Politics plays a role outside the business as well as inside. Inside the company you have the hierarchy of leaders and managers that sales teams, IT staff and the accounting team report to. The Company founders and acting CEO will affect the values and ethics of the business along with the internal politics. Internal politics can affect the productivity of a work place. If the boss is neglecting the needs of his employees, they will spend time arguing about their issues or leaving the company.
External politics would be the government of the country you plan to operate in. The political attitude of the region will dictate how you will operate in that location. Like our discussion about India and Indonesia, the way a government is run, and the success of the economy does affect how business is run.
When looking at countries when expanding it would be crucial to ask yourself specific questions about that region. Important questions would be:
How does the government run?
Is it a religious regime?
What laws must you follow?
Business laws vary from country to country and it would be invaluable to learn them. Neglecting to follow the laws of the country would have that branch of your company shut down.
When starting the new branch, combining both internal and external politics would help your success. Some countries hugely value religion and incorporating some of the region’s values into your company can help the community trust the business. Other countries do not believe in gender equality and would prefer a man to be in positions of power.
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What role does politics play in international business?
Despite the globalization of business, companies must adhere to the domestic rules and regulations of the countries in which they operate. Moreover, particular industries such as those that fall under national security (defense, telecommunications, and infrastructure) are essential to international business, in the sense that the domestic government is vigilant of those whom own the ports within its country. If problems arise within national security it can impact both the import and exports of a country. For example, government technological information could be leaked to suspicious, foreign entities.
Governments also use trade as a vindictive measure if they believe another country is politically or economically unjust. On the contrary, governments may promote trade to show a country political support on global matters. Governments create tariffs, subsidies; import quotas and voluntary export restraints (VER’s), currency controls, local content requirements, anti-dumping rules, export financing, free-trade zones, and administrative policies in order to manage and control international trade.
Additionally, the reactions of the local people that are linked to their political systems are equally important. The reactions of the locals are difficult to analyze and more unpredictable than structural political factors, and with modern-day social media networking—where things go viral in a matter of minutes—governments must be particularly cautious of how its political tactics affect its people. An example that stresses the importance of the people is Google Map’s repeated slip ups over the classification of disputed territories. These errors have angered or raised protest, boycotts, petitions and open censure from several countries such as Israel, the Palestinians, China, India, Iran, Nicaragua, Turkey and the Sahrawis.
Undoubtedly, politics plays an extremely crucial role in international business.
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