Political and legal forces are the driving factors behind many of the decisions made in business. A company’s political philosophy can guide its actions in terms of how it deals with different stakeholders, what kind of lobbying it does, and even which countries it does business in.
Political factors can also have a direct impact on a company’s bottom line, as governmental policies can dictate whether a market is open or closed to foreign investment. Similarly, legal factors can determine whether a company is liable for damages, how taxes are levied, and which regulations must be followed. Understanding the political and legal forces at play in any given situation is essential to making sound business decisions.
Politicians, attorneys, and judges command businesses. After these judgments have been made, political and legal forces have an impact on how they are presented. Laws have been passed to prevent firms from exploiting customers; these regulations impose stringent standards on goods in terms of health, quality, and safety. Furthermore, commercial transactions are regulated by laws regarding the amount and type of information supplied to clients during transactions.
Political and legal forces also influence environmental issues. The increased awareness of the role businesses play in environmental protection has led to the enactment of laws and regulations that hold companies accountable for their actions. Political pressure groups, such as Greenpeace and Friends of the Earth, also keep businesses in check by campaigning against those who they believe are damaging the environment.
The political philosophy of a country can have a significant impact on business activity. For instance, a communist regime is likely to nationalize key industries, while a capitalist democracy is more likely to encourage free enterprise. Political stability is another important factor – countries that are prone to coups or revolutions are often not attractive destinations for foreign investment. Political risk can be minimized by diversifying one’s business interests across multiple countries.
The legal system of a country also influences business activity. Common law systems, such as those in the United States and the United Kingdom, tend to be more conducive to business than civil law systems, which are prevalent in Continental Europe. This is because common law systems place greater emphasis on precedent and are thus more predictable, while civil law systems are more codified and rigid.
Businesses must operate within the bounds of both national and international laws. International treaties, such as the World Trade Organization (WTO) agreement, attempt to level the playing field by setting rules that all member countries must follow. However, businesses still face obstacles due to differences in legal systems from country to country. For instance, it can be difficult to enforce contracts in countries with weak rule of law.
Political and legal forces can have a major impact on businesses, both positive and negative. It is important for companies to stay up-to-date on changes in the political and legal landscape in order to minimize risk and maximize opportunity.
While Starbucks may have an easier time expanding their business in countries with which the United States has good relations, they should be cautious about researching the specific country they want to expand to. According to (Dudovskiy, 2012), nations experiencing political or social turmoil (such as Middle Eastern nations like Bahrain, Egypt and Libya) need special consideration before moving forward with expansion plans.
Political and social unrest likewise influence the business in a few different ways, for instance, lower need of goods and services, high crime rates, transportation issues and so forth. Political risk can emerge out of both micro and macroeconomic environments. Political risk at the microeconomic level identifies with the way that Starbucks’ activities could be controlled by national governments. For example, changes in import/fare controls or nationalization of assets could adversely affect Starbucks’ business inside a nation (Dudovskiy, 2012).
Political risk at the macroeconomic level alludes to more broad changes in government strategy that may adversely affect organizations working inside a nation. These dangers can include: expansions in corporate charges; changes in remote trade arrangements; exchange embargoes; environmental regulations; and so forth. Political risk is a genuine concern in light of the fact that political change can happen rapidly and without notice, making it hard for organizations to adjust (Dudovskiy, 2012).
The economic concern about Starbucks is that, despite the fact that individuals in the United Kingdom have a lot of purchasing power and are ready to spend on premium coffee like Starbucks, individuals with modest incomes are switching to brands owing to the fact that they are offering coffee for less money. The key to promoting development is not simply ease of production; it’s about adding value to the progress, design, brand identity, or unidentifiable talent in producing a product that customers enjoy buying.
Political risk is likewise a worry for the organization as they have to consider local, national and global regulations that may affect their business. Government policies can likewise impact business risk. For example, if the government changes environmental regulations it could make it harder or impossible for Starbucks to source the best coffee beans. Political risk is also present when a company does business in a country with an unstable government. For example, if the government of Ethiopia were to collapse, Starbucks would no longer be able to source coffee beans from that country.
Government regulations are one of the key political risks that Starbucks has to face. These regulations can vary from country to country, and can have a major impact on the company’s ability to do business. For example, in 2012 the Ethiopian government introduced a new regulation that required all coffee companies operating in the country to obtain a license. This license was not easy or cheap to obtain, and as a result, many small coffee companies were forced out of business. This left Starbucks as one of the only major coffee companies operating in Ethiopia.
Another political risk that Starbucks has to face is the risk of government intervention. For example, in 2015 the Chinese government announced an investigation into Starbucks’ tax practices. This created a lot of uncertainty for the company, and caused its stock price to drop.
In conclusion, Political and legal forces are a big worry for starbucks as they can change environmental regulations which could make it harder or impossible for them to source the best coffee beans and they also have to obtain licenses from different countries which can be difficult and costly. Political risk is also present when a company does business in a country with an unstable government. Therefore Political and legal forces are something that needs to be taken into account when doing business.