Every country possesses a unique and political environment. Businesses must determine how, where, and when to adjust their business strategic goals and practices without compromising the need for success. The political and legal factors determine how a country participates in local and international business. Managers in all organizations must analyze, monitor, and predict political environments and systems so that a business can adapt to the political environment. A political system describes the power dynamics and structural dimensions of a government that specifies interest organizations, institutions, and organizations, and explains the norms and regulations that will govern business and political activities in a country ( Shenkar, Luo, & Chi, 2014) . Some countries prefer individualistic political systems while other countries use collectivism political systems. The decision is dependent on the political and legal system in the country. The essay will evaluate legal and political factors affecting businesses.
Historically, the countries that adopted the free market model in the early twentieth century experienced rapid economic growth because of industrialization and global trade. The US and Europe experienced rapid economic growth that allowed them to become first world economies. However, the emergence of major economic players in Asia such as China, South Korea, and Japan brought the need for greater state control in their capitalist system. Most of the biggest economies in Asia are making a transition from a command economy to mixed economies and the success of the transition questioned the efficiency of the free market system ( Scherer & Palazzo, 2011) . A command economy describes a political system where the government, instead of the free market, determine the services and goods to be produced, the level of production, and the prices. Command economies are common in communist and autocratic societies. China and South Korea used to have command economies but transitioned to a mixed economy that has both capitalistic and communistic traits.
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In the individualistic paradigm, such as the US, political agencies and officials have limited roles in the business community. The relationship between businesses and the government is adversarial because the government only intervenes in the free market when there are particular market defects ( Shenkar, Luo, & Chi, 2014) . Also, they encourage marketplace competition. On the other hand, in the collectivist paradigm, the government determines the economic priorities and needs while partnering with businesses. Businesses and government are interdependent and highly connected and their relationship is cooperative rather than adversarial.
Some countries that have successfully used the collectivist ideology include Japan, South Korea, Taiwan, China, and Singapore. However, collectivist ideologies can be used in both authoritarian and democratic societies such as China and Japan. Some of the companies that have grown due to government intervention include Samsung and LG in South Korea, Sony Corporation and Toyota in Japan, and the diverse manufacturing industry in China ( Shenkar, Luo, & Chi, 2014) . Government intervention has allowed the companies to achieve competitive advantages through lower production costs. Ultimately, the companies grew to become large multinationals that have penetrated the European and US markets.
The essay evaluates legal and political factors affecting businesses. Although the free market is essential in global trade, state capitalism seems to protect local companies while encouraging foreign trade. The success of China from a third world economy to the second largest economy globally is attributed to the mixed economy model they have used over the past four decades. A mixed economy describes a market system of trade, resource allocation, and commerce where free markets can thrive and coexist with government policy interventions ( Scherer & Palazzo, 2011) . In a mixed economy, the government intervenes through tax policies, state-owned enterprises, tariffs, and regulations. It may also occur when a socialist government such as China made exemptions to their state rule so that they could reap the benefits of free-market incentives and private ownership. All in all, government intervention is essential to promote both innovation and competition.
References
Scherer, A. G., & Palazzo, G. (2011). The new political role of business in a globalized world: A review of a new perspective on CSR and its implications for the firm, governance, and democracy. Journal of management studies , 48 (4), 899-931.
Shenkar, O., Luo, Y., & Chi, T. (2014). International business . Routledge.
