Why is the political environment so influential
on international business? Give some examples.
Discuss for Meeting 3
Changes in tax rates, government policies and behavior, political stability of the region, foreign trade restrictions, and other political considerations all have an impact on how an international business firm operates. Political instability in the country has a direct effect on business operations. Furthermore, various tax policies and government interventions can often stymie business expansion in other regions.
Example:
Through Law no. 7 of 1994 international trade, Indonesia headed for a Free Trade system and also gave rise to protectionism. Indonesia was designated as one of the founders of AFTA (Asean Free Trade Area), carried out bilateral relations and was involved in the US-Singapore FTA which had a significant impact in the form of a sharp increase in illegal trade in Indonesia.
Through Law no. 7 of 1994 international trade, Indonesia headed for a Free Trade system and also gave rise to protectionism. Indonesia was designated as one of the founders of AFTA (Asean Free Trade Area), carried out bilateral relations and was involved in the US-Singapore FTA which had a significant impact in the form of a sharp increase in illegal trade in Indonesia.
The political environment is one of the outside factors of the organization that can influence both, directly and indirectly, the direction and policies of an organization in managing its business. The political environment relates to governments or institutions that have the authority to launch policies and regulations, such as the central government, Bank Indonesia, the Financial Services Authority (OJK), the World Trade Organization (WTO), the International Monetary Fund (IMF), and so on, which can influence organizations or companies.
Therefore, the political environment is so influential on international business because the political environment is one of the factors that can make a business go up or down. An unstable political situation will cause the economy to decline and it's certainly will give an impact on the business that is running by an organization or company.
The political environment can also affect the sustainability of an international business, because if there are political conflicts between countries so it can occur a boycott conflict over a certain product or changes in government policy. Besides, the political environment can also affect international business in a good way, if there is a tight relationship between the two, then it can build a good economy of a country. Therefore, there is a need for the stability of support between political policies and international business that is running by an organization or company.
Examples of the influence of the political environment on international business:
- If the dollar exchange rate rises, it will have an impact on companies that export and import raw materials and final goods. It is because, with the dollar exchange rate rises, it makes the raw materials imported from other countries by making payments using US dollars will be more expensive, which means that production costs will increase. It certainly makes companies have to increase the sales price which results in a decrease in total sales.
- If the conditions or relations between state governments are not in a stable condition, it can make the political situation unfavorable. This instability can affect the international business that running by an organization or company, for example, the company may lose capital, it can reduce sales for countries whose political situation or government relations is instability or in conflict, and can also make the potential investors and foreign companies difficult to open up a business in those countries.
International factors are influenced by a variety of political factors. Changes in tax rates, government policies and behavior, political stability of a region, foreign trade restrictions, and other political considerations all have an effect on how an international business firm operates. The lack of political stability in the country has a direct effect on business operations. Moreover, a number of tax policies and government programs.
legal Huawei in US
The Chinese government accuses the US of legal and political manipulation in the case that ensnared Huawei and its top brass, Meng Wanzhou.
Illustration of the logo of the Chinese telecommunications company, Huawei. (REUTERS / Thomas Peter)
Jakarta, CNN Indonesia - The Chinese government stated that the United States was carrying out political manipulation in the allegations it accused the telecommunications company Huawei . They claim the US is abusing the law to corner the company and the Bamboo Curtain Country.
"For some time, the US has used state power to discredit and crack down on a number of Chinese companies in an attempt to choke off the legitimate and legal operations of the companies," Chinese Foreign Ministry spokesman Geng Shuang said in a statement on Tuesday.
"There is strong political motivation and political manipulation behind the (US) action," continued Geng Shuang.
The Chinese government accuses the US of legal and political manipulation in the case that ensnared Huawei and its top brass, Meng Wanzhou.
Illustration of the logo of the Chinese telecommunications company, Huawei. (REUTERS / Thomas Peter)
Jakarta, CNN Indonesia - The Chinese government stated that the United States was carrying out political manipulation in the allegations it accused the telecommunications company Huawei . They claim the US is abusing the law to corner the company and the Bamboo Curtain Country.
"For some time, the US has used state power to discredit and crack down on a number of Chinese companies in an attempt to choke off the legitimate and legal operations of the companies," Chinese Foreign Ministry spokesman Geng Shuang said in a statement on Tuesday.
"There is strong political motivation and political manipulation behind the (US) action," continued Geng Shuang.
The political environment becomes increasingly so influential for an International Business as it moves from exports to foreign direct investment as the mode of international market entry. Exporting firms use political pressure tactics to have free exportability of the products in their home country regulations, hassle-free procedures, and legislative requirements and export incentives.
Besides, diplomatic channels are utilized to get improved market access for imported goods in the target foreign country markets, reduced import tariffs, compatible quality regulations, etc. The dispute settlement mechanism, legal framework, and judicial independence are also critical to fair treatment expected in international business.
For example:
The consequent to economic liberalization in the People’s Republic of China, multi­level marketing firms, such as Amway, Avon, Tupperware, and Mary Kay Cosmetics grew rapidly. By 1997, Amway had approximately 80,000 sales representatives who generated $178 million in sales, whereas Avon had nearly 50,000 representatives who generated sales of $75 million.
