Changes to policies and regulations pose a significant risk to the business. For example, changes in government policy are the political factors. Change can be economic, legal or social. It could also be a mixture of these factors. Rules and regulations could be applied directly by the government according to their political and legal philosophies. As existing technology evolves, sellers and buyers can more easily conduct their own business. However, countries still have the ability to regulate or force companies to abide by their rules and regulations. As a result, the political and legal climate in the countries where they currently operate or plan to operate in the future is monitored and assessed by their global activities. China is one of the most visible examples with its strong government and limited individual rights. Over the past two decades, however, China has sought a new balance between state planning and management of the economy. While the government remains the dominant force, controlling more than a third of the economy, more private companies have emerged.

China has managed to combine government intervention with private investment to develop a robust, market-oriented economy – all in a communist form of government. With a change in management policies, political factors emerge that can change the entire business scenario. These changes can be economic, legal or social and include the following factors: There are 4 main impacts of these political factors on business organizations. These include: The political environment can affect business organizations in several ways. This could add a risk factor and result in a significant loss. They need to understand that political factors have the power to change outcomes. It can also have an impact on government policies at the local and federal levels. Companies must be prepared to deal with the local and international results of the policy. In addition, political factors affect not only directly, but also other factors that can have a significant impact on the company and its operating environment. Certain factors create connections in various ways, such as: Federal agencies play an important role in business operations. If Pfizer wants to bring a new heart disease drug to market, it must follow the testing and clinical trial procedures established by the Food and Drug Administration and receive FDA approval.

Before issuing shares, Pfizer must register the securities with the Securities and Exchange Commission. The Federal Trade Commission will penalize Pfizer if its advertising promoting the drug`s benefits is misleading. These are just some of the ways in which the political and legal environment influences business decisions. Political factors can influence companies in several ways. These external environmental factors can result in a risk factor that can lead to a significant loss of business. These factors can alter overall results and, therefore, companies should be able to cope with local and international policy outcomes. You must have heard many times that an election year is an extremely important factor for the economy. For this reason, the type of government that governs in the center and in the state has a great influence on business. The government also decides on all fiscal policies, monetary policies and fiscal modules. A strong legal system is essential to the success of any business. A country therefore needs a strong and functioning legal system with laws that protect consumers and producers. There are various other issues such as company law, royalty law, patent law, intellectual property rights.

The political stability of a country is essential to the stability of the economy and the stability of the stock market. Various political groups also have great influence on business and trade unions. The political environment of a country is therefore an essential factor for the success of a company. China`s political stability affected the level of foreign business activity in China after the Tiananmen Square massacre which significantly declined in many areas, including tourism and foreign investment. While companies not yet operating in China are cautious about investing in China, countries already involved in investment activities seem to be waiting for a quiet period when economic progress resumes, believing that China will not expel foreign investors in the meantime. Existing joint ventures and foreign production facilities are unlikely to be closed under the current regime, but political stability remains a big issue for foreign investors. At the same time, China`s economic growth and reforms since 1978 have dramatically improved the lives of hundreds of millions of Chinese, increased social mobility, and expanded the scope of personal freedom. This meant much more freedom to travel, employment opportunities, educational and cultural activities, choices of work and housing, and access to information.

In recent years, China has also passed new criminal and civil laws that provide additional guarantees to citizens. Village elections were held in more than 90% of China`s one million villages. The political environment is perhaps one of the least predictable elements of the business environment. A cyclical political environment develops as democratic governments seek re-election every few years. This external element of the business includes stakeholder impact. Interest groups tend to change government policy. Companies, especially international companies, always study the cultural and social environment of a country before entering the market. It is important that your goods and services correspond to the social environment of the country. Otherwise, the company could face backlash and losses. Raising or reducing taxes could be an example of a political element. Your government could raise taxes for some businesses and cut them for others.

The decision has a direct impact on your business. So you should always keep abreast of these political factors. Government interventions such as changes in interest rates can have an impact on the demand behaviour of businesses. Countries as a region that are able to regulate or force companies to abide by their rules and regulations, which could be enforced directly by the government based on their political and legal philosophies. This political system regulates a comprehensive set of rules, regulations, institutions and attitudes. To determine how local policies, rules, and regulations affect their business, companies need to assess the balance. A company can also assess the political risk and stability of the country to know how long a company is expected to operate in a country and how easy it is for it to enter and exit a country. China has fully implemented the principles of the market economy. But in practice, China is suspected of building superiority to compete with the strength of the US economy. The main political structure of the People`s Republic of China consists of two vertically integrated but intertwined institutions.