The influence of the political environment of business is enormous. This article explains the topic of International political environment and system: with their important concepts; Legislature, Executive, and Judiciary. The political system prevailing in a country decides, promotes, fosters encourages, shelters, directs and controls the business activities of those countries. Political Environment is the relationship between the state government and institutions legislation public and private in the Business environment.
International political environment and system: with their important concepts; Legislature, Executive, and Judiciary.
A political system which is stable, honest, efficient and dynamic and which ensures political participation of the people, and assures personal security to the citizens, is the primary factor for the growth of any business. Two basic political philosophies are in existence all over the world, viz., democracy and totalitarianism.
In its pure sense, democracy refers to a political arrangement in which supreme power vests in the people. Democracy may manifest itself in any of two fundamental manners. If each individual is given the right to rule and vote on every matter, the result is pure democracy which is not, however, workable in a complex society with a large constituency.
Hence, the republican forms of the organization follow whereby the public, in a democratic manner, elect their representatives who do the ruling. In totalitarianism, also, call authoritarianism, individual freedom is completely subordinate to the power of authority of the state and concentrates in the hands of one person or in a small group which is not constitutionally accountable to the people.
Societies ruled by a pressure clique – political, economy or military – or by a dictator plus most oligarchies and monarchies belong to this category. The doctrine of fascism and erstwhile Russian Communism are an example of totalitarianism.
India is a democratic country. Our political system comprises three vital institutions:
- Executive or government, and.
Now, explain each one:
Out of three, the legislature is the most powerful political institution vested with such powers as policy making, law-makings, budget approving, executive control and acting as a mirror of public opinion. The influence of the legislature on business is considerable. It decides such vital aspects as the type of business activities, the country should have, who should own them, what should be their size of the operation, what should happen to their earnings and other related factors.
The legislature is the most powerful institution. The main powers are vesting in the legislature are; in today’s economies, particularly of developing countries like India, the relevance of a protective legal environment for Business assumes immense proportions as it is the very foundation of every investment decision.
The business has to be within the law of the Land. Every aspect of the business from its birth till death covers under the laws to ensure that not only profit is earned in a justified and fairway but also to ensure that in the attainment of business interests the interest of each person fully protect and the profits of the business are distributing in a manner beneficial to the society.
Government as Executive:
Also called the “state” the term government refers to “the center of the political authority having the power to govern those it serves”. For business consideration, we should know what are the government’s responsibilities to the business.
Specifically, the executive or government’s responsibilities towards business are as follows:
- Establishment and enforcement of the law.
- Maintenance of order.
- Money and credit.
- Orderly growth.
- Assistance to small industries.
- Transfer of technology, and.
- Tariffs and Quotas.
Government or executive is the executory body of the laws which are framed by the legislature.
According to E. V. Schneider,
“Government is that institution by which men everywhere, seek to order society, that is, to control the structure and functioning of society.”
According to Musselman and Hughes,
“Government is the center of the political authority having the power to govern those it serves.”
In simple words, the role of the Government or executive is to shape, direct and control the business activities. The translations of the objective of any laws to the reality depend as much upon the law itself as on its implementation. The implementation of the law in its word and spirit only can ensure the realization of its true objectives.
Indian constitution provides for a federal set up with powers being divided between central and the state governments. The powers and functions of central and state government are described in the constitution.
The third political institution is the judiciary. Judiciary determines how the work of executives has been fulfilled. It settles the relationship between private citizens, on one hand, and between citizens and the government upon the other. The judiciary sees to it that the exercise of authority by the executives is according to the general rules laid down by the legislature, it may declare that any particular order issued is, in fact, ultra vires (beyond the authority). It is the power of the Judiciary to settle legal disputes that affect business considerably.
1) Disputes between employers and employees, 2) employer and employer, 3) employee and employee, 4) employers and the public, and 5) employers and the government.
The power of the judiciary is of the dual type:
- The authority of the courts to settle legal disputes, and.
- Judicial review – the authority of the courts to rule on the constitutionality of legislation.
What is the International political environment?
Introduction: The political environment of the country of operation becomes increasingly important for the international firm. As it moves from exports to foreign direct investment (FDI) 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 utilizing to get improve 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 expecting in international business. Cordial political relations between the firm’s home country and the host countries have a direct favorable impact on FDIs.
As a firm expands internationally and begins to operate in multiple countries, political and legal issues become increasingly complex. 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, 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. Firm-level economic and political interests of the home and the host countries may differ widely.
International managers need to understand the significance of political decision-making in the host country that may severely influence its overseas operations. International business relations between the firms are greatly affecting from “affinity” or “animosity” among the countries based on historical or political reality. For instance, India’s political affinity with Sri Lanka and Mauritius has led to a high level of trade and investment whereas the reverse situation exists in case of Indo-Pak trade.
International Political Systems and Ideologies:
International political and economic systems or environment hardly function independently. The two are mutually inter-dependent. Political and diplomatic relations between the two counties greatly influence their economic relations. The political system of a country comprises various stakeholders. Such as the government, political parties with different ideologies, labor unions, religious organizations, environmental activists, and various NGOs.
Each of these players in a political system has its own unique sets of beliefs and aspirations and exerts its influence upon political decisions. The acquisition, development, securing, and use of power about other entities. Where did power view as the capacity of the social actors to overcome the resistance of the other actors are term as political behavior? Ideology is a set of beliefs or ideas as to how the society or group should organize, politically, economically, or morally.
Political ideology is a set of ideas or beliefs. That people hold about their political regime and its institutions about their position and role in it. Ideologies of different groups or political parties are often conflicting and they keep on challenging each other. In democratic countries, such as India, the US, and the UK, the shift in the political parties and their ideologies puts pressure on business operations of foreign firms. The power exerted by different pressure groups also varies from country to country.
For instance, communist or socialist parties in countries, such as Russia and China hardly face any considerable challenge whereas such parties exert sizeable political pressure in countries like India, Sweden, Italy, and Greece. On the other hand; these parties hardly have any political viability in the US. Most religious organizations are politically neutral in India. Whereas the Catholic Church played a crucial role in overthrowing Ferdinand Marcos in the Philippines and the liberation of Poland from Soviet domination. Islamic religious leaders in Iran greatly influence political decision making.