Politically, a country`s government may try to protect jobs or certain industries. Some industries may be considered critical to national security, such as defence, telecommunications and infrastructure – for example, a government may be concerned about who owns its country`s ports. National security issues can affect both a country`s import and export, as some governments may not want advanced technological information to be sold to hostile foreign interests. Some governments use trade as retaliation when another country is politically or economically unjust. On the other hand, governments can influence trade to reward a country for its political support in global affairs. Understanding the balance between China`s governance structure and ideology is key to doing business in this complex country. China is both an emerging market and an emerging superpower. Its leaders see the economy as an instrument for maintaining state power, which in turn is essential for maintaining the stability and long-term growth and viability of the Communist Party. Jason Dean, Andrew Browne and Shai Oster, “China`s `State Capitalism` Sparks Global Backlash,” Wall Street Journal, November 16, 2010, accessed December 22, 2010, online.wsj.com/article/SB10001424052748703514904575602731006315198.html. In this series on the importance of producing a PESTEL analysis, we have repeatedly mentioned that political, economic, social, technological, environmental and legal factors often overlap. Overlap is good because it ensures that leaders do not lack anything when considering critical strategic decisions.
Most notable is the overlap between the legal and policy factors we discussed earlier. Conducting a macro-environmental analysis, a good example of how political factors have influenced a company, can be associated with Nike. Nike is a globally recognized sportswear, shoes, accessories and sports equipment. Nike has been very lucky because the U.S. government has formulated such guidelines that will promote business growth. The company benefits from a stable currency and low interest rate conditions, as well as highly competitive tax provisions that help the company drive growth. The U.S. government has taken initiatives regarding transparency in the global value chain, from which Nike has benefited greatly.
However, Nike is facing tough times in its outsourced manufacturers in other regions such as Indonesia, Thailand and Vietnam, where political unrest is on the rise. The protection of citizens` property rights also has a significant impact on businesses. Those hoping to create organizations must be sure that they own the rights to their products. For this reason, governments enact copyright and trademark laws to ensure that companies retain ownership of their products or trademarks. Similarly, some jurisdictions have enacted laws regarding the use of toilets by transgender people. Again, this is an area where some sole proprietorships have strong objections to recognizing anything other than the traditional roles of men and women in toilet use. In the absence of nationally consistent guidelines on this topic, you need to be aware of trends in your local community to address these issues. Since political systems vary from one area to another, the policy implications differ. The people of the country democratically elect an open system of government. In totalitarian systems, the power of government comes from a select group. A government`s rules and regulations – its laws – will always have a macroeconomic impact on a company`s success. And for companies operating under the jurisdiction of multiple governments, executives need to be aware of the legal factors in each location.
Not surprisingly, established democracies, such as those found in the United States, Canada, Western Europe, Japan and Australia, offer a high degree of political stability. Although many countries in Asia and Latin America are also functioning democracies, their level of development affects the stability of their economic and trade policies, which can fluctuate with changes in government. Chapter 4 “World Economies” provides more information on industrialized, developing and emerging countries. As we have seen, a company has no control over the different elements that make up its macro environment. But it`s important to study them, as it allows companies to prepare for change. Let`s find out a little more about the political-legal environment and the social environment and its impact on a company. If you want to learn more about how globalization and political activity affect your business, consider taking an online course like Global Business. This way, you can prepare for the reality of globalization and the impact of political decisions on your business. Public goods benefit businesses because they enable other businesses to create value through their use. For example, a government provides public education that produces qualified people who can hire businesses. A strong legal system is essential to the success of any business. A country therefore needs a strong and functioning legal system with laws that protect consumers and producers.
There are various other issues such as company law, royalty law, patent law, intellectual property rights. Let`s focus briefly on how the political and economic ideologies that define countries affect their legal systems. Essentially, there are three main types of legal systems – common law, civil law, and religious or theocratic law.