Chapter seven

Political environment

Lecture:16 cont…
Chapter: 7
Date: 19/05/2011
Political environment cont…

Political environment: Political environment is

the result of any country’s political system,
constitutional provisions, party system and the
political event (Vote) which takes place in the
country from time to time.
Political environment cont…

Political stability , Stable government, Party in

power, opposition parties, law and order
situations, press and media etc are main
symbols of political environment. Business is
highly affected by the political environment.
Political environment cont…

This may create problems or this may brings

new opportunities to entrepreneurs. Political
environment may be favourable or either it
may be unfavourable.

Business must accept and adjust their plans and

policies accordingly because business and
policies are inseparable.
Political environment cont…

Sovereignty of nations: In the context of

international law a sovereign state is
independent and free from all external
controls.
It enjoys full legal equality with other states,
governs its own territory, selects its own
political, economic and social systems and has
the power to enter into agreements with other
nations.
Sovereignty of nation
Political environment cont…
Sovereignty also discuss about the citizenship,
defines geographical boundaries and controls
trade and the movement of people and goods
across its borders.
Nations can and do abridge (limited) specific
aspects of their sovereign rights in order to
coexist with other nations. For example
European Union (EU), NAFTA, NATO, and
WTO are agreeing to give up some of their
Political environment cont…

Sovereign (power) rights in order to participate

with member nations for a common, mutually
beneficial goal.
Stability of government policies: The ideal
political climate for a multinational firm is a
stable, friendly government. Unfortunately
governments are not always stable, and
friendly.
Political environment cont…

Radical shifts in government philosophy when

an opposing political ascends to power.

Government might change or new political

parties might be elected but the concern of the
multinational corporation should remain same
and stable.
Political environment cont…

Frequent change in government policy

discourage the foreign investment or MNCs.
Some Asian and African countries are
politically unstable. For example, Zimbabwe,
Chad, Congo, Afghanistan, Pakistan, Iraq,
Cambodia, Sudan.
Political environment cont…

Political parties: In those countries where two

strong political parties that typically succeed
one another in central of the government and
alter prevailing attitudes. For example in Great
Britain the conservative party has traditionally
tended to be more restrictive regarding foreign
trade than the labour party.
Political environment cont…

Nationalism: Each and every country is unique

in terms of economic and cultural perspective.
Nationalism can best be described as an
intense feeling of national pride and unity.
Political environment cont…

Feelings of nationalisms are manifested in a

variety of ways including a call to “ buy our
country’s products only”, restrictions on
imports, restrictive tariff and other trade
barriers to trade. They also can restrict to the
foreign investment.
Political environment cont…

 Business responsibility to government:

Business firm has a number of responsibilities
to the government. Some of them are given
below:

 Pay tax: Business must pay a number of taxes

and fees to the government to operate their
business. These can include taxes on revenues,
tariffs on imported goods.
Business responsibility to government
cont…
 Voluntary programmes: Business perform
various voluntary programmes to assist the
government. Such as drought relief, education,
Medicare, tree planting, sanitary works or
recreational activities.
Business responsibility to government
cont…
 Abide (stand) by labour laws: Business that
hire employees must abide by the laws
relating how they treat their employees. These
include salary/ wages, work hour, and the
criteria under which can be hired or fired.
Business responsibility to government
cont…
 Providing information: Business people will
provide necessary information to the
government regarding export and import and
supply and demand so that they can take
proper decision.
Chapter seven cont…

Political environment

Lecture: 16
Chapter: 7
Date: 16/06/2012
Business responsibilities to
government cont…
• Government contract: Many business firms
offer for government contract and if
successful carry out the project. Such as
housing projects, technological project and so
forth. For example machines, rice, wheat etc
are imported by the business people.
Business responsibilities to
government cont…
• Follow environmental regulations: Industrial
and manufacturing sectors are involved in
pollution activities. So, they will restrain from
that pollution activities Such as air pollution,
water pollution, soil pollution etc.
Business responsibilities to
government cont…
• Avoid restrictive trade policy: Companies
will not be involved in restrictive trade policy
which limits competition. Because it is
harmful to the customers and government. For
example Citycell mobile phone company bid
for a restrictive trade policy with the
government in 1989.
Business responsibilities to
government cont…
• Financial disclosure: Companies must
disclose a number of financial statements to
the government in the form of tax return. It
increases the financial transparency of the
company.
Business responsibilities to
government cont…
• Avoid corruption: Business in most nations
are also forbidden from public officials.
Because they are involved in protecting
citizen’s interest. For example invest in share
market.
Business responsibilities to
government cont…
• Political activity: Political participation is a
much debated subject today. There are
arguments for and against participation of
business people in political activities. By
donating their generosity they become involve
in politics.
Political environment cont…

 Government responsibility to business:

Government responsibilities to business are
much greater than the obligation of business
to the government.
Government responsibility to business

• Establishment and enforcement of laws:

Government establishes and enforces laws and
regulations under which the business
functions. Government is responsible for
providing the rules of the game which makes
the business systems function smoothly and
which help to maintain operations.
Government responsibility to business
cont…
• Maintenance of order: Government has the
responsibility of maintaining order and
protecting persons and property. Business
requires a peaceful atmosphere providing by
the government.
Government responsibility to business
cont…
• Money and credit: It is also responsibility of
government to regulate money and credit and
protect the integrity of the currency that is to
guard against rapid fall in it’s value. For
example inflation, recession.
Government responsibility to business
cont…
• Orderly growth: Orderly growth implies
balanced regional development, distributive
justice, full employment and protecting the
economy against ‘ booms and busts’ (Share
market). The government has the resources
and capabilities to ensure orderly growth.
Government responsibility to business
cont…
• Infrastructure: Business needs for its
effective functioning such infrastructural
facilities as transportation, communication,
power, finance, trained personnel and public
services.
Government responsibility to business
cont…
• Information: Government agencies
(Bangladesh Rural Development Board,
Bangladesh planning commission) must
provide a large volume of information which
is used extensively by business firms.
Information will be provided from
departments of commerce and industry,
agriculture, labour, health, education, banking
to take the business decision.
Government responsibility to business
cont…

• Assistance to small industry corporation:

Small-size business establishments have
special role to play in our economy.
Government will help these organisations
finance, marketing, know-how and do-how to
grow. For example handy crafts, pottery etc.
Government responsibility to business
cont…
• Transfer of technology: Government-owned
research establishments transfer with
discoveries to the private industry in order to
put them commercial production. For example
BSTI, Bangladesh Science laboratory.
Government responsibility to business
cont…
• Government competition: Government often
competes with private business firms for the
purpose of regulating competition, improving
quality or to supplement private activities with
government activities with government
programmes. For example BFC, Shine Pukur
Ceramics, BRTC and other private
transportation companies, BPC and other
private owned hotel and resorts.
Government responsibility to business
cont…
• Inspection and licences: Government
agencies conduct inspections activities - foods
and drugs for assuring quality and safety of
the products. Bangladesh Standard and
Testing Institute (BSTI) performs these
activities.
Government responsibility to business
cont…
• Tariffs and quotas: Tariffs and quotas are
used by the government to protect business
from foreign competition. Government should
provide different benefits to the domestic
industry to prevent foreign competition. For
example price reduction of gas and electricity.
Thus the end of Chapter 7