but it can still have a strong impact on a business. The political-legal environment is a combination of many factors such as the current political party, the degree of politicization of trade and industry, the effectiveness of the current government, government policy, the current legal framework, the attitude of the public towards the economy, etc. The lack of political stability in a country affects business operations. This applies in particular to internationally active companies. A political system is basically the system of politics and government in a country. It governs a comprehensive set of rules, regulations, institutions and attitudes. A key distinguishing feature of political systems is the philosophy of each system regarding the rights of the individual and group, as well as the role of government. The local economy and business environment are determined by politics, which is influenced by the philosophy of this political system. There are more than thirteen main types of governments, each consisting of several variants. The Parti Québécois (if they form the next government in the province of Quebec) have declared that every business, even small businesses, must operate in French (language of work) – which also means that employees must speak to each other in French, EVEN if they both speak English, of course. When the reader completes this unit, they are expected to be able to read information about an international business, commercial or commercial situation and analyze it in terms of the environments involved and how they have exerted influence. A country therefore needs a strong and functioning legal system with laws that protect consumers and producers.
There are various other issues such as company law, royalty law, patent law, intellectual property rights. How can rules that allow people to smoke „medical” marijuana become a problem for a small business owner? 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. 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. Companies should monitor their political environment.
Changes in political factors can affect business strategy for the following reasons: Rules and regulations created by politicians have a significant impact on the cost of running a business and how it can market its products and services – for example, Canada has strict regulations on alcohol and tobacco advertising. China`s political stability affected the level of foreign business activity in China after the Tiananmen Square massacre which significantly declined in many areas, including tourism and foreign investment. While companies not yet operating in China are cautious about investing in China, countries already involved in investment activities seem to be waiting for a quiet period when economic progress resumes, believing that China will not expel foreign investors in the meantime. Existing joint ventures and foreign production facilities are unlikely to be closed under the current regime, but political stability remains a big issue for foreign investors. At the same time, China`s economic growth and reforms since 1978 have dramatically improved the lives of hundreds of millions of Chinese, increased social mobility, and expanded the scope of personal freedom. This meant much more freedom to travel, employment opportunities, educational and cultural activities, choices of work and housing, and access to information. In recent years, China has also passed new criminal and civil laws that provide additional guarantees to citizens. Village elections were held in more than 90% of China`s one million villages. As we have seen, a company has no control over the different elements that make up its macro environment.
But it`s important to study them, as it allows companies to prepare for change. Let`s find out a little more about the political-legal environment and the social environment and its impact on a company. International laws, etc., which also have a great impact on corporate business. For example, new GST legislation will have a significant impact on businesses. 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. Permission to quote Canadian Business magazine from Scott Steele, Editor-in-Chief. Professor Richardson has written several articles on e-commerce and international trade for Canadian Business magazine over the years.
The government intervenes politically in trade, may try to protect jobs or certain industries. Some industries may be considered essential for national security purposes, such as defence, telecommunications and infrastructure. A country`s import and export may be affected by these national security issues, as some governments may not want advanced technological information to be sold to hostile foreign interests. Some governments use trade as retaliation when another country is politically or economically unjust. On the other hand, governments can influence trade to reward a country for its political support in global affairs. An example of this is his membership in the Clinton administration`s apparel industry partnership in 1997. Nike appreciated the changes in political factors in many ways. However, political pressure has had a negative impact on Nike`s employment practices. China entered the era of multilateral trade after formally joining the World Trade Organization (WTO) in 2005. This is an important move for China because China has fully implemented the principles of the market economy. But in practice, China is suspected of building superiority to compete with the strength of the US economy.
The political structure, basic laws, rules, regulations and practices that are implemented derive from China`s political system and control state power, government, and state-society relations. On the basis of the Union of Workers` Peasants and the democratic centralism practiced by the people, show whether China is a socialist country and whether the primary system in the country is the socialist system. Incredibly, in a moment of „political correctness”, the Human Rights Commission www.ohrc.on.ca/ agreed to hear the case AND paid a lawyer to represent the smoker. This forced the small business owner to hire a lawyer to defend himself, and he spent (until February 1, 2008) over $100,000 on legal fees and expert witnesses to „defend” himself against this discrimination lawsuit. The owner of the business says it is not „discriminatory” at all, he simply defended customers who did not want to smell the Majrijuana smoke coming in and out of the bar. The political situation of a country influences its economic environment. The economic environment influences the development of enterprises. A country`s political climate is another critical factor that managers must take into account in their day-to-day activities.
The scope of government activity, the types of laws it passes, and the overall political stability of a government are three components of the political climate. For example, a multinational like General Electric assesses the political climate of a country before deciding to set up a factory there. Is the government stable or could a coup disrupt the country? To what extent are the regulations applicable to foreign companies, including foreign ownership of business property and taxation? Import duties, quotas and export restrictions must also be taken into account. China is particularly dangerous in terms of political risks. The possibility of nationalizing industries must be considered. In fact, this has already happened in China (1949). There is also a risk of confiscation, expropriation, currency inconvertibility and termination of the contract. Currency devaluation and runaway inflation are possible scenarios in many countries that make the adequacy of insurance limits catastrophic as one of many potential problems. There is also a risk of personal harm or kidnapping to the company`s employees and a risk of extortion attempts for the company. A unique form of political risk occurs in China, and that is the constant struggle between the country`s central government and provincial and municipal governments over applicable law and its compliance or non-compliance. This makes it difficult for companies operating in China to know exactly what the rules are.
On January 25, 2005, the Toronto Star published an article in the Associated Press about how Microsoft will ship a different version of Windows to Europe than the one sold in North America – reason? – the EU regulatory environment. AP reported: „Microsoft Corp. will immediately ship a version of Windows that has been removed from the company`s media player in Europe and will reveal some software plans, though it continues to appeal European Union sanctions.