THE POLITICAL OR LEGAL

FACTOR AFFECTING THE BUSINESS

Submitted by

Canlas Harold Jake

Cariño, Desserie

Conde, Shane

Guiao, Din-din

Gonzales, Christian

Manalili, Ericson

Mandap Claire

Medina, Czarina Jean

Silvestre, Ella

Supan Danilo

Viray, Frennalyn

Yanga, John Christopher

Submitted to:

Ms. Cancan Manlutac

June, 2021
 The Political or Legal Factors

Why should companies be concerned about global political and legal issues?

Despite the globalization of business, companies must follow the local laws and regulations of

the nations in which they operate. Questions like: how business deals the different complications arise

in political or legal issues and what are the methodologies that the company used to solve those

problems, are taken to consideration to investigated the various solutions and chose what is the most

beneficial to the company. Different set of political and legal guidelines that can affect the growth of the

business in the economy are needed to perform ethical standard and avoid intricacy.

Many external environmental elements such as political, economic, social, and technical issues

(known as PEST analysis), can influence a company's performance. Managers frequently company’s

advancement.

In this report, the main objective is to identify the various political or legal factors affecting the

business growth. Align with this, discovering the positive and negative effects of political or legal

issues, applying different methodologies, and creating an absolute solution may tackled along the line.

Political or legal issues is one of the components of PEST analysis. According to Kenton (2020),

in order to become more competitive in the market, a company might evaluate significant external

variables that impact its operation and in that viewPEST analysis comes in handy. It is a strategic

business tool that allows businesses to identify, analyze, organize, and track macroeconomic elements
that may have an influence on their operations now and in the future. This helps the organizations

understand the "big picture" forces of change that their exposed to, and, from this, take advantage of the

opportunities that they present.

Political considerations impacting business are sometimes given a great deal of weight. Several

areas of government policy can have an impact on the economic world. All businesses must adhere to

the law. Managers must determine how new legislation will influence their operations.

Political factors can have an influence on a firm by making the market climate more or less

favorable. Governments often wield a significant degree of control over businesses, and there is often

nothing that businesses can do about it.

Political issues may have a variety of effects on companies. These external environmental

elements can introduce a risk factor that might result in a significant loss in business. These influences

can alter the overall outcome; therefore, businesses must be prepared to cope with both local and

worldwide political consequences. Furthermore, political issues not only have a direct influence, but

they also have an impact on other variables that might have a major impact on the organization and its

operating environment.

What are the Political or legal Factors?

With a shift in administration policy, political factors emerge that can alter the entire business

picture (Shawn, 2018). These changes can be economic, legal, or social in nature, and they may contain

the following elements:

 1. Government:

This include bureaucracy, corruption level, tariffs and tax policy (tax rates and incentives), and

government stability and related changes.

1.1 Bureaucracy

In business, bureaucracy is a hierarchical organization or a firm that follows a set of pre-

determined regulations. In a big organization, specialist sub-institutions that report up the management

chain generally fulfill a variety of duties.

A small firm can function under rules that management make up as they go along, without the

requirement for a documented set of policies. Without considerable diversification, a small number of

people may manage all of the essential duties. Furthermore, for larger firm they will need to create rules

that apply to every function of the organization, from internal rules for remuneration to external

standards for determining how to manage consumer returns.

1.2 corruption level

For many nations, corruption is a hindrance to economic progress. Some businesses survive and

thrive by paying bribes to government officials. These firms' success and development are not dependent

on the value they provide to customers.

 When corruption is rampant in a firm, the entire business climate suffers as public trust is being

jeopardized. Corruption may take various forms, including extortion, embezzlement, and bribery.

Because of this, many firms lose not just revenues, but also reputation in the eyes of their consumers.

1.3 Tariffs and Tax Policy

An excellent example of a political component is the suddenly fluctuation of tax rates. Due to

specific causes, government laws may increase the tax rate for some firms while lowering it for others.

This judgment will have an immediate impact on businesses. This is why it is critical to have a plan in

place that can cope with such circumstances.

As a result, businesses must always be aware of political developments. Government actions,

such as interest rate changes, can have an impact on a company's demand patterns.

Governments can raise or reduce corporate taxes, which affects earnings. They can also have an

impact on companies by raising the value-added tax on items or the business rates. They can enact new

legislation, such as the National Minimum Wage, which have an influence on profits and employee

rights. They can also impose additional health and safety regulations, requiring businesses to modify

their operations, such as by educating their employees. However, Legal issues can determine whether or

not there is a business behind the sale of a certain product (such as drugs or sharp items), and they can

also influence how a firm stores their inventory or interacts with their customers.

1.4 Government Stability and Related Changes

A country's lack of political stability can have a substantial influence on commercial operations.

This is particularly true for companies that operate on a worldwide basis. A hostile takeover, for
example, can destabilize a government. Such a condition will eventually result in looting, rioting, and

overall disturbance in the surroundings.

2. Customs

This include foreign trade regulations, freedom of the press, and competition regulation.

