The Political Environment Of Business Commerce Essay Example

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The micro environment or operating environment includes external factors like suppliers and distributors that directly impact the company. On a larger scale, the macro environment or remote environment encompasses external factors like industrial policy and demographics that affect industries. The business environment comprises both internal and external factors.

According to Dimock, today's most influential institutions in society are business and government. The political environment incorporates various factors including policies and characteristics of political parties,government structure,and economic/business policies set by authorities.These factors can vary significantly among different countries, regions within a country, and over time.Political decisions often have a strong impact on major economic policies.
During the early 1950s in India, the Congress party adopted socialist ideology and this significantly impacted their development strategy, resulting in a dominance of the public sector until the early 1990s. Similarly, political changes in countries like the USSR and Eastern European nations during the late 1980s caused drastic shifts in their economic policies. These factors ultimately influenced India's economic policies in 1991.

Renowned management expert Peter Drucker highlights how national political relations often take precedence over economic reasoning even within economic units. This is exemplified by the European Economic Community, where closing down an unnecessary factory in Belgium and relocating it to France has proven politically unfeasible due to national boundaries despite being just 30 miles away.

Political decisions have significant consequences for both the economy and business sector. The ruling party's economic policies play a crucial role, with communists and other collectivists historically favoring state capitalism while opposing private capital, particularly foreign investment. Key economic policies such as industrial policy, foreign capital and technology policy, financial policy, and foreign trade policy are

frequently influenced by political considerations.

While businesses primarily focus on economic activities, effective managers must also consider non-economic business environments.The political and legal context of business is significant as governments function as both political institutions and societal entities that create and implement social policies to maximize social benefits while minimizing social costs. The government's policies, programs, and laws can have a substantial impact on businesses due to their cultural and social value. Thus, businesses must take into account the structure, style, ideology, and mindset of each government when defining their strategies and tactics. Business decisions often reflect overall government policies and the system's environment. Governments enact various policies and programs through legislation based on their ideology or mindset. The political and legal environment includes laws, regulations, systems procedures,nas well as policies programs statements proclamations directives guidelines established by the government. Management success relies on considering the political environment of business in order to seize opportunities it presents.This environment encompasses factors such as the form of government; natureand significanceof authorities; The political orientation of the governing party; strength of resistance; role and duty of bureaucracy; political stability; effectiveness of Government's programs and initiatives; socio-economic statutes; politico-legal establishments are all important considerations for businesses in the current era.In countries like India, democracy plays a significant role in the government's representation and service to its people. This is evident through the promotion of industrial democracy within enterprises, which encourages worker involvement in management. In federal systems, state governments have functional independence due to limited central government authority. Consequently, both central and state-level public enterprises arise.

Democratic decentralization further empowers local governments by granting them the ability to collect specific business

taxes and allocate funds for local initiatives. The system of authorities and decision-making greatly affects business concerns. To gain favor from the government, business communities establish lobby groups that influence whether pro or anti-business measures are adopted.

For example, in India as a democratic nation with a people-oriented administration, various measures have been implemented to support medium and small-scale entrepreneurs. Such measures include establishing banks and financial institutions tailored towards their growth and development. Both the central and state governments actively work together to stimulate entrepreneurship across industry and service sectors through policies and programs aimed at enhancing small businesses' global competitiveness nationwide.In a democratic country like India, the ruling party's ideology influences the ownership, management structure, and size of businesses. If the governing party is right-wing leaning, they may implement pro-business policies. Conversely, a left-of-center bias could lead to measures such as nationalization and excessive centralization. The political orientation of the ruling party can either support or hinder business activity. Historically, our government has supported progressive income revenue enhancements and opposed unregulated business and finance. However, in recent years there has been a shift towards a more moderate economic and societal democratic agenda. Currently, our governing party is focused on implementing neo-liberal policies that promote societal liberalism secularism alongside a free market system regulated by the government.

