ECONOMIC AND

POLITICAL
ENVIRONMENT
RAJ SHAM
31952
• International political and economic systems hardly
function independently.
• These two are mutually inter-dependent as political
relations between two countries greatly influence
their economic relations.
 ECONOMIC ENVIRONMENT

• One system all over the world which only used for
the trade internationally among the developed
and developing countries is called International
Economic environment
TYPES OF INTERNATIONAL ECONOMIC
ENVIRONMENT
• Microeconomic part
• Macroeconomic part
 MICROECONOMIC PART

• It focuses on the recent economic environment

and the effect of location on business and
performance.
 MACROECONOMIC PART

• It focuses on the broader or spreader economic

environment and the world economy as all in all.
 ECONOMIC CONDITIONS

• Stages of business cycle

Prosperity
Boom
Decline
Depression
Recovery
• National income, Per capita income and
distribution of income.
 ECONOMIC CONDITIONS

• Rate of capital formation

Demand and supply trends
Inflation rate in the economy
Industrial growth rate, Exports growth rate
• Interest rate prevailing the economy
• Trends in industrial sickness
Efficiency of public and private sectors
Growth of primary and secondary capital markets
Size of market
• The law of one price
 POLITICAL ENVIRONMENT IN
INTERNATIONAL BUSINESS
• The political environment of the country of origin.
• The political environment in the destination country.
• The international political environment.
INTERNATIONAL POLITICAL SYSTEMS
AND IDEOLOGIES
• The political system of a country comprise of
political parties with different ideologies, labour
unions, religious organizations, environmental
activists, and NGOs.
• Each of them are players in a political system and
has there own unique sets of beliefs and power to
put influence on their decisions.
 POLITICAL FACTORS AFFECTING
BUSINESS
• Bureaucracy
• Corruption level
• Tariffs
• Education law
• Discrimination law
• Data protection law
• Environmental law
• Health and safety law
• Competition regulation
• Tax policy
• Government stability and related changes
• Import restrictions
 EFFECTS OF POLITICAL FACTORS

• Impact on economy
• Changes in regulation
• Lack of Political stability
• Mitigation of risk
 IMPACT ON ECONOMY

• The political situation of a country affects its

economic environment affects the business
performance.
 CHANGES IN REGULATION

• Government could alter their rules and regulations.

This could in turn have an effect on a business.
 LACK OF POLITICAL STABILITY

• Lack of political stability in a country effects business

operations. This is especially true for the companies
which operate internationally.
 MITIGATION OF RISK

• Solution of political risks in the business is simple as

you take the insurance.
THANK YOU