Political Factors: Their Influence on Global Business Operations

This essay examines the crucial role of political factors in global business, highlighting their potential to introduce risks and opportunities for firms. It discusses how political environments, shaped by government policies and regulations, can significantly impact economic growth, social trends, and technological advancements. The essay analyzes two articles, one detailing the negative effects of political criticism on businesses in the USA and another illustrating how supportive governmental policies in Australia can foster business confidence and regional economic growth. The analysis emphasizes the need for companies to be prepared for local, national, and international political consequences, as changes in government policies can influence various factors such as economic stability, legal frameworks, and social dynamics. Desklib offers a variety of resources, including similar essays and study tools, to help students further explore this topic.

Running head: POLITICAL FACTORS AFFECTING BUSINESS
POLITICAL FACTORS AFFECTING BUSINESS
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1POLITICAL FACTORS AFFECTING BUSINESS
The aim of this essay is to discuss the importance of analyzing microenvironment in
the context of global business of the world. There are four chief factors that help the business
grow in the international market. These are political, economic, social and legal factors that
describe a framework of the microenvironment factors utilized in environmental scanning
components of the strategic management (Collins 2018). The successful global organizations
conduct a strategic analysis and market research before they enter any country’s market and
use this tools for their external analysis. It this macro-environmental factors help the
companies to understand the market growth, business position direction as well as potential
for their operations. These factors are important to be analyzed as they may affect the
business both positively or negatively. As the aim is to make better decisions for the firms,
the managers want to minimize the impact of the external factors on business (Vahlne and
Johanson 2017). Therefore, the importance of external environment analysis is so important.
The aim of this essay is to discuss the importance of political factors in the decision making
process and the success of the firms.
The political factors or environment of any country have strong impact on the
business organizations and capable to introduce risk factors which cause the business to
suffer huge losses and compromise over their profit stream. This factor among all is most
important because political environment of a country can be changed at any point of time.
with the change of the government, the existing policies along with associated actions also
change at every level (Müller et al. 2017). Therefore, it is mandatory for the firms to plan
following the variability in the policies and regulations of the government for maintaining a
stable business environment.
Despite the fact the other macro environmental factors are also important but these
economic, social and lead gal issues all depend on the change of government and the policies
(Devereux 2018). Economic growth of a country relates with the interest rates, exchange

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rates and inflation rates which are the directly connected with the business operations. This is
because interest rates affect the companies’ cost of capital which regulate the growth and
expansion of the companies. The exchange rate accepts the costs of exporting goods, supply
and price of imported goods in the economy but all will have positive impact in the growth of
the firms when the government policies will be positive (Mont 2018).
Social factors include population growth rate, age distribution, cultural aspects and
career attitudes. The social trends of the country can affect the demand of the companies’
products as well as the operations of the firms. However, the companies can adapt different
management strategies to cater the demands (Rogers 2018). However, the political factors are
closely linked as the education and career opportunities of the population which build
effective workforce for the firms. Government ownership affect the demand of the population
and people have to buy what the government want or make available for buying.
Technological factor of a country in this global context has an important place. This is
because the process of automation in the firms, technology incentives and the rate of
technological changes are vital for the firms to grow in production and processing their
products and services. These may determine the barriers to entry in the markets, minimum
efficient production level as well as encourage the outsourcing decisions (Shirodkar and
Mohr 2015) In addition to this, the technological changes can effectively manipulate the
costs, quality and innovation. However, changing the firms’ procedure and shift to advanced
technology greatly depend upon the policies and regulations of the government without
which the global companies cannot introduce advancement in their production processes.
Political factors influence the business of the country in such a way that many a cases,
the business do not have much to do about it. These factors can add extra risk in the business
which may lead to major loss in the business (Khuong and An 2016). On the contrary the

