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How do political factors affects businesses? Provide a possible solution.

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Stephen w eNotes educator | Certified Educator

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Political factors affect businesses by creating a sense of uncertainty. A good example is the current trade war between China and the USA. American businesses that get most of their products or business from China are not sure how far both countries are willing to go with the tariffs. As a result, they cannot set long-term goals for their businesses. These firms have to make do with what is there. They can only focus on short-term sales targets because Chinese businesses are not totally locked out of the American economy.

The best way for businesses to deal with this uncertainty is to sit down with the Federal government and try to get them to commit to making the trade environment better for local firms. Since the elections are near, the Federal government will be more open to talks because they want another term. A commitment to support American businesses could help increase the popularity of the current government and change the voters' minds.

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pohnpei397 eNotes educator | Certified Educator

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Political factors can affect businesses by making the environment more or less friendly for business.  Often, there is very little that businesses can do.  They can lobby for better laws, but they clearly have little to no control over the political environment.

Governments typically have a great deal of power over businesses.  They can make life very difficult for those businesses.  They can require businesses to get all sorts of licenses to operate.  They can require voluminous paperwork.  They can pass laws about what employers have to do to hire and fire workers.  They can levy onerous taxes.  All of these things can make it very hard for businesses to operate.

The problem for businesses is that there is very little that they can do individually to combat these problems.  The government is the only entity that can actually change the laws.  Therefore, businesses have to try to persuade the government to institute changes.  The best solution, then, if for businesses to band together, perhaps creating a chamber of commerce or similar group that can speak for all businesses.  If enough businesses put their weight behind such a group, it might be able to influence the government and reduce the number of government policies that make it harder to do business.

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