Political Environment Flashcards
What is politics?
- Processes to manage conflicts
- People do politics every day
- State politics vs social politics
How does politics relate to business?
- Business activity occurs within and across state boundaries
- Every country has sovereign power to determine its own political and economic choices
- MNES are typically affected by the global political environment
- Political and economic arrangements or developments affect business processes and performance
- Political influence on business is not limited to political boundaries
What levels of political power exist?
- Global level (United Nations)
- Regional level (EU)
- National level (UK gov)
- Local level (Bath City Council)
What does the political environment comprise of?
Of institutions that:
- Create policies
- Pass laws and establish regulations
- Implement and enforce laws and regulations
What is the state?
Set of institutions having the legal power and authority to make decisions in matters of government
What are the branches of the state?
Legislative branch - setting the laws and rules
Executive branch - putting the laws and rules into effect
Judicial branch - enforcing the laws and rules and ensuring consistency
What are the different political systems?
Liberal democracy - very prevalent/common
Authoritarian or absolutist - Burma, Saudi Arabia, Swaziland
Communist - China, Cuba, Vietnam, Swaziland
Theocratic - Iran, Vatican
What is a liberal democracy?
> Right of citizens to elect governments to represent their interests
Governmental institutions based on majority rule
Free and fair multi party elections
Right to personal freedom of expression
Separation of powers across state institutions
What is an authoritarian and absolutist system?
> Restrictions on political parties
Power in hands of one or a few people
No checks or balances for those holding power
Power retained through patronage
What is a theocratic system?
> Religion/faith plays dominant role
Religious leaders and political rulers are the same people
Political decisions derived from the principles of the dominant religion
Overlaps with absolutist system
What is communism?
> Domination by one political party
The party controls the legislative, executive and judicial branches of the state, as well as trade unions and the media
Means of production owned by the state i.e collective ownership
Focused on equality by restricting private property - emphasises a classless society
What are the functions of the state?
- Regulator and deregulator
- Arbitrator/judge
- Macroeconomic management
- International negotiator
- Internal and external security
- Competitor
- Customer
- Subsidiser
What does regulation of competition and anti trust prevent?
- Formation of cartels
- Abuse of market power
- Impediment of competition
Which government initiatives have occurred in the UK?
- UKTI launched the HQ-UK in Feb 2015, to simplify and accelerate the process of building an international HQ for IT industry, Cray Inc worked closely with UKTI and selected Bristol as the HQ
- Tax credits available for companies involved in R&D - 100% tax deduction
Which political risks affect business performance and survival?
- Expropriation/nationalisation e.g BP nationalised in Nigeria in 1979, Libya in 1971 and Kuwait in 1975
- Policy change
- Bribery and corruption
- Military interventions
- Wars and conflicts
How can business influence the political environment?
Financial: campaign contributions, donations
Informational: lobbying, research, threats and premises, representation on government bodies
Constituency building: press conferences, public relations
Relational: informal ties, personal connections, employment of former politicans
How has Cisco lobbied the government?
Issues relating to…
- Telecommunications
- Taxes
- Copyright, patent and trademarks
- Computers and information tech
What examples are there of companies employing former politicians?
- Goldman Sachs employed Faryar Shirzad - previous US senate committee on finance now national security advicor on international economic affairs
- David Cameron president of Alzheimer Research UK
- Sir Nick Clegg hired as head of Facebook’s Global Affairs and Communications team
What are the benefits of governments influencing politics?
- Risk reduction
- Bail out
- Trade mission participation
- Tax
- Interest rates
- Government contracts
- Access to loans
- Fraud detection
- Sales/profitability
What politically driven opportunities exist?
- Government failures have led to privatisations
- Public private partnerships in emerging countries
- Trade agreements
- Special economic zones
What are economic/enterprise zones?
- Allow duty free imports of raw and intermediate inputs and capital goods for export production
- Gov red tape is streamlined
- Firms in zones are given long term tax concessions
- labour laws and ownership requirements often more flexible than for firms in domestic market
- Zone firms can be domestic, foreign or joint ventures
How many enterprise zones are there in the UK?
- 45 locations across England
- 8 zones in Wales
- 16 zones in Scotland
How is there renewed nationalism globally?
Nationalism:
- Stand alone
- Conflicts
- Wars
- -> Global Integration:
- Regional blocs
- Global trade institutions
- -> Renewed Nationalism:
- Immigration
- Terrorism
What are the effects of Brexit on the UK’s economy and society so far?
- Depreciation of the pound against major currencies
- Inflation
- Decline in economic growth
- Migration falls
How will agriculture be affected by Brexit?
2/3 of exports are to the EU
90% of Pickers from Europe
UK farmers rely on CAP for 55% of income
Fishing industry to benefit
How will manufacturing be affected by Brexit?
Automobile, aerospace
Exports to Europe
Talent from Europe
How will services be affected by Brexit?
Finance, education, health care
Bank passporting to Europe
EU students and academics
EU research grants
