Four Key Effects of the Political Environment on Business Organizations

1 - Impact on the Economy

The political environment in a country affects its economic environment. The economic environment, in turn, affects the performance of a business organization. In the United States, for instance, there are significant differences in Democratic and Republican policies. This has implications for factors such as taxes and government spending, which in turn affect the country's economy. A higher level of government spending tends to stimulate the economy, for instance.

2 - Changes in Regulation

Governments could change their rules and regulations, and this could have an effect on a business. For instance, after the accounting scandals of the early twenty-first century, the United States Securities and Exchange Commission became more focused on corporate compliance and the government introduced the Sarbanes-Oxley compliance regulations of 2002. This was a response to the social environment that called for such change to make public companies more accountable.


3 - Political Stability

Particularly for businesses that operate internationally, a lack of political stability in any country has an effect on its operations. A hostile takeover could overthrow a government, for instance. This could lead to rioting and looting and general disorder in the environment. All this disrupts the operations of a business. Such disruptions have occurred in Sri Lanka, which went through a protracted civil war, and in Egypt and Syria, which have been subject to disturbances as people agitate for certain rights.

Mitigation of Risk

One way to manage political risk is to buy political risk insurance. Organizations that have international operations use this type of insurance to mitigate their risk exposure as a result of political instability. There are indices that provide an idea of the risk exposure an organization has in certain countries. For instance, an index of economic freedom ranks countries based on how political interference impacts business decisions in each country.

Top 5 Factors Influencing Decision-Making in a Business Environment

1 - Market Research According to economist Rob Hyndman, to be successful, every business needs to be familiar with the market environment and this is why research is necessary in order to obtain necessary information.
 The scholar explains that business organizations need to always pay attention to what is happening in the business world, what are the trends among consumers and what is demanded the most. By assessing the relevant information, businesspeople take adequate steps to respond to specific demand by consumers. For example, after exploring the market, the Taiwanese technology producer HTC incorporated the Android software in its mobile devices. This step boosted the sales of HTC products due to the high popularity of the Android operational system.

2 - Competition Competition is another factor that strongly influences decision making processes within businesses. Since the market nowadays is highly competitive, businesspeople always pay attention to the business operations of their rivals. For example, when Apple released its iPad tablet, Samsung quickly responded by releasing its Galaxy Tab which proves that while taking decisions on future developments, businesses consider competitors and their business development plans.

3 - Economic Environment Economic environment is particularly important because it is related toith the buying capacity of customers and what products the people in general would afford. When taking decisions, business people bear in mind that they must comply with some standard and not, for instance, impose high prices on their production in times of financial recession. For example, Apple produces the iPhone mobile devices which are more expensive than similar devices by other brands. However, when major consumer states like the UK entered into severe financial crisis in the beginning of 2011, the company announced that it is developing a cheaper version of the iPhone that would respond to the economic environment in countries where there are financial problems.

4 - Social Responsibility Social responsibility towards customers is also a factor that influences business decision making. Economist Paul Hohnen from the International Institute for Sustainable Development emphasizes that its concept is that business must be acting for the common good and in the interest of the general public. For example, UK legislation does not allow banks to impose unreasonably high fees on customers who are late with their mortgage payments. This legislation is followed by leading bankking institutions in the UK such as HSBC and Lloyds TBS.

5 - Cost and Benefit Financial expert April Dmytrenko highlights that for successful business decision making, it is required that business bodies create cost and benefit analysis. This approach takes into account expenses for the business from the process of production and revenue that would be generated when the production is put on sale. Thus business people are able to determine whether certain products would be a good business opportunity. For example, before releasing the Chevy Volt hybrid car, the business developers in Chevrolet analyzed a detailed cost and benefit plan. It determined that the revenue from Volt hybrid sales would justify the expenditures of its production.

Top Five Behavior Modification Techniques in the Business Environment

1 - Operant Conditioning

The research of B.F. Skinner, an American psychologist, showed that pigeons who were put on a very low-calorie diet and always in a state of hunger could be engineered to learn differences between words through reward reinforcement using food.

 For example, pigeons discovered that pecking in a certain way resulted in food being provided. The behavior could then be reinforced and modified based on scheduled recurrences of reward reinforcement.

