Political Regime and Business - Essay Example

? Political Regimes and Business The political regime in any given country is usually an important factor in determining the kind of business environment that the country will enjoy. This is because the political regime is responsible for putting in place the policies within which business in the country is supposed to operate. It is the responsibility of the ruling regime to put in place the measures that they expect will protect the interests of the country and of the citizens. In the attempt to protect the interests, the business environment may be affected. The political regime in the country is usually a reflection of the culture of the country. By an examination of the political regime, one can therefore make the decision to invest or not to invest in a given country. Most countries often have political regimes that are different and diverse in their ideologies and in their practices. An example of two countries with different ideologies is the United States and China. Given the different ideologies in the two countries, the business environment in the two countries is likely to be very different. The changes in the political environment of a given country usually have an impact on the business environment of the country. A stable political regime often means that there will be less tension which will in turn create a positive business environment. The stable political regime also means that it will be easier to start up a business in this environment. The two governments (the Chinese government and the United States government) usually put in place different ideologies that have different impacts on the business environment as will be discussed in the paper (Collins and Block, 2007, p. 130). The term political ideology refers to the set of beliefs and ideals that seek to explain or direct how the society should work and how power should be allocated to the different sectors of the society. A political ideology is therefore a collection of ideas and thoughts on how the society and the different sectors of the society should function and on how best to achieve this ideal functioning of the society. The differences in ideologies followed therefore form the basis of the differences in political regimes. In most political regimes, the old policies that have proved to be ineffective are often replaced by newer policies in an attempt to improve the situation. The political regime of a given country usually has a direct impact on the practices that will be followed in the country which will in turn affect the business. This effect is usually felt in the types of employment contract that are in place in a given country which affect the way that a business hires and treats its employees. The effect is also felt in the human rights treatment which affects the environment under which the business is expected to operate. The political regime in the United States is characterised by a mixture of liberalism and a high level of individualism in their practices. There is also a high emphasis on individual rights and liberties which translates even in the business environment in the country. The country was founded on the principles of democratic republic. At present, the major political parties in the country are the Republican and the Democratic parties. The democratic situation in the United States encourages private ownership of property (Jennings 2010, p. 69). The United States also adopts a free market policy. This means that the prices and other market conditions are regulated by the laws and forces of demand and supply. The government does not interfere with the means of production, and these means are controlled by the private citizens. In this free market, the prices of commodities in this market are as a result of voluntary transactions as opposed to being subjected to government control. Such a policy opens room for competition among various entities. The liberalised government system of the United States presents prospective businesses with many advantages. One such advantage is the ease at which a business can be started because of the effective regulatory framework that has been put in place. Another advantage is the liberalised market which makes it easy for a start up business to compete to penetrate the market and compete with the existing businesses. There are also fewer government controls that are put in place thus presenting the ideal business environment. The United States democratic system however has some disadvantages. One such disadvantage is the fact that it takes a longer time for massive business projects to be completed compared to the amount of time that it takes in authoritarian systems. The democratic system is also said to increase the pressure in the society for immediate consumption which often has an impact on the cost of investment (the cost of investment goes up) and hence slows down the rate of economic growth. Another disadvantage of the political ideology in the United States is that by increasing the demand for current consumption, the profits of a business enterprise are threatened (Bloone and Kurtz 2010, p. 12). China on the other hand was establishes as a single party communist state. At present, the country is governed by the Chinese Communist Party which is the party with the most influence. The opposition political parties hardly have any impact at all to the country. This implies that the country is a one party state. At present, the political regime in China can be defines as a totalitarian communist dictatorship. The political, social, and economic policies that are put in place therefore reflect this state of governance. One advantage of this political ideology and system of government is that is allows for business projects to be undertaken within a shorter time than would be possible in a democratic government. It also means that it takes a shorter time for one to meet all the requirements so as to start a business. This is however dependent on the government provisions. The political regime in China has also put in place policies that have encouraged technological advancement and a competent labour force. This means that it is easier for a business that is in operation in China to get effective employees for the business. There has also been a shift in the policies that have been in place to bring rise to more market friendly policies. This has encouraged the Chinese economy to experience steady growth which has benefited the businesses that are in operation. The economic growth that has been experience as a result of government policies that have been put in place have increased the spending power of the Chinese people which has benefited the businesses in operation in China (Chao, 1982, p.212). The government also exercises regulation upon the market in the country. This means that the government has a level of control over the factors of production. As such, the government may also have an influence over the prices of the different products that will be available in the markets. The Chinese government also imposes control on the stock markets in the country. The country is however making attempts to move from the planed and regulated