Free Essay. Business-Government Relations and the Political Environment

The government and political environment that affects business activities are always of great importance because different government policies are set and tend to have many ways by which they affect business activities. Business managers should set measures to reduce the effects of the political environment because it is among the most unpredictable element in business. The government and political environment has several pros and cons to the business activities of a particular country.

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The involvement of government in business instills order and discipline in business organizations, and this makes businesses to behave and act in a responsible way (Lazzarini, 2015). The political environment, as well as the government policies set in a country, makes it a requirement that all business organizations either local or foreign and operating in the local country are subject to the law and regulations which govern the activities of a business in a country. The government policies also ensure that the business organizations are registered which help to contribute to the government revenue when they pay taxes. Government control of the business organizations helps to ensure that all businesses responsibly conduct themselves with consideration to business etiquette. The advantage of this is that it ensures some businesses do not take advantage of their clients through hiking prices and exploiting them when they sell products that are below standards (Wang, Hong, Kafouros & Wright, 2018). Economic development is also stimulated by government involvement in the business where social amenities such as roads, infrastructure, and other projects are developed from the revenue that is gotten from business activities.

Government intervention into business activities might result in certain disadvantages based on the rules and regulations that they apply (John, Rajwani & Lawton, 2015). For instance, when the government uses price policies on business, it tends to acquire revenue while the consumers are profoundly hurt. The policies imposed by the government on business include direct payments and input policies. The government also prevents any foreign investment through the application of rules and regulations hindering various types of business from taking place. Government enterprises might fail to perform correctly as a result of the political interruption. The cons of government involvement are that the government can intervene through the implementation of strict regulations, subsidies, and tariffs. These may lead to political risks to the host country that have many adverse effects on the profits and goals.

The disadvantages can be caused by the government creating laws that prevent capital movement in the economy of the country. Government involvement has two significant risks which include macro risks and micro risks (Wroblewski, 2018). The macro risks include adverse actions that have negative effects to foreign firms while the micro risks are the adverse effects that affect specific sectors of the business such as corruption activities and actions that are spread against companies.

Affirmative action involves a process of responding to government policies after they happen. Affirmative action engages government policymakers in trying to influence public policies which serve different business interests (Shirodkar & Mohr, 2015). This action acts on influences of policies that serve business interests. Changes in federal policies are anticipated, and they enhance competition through correct policy changes. Affirmative action engages the government and other business actors such as the media in the influencing of public policies to serve business interests.

Conclusion

The politics and the government of a country affect the business sector through the events complicating the direct impacts as well as the indirect impacts. Political risks that arise from the actions of the government in a country might be from wars, terrorist attacks, and overthrowing of the government, which significantly affect the businesses in the country. Such risks cause violence that is directed towards the business sector and its employees causing financial constraints and limits to imports and exports due to warnings and sanctions given by other countries against the country facing the negative political environment.

References

John, A., Rajwani, T. S., & Lawton, T. C. (2015). Corporate political activity. The Routledge Companion to Non-Market Strategy, 115.

Lazzarini, S. G. (2015). Strategizing by the government: Can industrial policy create firm-level competitive advantage?. Strategic Management Journal, 36(1), 97-112.

Shirodkar, V., & Mohr, A. T. (2015). Explaining foreign firms' approaches to corporate political activity in emerging economies: The effects of resource criticality, product diversification, inter-subsidiary integration, and business ties. International Business Review, 24(4), 567-579.

Wang, C., Hong, J., Kafouros, M., & Wright, M. (2018). Exploring the Role of Government Involvement in Outward FDI from Emerging Economies. In State-Owned Multinationals (pp. 75-109). Palgrave Macmillan, Cham.

Wroblewski, M. (2018). The Advantages & Disadvantages of a Business & Government Partnership. Retrieved from https://smallbusiness.chron.com/advantages-disadvantages-business-government-partnership-50553.html