Introduction
The political environment in the international business context refers to the political factors and government activities operating in a foreign market that affect the conduct of business. The environment differs from one country to another depending on the type of government, whether it is anarchy, monarchy, or a democratic government. They type of government influences the policies adopted in terms of trade and international relations. Effects of the economic systems and market system have a direct impact on business activities and may, therefore, encourage or discourage foreign trade (Kaim & Hillman, 2008). Political and legal systems are essential elements for an international business entity to consider when determining the countries to trade.
Globalization
Globalization has facilitated international trade through opening up borders of different countries and enhancing the flow of products (Pankaj, 2011). The internet is responsible for the communication channels across the globe through which trade information flows. Despite the smooth flow of business with the emergence of modern technology, countries have come up with ways to control trade within their boundaries. The governments succeed in doing this through setting up restrictions on the type of business activities and the products supplied to the market. Trade restrictions occur in the form of taxes, tariffs, and quotas that affect the quantity and price of commodities entering the country from various regions. Despite conformance to international business standards such as quality standards, the business must conform to local rules and regulations in order to run business in a particular country.
Regional Trade Treaties
Regional trade involves the collaboration of a group of countries located in a certain region in an attempt to ease trade activities among themselves. The treaties eliminate or minimize the restrictions in the form of taxes, tariffs, and quotas hence making products competitive in the domestic market. Products from the foreign country enter the market with minimal charges and restrictions hence offering them a competitive advantage over those from countries without a treaty with the same country. A treaty may be between two or more countries where the countries benefit from doing business with each other. The countries may specify the commodities featured in the treaty to enable the elimination of restrictions to the trade of the commodities in its local market. Changes in government may, however, have a bearing on the current and future treaties. The policies and philosophies adopted by the government influence the countries to associate with as well as the products that require an increase in their quantity (Bartlett & Ghoshai, 2011). For instance, a government with an agenda to improve infrastructure will seek treaties with nations possessing the advanced and sophisticated technology.
Conclusion
Politics is a determining factor for international business since it affects business activities in a favorable or unfavorable manner. Each country has a different form of government that influences the policies adopted in relation to trade with other nations (Dunning, 2008). Trade restrictions make it difficult to trade with certain countries and the sale of certain products. Regional trade treaties are a common way to eliminate the barriers to trade between different countries by reducing the amount of taxes, tariffs, and quotas on imports from the countries. This improves the competitiveness of these products in the domestic market hence improving their performance against local products. Countries benefit from treaties in one way or the other since each country requires the other for survival. Politics, therefore, plays a major role in the success of international trade and the local market influences the international market.
References
Bartlett, C. & Ghoshai, S. (2011). Managing Across Borders: The Transnational Solution. New York: Cambridge University Press.
Dunning, J. (2008). Multinational Enterprises and the Global Economy. Sydney: Ashbury Printers.
Kaim, J. D. & Hillman, A. J. (2008). Political Environments and Business Strategy: Implications for Managers, Business Horizons, 51: 47-53.
Pankaj, G. (2011). The Cosmopolitan Corporation. London: Routledge.
