Political and Legal Environment of International Business

Political and Legal Environment of International BusinessNameInstitutional AffiliationDate
Executive Summary
The performance of a business is indicated by the ability of the company to meet its objectives of customer and employee satisfaction, societal satisfaction and profitability. Different political environments exist in many countries. The legal political framework is one of the factors that has to be put into consideration when someone is coming up with the business plan.
The purpose of this report is to evaluate the different ways in which the legal political environment can influence the operations of a company. The report contains a literature review that highlights the work of researchers on the topic. A case study of Google and its operations in China has been given in this report to provide a clear understanding. The report also offers recommendations on how a company ca get into a foreign market.
Literature Review
International business refers to the commercial transactions between two or more countries. These transactions can be both private and public. Engaging in international business can make the company to expand its sales, acquire more resources and minimize its business risks. The management of an international businesses requires a number of skills such as a clear understanding of the legal and political environment of the country of operation and social understanding. The legal and political factors can vary from one country to another and these factors can influence the performance of an international business in different ways.
A number of studies carried out by researchers such as Perlmutter (2017) demonstrate that businesses must take care of the political and legal environment existing in different countries for a number of reasons. First, the researcher points out that this understanding will help the company to know how it can better position itself in order to achieve its objectives such as increased customer satisfaction, increased sales among other factors CITATION Per17 \l 1033 (Perlmutter, 2017). It will also help the company to prepare adequately for any political risk. For international business, a political risk is emanates from the political environment of the country where the country can make some decisions which can affect the profit and the goals of the international business.
According to Kolk (2017), the government affects almost every aspect of business in a country. National politics can affect the business environment directly through the changes in regulations, policies and laws CITATION Kol16 \l 1033 (Kolk, 2016). The government has the ability to decide which of the industries within the country can receive protection and which of them will be open to competition. The government is responsible for coming up with the labor regulations and the property laws that will guide business operations. In their research, John and Johnson (2015) further point out that the regulatory and legal framework measures put in a country can have an influence on the foreign investment CITATION Joh15 \l 1033 (John & Nwaiwu, 2015).
Political stability can affect the actions that the government takes in relation to business activities. This is the main reason why the executives of international companies are often faced with the challenge of understanding business regulations in the home and the host countries. Leslie and Webster (2015) define the home country as the country where the parent company is based and where it operates from. On the other hand, host country refers to the country where the companies are allowed to do business while abiding by the regulations and the laws set aside CITATION Les18 \l 1033 (Leslie & Webster, 2018).
Most of the international companies operate in a dynamic legal-political environment characterized by risks of multiple taxation, devaluation of the currency, inflation, campaigns against the foreign goods, labor legislations, civil wars and even terrorism. As an international business, a company is supposed to come up with the appropriate strategies that will guide its operations outside the home country. Without adhering to these requirements, the company can risk its closure and fail to make profit CITATION She11 \l 1033 (Sheng, Kevin, & Li, 2011).
In his research, Sun (2019) observes that since most of the international companies do not carry out operations in countries that have been hostile to their home country, most of the executives of these companies tend to take for granted the political environment of the host country. However as the author further points out, political upheavals and other uncertain occurrences can take place within these countries and bring the business operations to a standstill CITATION Sun19 \l 1033 (Sun, 2019). Some of the factors are also non-governmental meaning that they are outside the responsibility of the government. Factors such as terrorism, demonstrations, strikes, extortion and kidnappings are derived from unstable social situation characterized by frustration of the citizens and intolerance between the government and the people.
The internet has also had a great influence on how people can carry out international businesses. The internet is slowly changing the ability of the government to directly enforce rules and regulations based on their own political preferences. Buyers and sellers can easily reach each other through the internet. However, this does not mean that the government is not putting in place measures to regulate these businesses. The government still has the ability to monitor business activities of these internet companies.
International Business Context
Most of the factors that can influence the operations of an international business can be observed when the company is coming up with the business plan. The first step in the formulation of a business plan for an organization is coming up with the guiding principles of the business on the market. These guiding principles usually guide the operations of a company including the time when the company wants to expand its operations outside the home country. However, in a way, the cou...