Political Environment

The political environment refers to the actions taken by the government, which potentially affect
the daily business activities of any business or company. According to the Law Dictionary, such
actions occur on a local or international scale depending on the governmental institution's
authority.
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 countrys socio-cultural environment.

Politicians can influence the rate of emergence of new technologies.

Politicians can influence acceptance of new technologies.

The political environment is perhaps among the least predictable elements in the business
environment. A cyclical political environment develops, as democratic governments have to
pursue re-election every few years. This external element of business includes the effects of
pressure groups. Pressure groups tend to change government policies.
Corruption is a barrier to economic development for many countries. Some firms survive and
grow by offering bribes to government officials. The success and growth of these companies are
not based on the value they offer to consumers.
What are the political factors affecting your marketing plan?
1. Taxation
2. Protection of environment.
3. Employment law.
4. Health and Safety.
5. Foreign Trade Agreement (FTA).
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BSA 1-1

6. Stability of political system.

1. Taxation
When the taxation decreases, this will lead to increase in the disposable
income (gross
income minus income tax on that income). When the normal individuals disposable
income increase, this will results in increasing the buying power, which means the individuals
are becoming more able to buy things and facilities, so you have a good chance to make a profit
from selling your product to that country (which has a good buying power).
2. Protection of the environment

Are you going to manufacture a product which could harm the environment?
If you are going to harm the environment in small extent, you should know that
there is are tax and penalties from the government for the environmental damage
you make. Also you should select the place of your factory, if your company is
going to build a factory that manufacture your product, then choose a region that
is close to factories environmental areas and try to be away from the main
populations.
Do you have manufacturing wastes that could harm the environment?
You should consider this issue well, because there are millions of money could be
spent on making products, developing factories which its wastes are less harmful
to the environment and human health. And by the way this will get you a profit on
long term and you will have a good corporate social responsibility
(CSR) towards society, environmental groups, legal and regulatory authorities in
your country.

3. Employment law

What about the hiring and firing costs in the country that you are going to market your
products in?

Are employees in your country having instability in their job? Do they have stability with
their job?
You should know how much the normal cost that you are going to purchase to your
employees (if you are going to make new companies) or your employees (are they
satisfied with their salaries), what about the compensation and benefit schemes? Do you
have a good compensation and benefit scheme to your employees (because the normal
people of your country are stable at their job)?

4. Health and Safety

You should know that your product has the highest safety profile and minimum hazard
on consumers health. Also you need to read and apply the Consumer Safety Act 1974.
5. Foreign Trade Agreement (FTA)
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BSA 1-1

The Foreign Trade Agreement (FTA) gives the companies that are from foreign
countries to penetrate your country market and marketing their products there. So you
should know if the Foreign Trade Agreement (FTA) applied in your country or not.

If the no. of imported products (that comes from the foreign countries) decrease, that will
help you to establish your product in the market (if your product is newly starting its
business in that market).

6. Stability of the Political Systems

You should know and study the political stability of the country that you will market you
products in. This issue affects your long term investment of your products; also it gives you
indication about the duration that you should spend in marketing your products in that country.
Example: How political factors affect Nike
Studies show that Nike has earned high profits from the growth orientated policies of US
government. The policies maintained low-interest rates. Currency exchange stability and
internationally competitive tax arrangements were also maintained. The company has also
benefited from government initiatives in terms of transparency in the global value chain.
One example of this is in membership of the Clinton administrations 1997 Apparel Industry
Partnership. Nike enjoyed changes in the political factors in many ways. However, political
pressures had a negative impact on Nikes employment practices.
There are 4 main effects of these political factors on business organizations. They are:
1. Impact on economy
The political situation of a country affects its economic setting. The economic
environment affects the business performance.
For example, there are major differences in Democratic and Republican policies in the US. This
influences factors like taxes and government spending, which ultimately affect the economy. A
greater level of government spending often stimulates the economy.
2. Changes in regulation
Governments could alter their rules and regulations. This could in turn have an effect on a
business.
The social environment urged a change to make public companies more liable.
3. Political Stability
Lack of political stability in a country effects business operations. This is especially true
for the companies which operate internationally.
For example, an aggressive takeover could overthrow a government. This could lead to riots,
looting and general disorder in the environment. These disrupt business operations.
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BSA 1-1

4. Mitigation of Risk
Buying political risk insurance is a way to manage political risk. Companies that have
international operations use such insurance to reduce their risk exposure.
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.

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.

Technological Environment
Technology affects all of us. Technology can catapult a business to success or destroy it.
Technological Environment means forces that create new technologies, creating new product
and market opportunities.
Japan is a good example of technological environment because it is known for its high
technology and it has its distinct market. This is especially true when one sees the cell-phone
market in Japan. Cell phones are must have gadget to Japanese, especially for people in Tokyo
where they spend majority of the day outside of their home. Japanese cell-phones have thus
developed as more than a phone and have their own features. This technological advance
together with the high usage of cell phones caused Japan to have its own marketing system.
Technology has had an immense impact on marketing and advertising methods. One hundred
years ago, advertising was largely limited to newspapers and billboards. Today, advertising and
marketing dominate the human environment. Commercial messages have moved beyond radio,
television and magazines and can now be found on the Internet, cell phones, bathroom stalls,
busses and even in the sky.
Advantage: Increased Reach
Using information technology, a marketer can reach an enormous number of people with just the
click of a button. Networked technologies give millions of people instant access to each other,
and this fact is being exploited ever more actively by marketers trying to get their products into
the public eye. While the Internet allows broad dissemination of advertising, other technologies
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facilitate its quick design and production. Photo editing and graphic design software enable
artists to produce ads in a fraction of the time that would be required with older technologies.
Advantage: Speed and Flexibility
Technology allows advertisers to respond quickly to changes in the market place.
For example, if a competitor develops a product that quickly becomes popular, an advertiser can
alter the image of his own product to more closely resemble the competitor's. Different markets
can be targeted with differently themed promotions using digital technology, without the
prohibitive costs associated with traditional print technologies. A slick magazine advertisement
can be put together in a day using graphic design software and sent via email to the magazine.
Disadvantage: Competition
What makes all of these technological developments less than perfect is that they are available to
everyone. If only one promoter had access to advanced technology, he would certainly have a
tremendous advantage. In a world that is saturated with such technology, the result is a marketing
arms race in which each business is striving for the next edge over its competitors. This level of
competition can become expensive and stressful as new machines and software are constantly
being purchased and employees are constantly being trained in new practices.
Disadvantage: Homogenization
As marketers all hone in on the fastest, most efficient and most effective way of getting public
attention, the result is a growing homogenization in both products and the way that they are
promoted. Because digital technologies make replication so easy, no marketer can have an edge
on the competition for very long, because others will copy whatever is effective. An advertising
environment in which everything looks the same makes it difficult for consumers to distinguish
between products, and increases public cynicism about the process of marketing itself.

Ninalyn P. Avila
BSA 1-1