Question

Assess the influence of economic policies on a business organisation.

Answer 1

Governments set numerous regulations and policies that guide business. Some laws are compulsory, such as minimum wage, while other regulations can have an indirect effect on your company. Enterprises must be sufficiently agile to adapt to evolving rules and policies. This applies not only at national level but also more locally, since states and municipalities have their own set of rules. Indeed, there are foreign conventions, too, that can affect how companies conduct business.

The Government can implement a policy that changes the business environment's social behavior. The government will, for example, levy taxes on the use of carbon-based fuels, and give discounts to companies using green energy. The government can underpin the development of new technology that will bring the change needed. To place additional taxes or duties on a given sector than is appropriate would cause investors to lose confidence in that sector.

Similarly, exemptions from taxes and duty on a given sector trigger investment in it and can generate growth. A high rate of taxation on imported goods , for example, may encourage local production of the same goods.

The political culture of the moment will always be dependent on government policy. Policies developed in a politically stable country will be different from those formed in a volatile country. A stable political system can make decision-making that promotes local businesses and attracts foreign investors.

Unstable systems present challenges that put government's ability to maintain law and order in jeopardy. This would have a negative impact on the business environment.