It was reported that some other companies using the so-called pyramid schemes were cheating consumers. Consequently, the Chinese government banned direct selling in April 1998. As a result, the direct marketing companies were prohibited to operate their business model in China. It was only after diplomatic pressures and negotiations between the US and the Chinese governments that the policy was reversed.
Besides, diplomatic channels are utilized to get improved market access for imported goods in the target foreign country markets, reduced import tariffs, compatible quality regulations, etc. The dispute settlement mechanism, legal framework, and judicial independence are also critical to fair treatment expected in international business.
For example:
The consequent to economic liberalization in the People’s Republic of China, multi­level marketing firms, such as Amway, Avon, Tupperware, and Mary Kay Cosmetics grew rapidly. By 1997, Amway had approximately 80,000 sales representatives who generated $178 million in sales, whereas Avon had nearly 50,000 representatives who generated sales of $75 million.
It was reported that some other companies using the so-called pyramid schemes were cheating consumers. Consequently, the Chinese government banned direct selling in April 1998. As a result, the direct marketing companies were prohibited to operate their business model in China. It was only after diplomatic pressures and negotiations between the US and the Chinese governments that the policy was reversed.
Forever under the general rulings of the dreaded MurphyΓÇÖs Law, every campaign, product launch or global market initiative has the potential to go wrong. The factors that could interfere are countless and while some are predictable and can be controlled, many others cannot. In general, factors that can be controlled pertain to the company and its organization and are called internal factors. Those that cannot be controlled constitute the external factors, or the environment. Politics is one of the main environmental factors and is in general out of companiesΓÇÖ control. When a company launches a product, a campaign or operations in a foreign market, it can be faced with problems if the launch runs into issues that are political in origin.
The ways in which politics affects business and marketing operations are typically two. I shall call them the ΓÇÿstructural wayΓÇÖ and the ΓÇÿpopulist wayΓÇÖ. Structural influences are determined by elements that are already in place and are more or less predictable like active legislation, taxation, trade regulations, international treaties and agreements, the ruling party or government in place until the end of the mandate, etc. Populist factors pertain to public identities and sensitivities that are linked to peopleΓÇÖs political identity and it can be related to ideology, history, nationalism, even mythology; any element that is constitutive of peopleΓÇÖs political identity has the potential to backlash if people feel it is being challenged or disrespected or if it undermines their belief system. Populist factors are far more volatile in nature and are notoriously difficult to predict. However, in the digital age we live in, they have the potential to be even more disruptive than the structural ones as reactions can be shared and spread online in a matter of minutes and regaining control can be very costly and challenging. I will discuss ways to deal with structural factors first and then I will discuss issues that relate to populist political reactions.
Examples include: Government policy, political stability or instability, bureaucracy, corruption, competition regulation, foreign trade policy, tax policy, trade restrictions, labor/environmental/copyright/consumer protection laws, funding grants & initiatives, etc.
The ways in which politics affects business and marketing operations are typically two. I shall call them the ΓÇÿstructural wayΓÇÖ and the ΓÇÿpopulist wayΓÇÖ. Structural influences are determined by elements that are already in place and are more or less predictable like active legislation, taxation, trade regulations, international treaties and agreements, the ruling party or government in place until the end of the mandate, etc. Populist factors pertain to public identities and sensitivities that are linked to peopleΓÇÖs political identity and it can be related to ideology, history, nationalism, even mythology; any element that is constitutive of peopleΓÇÖs political identity has the potential to backlash if people feel it is being challenged or disrespected or if it undermines their belief system. Populist factors are far more volatile in nature and are notoriously difficult to predict. However, in the digital age we live in, they have the potential to be even more disruptive than the structural ones as reactions can be shared and spread online in a matter of minutes and regaining control can be very costly and challenging. I will discuss ways to deal with structural factors first and then I will discuss issues that relate to populist political reactions.
Examples include: Government policy, political stability or instability, bureaucracy, corruption, competition regulation, foreign trade policy, tax policy, trade restrictions, labor/environmental/copyright/consumer protection laws, funding grants & initiatives, etc.
The political environment that affects international business because there are diplomatic channels that can be used to increase market access for important goods on the target of reducing import tariffs and quality regulation. Politics is also one of the external factors that determine whether the business will pace or not in international business.
There are two ways politics affects business operations and marketing, namely structurally and populist ways which are read as populist ways which are much more unstable and very difficult to predict and in this era of globalization it is increasingly difficult to control and becomes something that is very challenging.
And Political emvironment related to government institutions that have authority to launch policies and regulations, such as Bank Indonesia, OJK, and so on which can influence organization or companies.
For example, Indonesia sends rice from India during the rice harvest season in Indonesia on the grounds that good relations can be established between the two countries, such as when Indonesia asks for help from other countries, it will be willing to help because of the establishment of good political relations between India and Indonesia.
There are two ways politics affects business operations and marketing, namely structurally and populist ways which are read as populist ways which are much more unstable and very difficult to predict and in this era of globalization it is increasingly difficult to control and becomes something that is very challenging.
