POLITICAL ENVIRONMENT OF BUSINESS ENTERPRISE

What is political environment in business?

- The political environment in business encompasses the governmental activities and the
political conditions that impact the operations of a business. Some of the political
factors include political stability and employment laws.
Business Enterprise – A business enterprise is any type of operation that is involved in providing
goods or services with the anticipated outcome of earning a profit.
Relationship between Business and Government
 Responsibility
 Accountability
 Duty

Importance of political environment

- The political environment is crucial for international businesses, as it can affect
marketability, investments, and share price valuation.
- The level of involvement in a foreign market determines the need for monitoring the
political climate of the countries where the business operates.
- Understanding the political environment is essential for businesses to plan their
operations effectively and make informed decisions.

 Changes in government policies and attitudes towards foreign businesses can lead to
changes in the business environment. For instance, a government may introduce new
policies that favor local businesses, making it more difficult for foreign companies to
operate in the country. Conversely, a government may encourage foreign investment by
offering incentives and reducing barriers to trade.
 Government ownership of economic activities is still customary in some countries lacking a
well-developed private sector. In such cases, the government may own significant shares of
companies or operate industries directly. This can impact the company’s operations and
decision-making processes.
 Political Stability: Investors should be aware of the stability of the political environment in
the target country. A loss of confidence in the political environment could lead to a
company having to reduce its operations or withdraw altogether. Frequent changes in
regime are often indicators of political instability.
 Factors affecting political instability
• Civil war
• Declaration of emergency in the country
• Changes in the form or structure of administration of government.
 Import Restrictions: Products and investments seen as undesirable or a threat to local
industry may face import restrictions. Governments may impose quotas, tariffs, or other
 barriers to trade to protect local industries or to promote self-sufficiency. These restrictions
can significantly impact the operations of foreign companies in the country.

CONTEMPORARY SOCIAL ISSUES

Contemporary social issues- corporations deal with various social issues and problems, both
directly related to their operation and not. It would not be possible to satisfactorily describe all
of the social issues faced by business.

3 Contemporary Social Issues

• Environmental issues
• Global Issues
• Technological issues