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Political environment

It includes factors such as the characteristics and policies of the political parties, the nature of the constitution and government system and the government environment encompassing the economic and business policies and regulations. These factors may vary very considerably between different nations, between different provinces of the same nation and also over time.

Political environment
A political system is the complete set of institutions, political organizations, interest groups, the relationship between those institutions and the political norms & rules that govern their functions. Government is a political institution but it has social purpose: ways and means of maximising social benefits and minimising social costs. The days of laissez faire is gone. Business is no longer left alone. Government intervention in business activity in the present world is a hard fact. Under a democratic set up, the ideology of the ruling party influences ownership, management, sizes of business.

Emergence of India as a welfare state


Political concept with economic content. It mainly based on three pillars Freedom from want. Freedom from exploitation Freedom from fear. A welfare state should better be called an opportunity state because it provides all possible opportunities for fuller and development life. Organized power is deliberately used to modify the play of market forces in at least two directions: guaranteeing individuals and families a minimum income irrespective of the market value of their work or their property. narrowing the extent of insecurity by enabling individuals and families to meet certain social contingencies which otherwise leads to individual and family crisis..

Economic roles of government


The scope of government regulation of business can extend from entry into the business through conduct of the business and final results to exit. Government normally play four important roles in an economy Regulatory role- the reservation of industries to small scale, public and cooperative sectors, licensing system etc regulate the entry, Regulations of product mix, promotional activities etc. Broadly divides intoindirect control: exercised through various fiscal and monetary incentives and penalties. direct control: they are applied selectively from firm to firm and industry to industry.

Promotional roles: direct responsibility to build up and strengthen the necessary development infrastructures, such as power, transport, finance, marketing, institutions for training and guidance . Entrepreneurial roles: establishing and operating business enterprises and bearing the risks.
Planning role: especially in the developing countries, the state plays a very important role as a planner.

Economic roles of government in India


THE CONSTITUTIONAL ENVIRONMENT The socio-economic and political objectives of the Indian republic and the basic guiding principles of the state functioning have been clearly laid down in : The preamble to the constitution The fundamental rights The directive principles of the state policy

The preamble
It lays down that the attainment of social, economic and political justice and equality of status and of opportunity should be among the most important basic guiding principles of the functioning of the state.

The fundamental rights


The Indian constitution offers all citizens , individually and collectively, the best fruits of democracy and those basic freedoms and conditions of life which alone make life significant and productive. The fundamental rights enumerated in part 3 of the constitution:

Right to equality Right to freedom Right against exploitation Right to freedom of religion Cultural and educational rights Rights to constitutional remedies

The directive principles


The Directive Principles of State Policy are guidelines to the central and state governments of India, to be kept in mind while framing laws and policies. It provides enormous scope for government intervention in the functioning of the economy.

Some directive principles are quoted below The state shall Endeavour to protect and improve the environment and to safeguard the forests and wild life of the country. (Article 48-A) The state shall take steps, by suitable legislation or in any other way, to secure the participation of workers in the management of undertakings, establishments or other organizations engaged in any industry. (Article 43-A) The state shall take steps to organize village panchayats and endow them with such powers and authority as may be necessary to enable them to function as units of self-underserved wants (Article 40) The state shall make provision for securing just and humane conditions of work and for maternity relief (Article 42) The state shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life (Article 38(1)). Etc..

Legal environment
The legal environment is derived partly from the political climate in a country and has three distinct dimensions to it: The domestic laws of your home country. The domestic laws of each of your foreign markets. International law in general. The legal environment refers to the principles, rules and regulations established by the government and applicable to people. These regulations come through various legislations. The government has passed and enacted various Acts. Now due to globalisation of economy, it became necessary to make changes in these Acts.

Domestic laws govern marketing within a country, e.g. the physical attributes of a product will be influenced by laws (designed to protect consumers) relating to the purity, safety or performance of the product. Domestic laws might also constrain marketers in the areas of product packaging, marking and labeling, and contracts with agents. Most countries also have certain laws regulating advertising, e.g. Britain does not permit any cigarette or liquor advertising on TV.

politico-legal environment
The political and administrative system in a country dictates policies, formulation its implementation and control of business. Whenever there is a change in the political scenario of a country, there will be a change in economic policies. This is due to the fact that each and every political party does some promises with the people in their election manifesto. Business activities of a country are affected by the policies and directions, shelters and control exercised by the prevailing political system.

If the political environment identifies key constituencies, the legal environment sets the rules of the game as well as the range within which legitimate business activity is conducted. Since, at least in democratic systems, laws are enacted by elected legislative bodies, political processes both determine legal issues and are guided by them.

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