Impact Of Political And Economic Environment On Business
The impact of political environment, economic environment, socio-cultural environment etc can never be over emphasised, this is because of the important role they play in the day to day activities of the people. One will agree that politics affects our businesses, here is how it works, it is from the political wind that government of the day is formed, and then government has the responsibility to form the policies which affects our everyday life.
In essence, the political environment has to be healthy for other sectors to function properly, both the economic, socio-cultural etc relay on the goodwill of the political arm of the country. On this article, we will go further with those business environmental concepts that can plague a nation, hence the need for a synergy between the political and economic environment on business.
The political environment is views in terms of the type of government (military or civilian) in power and their activities. To a good extent, a civilian government presents a more stable business environment than a military type of government. Entrepreneurial activities are affected by the operations and policies of the government in power, therefore, entrepreneurs should have at least a fair knowledge of the political situation and the extent to which it might affect their operations.
For instance, as presented by a scholar, in the military regime, business is more likely to be constrained. Astute entrepreneurs may not have the opportunity to be effectively proactive during most military regimes. This is because the political climate is usually autocratic, dictatorial and turbulent.
But in civilian kind of administration, economic expansion and development are stimulated. Constraints are introduced in defined aspect of the economy. Entrepreneurs in democratic process ought to be acquainted with general political climate of the society because the nature of political organisation including degrees of decentralization, diversity of functions help to an extent to introduce some elements of economic stability.
The economic environment is concerned with the set of economic condition prevalent in an economy. it comprises the general economic framework including the type of economic organisation, private versus public ownership, centralization and decentralization of planning; the banking system, fiscal policies, interest rates, inflation, unemployment and availability of disposable income, balance of payment, level and nature of competition, prevailing payment system, type of economic system – capitalism, socialism or mixed economy. The economic environment covers as well the availability and cost of media of communication, power supply, transportation, good network of roads and other similar infrastructure.
If power is considered, it would be observed that in a situation where power supply is regularly available for entrepreneurial activities, the firm may not likely lack working capital. But in a situation where entrepreneurs are meant to provide own power, working capital will be negatively affected and it will significantly increase cost of production, with increase in the cost of production, selling price will increase thereby exposing the entrepreneur to avoidable disadvantage.
Similar competitive explanations could be made to the other variables of the economic environment. Given the effect of the economic environment on entrepreneurial activities, entrepreneurs are acquainted with the components of the economic environment so as to make diligent use of the components in analyzing their strengths, weakness, opportunities and threats and indeed the possible strategies to adopt in order to remain in demand and also to encourage a supposed synergy between the political and economic environment on business.