Despite the minimalist approach taken by most analysts to separate business from politics, the two concepts are virtually inseparable. In the business environment, politics is an external environment factor that is not only significant but also unpredictable thereby potentially influential to a business. This facet is represented in the PESTLE analysis where politics is the P. As such, in this analysis, the political situation has the greatest effect on the economic position of a country, and this is represented through aspects such as government spending, taxes, and monetary policies among others. To this end, politics pertaining to international relations have a serious effect on business, especially offshored businesses. For instance, if there is political instability between two countries, each government may resort to actions that impede rival’s business in that country.
A significant way that international politics and relations affect business operations is through the imposition of sanctions. In the video SNHU COCE Assistive Technology (2017), the reporter and Michael McKee ascertain the effects of the sanctions imposed on Russia by other Western nations as well as sanctions by Russia affecting US companies in Ukraine and Russia. In addition, the video illustrates that the poor international relations and politics between Russia and other Western countries have resulted into wildly varying currencies thereby plummeting the stocks, share prices, as well as bonds of most companies located within Ukraine and Russia such as Ruble and CAT.
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In this regard, political instability between nations affects international business, especially if the warring nations impose trade restrictions or raise taxes on international businesses. In the video, companies such as Boeing that has had long-term relations with Russia may be hurt by the sanctions and restrictions that have seen the rise of raw materials for their jets and planes. In some cases, the rationale behind the distasteful international relations includes vices such as terrorism or cybercrime that equally affect international business. A fundamental example of this assertion is seen in the recent US elections where Russia was alleged to have interfered with the elections through internet trolls. In the event of this discovery, there has been a sour relationship between the two nations, which has seen more sanctions being imposed as well as poor trade relations. Additionally, political conflict as contended in the video leads to a slowing down of markets ultimately affecting international trade.
As globalization becomes an international phenomenon, borders become less defined, and as such, politics become more in business. To this end, a lot of regulations affect business such as data privacy rules, competition policy, corporate governance, and environmental regulations that vary across different nations. It must be noted that political and international relations underpin these regulations, which are exacerbated by political conflicts between nations (IE Business School, 2008). Moreover, the media plays a central role in correlating politics and international business or trade. For instance, a nation’s leader could give implicating statement on national or international media that could spark political flares thereby affecting trade and business relations with other countries.
According to IE Business School (2008), for a business to successfully protect itself, it has first to differentiate the market environment that includes elements such as investors, suppliers, clients and competitors from the non-market environment, which consists of the government, regulators, NGOs, society, as well as the media. Other than differentiation, creating a working strategy for both milieus is also fundamental. The approach should define not only the rules of the industry but also the competitive market, which the business competes. This precept not only gives businesses inoculation or protection internationally but also a competitive advantage.
As such, businesses need to comprehend the salient facet of strategically engaging politics to the social as well as business environment. Moreover, businesses can undertake insurance cover that protects them against political extremities such war, revolutions, and civil rebellion. In addition, businesses need not take risks of investing in emerging markets where there is political instability. However, if it is necessary, the business should have a contingency strategy of mitigating the risk through concepts such as the risk management analysis.
References
IE Business School. (2008). The role of politics in international business - IE Professors Talk. YouTube . Retrieved from https://www.youtube.com/watch?v=61TIY5WhCvg
SNHU COCE Assistive Technology. (2017). INT 316 U S Companies Could Be Lowers in Ukraine Crisis CC. YouTube . Retrieved from https://www.youtube.com/watch?v=cOJWa55e4Vw
