Government actions which affects the operations of a company or business are called as political environment. These actions may be on local, regional, national or international level. Business owners and managers pay close attention to the political environment to gauge how government actions will affect their company.
The legal/political aspect is very important in global marketing. "International law" can be defined as rules and principles that states and nations consider binding upon themselves. This raises two interesting characteristics of international law. The first is that "law" belongs to individual nations and international law only exists to the degree that individual nations are willing to relinquish their rights. The second is the lack of an adequate international judicial and administrative framework or a body of law which would form the basis of a truly comprehensive international legal system.
The international business is also subject to political decrees made by governments both in "home" and "host" countries. Home governments can apply pressure not to deal with disapproved parties. These measures may take the refusal to grant an export license, or withdrawal of export guarantee cover. The host government may take measures like taxation, ownership controls, operating restrictions or expropriation.
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India has adopted parliamentary system of government which is based on universal adult franchise. The Government of India is of a democratic form which means it is a government `by the people, for the people and of the people`. In this parliamentary system of government, parliament is supreme and there is fusion of Executive and Legislative powers. The President is the constitutional head of the Executive. All the executive powers are exercised by the Council of Ministers with the Prime Minister as head. After independence, the whole political scenario changed with the Congress in Power. The Constitution of India being the supreme law of the land came into force on 26 January 1950. The preamble of the Constitution defines India to be a sovereign, socialist, secular, democratic republic. The parliamentary system of India is a replica of the Westminster-style. The first general election was held under the Constitution during 1951-52
Parliament occupies a prominent position in the structure of the Government of India. It is the representative institution of the people. It is through the Parliament, the sovereign will of the people finds expression. Article 79 of the Constitution of India states that there shall be a Parliament for the union and the government will be responsible to legislature and the legislature is in turn responsible to the people who are the ultimate sovereign. The composition of the parliament consists of the president and the two Houses- the Lok Sabha or the House of the Parliament and the Rajya Sabha or the council of States. The continuation of a President or the Head of the State in the Parliamentary form of government symbolizes its true character. The President though does not participate in the discussions of the two Houses, yet he exercises several powers and performs important functions. The president of India is elected by an Electoral College consisting of the elected members of the two Houses of the parliament and the Legislative Assemblies of the state. The Rajya Sabha which is another essential part of the parliament consists of not more than 250 members. Of these, 233 members represent states and union territories and 12 members are nominated by the President. Members to the Rajya Sabha are elected by the elected members of Legislative Assemblies of the concerned states. The Rajya Sabha is not subject to dissolution in contrast to the Lok Sabha and one third of its members retire every second year. However, in the Indian Polity, the LokSabha is composed of representatives of the people chosen by direct election on the basis of universal adult franchise. As present, the Lok Sabha consists of 545 members with two members nominated by the President to represent the Anglo-Indian Community. The term of the Lok Sabha is for five years and gets dissolved under circumstance of failure of the leading party to prove clear majority or a no-confidence motion.
Article 74 (1) of the Constitution provides that there shall be a Council of Ministers headed by the Prime Minister to aid and advise the President who shall, in exercise of his functions, act in accordance with such advice. India is a bicameral parliament consisting of the Lok Sabha (House of the People) and the Rajya Sabha (Council of States). The Council of Ministers is collectively responsible to the Lok Sabha, the House of the People. The Council of Ministers comprises Cabinet Ministers, Minister of States and Deputy Ministers. It is the Prime Minister who communicates all decisions of the Council of Ministers relating to administration of affairs of the Union and proposals for legislation to the President. Each department has an officer designated as secretary to the Government of India to advise Ministers on policy matters and general administration. The Cabinet Secretariat has important coordinating role in making decision at highest level and operates under direction of Prime Minister.
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Government of India has certain departments that carry on their duties under the supervision of several ministries. The Central Ministry is part of the Executive branch of Government India. Depending on the federal character of the political system of India, Indian Government Departments are divided into Central government departments and State Government department. The central ministry work independently and the State governments work under the supervision of the Central Government. There are certain departments including Departments of Agriculture, Home Affairs, Commerce and Industry, External Affairs, Corporate Affairs, Defense, Information and Broadcasting, Civil Aviation, Human Resource Development, Railways, Environment and Forests, Finance and Company Affairs, Health and Family Welfare, Heavy Industries and Public Enterprises, Petroleum and Natural Gas, Power, Labour, Tourism, Women and Child Development, Youth Affairs and Sports and several others constitute the Indian Government Departments. These departments work for public welfare.
The ministers of these government bodies are chosen through general election India at an interval of every five years. But the bureaucrats and other officials are appointed through competitive exams that are held throughout India. Examinations such as IAS, IPS, IFS, UPSC and other exams are held annually across the nation. Moreover, it is through the Government of India, the defense of the country is ensured. The Supreme Command of the Armed Forces is invested in the President and the responsibility for national defense vests in the Cabinet. The Ministry of Defense performs the work assigned. Defense Minister or the Raksha Mantri is the head of the Ministry of Defense
B) The Ideology of ruling Party
Historically, the party has favored farmers, laborers, labor unions, and religious and ethnic minorities; it has opposed unregulated business and finance, and favored progressive income taxes. However, in recent years the party had adopted centrist economic and social democratic agenda. Today, the INC advocates neo-liberal policies which includes populism, social liberalism, secularism and free enterprise system with government regulations such as public-private partnership (PPP) model. Though it strongly believes in eradicating poverty, illiteracy and strongly supports the weaker section of the society.
