Business and Politics

In the wake of worldwide economic turmoil and efforts toward recovery, understanding the interdependence of government and business is more important than ever. Monitoring, understanding and adapting to the political environment absolutely essential for any business, because it significantly affects every business. Economic growth and the development of a stable, competitive environment for businesses is a top priority for local and national administrations. Politics and business are interrelated, as one of the most important success factors for a government is its economic policy.

However, political decisions can have serious effects on the world of business. The political environment in a country affects business organizations and could introduce a risk factor that could cause them to suffer a loss. The political environment could change as a result of the actions and policies of governments at all levels, from the local level to the federal level. Businesses need to be prepared to deal with the fallouts of government politics.
Global economic trends and local political pressures are forcing cities into competition for economic development. This phenomenon is now visible in Europe. In the United States, Britain, and France, local politics is being reconstituted, with the emergence of interclass, place-based development coalitions. These do not correspond to a single growth machine model but take differing forms in different national contexts.

Some of political factors that effect the business?
1. Stability of the government 

2. Government type (dictatorship, democratic, monarchy, etc)
3. Economic policy of the government 

4. Trade policy 

5. Diplomatic events in surrounding countries

Changes in Regulation * Governments could change their rules and regulations, and this could have an effect on a business. For instance, after the accounting scandals of the early twenty-first century, the United States Securities and Exchange Commission became more focused on corporate compliance and the government introduced the Sarbanes-Oxley compliance regulations of 2002. This was a response to the social environment that called for such change to make public companies more accountable.


Political Stability * Particularly for businesses that operate internationally, a lack of political stability in any country has an effect on its operations. A hostile takeover could overthrow a government, for instance. This could lead to rioting and looting and general disorder in the environment. All this disrupts the operations of a business. Such disruptions have occurred in Sri Lanka, which went through a protracted civil war, and in Egypt and Syria, which have been subject to disturbances as people agitate for certain rights.

Employee Taxation * Opponents to taxation feel that direct taxation reduces the incentive to work. Workers feel that their work will not earn them a significant paycheck, so they instead prefer to take advantage of government programs designed to assist them. However, those in favor of government taxation argue that direct taxation increases the incentive to work because workers put in more hours so that they can increase their earnings. Working harder can increase business income. Employer Taxation * When businesses have to pay more taxes, they have fewer resources to invest in expansion, leading to the creation of fewer jobs. However, businesses can benefit when the taxes they pay fund projects that benefit businesses such as their own. Also, businesses do not necessarily invest in expansion when they have extra revenue.


Market Volatility * Markets are volatile, with business cycles often experiencing booms and busts. Governments sometimes lower taxes during busts to encourage businesses to invest. They also artificially lower interest rates, encouraging borrowing and spending.


Debt
* Foreign investors can buy government debt. Governments eventually have to offer higher interest rates for their debt to attract more investors, which can slow down economic growth for businesses. Government debt can grow and eventually lead to a mounting national debt that the country can struggle to pay off.
Government Contracts * Many businesses have contracts with government agencies or provide services to government workers. When governments are not capable of funding themselves, they can experience shutdowns, which can have negative effects on businesses that work with government agencies. Either the businesses are incapable of finding new customers to replace the lost government agencies, or even worse, projects started by the business receive no compensation or must be halted abruptly. For example, a business constructing a building for a government agency might have to stop construction, leaving the structure vulnerable to weather and other damage.


Regulations
* To protect workers and customers, governmental agencies often create regulations that govern how businesses conduct operations. These regulations can place burdens on businesses, forcing them to devote resources toward satisfying the regulatory demands. However, not all research suggests that regulations, such as environmental regulations, reduce economic growth.


Monopolies
* Under some circumstances, businesses can develop monopolies, preventing other businesses from entering into the marketplace and competing with them. Governments sometimes establish anti-trust laws that prevent this. The theory is that competing businesses will lower prices and raise the quality of their goods to attract customers.

Political factors
Businesses can be affected by many aspects of government policy. In particular, all businesses must comply with the law. They must also consider the impact of any forthcoming legislation on their operations. This may require taking action before the legislation comes into effect.
Legislation and regulations
One issue that affects manufacturers and retailers of electronic goods is the disposal of these products at the end of their life. Recycling is high on the public agenda. There are government initiatives to promote more recycling. These initiatives are sometimes backed by legislation.
For example, the Waste Electrical and Electronic Equipment (WEEE) regulations are designed to reduce the amount of electronic waste going to landfill sites. Businesses must obey these environmental laws. However, a company that goes further by taking other measures to minimise its environmental impact will be seen more favourably by consumers.
Jessops responded to the WEEE regulations by contributing towards a national fund to assist local councils to develop collection facilities for electronic goods. The company is working to increase awareness of the WEEE regulations. It has set up convenient battery recycling points in its stores.
These responses show a dedication to minimising the company’s environmental impact. This could give Jessops a competitive advantage over competitors that have not taken these initiatives.
Government initiatives
Businesses also have to take into account the more general political ambitions of the government. The current Conservative-led coalition government is cutting jobs in the public sector and is hoping that the private sector will grow to create new jobs in the economy.
The private sector consists of small single-owner businesses (sometimes known as sole traders), partnerships and companies, like Jessops, owned by shareholders. The government’s emphasis on private sector growth could provide opportunities for Jessops if it leads to a more buoyant economy.