The political environment also affects business environment and operation of their activities. The interaction between government, politicians, and business significantly affect the form of the business. So, it has been correctly said that political decisions may change even the direction of the business.
Politicals Factors Affecting Business Activities
Following factors of the political environment, affect the business activities:
1. Government Policies and Rules
Government policies, capital market, import-export policy, nationalization policy, privatization, globalization and simplification, and rules, relating to business activities substantially affect the functioning of the business organizations.
If these policies are liberal and practical, then that government will be able to witness the growth of business in its tenure, otherwise not.
2. Political Ideology of the Government
If the ideology is of socialism, then the business activities will be developed and expanded.
However, with dictatorial ideology, business activities will not be developed much.
3. Political Stability
Political stability in any country may be visualized by presidents rules, the position of the governments in the states, anarchism, emergency, majority gained by ruling parties in parliament, etc.
If the government in the country is stable, then the entrepreneurs and business organizations will get encouragement for development-oriented activities and will make expansions of the enterprises and business.
On the contrary situations, the functioning of the organizations may come to stand still.
4. National Security and Defence Policy
From the viewpoint of national security political environment is also affected by dealings with belligerent countries and defense policy of the country.
For example, the anarchism of whatever country, in whatever country is not conducive for the favorable business of environment for any of the countries.
The position of the bureaucrats in the government, their cooperation with political leaders, red-tapism and corruption also affect business activities.
6. Political Donations and Gifts
The donations and gifts received by political parties and persons from business organizations may either create a political environment or may spoil it, as well. It also affects the business environment.
7. Community Welfare and Social Justice Related Policies
Government policies related to community welfare and social justice also affect the business environment.
If these policies are oriented towards public welfare and provides social justice, then business activities will enhance, otherwise, these will shrink.
8. Foreign Policy
The business environment is also affected by policies of non-alignment or of alignments and the tariff policy, etc.
9. Other Factors
- The organization of the government, legislature, executive and judiciary, etc.
- Political attitudes towards business and parliamentary and administrative decisions.
- Role of business in constitutional provisions and goals.
- Nature and powers of administrative institutions.
- The form of central, state and local administration and civil rights.
Thus, now you know the Politicals Factors Affecting Business Activities.