Will businesses get affected due to political factors?

Several external factors have chances to affect your business. The business managers should assess and determine these factors minutely. The main aim is to make the right decisions for the progress of the company. Certain common factors that affect businesses are technological, social, economic, and political. It is also referred to as PEST analysis. Businesses should also learn demographical, ethical, legal and environmental factors.

Certain political factors that affect business given more importance. Some aspects of government policy could affect business. All the companies should follow the law. It is the responsibility of the managers to determine how the forthcoming legislations affect their business activities.

Political trends can influence any part of society, be it families, individuals or organizations like small businesses. The trends in policies established by the government leaders and agencies have chances to affect business framework within where business functions, the market situations that influence customer behaviour and the level of assistance provided to industries by the government.

The factors may be impending, and current legislation, political changes, and stability, protection, freedom of speech and discrimination laws have chances to affect business activities and operation. The political factors can make the market place less or more friendly for business. It is well known that governments have sufficient power on businesses and several times, the businesses will not have much to do about the laws and changes.

A Business man Pointing Towards The Digital Screen Which Representing Economic Growth In Business Concept.

In the form of Economic trends

Various political individuals or parties enact various policies to guide local and national economies to prosperity depending on their economic policies. It means the political trends play an essential role in the taxes as GST charged on individuals and businesses, allowing yourself and your customers with less or more money to apply in the market. Economic policies even have chances to affect interest rates all over the economy, covering rates for business loans.

Decrease or increase is one of the best examples of the political element. There are chances for the government to increase tax for individual companies and reduce it for others. The tax increase or reduction can directly affect your business. It is necessary to remain updated with certain political factors. Government interferences such as changes in interest rate will impact the demand outlines of the company. Some factors develop inter-linkages in several ways. Certain examples are:

  • Politicians can influence receipt of new technologies
  • They can impact the rate of the advent of latest technologies
  • Their decisions can affect the social-cultural environment of the company
  • Political decisions have chances to influence the economic environment

In the form of Labor laws

Variations in labour laws could be expected, and you need to focus on the political trends to track the current labour laws. Most political candidates offer vocal promises in terms of insurance requirements, minimum wages, labour associated taxes, GST and regulation of employment. If there is any change planned in labour laws, it has chances to change the business expenses. Small businesses without much cash reserves consider these as significant expenses. For instance, when there is an alteration in the lowest wage, it has chances to affect the profit of the small company.

Image Represneting Foreign Trade Regulations Concept.

In the form of foreign trade regulations

Each business has a requirement to enlarge business processes to other countries. But still, the country’s political background has chances to affect the business’s desire to expand its set-ups. Tax policies, mainly managed by the government, have opportunities to induce a specific business to enlarge operations in various regions where certain other tax policies have chances to hinder the business expansion process for specific industries. Government initiatives that are developed to assist local businesses could function against international companies, especially when they are competitive in a foreign country.


It is the potential to determine and find out the government policies’ impact while doing business. PEST analysis is an established model. It helps in evaluating social, economic, technological and political factors that have chances to influence the difficulty and cost of performing business. The economic and political portions of the analysis are related to the government directly, while government rules indirectly influence the technological and social environment. PEST analysis is also referred to as PESTLE or PESTEL. The environmental and legal factors are added to the equation. These are strongly prejudiced by government policy. To Know More about political factors affects businesses.

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