Business Environment
The purpose of this paper is to describe the political and economic environments in business and examine how power is exercised in each of the environmental factors. Additionally, I will provide examples of the environmental factors discussed in this paper. For the purposes of this paper, I will use examples of the political and economic environmental factors affecting Coca Cola Company.
Economic environmental factors analyze the potential areas where a firm can grow and expand. The economic factors affecting operations of a business include interest rates, inflation rates, exchange rates, economic growth of the country, wage rates and costs of labor, unemployment rates, taxes and tariffs (Keshav & Pailwar, 2009). These factors are influence the business environment. When these factors lead to increased economic growth, the business investment increases.
Before venturing into business, a potential business must analyze the economic factors prevailing in the market in order to ensure sustainability. Economic growth leads to increased purchasing power, and investment. For example, after analyzing the economic factors, the Coca-Cola Company started its distribution in various favorable economies. The company has stabilized and does not borrow money for investment, therefore, the changes on the interest rates does not directly affect its operations.
Political factors refer to the extents to which governments intervenes or controls the operations of a company. Multinational organizations face this challenge since they operate in several governments that impose different regulatory measures. These regulatory measures include tax policy, environmental policy, trade restrictions, labor laws, amount of goods that the government permits and services that are provided by the government (Shaikh, 2010).
Political factors are very important since political stability and instability directly and indirectly affects business. Politically unstable economies scare investors since the customers and investors might fear for uncertainties. Unfavorable regulatory measures also discourage investment and increase the price of commodities that the customers cannot easily afford.
The products of the Coca-Cola Company fall under Food and Drug Administration. The FDA checks and certifies whether the ingredients used in production of the company’s products conform to the standards of the particular countries they distribute their products in them. Additionally, there are some countries such as India that disturbed production and distribution of the company due to their political unrest.
References:
Keshav V. P. & Pailwar V. K. (2009). Economic Environment of Business. New Delhi: PHI Learning Pvt. Ltd.
Shaikh S. (2010). Business Environment, 2/E. Upper Saddle River, New Jersey: Pearson Education India.
