The Political environment is often a direct consequence of the political parties in power, which represents the popular opinion of the citizens of the region. If the citizens are, for example, pro-Big Business then probably taxation will be modest and there will not be a lot of stringent rules about environmental considerations.If the citizens are very concerned about safety issues, for example, then there will be a lot of rules and regulations governing things such as transportation safety, which will make it more expensive for some companies that have big shipping costs.
The political environment can affect a business either positively, or negatively, depending on the prevailing situation in a country. It mainly forms the external factors - which are part of the macro-environment, control of which is beyond the ability of human beings.
These factors touch on the way politics are conducted in a country, which directly reflects on what is happening within the government itself.
This means that a democratic country will accord freedom to its people to vote for a government which has their interests at heart, and thus business will thrive - owing to the good policies the government implements.
On the other hand, a dictatorial government will not earn the respect of its citizens - leading to economic as well as political instability and uncertainty.
Even though such a government will eventually go, businesses suffer a lot during the government's tenure, since they are not sure of their future. This underlines the importance of a democratic government to a country and to business.
Needless to say, once a country is stable, more investment opportunities will be realised, thus attracting more and more investors. This will reflect positively and directly on local businesses, as citizens will be able to have full confidence in them....