How the Political Environment Affects Business?

Political and Government environment

            Political and Government environment has close relationship with the economic system and economic policy. For example, the communist country had a centrally planned economic system. In most countries, there are a number of laws. These cover such matter as standards of product, packing, promotion etc. to regulate the conduct of business.

 

Product Regulations:

            Some government specify standard for the products to be marketed in the country, some times even prohibiting the marketing of certain products. Promotional activity are subject to various types of control in most nations. Several European countries restrain the use of children in commercial advertisement. The advertisement of alcoholic liquor is prohibited in India. Advertisement of cigarettes must carry statutory warning that “cigarette smoking is injurious to health”. Advertisement of baby food must necessarily inform the potential buyer that breast feeding is the best. Product comparison advertisement and the use of superlative like ‘best’ or ‘excellent’ in advertisements is not allowed in countries like Germany.

In the U.S.A. the federal trade commission is empowered to force a company to provide sufficient evidence to substantiate the claims concerning the quality, performance or comparative prices of it produce. As R. Marshal puts it. “What is being asked of the drug industries and of American business in general is a fuller disclosure of the relevant facts about products. For drugs, food additives, some cosmetic preparations, and so forth, a full disclosure requires more knowledge of the long-range side effects of material injectors into the complex human body. For American industries as a whole, greater condors has been called for under such legislation as such as truth in lending and fair packaging Act, Under Administrative decrees such as the warning requirement on the cigarettes packages and advertisement, under the threat of private damage suites using the common law concept of warranty, and voluntary programmers such as unit pricing and listing nutritional content of foods.

        The increasing complexity of products and the variety of product and the variety of product choices suggest further moves away from ‘caveat emptier’ or let the buyer beware’ doctrines, moves which on the whole should provide a welcome although sometime inconvenient challenge for business.

Control on Monopoly:

If the MRTP companies wanted to expand their business they had to convince the government that such expansions was in public interest.  In the word of T. Thomes, “government in India has an all-pervasive and predominantly restrictive influence over various aspect of business, e.g., industries licensing which decides location, capacity and process; import for machinery and material; size and price of capital issue; loan finance; pricing; managerial remuneration; expansion plans; distribution restrictions and a host of other enactments. Therefore, a considerable part of the attention of the Chief Executive and his senior colleagues has to be devoted to a continuous dialogue with various government agencies to ensure growth and profitably within the framework of control and restraints.

 

Control-on competition:

Today many countries have laws to regulate competition in the public interest. Elimination of unfair competitions and dilution of monopoly power are their important objective of these regulations. In India, the monopolistic undertaking, dominant undertaking and larger industries houses are subject to a number of regulations which prevent the concentration of economic power to the common determent. The MRTP Act also controls monopolistic, restrictive and unfair trade practices prejudicial to public interest. Such regulation brighten the prospects of small and new firms and increase the scope of some of the existing firms to venture into new areas of business.

Changes in Government Policy:

Changes in government policies such as the industrial policy, fiscal, tariff policy etc. have profound impact on business. Policy ‘development create opportunities as well as threats. A development which brighten the prospects of some enterprises may pose a threat to some others. For example, the industrial policy liberalization in India have opened up new opportunities and threats. While they have provided opportunities to a large number of enterprises to diversify and to make their product mix better, they have also given rise to serious threat to make their product by way of increase competitions. Many sellers’ markets have given to buyer’s promotions very heavily. This has provided a splendid opportunity for the advertising industries.