Practically speaking, an employer implementing a reward reinforcement program delivered in various intervals could modify the behavior of his employees in line with the company's agenda.

2 - Variable-Ratio Schedule

A variable-ratio schedule is based on the architecture of reward reinforcement (operant conditioning). A practical example implementing a variable-ratio schedule is gambling. A variable-ratio schedule in this illustration involves facilitating the continued occurrence of gambling in casino customers.

 Casinos might schedule a monetary payout from their machines at certain intervals, but the schedule is unknown to the gambler, which incrementally rewards the behavior of gamblers. The casino's desired end result is to modify a person's behavior to gamble, which favors the casino's agenda, and to prolong the opportunity to extract more money from customers.


3 - Hawthorne Effect

Behavior modification techniques in the business environment include the Hawthorne effect. The Hawthorne effect within business environments concerns the social dynamics of employees who feel they are being watched, and how that "feeling" facilitates an increase in job performance

. Businesses managing their employees are concerned with modifying behavior congruent with making their business more profitable. Obvious examples include the micromanager who makes micro adjustments to an employee's behavior particular to the business' main objective.

4 - Implementing Ceremonies

Behavior modification techniques in the business environment often implement ceremonies and activities involving an employee's physical-emotional involvement while inserting the business's mission statement and employee expectations into the emotionally amplified event.

 This creates a sort of emotional investment on the employee's part, which also heightens her suggestibility. An example of this is when a company implements a "More than just an employee...you're family" message to better assimilate employees into a profit-seeking organizational culture.

5 - Setting Goals to Guide Behavior

Behavior modification techniques in the business environment include the correct implementation of setting goals to guide and modify behavior. As soon as an employee simply attempts to accomplish a goal designed by a manager; then the employee's behavior has been instantly modified specific to the business's agenda, as oppose to the employee's.

Four Points on How Inflation Affect the Business Environment

 1 - Rising Prices:- Inflation occurs because of a self-reinforcing cycle of rising prices. Workers in a company assume all prices are going to rise because of inflation, so they demand an increase in their salaries. Their employer then increases the price of its goods to keep up with costs.

 This causes companies that purchase these goods to increase their prices as well, raising the overall price level for all goods. This higher price level causes workers to expect more inflation and demand raises for the next year, thus continuing the cycle of rising prices.

2 - Higher Menu Costs: - Inflation on its own does not damage a company's profitability. As long as a company can continue to raise its prices by the inflation rate, its earnings should stay the same. This constant change in prices can create additional expenses for businesses.

 Inflation forces a company to continually update its prices. If the company publishes menus or brochures for its customers, the company must continuously pay to edit and republish this information. This added cost is known as the menu cost of inflation.


3 - Investment Myopia : - For businesses to make a long-term investment, they require a stable price environment. This lets companies accurately predict the future earnings and losses for long-term projects. Inflation creates uncertainty in investing.

 As price levels fluctuate, it becomes difficult for a business to value a long-term investment. This uncertainty will spook companies into only investing in short-term projects, as there is too much pricing risk in the future. This is known as investment myopia and is another negative impact of inflation.

4 - Decreasing Debt Values : -Since inflation causes the value of the dollar to decrease, it will also decrease the value of fixed debt denominated in dollars. While companies can raise their prices because of inflation, lenders do not have this flexibility with debts.

 Each year, inflation will decrease the real value of a fixed debt. This is advantageous for companies that have a lot of debt, as inflation will make it less expensive to pay off their loans. Inflation is a disaster to companies that have made loans, especially banks.

Top Six Steps on How to Start a Small Environmental Business

Step 1 -  Log on to an association website like the "Solar Energy Industries Association" to locate manufacturers seeking distributors for environmental products. Join a state chapter to choose a niche within the solar energy industry.

 Select products that will save businesses money and improve on their current lighting needs. Make notes of what utility companies are doing within the solar area and how they form partnerships with smaller entities.

Step 2 - Offer auditing services to stores, landlords, and office companies to audit their utility bills. Connect them with suppliers or manufacturers that can save time and money related to energy usage, waste removal, or office supplies and operation that include the reduction of toner and paper.


Step 3 - Connect environmental businesses with emerging economies in Asia such as India. The U.S. Commercial Service states that India has requirements for equipment and services in sectors that include environment, high tech and healthcare.

