The political environment is perhaps one of the least predictable elements of the business environment. A cyclical political environment develops as democratic governments seek re-election every few years. This external element of the business includes stakeholder impact. Interest groups tend to change government policy. Many external environmental factors can impact your business. It is common for managers to accurately assess each of these factors. The goal is always to make better decisions for the progress of the company. Some common factors are political, economic, social and technological factors (known as PEST analysis). Companies are also looking at environmental, legal, ethical and demographic factors. Before we can assess the impact on the economy, let`s first look at the different political and legal systems. Companies should monitor their political environment.
Changes in political factors can affect corporate strategy for the following reasons: Let`s briefly focus on how the political and economic ideologies that define countries affect their legal systems. Essentially, there are three main types of legal systems – common law, civil law, and religious or theocratic law. Most countries actually have a combination of these systems, creating hybrid jurisdictions. An example of this is his membership in the Clinton administration`s apparel industry partnership in 1997. Nike appreciated the changes in political factors in many ways. However, political pressure has had a negative impact on Nike`s employment practices. At the federal level, the Federal Election Commission enforces the Campaign Finance Act for the United States House of Representatives, the United States Senate and the Office of the President of the United States. [4] Campaigns for federal offices are subject to contribution limits and certain contributions are prohibited. The Department of Public Integrity (NIP) of the Department of Justice is responsible for alleged criminal violations of many political laws.
All these factors will shape the political and legal environment in which the firm must operate and be competitive. There are three main elements of a political-legal environment. Let`s take a look. The following table lists some of the laws that could be considered when analyzing legal factors: Changes in government policy are the political factors. Change can be economic, legal or social. It could also be a mixture of these factors. It may seem easy to assume that companies prefer to operate only in democratic, capitalist countries where there is little or no state involvement or intervention. However, history shows that global companies in certain industries have chosen to do business with countries whose governments control that industry. Companies in sectors such as commodities and oil have found more authoritarian governments as more predictable partners for access and long-term investment in these commodities.
The complexity of trade in these situations is increasing as governments throughout history have come to the aid and protect their countries` greatest commercial interests in markets around the world. The history of the oil industry shows how various governments have sometimes protected their national companies` access to oil through political violence. In modern times, the Chinese government uses a combination of government loans and investments in Africa to give Chinese companies access to local resources and raw materials. Many business analysts mention these issues in discussions of global business ethics and the role and responsibility of business in various policy environments. Civil lawA legal system based on a detailed set of laws that form a code and how the law is applied to facts. is based on a detailed set of laws that form a code and focus on how the law is applied to the facts. It is the most widely used legal system in the world. Law and politics are closely linked. The law is an essential instrument of state action, an instrument through which the government tries to influence society. The law is also the means by which the government itself is structured, regulated and controlled. It is therefore not surprising that law is an important prize in political struggle and that law shapes the way politics is conducted. Common LawA legal system based on tradition and primacy.
In this system, judges interpret the law and court decisions can set precedents. is based on tradition and primacy. In common law systems, judges interpret the law and court decisions can set precedents. That`s all there is about legal factors in PESTLE analysis! These are simply the factors that affect businesses due to or directly related to government laws. They play a huge role in deciding how businesses operate, how much money they make, and how customers behave. Examples include the legality of pyramid schemes and import-export laws. Finally, they can be seen as affecting companies of all sizes such as Tesco and Anthropologie. State-owned enterprises, like their private-sector counterparts, can retain the profits from oil production, providing a significant incentive for governments to retain or regain control of this highly lucrative industry. Whether the motive is economic (i.e. profit) or political (i.e. government control), „foreign companies and investors are finding that national and local rules and regulations are increasingly designed to favor domestic firms at their expense. Multinationals are now competing as never before with state-owned enterprises armed with significant financial and political support from their governments.
Ian Bremmer, „The Long Shadow of the Visible Hand,“ Wall Street Journal, May 22, 2010, accessed December 21, 2010, online.wsj.com/article/SB10001424052748704852004575258541875590852.html. Raising or reducing taxes could be an example of a political element. Your government could raise taxes for some businesses and cut them for others. The decision has a direct impact on your business. So you should always keep abreast of these political factors. Government interventions such as changes in interest rates can have an impact on the demand behaviour of businesses. While theoretically any country can pose a risk to all of these factors, some countries offer a more stable business environment than others. Indeed, political stability is an important part of the government`s efforts to attract foreign investment to its country. Companies need to assess whether a country believes in free markets, government control, or strong intervention (often for the benefit of a few) in the industry. The country`s view of capitalism is also a factor in commercial considerations. In the broadest sense, capitalismAn economic system in which the means of production are owned and controlled by the private sector. is an economic system in which the means of production are privately owned and controlled.
In contrast, a planned economy, an economic system in which the government or state directs and controls the economy, including the means and decisions of production. is that in which the government or state directs and controls the economy, including the means and decisions for production. In the past, democratic governments have supported capitalism and authoritarian regimes have tended to adopt a state-controlled approach to managing the economy. The first volume of the collection focuses on jurisprudence and constitutionalism, bringing together key works that address the fundamental question of what is just and what constitutions serve. The second volume is devoted to the functioning of the courts and how judges make their decisions, and examines the judicial process from the courts of first instance to the courts of appeal. The third volume focuses on the relationship between law and society and addresses the interface between the legal process and social actors, taking into account, for example, the question of how ordinary people think about the law and how respect for the law works. The final volume examines law, courts, and politics from an international and comparative perspective, bringing together research on topics such as the foundations of judicial independence and the relationship between law and economic development. In this series on the importance of producing a PESTEL analysis, we have repeatedly mentioned that political, economic, social, technological, environmental and legal factors often overlap. Overlap is good because it ensures that leaders do not lack anything when considering critical strategic decisions.
Most notable is the overlap between the legal and policy factors we discussed earlier. A strong legal system is essential to the success of any business. A country therefore needs a strong and functioning legal system with laws that protect consumers and producers. There are various other issues such as company law, royalty law, patent law, intellectual property rights. When considering legal factors in your PESTEL analysis, it`s important to remember that laws are generally not meant to restrict your business. Instead, they are there to help. According to Businesslawbasics.com, the purpose of laws is to set standards, maintain order, resolve disputes, and protect freedoms and rights. As a business owner, you don`t have to like all laws.