2.1 Foreign Trade Regulations

Every company has to extend its operations into new countries. However, a country's political

history might have an impact on a company's desire to extend its activities. Government-controlled tax

policies can encourage a company to extend operations in new areas, but other tax rules might stymie

the development of specific businesses. When it comes to multinational firms' competitiveness in a

foreign location, government efforts meant to promote local enterprises may turn against them.

2.2 Freedom of the Press

Press freedom is an essential component of a democratic society. It is the freedom to express

oneself without fear of censure from the government. In most Western countries, including Australia,

the press is free to print anything it wants, without intervention from the government, even if editorial

views are directly opposed to official government policy. That is how press freedom operates.

However, the erosion of journalistic freedom is hazardous in many ways, not the least of which

is for the democratic process. What companies don't usually consider is that a free press is essential for

economic success. Businesses benefit from complete freedom of expression because it provides a fair

playing field.
 Companies are more prone to engage in fraudulent operations, favoritism, and bribery if the

press is not allowed to investigate and report on corruption. Press freedom also contributes to a solid

economic infrastructure, where openness is important.

2.3 Competition Regulation

Competition regulation has a beneficial impact on businesses because it promotes a corporate

culture that fosters competition, allowing firms to adapt and evolve in order to stay a successful

competitor in the industry. Furthermore, competition law assures that no one company in a strong

market position may misuse its position to the prejudice of other enterprises.

Competition policy encourages firms to improve themselves while also benefiting customers,

who have a wider choice of services to choose from as a result of market competition. As a result, it is

critical for firms to comply with competition law in order to keep the market vibrant and valuable.

3. Laws

This include anti-trust law, employment law, data protection law, intellectual property law

(copyright, patents), and consumer protection.

3.1 Anti-Trust Law

The objective of these Anti-Trust law is to ensure a level playing field for similar firms in a

given industry while prohibiting them from obtaining excessive control over their competitors. Simply

put, they prevent firms from engaging in unethical behavior in order to maximize profits.
 Antitrust laws apply to a wide range of shady commercial practices, including market allocation,

bid rigging, price fixing, and monopolies, where governments enact it to protect consumers from

exploitative commercial activities and to guarantee fair competition.

3.2 Employment Law

Employment laws safeguard employees' rights and cover every element of the employer-

employee relationship. Employment law is a complicated subject with several hazards. Businesses that

stay up to date on the newest changes in this law can steer their operations in the correct direction; but,

those that get it wrong must be well prepared for the costly consequences. In modern corporations,

employees are almost 98% of the company for the accomplishments or lack thereof and any changes

within employment law will, of course, have a great impact on the business operations.

3.2 Data Protection Law

Noncompliance can result in an enforcement letter prohibiting the firm from processing data,

thus shutting down numerous enterprises, as well as substantial fines. Furthermore, the company's top

management, including managers and directors, can be held personally criminally responsible for

noncompliance.

To guarantee that their legal duties are satisfied, businesses should have a data protection policy.

The policy should consider the company's specific personal data demands as well as how it handles this

information. The policy should also cover places where personal and sensitive data may accidentally

leak in violation of your legal obligations.

 3.3 Intellectual Property Law

Intellectual property is utilized to propel a small business's growth and reputation, as well as to

carve out a market niche. These niches are what give significant value to respectable buyers and

investors. This include the copyrights, patents, trademarks and trade secrets.

The authors of “original forms of expression” (e.g., books, movies, musical compositions, and

works of art) are granted exclusive rights to reproduce, modify, and publicly perform their creations

under copyright law. For patent law, it gives the inventors of new products and processes the ability to

prevent others from making, using, or selling their inventions. Trademark law on the other hand, allows

sellers of goods and services to use distinguishing phrases or symbols on their items and prevents rivals

from adopting the same or confusingly similar insignia or wording. Finally, trade-secret law bans

competing firms from using improperly obtained private commercially valuable information (e.g., soft-

drink formulas or secret marketing strategies).

3.4 Consumer Protection

Some businesses act unfairly towards their consumers. For this reason, most countries have

consumer protection laws that are aimed at ensuring that consumers are protected. When making a

purchase, buyers frequently prioritize exceptional customer service over many other considerations.

Good customer service may make a firm stand out, but it must adhere to consumer law.

Consumer law (also known as consumer protection) is intended to protect consumers from

deceptive businesses or activities while also preserving their rights in the marketplace. Consumer law,
for example, requires major corporations to devote a significant portion of their resources to

disseminating accurate information about their products and policies.

It is meant to protect customers from low-quality goods and unethical business methods.

Compliance with the law will help a firm avoid legal difficulties and reassure customers about the

quality of its products. It will also help the company retain a good reputation in the market.

What are the Effects of Political or legal Factors?

The primary goal of business law is to keep order, arbitrate disputes, create widely recognized

norms, and safeguard rights and freedoms in the context of company and its interactions with other

businesses, government agencies, and customers.