And Political emvironment related to government institutions that have authority to launch policies and regulations, such as Bank Indonesia, OJK, and so on which can influence organization or companies.
For example, Indonesia sends rice from India during the rice harvest season in Indonesia on the grounds that good relations can be established between the two countries, such as when Indonesia asks for help from other countries, it will be willing to help because of the establishment of good political relations between India and Indonesia.
Political culture is a series of beliefs or attitudes that influence public policy and administration in a country, including patterns related to economic policy or business behavior.
Political risks are generally closely related to governance and the political and security situation in a country. Every action in a business organization is political, except charity or social organizations. These factors determine the smooth running of a business. Therefore, if the political situation is favorable, business in general will run smoothly.
There are politics that are designed to keep government interference in the economic / business sector. The system is called a liberal system and its politics is democratic. There is politics that is fully interventionist with the support of a clean government. There is also politics that tends to direct the government to get involved / interfere in the field of business economics.
For example, the policies carried out by the government, most companies in Indonesia, whose politics still require intervention from the government. This can be seen from the policies made by the government for companies to support their business activities. This of course has an influence on the company. The relationship between politics and business basically refers to the economic context in which it is influenced by political policies made by companies and policies made by the government for these companies.
Political risks are generally closely related to governance and the political and security situation in a country. Every action in a business organization is political, except charity or social organizations. These factors determine the smooth running of a business. Therefore, if the political situation is favorable, business in general will run smoothly.
There are politics that are designed to keep government interference in the economic / business sector. The system is called a liberal system and its politics is democratic. There is politics that is fully interventionist with the support of a clean government. There is also politics that tends to direct the government to get involved / interfere in the field of business economics.
For example, the policies carried out by the government, most companies in Indonesia, whose politics still require intervention from the government. This can be seen from the policies made by the government for companies to support their business activities. This of course has an influence on the company. The relationship between politics and business basically refers to the economic context in which it is influenced by political policies made by companies and policies made by the government for these companies.
There are many external environmental factors that can affect your business. It is common for managers to assess each of these factors closely. The aim is always to take better decisions for the firmΓÇÖs progress. Some common factors are political, economic, social and technological (known as PEST analysis). Companies also study environmental, legal, ethical and demographical factors.
The political factors affecting business are often given a lot of importance. Several aspects of government policy can affect business. All firms must follow the law. Managers must find how upcoming legislations can affect their activities.
The political environment can impact business organizations in many ways. It could add a risk factor and lead to a major loss. You should understand that the political factors have the power to change results. It can also affect government policies at local to federal level. Companies should be ready to deal with the local and international outcomes of politics.
Changes in the government policy make up the political factors. The change can be economic, legal or social. It could also be a mix of these factors.
Increase or decrease in tax could be an example of a political element. Your government might increase taxes for some companies and lower it for others. The decision will have a direct effect on your businesses. So, you must always stay up-to-date with such political factors. Government interventions like shifts in interest rate can have an effect on the demand patterns of company.
Certain factors create Inter-linkages in many ways. Some examples are:
Political decisions affect the economic environment.
Political decisions influence the countryΓÇÖs socio-cultural environment.
Politicians can influence the rate of emergence of new technologies.
Politicians can influence acceptance of new technologies.
The political factors affecting business are often given a lot of importance. Several aspects of government policy can affect business. All firms must follow the law. Managers must find how upcoming legislations can affect their activities.
The political environment can impact business organizations in many ways. It could add a risk factor and lead to a major loss. You should understand that the political factors have the power to change results. It can also affect government policies at local to federal level. Companies should be ready to deal with the local and international outcomes of politics.
Changes in the government policy make up the political factors. The change can be economic, legal or social. It could also be a mix of these factors.
Increase or decrease in tax could be an example of a political element. Your government might increase taxes for some companies and lower it for others. The decision will have a direct effect on your businesses. So, you must always stay up-to-date with such political factors. Government interventions like shifts in interest rate can have an effect on the demand patterns of company.
Certain factors create Inter-linkages in many ways. Some examples are:
Political decisions affect the economic environment.
Political decisions influence the countryΓÇÖs socio-cultural environment.
Politicians can influence the rate of emergence of new technologies.
Politicians can influence acceptance of new technologies.
The political conditions of a country can affect international trade because the politics of a country affect government policies, and government policies are closely related to the economic conditions of a country, therefore, political conditions can affect international trade. If the political conditions of a country are in chaos, then the economy of that country is also chaotic, and exporters and importers will avoid countries that are not stable in the economy and political conditions to cooperate in the trade sector.
For example, we can see for ourselves how countries in modern times go to war, then fight economically, as was done by America and China some time ago, trade wars carried out by China and America can have a global impact, because the US dollar currency is often used by many countries to transact. Therefore, the economic and political strength of a country can influence international trade
For example, we can see for ourselves how countries in modern times go to war, then fight economically, as was done by America and China some time ago, trade wars carried out by China and America can have a global impact, because the US dollar currency is often used by many countries to transact. Therefore, the economic and political strength of a country can influence international trade