MARCHELLE IRISH S.

PARALE
PUP-MBAOU-4

Among the external constraints in the business environment, what do you think is the most
influential factor that determines success of business performance? Why?

Considering the outside environment allows businessmen to take suitable adjustments to their
marketing plan to make it more adaptable to the external environment. There are numerous
criteria considered as external elements. Among them some most outstanding and important
factors need to listed are current economic situation, political, government and legal forces,
surrounding infrastructure, and customer demands. Though all factors are important and have
influence to determine the success of business performance, I think the most important is
Political, government, and legal forces.
The political climate of a country is critical factor to consider in day-to-day business operations.
The amount of government activity, the types of laws it passes, and the general political stability
of a government are three components of political climate. For example, a multinational
company such as General Electric will evaluate the political climate of a country before deciding
to locate a plant there. Is the government stable, or might a coup disrupt the country? How
restrictive are the regulations for foreign businesses, including foreign ownership of business
property and taxation? Import tariffs, quotas, and export restrictions also must be taken into
account.
The rules and regulations from local government play an integral role in the development of the
company. There are some countries which their laws prevents the development of some certain
industries. That can be a threat to the company. On the other hand, some industries receive
positive and continuous support from local government via their rules and regulations. Besides,
if the laws allow organization outside the countries invest in local industries, they will indirectly
create an enormous source of financial support for local business.

Many political factors influence how managers formulate and implement strategic direction. Due
to the socialist learnings of some of the ministers, for example Coca Cola and IBM had to move
out of India in late 70s. A deep-seated fear of multinationals prevented political leaders to shut
the door on giant multinational companies for a painfully longtime in India.
Barriers to entry protectionist policies, high tariffs, anti-nationalist slogans, bad publicity have
had a cumulative effect in creating a closed economic model where people had to wait years
together to buy a Bajaj Scooter or a Fiat car in India. When things turned bad to worse, the
situation is sought to be remedied through a bold liberalization program in early 90s.
Apart from willingness to bend the rules and get along with the times, political stability is also
essential for economic growth. After the Babri Masjid demolition in 1992, economic reforms
again took a back seat and the then prime minister, P V Narasimha Rao could not carry on the
bold liberalization program further.
MARCHELLE IRISH S. PARALE
PUP-MBAOU-4

Another example in the United States, laws passed by Congress and the many regulatory
agencies cover such areas as competition, minimum wages, environmental protection, worker
safety, and copyrights and patents. For example, Congress passed the Telecommunications Act
of 1996 to deregulate the telecommunications industry. As a result, competition increased and
new opportunities arose as traditional boundaries between service providers blurred. Today the
dramatic growth in mobile technology has changed the focus of telecommunications, which now
faces challenges related to broadband access and speed, content streaming, and much-needed
improvements in network infrastructure to address ever-increasing data transmissions.

Federal agencies play a significant role in business operations. When Pfizer wants to bring a new
medication for heart disease to market, it must follow the procedures set by the Food and Drug
Administration for testing and clinical trials and secure FDA approval. Before issuing
stock, Pfizer must register the securities with the Securities and Exchange Commission. The
Federal Trade Commission will penalize Pfizer if its advertisements promoting the drug’s
benefits are misleading. These are just a few ways the political and legal environment affect
business decisions.

States and local governments also exert control over businesses—imposing taxes, issuing
corporate charters and business licenses, setting zoning ordinances, and similar regulations

In Philippines, in the 1st quarter of 2019, the country's gross domestic product (GDP) broke the
6% streak as it slowed down to a 4-year low of 5.6%. Politics in the budget caused the delay.
Meanwhile, the Philippine Economic Zone Authority (PEZA) reported a drastic drop in
investments last year. In 2018, PEZA got only P68.3 million in direct investments, 12.8% lower
than 2017's P78.3 million. So why are investors not flocking to the Philippines? Businessmen
point to 3 things: taxes, wages, and red tape. The slow Covid response of the Government also
influence the business operation, almost a year of lockdown and hundreds of business were
closed due to this.

References:
https://www.rappler.com/newsbreak/in-depth/how-businessmen-cope-duterte-politics
https://opentextbc.ca/businessopenstax/chapter/understanding-the-business-environment/
https://www.mageplaza.com/blog/what-are-internal-external-environmental-factors-that-affect-
business.html