Explain the critical elements of the Politico-Legal environment of business.
The critical elements of the politico-legal environment of business are:
The Form and Structure of the Government: It is a very important and decisive factor for the business sector. Democracy states government of the people, by the people and for the people.
At the enterprise level also people’s participation is very important. We authorize the local Government to collect some business taxes and spend money on local activities, when we accept the principle of democratic decentralization. Thus, the system of government and the structure of administration affects business.
The Ideology of the Ruling Party: It influences ownership, management, structure and size of business. The philosophy of the ruling party may help or hurt the course of business activity.
The Strength of the Opposition: Opposition has a very important role in democracy.
The party which gets an absolute majority forms the government under the two party system whereas, the party which gets a relative majority forms the Government with the collaboration of some other political parties. The candidates who do not command majority forms the opposition.
The strength of the opposition depends on whether the opposition parties are united or divided. To protect, promote and regulate business in the best interests of society, opposition is as important as a dedicated government.
The Role and Responsibility of the Bureaucracy: The work done by the Government is through the bureaucracy Ministers change from time to time, but Government administration must run without any break. Here the bureaucracy comes in.
The bureaucracy is very powerful in enforcing Government rules and regulations, systems and procedures, licenses and restrictions.
The bureaucracy enjoys tremendous power in the context of a system environment based on a host of controls and regulations. When the Government proposes liberalization, relaxation of rules and regulations, streamlining of systems and procedures, control becomes redundant and meaningless.
Political Stability: Business grows in a Politically stable region. Whenever the nation becomes politically unstable, the flow of foreign capital and enterprise is adversely affected, and this in turn effect the business, both.national and multinational.
The Velocity of Government Policies, Plans and Programs: If policies and programs are stable then business can plan its activities. otherwise it faces a tremendous amount of “non-market” risk and uncertainties. Stable policies help corporate planning and build up business confidence.
Sometimes policies are formulated with a clear “direction” but at snail’s’ “speed” and sometimes “speed” is fast but “direction” is not clear, we suffer on account of lack of “velocity” of such policies and this affects business unfavorably.
When there are so many policies such as policy-thinkers, policy-planners, policy-makers, policy executors, policy-adjudicators and so on, the business sector views policies with suspicion. Policies once formulated have to be implemented.
Socio-economic Legislation’s: Laws are needed to protect consumers, workers, managers, owners, shareholders and society at large. MRTP, FERA, IORA and so on are some of the business legislation’s to maintain order in the industrial economy. Industrial order and harmony is a condition for survival and expansion of business.
Politico-legal Institutions: These are the parts of the non-economic environment of business’s. The functioning of the legislative, executive and judicial organs of the Government affects business environment directly and indirectly.