Shah khalid 10538 sec (D)

Submitted to: SHAHNILA YOUSAF ass 4

Q: How changes in political environment affects businesses?

Contemporary Business issues
External factors affecting business
The importance of observing the political environment
Political environment effects
Political factors affecting business
Political instability
Political instability and economic growth
Causes of political instability
CONTEMPORARY BUSINESS ISSUES:
A contemporary business issue can be defined as any event, idea, opinion
or
Topic affecting business that is relevant to the present day.
For example
Political factors
Environment
CSR
Child labor
Energy crisis etc.
External factors affecting business:
There are many external factors that can affect your business. The aim is
always to take better decisions for the firm’s progress. Some common
factors are political, economic, social and technological (known as PEST
Analysis).
The importance of observing the political environment:
Firms should track their political environment. Change in the political
factors can affect business strategy because of the following reasons:
The stability of a political system can affect the appeal of a particular local
market.

1|Page
Shah khalid 10538 sec (D)
Submitted to: SHAHNILA YOUSAF ass 4

Governments view business organizations as a critical vehicle for social

reform.
Governments pass legislation, which impacts the relationship between the
Firm and its customers, suppliers, and other companies.
The government is liable for protecting the public interest.
Government actions influence the economic environment.
Government is a major consumer of goods and services.
POLITICAL ENVIRONMENT EFFECTS:
Political decisions affect the economic environment.
Political decisions influence the country’s socio-cultural environment.
Politicians can influence the rate of emergence of new technologies.
Politicians can influence acceptance of new technologies.
POLITICAL FACTORS AFFECTING BUSINESS:
Corruption level
Trade control
Bureaucracy
Tariffs
Freedom of the press
Competition regulation
Regulation and deregulation
Education law
Discrimination law
Antitrust law
Employment law
Health and safety law
Environmental law
Tax policy
Government stability and changes
2|Page
Shah khalid 10538 sec (D)
Submitted to: SHAHNILA YOUSAF ass 4

Government participation in trade unions

Import limitations on quantity and quality of the product
Legislation that manages environment pollution
Consumer e-commerce and protection
Intellectual property law
Data protection law
EFFECTS OF POLITICAL FACTORS ON BUSINESSES:
Government changes in their rules and regulations could have an impact
on business.
The political condition of a country affects its commercial setting.
The economic environment affects the business presentation.
The absence of political stability affects business operations, most
especially for those companies who operate internationally.
Obtaining political risk insurance is a method to manage political risk.
Firms that have international operations uses this kind of protection to
decrease exposure to risk.
POLITICAL INSTABILITY:
Political instability is a situation where by a country is currently going
through political turmoil.in many cases the country deteriorate in terms of
its economic progress
Political instability is when there is unconstitutionally changed of
government. it can be regular or irregular change of government
POLITICAL INSTABILITY AND ECONOMIC GROWTH:
On the one hand, the uncertainty associated with an unstable political
environment may reduce investment and the speed of economic
development. On the other hand, poor economic performance may lead to
government collapse and political unrest.
CAUSES OF POLITICAL INSTABILITY:
Rights and freedoms of the people are not respected
Corruption and mismanagement of the wealth of a country by the leaders.

3|Page
Shah khalid 10538 sec (D)
Submitted to: SHAHNILA YOUSAF ass 4

When elections are not free and fair

Mass unemployment and poverty can easily trigger political instability in
any country.
Suppression of opposition parties by the ruling government.
The government decides not to be open and transparent.

4|Page