economy to a more market oriented policy. This transition translates to changes in the economic environment of the country. There are however many disadvantages to the Chinese government system. One such disadvantage is that the human rights situation in China is also one that does not encourage a vibrant business environment. The tight control of the economy that is exercised by the political regime in China usually means that economic growth in the country is hindered. This means that a business may not be able to experience the same rapid growth that it would have experienced in a democratic and capitalist society such as the United States. While the Chinese economy has opened up the trade and investment avenues in the country, there is still a great deal of government control over many sectors of the economy (Joint Economic Committee 1992, p. 777). The strict government control that has been adopted by the Chinese government also means that there is a slow pace in reforms of the policies that have been put in place. This is because in most cases, the authoritarian government is resistant to change. This means that the necessary policies that may benefit the business will take longer to be implemented. In addition, the top-down approaches that the Chinese government agencies have adopted to standards and conformance have led to a situation where stakeholders do not have an opportunity to participate in the setting of the that will affect their businesses and operations (Owen, 2010). The businesses community also lacks the necessary platform to advocate for the changes that would be of benefit to the community as opposed to a democratic system where the representatives that have been elected represent the interests of those that they represent. Another disadvantage of the Chinese political regime is the lax attitude that it adopts towards the counterfeiting problem. In the attempt to impose controls on the different sectors of the economy, the Chinese authoritarian government has created a condition in which the counterfeit industry thrives. This makes it hard for the business to make substantial profits because the counterfeit products eat up into the market share of the businesses. The chosen environment for the business would be in the United States. The intended business is the manufacture and sale of soft drinks. The business will be responsible for producing, bottling, and selling soft drinks in different flavours. This is because the soft drink industry has a ready and willing market that has not been overexploited as opposed to other businesses. In addition, the soft drink brands are harder to imitate as opposed to other businesses such as the telecommunications or electronics business. This will reduce the risks that the business is likely to incur. The soft drink market is also ready to penetrate as opposed to other products. This is because it is easier to develop marketing strategies for soft drinks than for other products. The target market is also wider and easier to reach. The main reason as to why the United States has been preferred for the soft drinks business is the freedom for doing business that is offered by the United States. The political ideology in the United States is highly supportive of business ventures. The political ideology of the United States is preferred for this business as there are fewer regulations and hurdles in starting the business. The capitalist system on which the country operates encourages private ownership of the factors of production and entrepreneurship is supported. The free market policy that the United States government is also preferable as it does not impose any limitations on the prices of the products. Because it does not control the factors of production, it then leaves it upon the market forces to regulate the prices. This will be beneficial for the soft drinks company as it will help the company to maximise the profit potential. The subsidiary elements that are necessary for the success of a soft drinks company are also better established in the United States. This is because the free market policies encourage other businesses and industries such as transport and communication. The United States is also favourable for the soft drinks company as there is a ready market for the products. There are more soft drinks consumers in the United States than would be found in China. There are also more avenues to reach the target market such as through advertising. This stems from the fact that the government does not impose restrictive policies on the avenues of advertising such as the internet. This makes it easier for a business to advertise and run its operations. The managerial style that is adopted by the business world in the United States is also more attractive to a soft drinks manufacturer as it will help in maximising productivity within the company. The government has also adopted policies that have promoted education and there is thus a well-educated workforce which will be vital for the success of the company. It is therefore preferred to therefore operate a business in the democratic environment that is presented by the United States government. This is because the democratic state presented by the government secures the rights of the business owners and creates an environment in which economic growth can be experienced as opposed to the totalitarian government regime that is presented by the Chinese government which does not promote and safeguard the rights of the individuals to own and operate businesses and experience growth. It is important to understand the business environment in which one is going to operate before making the choice on where to invest. As seen, the business environment has an impact on all the aspects of the business which include personnel policies, product pricing, location of business, nature of the business and the guidelines under which the government will operate. It is therefore important for one to carefully consider this before making the decision on which country is best to start the business. While some of the costs of running a business such as salaries to employees may be fewer in China the tight government control over the industries and companies in the country makes it harder to conduct business there. The free market policies and the support to business that is offered to enterprises in the United States make the country ideal for the soft drinks company. References Owen, E., ‘China's approach to standards and conformance can create significant challenges for US companies doing business in China’ retrieved on January 18 2011 from https://www.chinabusinessreview.com/public/1001/owen.html Joint Congress Committee, 1992, China's economic dilemmas in the 1990s: the problems of reforms, modernization, and interdependence, New York, M.E. Sharpe. Collins, R., Block C., Doing Business in Chine for Dummies, Indianapolis, John Wiley and Sons. Jennings, M., 2010, Business: its Legal, Ethical, and Global Environment, New York. Cengage Learning. Chao, A., 1982, China’s economic reforms, Pennsylvania, University of Pennsylvania Press. Bloone, L., Kurtz, D., 2010, Contemporary Business, Indianapolis, John Wiley and Sons Read More