The political-legal dimensions of the general environment also effects business activity. The philosophy of the political parties in power influences business practices determines the risks of doing business in a particular country or region. Political stability is a key factor in determining attractiveness of markets and setting up of businesses. The legal environment serves to define what organizations can and cannot enable particular point in time. A pro-business attitude on the part of government enables firms to enter into arrangements that would not be allowed under a more anti-business philosophy.
2. Legislation regulating business
The legal environment facing organizations is becoming more complex and affecting businesses more directly. It has become increasingly difficult for businesses to take action without encountering a law, regulation, or legal problem. Regulations concerning many business practices differ between states. Tax rates vary widely, with multiple levels of taxation. Local governments have the potential to affect business practices significantly. Some local governments may be willing to provide incentives to attract business to the area by build industrial parks, service roads, tax holidays, connectivity to ports, railheads and airports to encourage a desirable business to move into the community. Regulatory measures such as building codes and zoning requirements differ significantly between communities. Infrastructure such as electricity, telecommunications, educational facilities and sewage treatment capabilities may not be able to accommodate the increased demand associated with certain industries, making that locale unsuitable for establishing some businesses.
3. Special interest groups
Most companies are now come under increased public scrutiny. Consumer activism is on the rise, due to the growth of a number of special interest groups, fighting for the right of consumer. In response, companies have realized the need to adopt a more sensitive stand towards these issues and have established special consumer affairs cells to help formulate policies and respond to complaints. Customer issues are not taken lightly, as even a very small issue can, if not responded to, can snowball into a major controversy and damage the company’s reputation.
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