 Research regulations and offer the expertise to businesses as a consultant to help manufacturers and other affected companies adhere to guidelines.



Step 4 - Identify needs for homeowners from saving water to reducing electrical use. Find reputable solar power companies that offer services to residential homeowners.

 Form small sales teams to offer free energy audits to customers, work within incentives for homeowners, and sell solar energy services.

Step 5 - Sell drinking water purification systems. Research consumer advocacy groups to determine the most effective systems.

Step 6 - Start a company that helps homeowners protect and care for their property. Offer pest control education, using information from agricultural studies programs like the University of Kentucky's "Termite Control: Answers for Homeowners."

Teach homeowners how to plant drought tolerant gardens in western and plains states. Make and sell rain barrels to collect water run-off from house and garage roofs during late winter and early spring rains to reduce the use of residential sprinklers. Sell ergonomic gardening tools and host workshops on gardening techniques like composting.

Five Steps in Designing Organizations for the Global Business Environment

Step 1- Determine the level of global involvement.

There are various strategies in which businesses can engage global expansion; determine which is appropriate for the venture. Examples include exporting (or importing), contractual agreements (or franchising, licensing or sub-contracting), and direct investment (or acquisition, joint ventures or establishment of an overseas division).

Step 2 - Decide which foreign market to enter.

 Research the local demand for the firm's product or service, availability of needed resources for production and marketing, and the ability of the local workforce to produce the desired quantity and quality of the designated products, as noted by Boone in "Contemporary Business."

Step 3 - Research potential barriers to international trade.

World Trade Organization, the World Bank and the International Monetary Fund are organizations that create alliances to remove (or mitigate) barriers to the flow of trade, goods, capital and people across borders of its members. Read the North American Free Trade Agreement (NAFTA), Central America Dominican Republican Free Trade Agreement (CAFTA-DR) and European Union (EU).

Step 4 - Recognize and address social and cultural differences.

Differences in languages, values, religion, standard of living, and business practices differ among countries and must be addressed with sensitivity and respect.

Step 5 - Distinguish between the global and multi-domestic business strategy.

The global strategy addresses a position of standardization, offering the same product worldwide; the multi-domestic strategy employs the principles of adaption, customizing products to the customs and preferences of a nation.

Four Things That Impact the Technology on a Business Environment

1 - Consumers - The impact of technology on a business isn't restricted to business use. A business is also affected when consumers use technology. At one time, the only way some people had to file their tax returns was through going to either a certified public accountant or a professional tax preparer, or doing taxes themselves. The tax code is complex and some people might not have felt secure in preparing their taxes on their own. However, accounting software evolved to the point where many people simply had to answer a series of questions and the computer would do the rest, including filing the information electronically.

2 - Crossover - The technology a business uses might not have been designed for businesses. From a marketing point of view, a company makes more money by going after consumers than businesses. Consumers might buy the latest upgrade to a technological device, such as an iPhone, while businesses tend to use products for longer periods of time. On the other hand, the more consumers purchase the latest product, the better the business side of manufacturing does. A company can reach the consumer market first, then expand into the business arena. When Apple added enhanced security features to the iPhone, businesses began to look at adding iPhones to the list of acceptable phones to use in the business environment, resulting in a crossover market.


3 - Social Networking - Social networking affects the business environment. Employees are connected to social networks. This can be a double-edged sword, however. An employee might post something about the business publicly which should not be shared. In addition, employees need to understand what gets posted for the public to see can have an impact on the work environment, especially if the employee is posting negative comments about the work environment or other employees. On the flip side, businesses can use social networks to monitor customer satisfaction. For example, if a customer is not happy with a product and he posts his feelings online, the company can contact the customer and try to resolve any problems. Since social networks have links to friends and family, seeing the company work hard to make things right with the customer might turn the potential loss of a customer into the chance to gain new customers.

4 - Telecommuting - Technology has had a large impact on the business environment in terms of telecommuting. With broadband access and computers today, as well as smartphones, employees can work out of their homes, saving the company money by not needing as physically large a space to operate. With video conferencing, business meetings no longer need to be face-to-face, saving on air fare and hotel reservations.