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government policies can be supportive for the companies too. According to the theory of
Porter, there are chiefly five forces which shape the competition within the industry of a
country which are regulated by the trade barriers and powers of the companies and the
markets. These elements are purely regulated by the government policies which provide some
predictability and protection. Through trade agreements, the countries facilitate the trade
among themselves by which the foreign countries get opportunities to enter the new markets
(White 2018). Moreover, political support helps the companies face fewer trade barriers to
export their products in other countries.
Tax and economic policies are completely dependent on the political decisions.
Government regulations can raise tax rates or lower them which directly affect the sales and
profit of the companies (Collins 2018). The employment laws are made by the governments
to protect the rights of the employees. This is a quite complicated aspect which may affect the
business decisions of the companies. Through protecting the employee rights, the business
can move in a right direction and can be free from the issues of forced labor or unpaid labors.
The government policies to offer educated, skilled yet cheap labors can attract the business
organizations which support the interests of both the governments as well as the
organizations. In addition to this, the government policies regulate the trade barriers which
balance the competition in the markets (Shearer 2018). Through tariffs, the government can
close the entry of the foreign companies to enter the domestic market. This is the reason why
the countries need to be always ready to face such challenges and adopt to overcome such
barriers.
The article Amazon has lots of company as Trump slams ‘stupid’ businesses
by Michael D. Shear and Cecilia Kang published in 4 April 2018 has described the recent
political issues occurring in the USA which have greatly affected the global business
organisations including Amazon (Kang 2018). To the authors of this article, the political

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criticism on the performance of the global brands has a far reaching effect than can be
perceived. The US president’s idea of business has proved to be a negative factor for the
business firms operating in all over the world include g the US. The tremendous pressure on
the tech firms, automobile industries, military contractors, financial firms, mobile phone
corporations, drug companies, air-conditioner manufacturers, media companies, sports
leagues and most importantly the Wall Street giants have changed the face of the political
benefits which these firms have been enjoying so forth. To the authors, “Lately, Trump's anti-
business rants have become particularly menacing and caused the stocks of some companies
to plunge”. Despite the fact that many of the political leaders have clash with the business
industries ns interests but what the IUs president has been doing in defaming the global
brands are not supported by the US chamber of commerce. To the experts, this issues of
antitrust have seriously harmed the reputation of these firms which has affected the sales of
these companies. This political issues can have an important impact on the market where the
other global companies will not eager to enter the US market.
On the contrary, the article named “ACT businesses most confident in Australia,
survey finds” by Blake Foden published in 17 April 2018, has described how the
governmental policies can change the face of business as well as the regional
economy (Foden 2018). In this particular article one can find how political
stability and support can be beneficial for both the companies as well as the
country. Australian Capital Territory government has started to implement new policies
which is proving the businesses the certainty that they expect from every regional markets.
Though a strong education system the government has been ensuring career opportunities so
that the skilled labors do not leave the place for unemployment. Despite the fact that the
government has been facing the issues of tax increases and worker’s compensation, the
business certainty has shown big jump in the survey conducted in December 217. According

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to the author, “The survey, which reflects the view of 1000 small and medium-sized
Australian businesses, shows businesses in the ACT and Tasmania share the most positive
outlook at +54 on the index”.
Therefore, it can be concluded that the political factors are the most important
environment which may affect positively or negatively. Companies must always be ready to
deal with this local, national as well as international consequences of politics. Any type of
changes in the government policy can make up the political factors which can impact on the
factors like economic legal and social. As discussed in these two articles, criticism by the
highly influential political leader can be effective to enhance risk factor from the companies
doing business in the global market. Similarly, political stability and support can increase the
certainty level of the trade which benefits the companies as well as the economy of that
region.

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References:
Cohn, T.H., 2016. Global political economy: Theory and practice. Routledge.
Collins, T. 2018, What would political reforms mean for the Ethiopian success story?
Ethiopia's economic success over the last 20 years has been based on a state-led model, but
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Devereux, M.J., II 2018, "The Impact of Tax Reform on Moldmaking", MoldMaking
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Foden, B. (2018). ACT businesses most confident in Australia, survey finds. [online] The
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Kang, M. (2018). Amazon has lots of company as Trump slams ‘stupid’ businesses. [online]
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