Business Environment: Political Environment -The Commerce subject detailed notes with practice tests are very useful for Assistant Professor / UGC NET / JRF and other competitive exams preparation.
The politics always play an important role in setting government policies, rules and regulations. Foreign investment is also dependent upon political stability; the risk factors offer both opportunities and threats.
Political Environment
Political Factors include:
1. Laws: The laws help in providing regulatory environment for the business. The bills are introduced in central and state assemblies, and when passed they become acts. The various laws have been explained in Unit 9.
2. Licensing and Permits: Sometimes licenses and permits may be made expensive or less costly for investors from different nations. The basic idea may be to ensure that business sales stay in the nation. Though WTO broadly does not allow such practices
3. Taxes: Taxes affect the consumer behaviour. Taxes can and do impact our ability to make a profit selling goods and services in a foreign country and will shape our international marketing strategy because of that. A high tax rate regime will make it difficult for a business to maintain its profitability.
4. Fees: When you market your products for sale in a foreign country, you may be subject to pay certain fees for the right to do that. These fees can be a one-time deal or recurring, and they can also be quite high in some circumstances if they involve what might be considered luxury items.
5. Tariffs: Tariffs is an effective tool to protect national companies from competition and yet maintain trade with other countries. It plays an important role in international trade and also helps in marketing the business’s good or services
6. Currency Risks: There are always risks when doing business in the currency of a foreign country that you are marketing your product or services to. One may lose millions if the business is carried out in foreign currency and the economy happens to fall or fluctuate.
7. Other Political Risks and Restrictions
(a) Investment Restrictions: Many nations follow strict guidelines and regulate who can invest, do business or set up new business in their country. Governments around the world have imposed many investment restrictions from China.
(b) Operational Restrictions: The operation restrictions may also become a good reason, though Information Technology helps in overcoming them.
(c) Discriminatory Restrictions: Certain discriminatory operations may also hinder or forbid foreign goods and services from being marketed in a country. Many European nations imposed restrictions on Russia in the wake of Russia-Ukraine war. Russia put payment conditions on European nations. India and China reduced their oil supplies from Middle East nations and increased their supplies from Russia.
Business Environment: Economic Policies
Business Environment: Economic System