There are four major effects of political issues on commercial enterprises. They are as follows:

economic impact, changes in law, political climate, and political risk.

A country's political situation has an impact on its economic situation. The state of the economy

has an impact on business performance. In the United States, for example, there are significant contrasts

between Democratic and Republican policy. This has an impact on things like taxes and government

spending, which in turn has an impact on the economy. Increased government expenditure has been

shown to stimulate the economy.

Expenses, specifically, can massively affect the business overhead and overall revenues. In most

fair states, changes in government frequently bring critical administrative changes identified with tax

collection, with these progressions regularly relying on the political belief systems of the gathering in

power. For instance, the Republican Party in the US and the Conservative Party in the UK are a
reasonable representation of gatherings who favor tax breaks as a course to aiding organizations

develop. Donald Trump's political decision in the US has brought about the absolute greatest tax breaks

in living history, which, obviously, is extraordinary information for ventures around there.

While improvements in tax collection and rules might be beneficial, variations in the overall

political climate are usually detrimental. Clearing political change may have a variety of effects on

organizations, particularly in regions where there is strong social discontent. Venezuela is an excellent

example of this. As a result, the nation is experiencing widespread hardship as a result of growing anger

against the decision-making system; the economy has collapsed, and formerly flourishing organizations

can no longer function under such conditions. Comparable experiences may be found in many places,

including as Afghanistan, Yemen, Haiti, and a few African countries, where patterns of political

urgency, violence, and overall unsteadiness have made it nearly impossible for groups to succeed and

daring to show up.

Political risk insurance can be used to mitigate political risk. Companies having international

operations use this form of insurance to reduce risk. Certain indices may assist you in determining how

much danger you are exposed to in various nations.

What are the possible solutions to legal or political factor?

Economic Impact
 Economic growth is assessed by an increase in Gross Domestic Product (GDP), which is defined

as the total value of all products and services produced inside a country in a given year. Economic

development is influenced by a variety of factors. However, no one factor continuously stimulates the

optimal or ideal level of growth required for an economy. Unfortunately, recessions are unavoidable and

can be triggered by external causes such as geopolitical and geo-financial events.

Strengthening the business entails more than simply financial management. It also covers

methods for retaining and expanding the customer base, marketing the firm at a low cost, maintaining

good employee morale, and improving business processes. Management should also seek for

opportunities to network and create partnerships, since this will assist them to reduce risk exposure. As

the economy changes, businesses must adopt.

Changes in law

As the law change, the taxes of the economy follow. To prevent the economic downturn

government may implement tax cuts and tax rebates. It is designed to put more money back into the

pockets of consumers. Ideally, these consumers spend a portion of that money at various businesses,

which increases the businesses' revenues, cash flows, and profits. Having more cash means companies

have the resources to procure capital, improve technology, grow, and expand. All of these acts boost

productivity, which helps the economy develop. Tax cuts and refunds, proponents believe, allow

consumers to stimulate the economy by injecting more money into it.

The Tax Cuts and Jobs Act was presented by the Trump administration and enacted by Congress

in 2017. The Act reduced corporation taxes to 20%; prior to the measure, the maximum corporate
income tax rate was 35%. Several personal income tax rates were also reduced. This action plan give the

US back to track.

Political Climate

In general, a country's political climate and economic environment are inextricably linked. The

stock market, for example, might react differently in response to political events. Regulations that

influence businesses, for example, will have an impact on their bottom lines. Investors will take notice if

they are projected to grow their bottom line and will be more inclined to acquire the stocks of those

firms. Investors are less inclined to acquire and may even sell equities if they are projected to have a

negative influence on the bottom line.

In many situations, the real impact of policy initiatives will not be apparent until the policy is

implemented and the firms affected respond — and other reasons can also affect stock prices. Again,

corporate fundamentals are more important than political headlines.

As a result, business, must invest in their corporate stock, create a strategy that can prosper their

assets, and plan a counter measurement as the economy change due to political climate.

Political Risk

Political risk for multinational corporations refers to the danger that a host country may make

political decisions that have a negative impact on business earnings or aims. Companies who are

unprepared for these bad events generally end up losing a lot of money.
 Management make decisions by minimizing fixed investment. Of course, political risk is always

proportional to the amount of capital at stake. Given the same political risk, a lower-exposure alternative

is preferable. A firm might choose to lease rather than acquire facilities, or it can rely more on outside

providers, assuming they exist. In any event, businesses should restrict exposed assets to a minimum in

order to reduce the harm of political issues.

The easiest option is to investigate a country's riskiness, either by purchasing for reports from

experts who specialize in generating these assessments or by conducting own research. The company

will then be in a better position to avoid establishing operations in nations regarded political risk

hotspots.

Multinational corporations could purchase a policy from one of the many organizations that

specialize in selling political risk insurance and be compensated if an adverse event occurred because

premium rates vary by country, industry, number of risks insured, and other factors, the cost of doing

business in one country may differ significantly from that of another.