Assess the Impact of a Political Environment on International Business Essay

Assess the Impact of a Political Environment on International Business - Essay Example The significance of politics is much more in international business because the political system varies from country to country. Purpose of the study: According to (Batler 1998), a business entity should always take into account political risk because it is directly related to the investment, cost, tax structure and the return from that country. Keillor et al (2005) also have similar opinion. They admitted politics as a threat to international operation. Background of the study: A case study on Bangaladesh, a developing country can be cited here. The World Bank has forecasted the GDP growth of Bangladesh at 5.7 percent for the fiscal year 2014.This is way below the growth forecast 7.2 percent, done by the Bangladesh government itself. According to World Bank, the reasons behind the slower growth are political unrest, remittance crisis and problem in garments sector. Remittance is a political issue and garments is outsourced business, so again a political issue) 1. General political uncertainty: Though the normal political instability is not considered as a serious problem but if the uncertainty increases it harms the business growth. Giving the example of Africa Frynas (1998) mentioned that, political instability of Africa is the main barrier for economic development. 2. Ownership risk: If the government takes over a private business or goes for expropriation then the private owners might lose its ownership. These situations are termed as nationalization or protectionism of business. 3. Operational Risk: Government policies of the country where the business is operating matters a lot. The availability of finance, cost structure, tax structure, buying of property, human resource strategy, marketing technique everything is dependent on the government policy. Korrin (1979) expressed his concern in the case of political influence in business decision making process pr planning. In much