Political Factors Flashcards
(6 cards)
Instability - Political Factor
One of the major objectives of government is to provide a stable economic and legal framework within which businesses can operate and grow and individuals thrive. Competition needs to be fair; the rule of law and clear property rights must apply. Businesses that venture into countries that are politically unstable are taking considerable risks.
National Security - Political Factor
This is an increasingly important issue for many countries as terrorist attacks have become commonplace across the world. As governments seek to protect their citizens, they introduce measures that may well restrict the movement of goods, people and capital. Many businesses may suffer negative impacts as a result, especially when attempting to resolve skill shortages.
Major trading partners - Political Factors
Whilst the UK has decided to remove itself from membership of the European Union, the 27 remaining countries are still a vital market for many UK businesses. The UK may not be the only country that decides to make such a move. Such uncertainty has the impact of disrupting financial markets and creating considerable uncertainty in the European Single
Market and the Eurozone.
Changes in government - Political Factor
New governments may well have a more, or less, positive attitude towards business activity. For example, legislation may be put in place that lifts restrictions on businesses in terms of such matters as pollution or workers’ rights. This may result in cost increases for businesses and impact upon future profitability. Republican governments elected in the USA, for instance, have tended to be more pro-business than Democratic governments.
Pressure groups - Political Factor
The activity of such groups can have a significant impact upon political decision-making. Campaigns against the tobacco, alcohol and gambling industries have all had a significant impact upon bringing about changes in legislation. Businesses are required to put in place measures to comply with such legislation and this inevitably raises costs and lowers profits. Pressure groups are an increasingly significant factor in bringing about political change and businesses need to be fully aware of their activities.
PEST Factors
A PEST analysis examines the Political, Economic, Social and Technological environments that affect markets and businesses.
It is recognised by decision makers that, in the longer term, the survival and success of a business are dependent upon adopting objectives and strategies appropriate to the external environment within which their business operates. It is not enough to say we have the right marketing mix or the best product portfolio
without being aware of the external environment. It is also worth bearing in mind that the external environment is continually changing and businesses have to adapt to such changes if they are to remain competitive.
