There are a lot of factors that can affect your international business. These factors can be external, or internal. External factors are the ones that exist outside your business. These factors can be political, economic, and social in nature. Apart from this, these factors can include technological, environmental, and competitive aspects too. At some point in your business, these factors can impact your level of success. You need to adopt immediate measures to minimise the intensity of their impacts. Sometimes, you might have to face political factors.
These factors can impact you a lot. You need to keep a close eye on these factors. This will help you in making some good decisions for your business’s success. In the recent years, political factors have been affecting international businesses a lot. You cannot afford to break the laws and regulations, so you need to respect them. You must have a brief understanding of how to avoid their impacts as well. This article aims to discuss the political factors that are affecting international businesses. Let’s discuss these factors in detail:
Bureaucracy:
One of the major’s political factors is Bureaucracy. It means a system of officials in which higher officials or top management take the decisions. The owner operates his business with the help of set rules. In an economy, several businesses are operating on an international scale. They include diverse functions to manage all these aspects. Apart from this, there are several sub-institutions.
These institutions aim towards making progress reports. Then they send these to the top management. A bureaucracy will allow the business to define rules. Large-scale businesses will operate under these rules then. It will also ask them to define the protocol for decision-making. So, any change in the bureaucracy will surely impact these rules. Once the rules get changed, it will take more time to align the business with newly established ones.
Corruption:
Among political factors, Political corruption is another factor that can affect international businesses. It is a multidisciplinary subject that has different types. Political corruption is one of its types. Political corruption can take place in several ways. It can be in the form of foreign direct investment. It can also be found within international trade systems. As a result of this, the government might have to face several restrictions. These restrictions usually come from International Trade Unions. The country might have to face a trade ban in several countries of the world because of this factor.
Tariffs:
According to a PhD dissertation writing service, tariff is another type of political factors that can impact a business. It is a sort of trade barrier that the government will introduce. As a result of this restriction, the prices of international goods will increase. The prime focus of introducing tariffs is to divert the consumer’s attention towards local products. Most of the time, consumers prefer using international products.
As a result, it causes a great loss to the national economy. This is because locally made, or sourced products are not purchased as often. Tariffs will discourage the usage of international products. It will help local companies in producing better quality goods. So as a result, consumers will shift to local goods.
Trade Control:
Trade control is another political factor that can affect your business. Suppose two countries are trading partners and use trade control barriers. This will result in the start of a trade war. Countries will impose trade control restrictions to reduce over-reliance on imported goods. According to economists, there are many negative impacts of these restrictions. One of these negative impacts is that it decreases economic efficiency.
This rule works under the Theory of Comparative Advantage. Developed countries set the rules for developing countries. As a result, developing countries face high trade barriers. They have to pay high taxes for the import of goods. In short, trade control restrictions will also impact a business greatly.
Employment Laws:
Another major political factor that can impact your business is employment laws. You need to meet the international standards for exporting goods. For this, you will need the latest technology, and machinery. Apart from this, you will need skilled labor. This labor will help you in producing export-quality goods. But if you are hiring international labor, you will face some restrictions too. You might have to face employment laws. It will cause some extra costs as a result. You will have to spend money for the hiring and pay process too. You have to follow the health and safety laws of your employees as well.
Unstable Governments:
Political factors also include instability, which is another aspect that can affect international business. Most of the time, developing countries have to face this issue. There are several reasons behind this issue’s occurrence. The government might collapse because of ongoing internal conflicts. It can collapse when the government fails to deliver what it promised. This is also possible because of rapid policy changes. Hence an unstable government regime will affect international businesses too. As a result of this, transaction costs will increase. The exporter will receive low profits and will fail to maintain business as well.
Regulatory Changes:
Regulatory change/s can be mentioned as another aspect affecting international businesses. It usually includes tax, monetary, and fiscal policies. Apart from this, it will also include government, and trade policies. The government can change these policies after having a clear picture of the economy. These policies can impact your business. This impact can be witnessed in a positive, or negative way. These policies can help you in growing your business. But a negative impact of these can prevent your business’s growth too. If there are strict regulatory policies, then your business will face losses. If these policies promote free trade, you will earn high profits. This will also help your business in growing further.
Conclusion
There are a lot of factors that can affect your business. These political factors can be either internal, or external. External factors can be political, economic, and social. This article discussed political factors that can affect international business. Bureaucracy is one of the most important reasons that can impact a business. It follows a chain of command that works on set rules. Apart from this, you might have to face trade restrictions.
These include tariffs, and taxes. Tariffs will increase the value of imported goods. Through this, the price of products will also increase. Political corruption and instability are other reasons that can impact a business. Regulatory changes, and employment laws are also valid reasons that can affect your business. You need to spend more on hiring, and paying the employees. All these factors will decrease economic efficiency too.