Under the leadership of Mr. P.V., significant economic reforms were implemented during Narasimham Rao's tenure as Prime Minister and Dr.Manmohan Singh's role as Finance Minister. These reforms prioritized "efficiency" over "equity" which had an impact on how public enterprises operated day-to-day. In 1991, the Congress party introduced the New Economic Policy that embraced privatization but this policy was discontinued

under Prime Minister Shri Atal Bihari Vajpayee's leadership of the BJP government. However, privatization was reintroduced in 2004 with the emergence of the Congress party once again taking powerIn a democracy, the role of opposition is crucial in ensuring proper functioning according to the will of the people. It is necessary to have a strong and reasonable opposition for a successful democratic system. The oldest democracy in the world, England, serves as an example of how resistance strengthens democratic systems. Usually, one dominant political party represents resistance and reinforces the democratic system. In India's multi-party system, parties often need to cooperate or gain support from other parties to form a government if they lack an outright majority. Parties without majority become part of what is known as Opposition. The strength of the opposition depends on unity among resistance parties despite ideological differences. It is essential for multiple resistance parties in India to come together and objectively assess the actions of those in power for the progress of democracy. Their effective functioning plays a significant role but can also disrupt growth and development in the country. Instances of violent protests in Gujarat, Bihar, Assam, and Punjab have resulted in loss of life and assets that negatively impact businesses. However, if the opposition is fair, strong, and consistent it can provide valuable critique on government policies affecting businesses.
The Government has a responsibility for economic stability and must act responsibly in the business sector. However, there have been instances where unjust criticism from political motives has been aimed at the Government's foreign direct investment (FDI) policy in retail. These destructive approaches go against national interests. In a democratic

system, having an effective opposition is crucial for safeguarding, promoting, and regulating businesses for societal benefit. Additionally, bureaucracy plays a vital role in governmental operations within any country.

Under democracy's framework, different parties may gain or lose power during elections. Even if a party remains in power after elections, there is no guarantee that individuals will retain their positions within ministries. While ministers may change over time, uninterrupted continuity of government administration remains imperative.

The bureaucracy plays a crucial role in ensuring smooth operations in both business and non-business sectors within the Government. In systems where businesses are extensively controlled and regulated, the bureaucracy holds significant power in enforcing government rules, regulations, systems, procedures licenses and restrictions.

It is therefore important for businessmen to find effective ways to interact with and influence the bureaucracy. Bureaucratism serves various purposes in underdeveloped states like India.Firstly, political leaders receive expertise from professional civil executives in policy formulation by understanding the technical complexities of laws and policies. They provide advice to ministers in shaping policies. Secondly, civil servants play a crucial role in policy implementation. They formulate and execute laws and policies aimed at achieving goals of a welfare state, such as social equity, economic development, and growth. Additionally, due to time constraints, workload pressure, and legislative complexity faced by the legislative assembly, it delegates its power to civil executives for drafting complete measures within existing laws. This delegated legislation is also known as executive or low-level legislation.

Furthermore, civil executives also serve an administrative adjudication function by settling disputes between citizens and the state through a quasi-judicial process. The presence of Administrative Courts in India – such as the Income Tax Appellate

Tribunal, Industrial Tribunals, Rent Tribunals, and Railway Rates Tribunals – are discussed in this text. These courts aid in resolving disputes between citizens and the province.

Moreover, civil executives engage in administrative planning activities while managing public endeavors and handling financial operations. However, with the introduction of liberalization in 1991 came a dilemma for the bureaucracy. They became aware that their role of implementing controls would diminish and lose significance.The opposition to liberalization was driven by a desire for control and regulation, leading to conflicts between administrative officials and technocrats. Business and economic policies are enforced through statutes, with various socio-economic laws governing business operations in India. Understanding the law and seeking legal advice is essential for modern businesses due to the numerous laws that can impact their operations. In today's context, business operates like a "legal contract" rather than a "social contract", as multiple business laws protect the interests of consumers, workers, managers, owners, shareholders, and society as a whole. Implementation of business statutes such as MRTP, FERA, and IDRA is crucial for maintaining order in the industrial economy. Preserving industrial order is vital for businesses' survival and growth. Laws not only protect businesses but also contribute to their creation; tax regulations become more complex with increased business operations, creating a greater demand for tax advisors. Therefore, economic regulations and the business environment are interdependent.Legal institutions play a significant role in the non-economic business environment as government bodies directly and indirectly influence legislative, executive, and judicial aspects through organizations and establishments. The effective functioning of entities like the Supreme Court, High Courts, and lower tribunals is crucial in India because inefficiencies within these tribunals can

hinder the resolution of business matters. Additionally, inadequate efforts by the police department can lead to an increase in economic offenses within the country. Cooperation and coordination among various government departments such as DGTD, DGS&A, DBPE are essential for ensuring smooth operations within businesses. Conflicts between ministries or departments can have a detrimental impact on businesses; therefore coordinating bodies are often established to prevent such conflicts. Efficient operation of these bodies facilitates business success by minimizing unnecessary obstacles. However, bureaucratic delays, excessive centralization, lack of dedication, and poor interdepartmental coordination can impede business operations.