Political Environment Public opinion is a very important aspect of modern life.

In a democracy, any act must be supported by public opinion to be upheld and sustained. The business activity must get the support of public opinion. Political leaders are the representatives of the public and therefore, business and politics are closely related. Without a clear understanding of dynamics of politics and the support and encouragement from the politicians, business cannot prosper.

‡ The business strategy adopted by the businessman is to be framed keeping in mind what is the present political situation. what are going to be the steps taken by political forces in the country and abroad and what will be the repercussions of different political developments on the life of business. the businessman has to deal with it by making necessary modifications in his attitude. If the general atmosphere in the political circle is against business-specially the private sector. policies and practices. .

Whether the company is domestic. international. And the most crucial and unavoidable realities of international business are that both host and home governments are integral partners. large or small. Reflected in its policies and attitudes toward business are a governments idea of how best to promote the national interest.‡ Political environment has a very important impact on every business operation no matter what its size. . political factors will have an impact on it. national. considering its own resources and political philosophy. its area of operation.

. the company's influence on the market is greatly reduced. In either case.‡ The implications of government ownership to a company marketing abroad might be that certain sectors of the foreign market are the exclusive preserve of government enterprise or that the company is obliged to sell directly to a state trading organisation.

In either case. .‡ The implications of government ownership to a company marketing abroad might be that certain sectors of the foreign market are the exclusive preserve of government enterprise or that the company is obliged to sell directly to a state trading organisation. the company's influence on the market is greatly reduced.

the investor should bear in mind that marketing activities in the country concerned may be restricted and that the so-called controllable elements of the marketing mix (see Chapter 4) will be less controllable.‡ If an exporter is seeking to establish a subsidiary in a country where there is a high degree of state influence over the factors of production. .

it often heralds a change in policy towards business. . particularly international business. One of the surest indicators of political instability is a frequent change in regime.‡ To an exporter the primary concern should be the stability of the target country's political environment. Although a change in government need not be accompanied by violence. A loss of confidence in this respect could lead to a company having to reduce its operations in the market or to withdraw from the market altogether. Such a development could impact harshly on a firms long-term international marketing programme.

etc. Foreign products and investment seen to be vital to the growth and development of the economy often receive favourable treatment from the government in the form of reduced tax. exemption from quotas. .‡ Government's attitudes and policies towards foreign business are its ideas about how best to promote national interest in the light of the country's economic and political resources and objectives.

. This was a major consideration during South Africa's political isolation. It is also important to be aware of the nature of the relationship between South Africa and the foreign target market. Fortunately. South Africa's international relations have normalised .‡ products considered by a government to be non-essential. or a threat to local industry are frequently subjected to a variety of import restrictions such as quotas and tariffs. undesirable.

‡ The political environment is connected to the international business environment through the concept of political risk. from a political perspective.‡ Today South Africa is viewed very favourably. by the rest of the world. .

‡ Political risk is determined differently for different companies.g. industries requiring heavy capital investment are generally considered to be more vulnerable to political risk than those requiring less capital investment. capital-intensive extracting or energyrelated businesses operating in the foreign market are more vulnerable than manufacturing companies exporting from a South African base. Vulnerability stems from the extent of capital invested in the export market. . For example. as not all of them will be equally affected by political changes. e.

‡ Political risk is of a macro nature when politically inspired environmental changes affect all foreign investment. . It is of a micro nature when the environmental changes are intended to affect only selected fields of business activity or foreign firms with specific characteristics. (possibly by expropriation).

‡ When business is conducted in developing countries. labour disruptions and price controls are generally seen to pose the greatest threats to a company's profitability. war and expropriation. the risks of greatest concern are civil disorder. . When business is conducted in industrialised countries.