Social policy of the INC is based on Gandhian concept of Sarvodaya (upliftment of all sections of the society.) In particular INC gives special emphasis on the welfare of the economically and socially disadvantaged sections of the society. This includes "affirmative action" reservations for weaker sections of the society in education and employment, emphasis on employment generation for rural population (through schemes such as National Rural Employment Generation Scheme) etc. The party supports family planning with birth control but opposes elective abortion, in particular sex selective abortions and late term abortions.
Traditionally, Economic policy of the INC emphasized on the importance of the public sector aimed at establishing a "socialistic pattern of society". However, since the economic liberalizations initiated by Dr. Manmohan Singh, the then Finance Minister in the early 1990s, the economic policy of INC has been changed somewhat and it is now adopted free market policies, though at the same time it is in favors of taking a cautious approach in proceeding with liberalization to ensure that the weaker sections are not affected too hard by the liberalization process.
Traditionally, nonalignment has been the bedrock of the foreign policy of the INC.
The organization developed by Mohandas Gandhi's reorganization of the Congress in the years of 1918 to 1920 has largely been retained till today.
In every Indian state and union territory or pradesh, there is a Pradesh Congress Committee (PCC), which is the provincial unit of the party, responsible for directing political campaigns at local and state levels and assisting the campaigns for Parliamentary constituencies. Each PCC has a Working Committee of 10-15 key members, and the state president is the leader of the state unit. The Congressmen elected as members of the states legislative assemblies form the Congress Legislature Parties in the various state assemblies, and their chairperson is usually the party's nominee for Chief Ministership.
The All India Congress Committee (AICC) is formed of delegates sent from the PCCs around the country. The delegates elect various Congress committees, including the Congress Working Committee, which consists of senior party leaders and office bearers, and takes all important executive and political decisions.
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The President of the Indian National Congress is in effect the party's national leader, head of the organization, head of the Working Committee and all chief Congress committees, chief spokesman and the Congress choice to become the Prime Minister of India.
Constitutionally, the president is to be elected by the vote of the PCCs and members of the AICC. However, this procedure has often been by-passed by the Working Committee, choosing to elect its own candidate as an emergency measure.
The Congress Parliamentary Party (CPP) is the group of elected MPs in the Lok Sabha and Rajya Sabha. It is headed by senior Congress leader Pranab Mukherjee. Since the current Prime Minister Dr.Manmohan Singh is not an elected member of the Lok Sabha, Pranab is the CPP president. Dr. Singh is Leader of the Rajya Sabha. There is also a CLP leader in each state. The CLP (Congress Legislative Party) consists of all MLAs[vague] in each state. It also comes under the CPP so Pranab is head of the MLAs also. In cases of states where the Congress is single-handedly ruling the government, the CLP leader is the Chief Minis
C) OPPOSITION (PARLIAMENTARY)
Parliamentary opposition is a form of political opposition to a designated government, particularly in a Westminster-based parliamentary system. Note that this article uses the term government as it is used in Parliamentary systems, i.e. meaning the administration or the cabinet rather than the state. The title of "Official Opposition" usually goes to the largest of the parties sitting in opposition with its leader being given the title "Leader of the Opposition".
Opposition to the Congress has always been fragmented. Opposition parties range from Hindu nationalist parties such as the BJP on the right to communist parties on the left (see table 33, Appendix). The divisiveness of the opposition, combined with the "first-past-the-post" electoral system, has enabled the Congress to dominate Indian politics without ever winning a majority of the vote from the national electorate. The extent of electoral alliances among the opposition is an important predictor of its ability to win seats in Parliament. The first two instances when the opposition succeeded in forming a government at the center occurred after it united under the Janata Party banner in 1977 and after the formation of the Janata Dal and the National Front in 1988. In each of these cases, the unity that was facilitated by anti-Congress sentiment prior to the elections collapsed in the face of rivalry and ambition once the opposition came into power.
The Opposition's main role is to question the government of the day and hold them accountable to the public. The Opposition is equally responsible in upholding the best interests of the people of the country. They have to ensure that the Government does not take any steps , which might have negative implications on the people of the country.
the role of the opposition in parliament is basically to check the excesses of the ruling or dominant party, and not to be totally antagonistic. There are actions of the ruling party which may be beneficial to the masses and oppositions are expected to support such things.
In Parliament, Opposition Party should act firmly on behalf of common mass fighting for their common interest and grievances. They should raise immediate protest before a Bill passed, which is against the interest of common-men. Opposition legislators should always bear in mind that they are the representatives from each and every countryman fighting for justified demands and defending all unlawful and unfair practice.
Bureaucracy is the sovereign factor in public administration. It is also called manpower management, personnel management, labour welfare management and so on. But bureaucracy has wider meaning; it deals with classification, recruitment promotion compensation, discipline and retirement benefits of the personnel in government. It does not include persons of military service, judicial service and police service. It does not include persons who hold political offices and those persons who work for the state without being paid that is in an honorary capacity. Thus Bureaucracy is a body of professional administrators as opposed to amateur politicians. Impartial selection that is its members are appointed by an open competition as against politicians who are elected on party lines. They are paid regularly by the state and do not have the incentive of private profit while in civil service.
It is a career service in the sense that its members take up public service as a lifetime occupation. Its members are skilled in the sense that they become expert in their profession due to continuous work experience. It is organized on the principle of hierarchy in which a chain of command stretches in a pyramid fashion from the lowest office to the highest. Neutrality that is its members serves different political regimes impartially. Anonymity that is its members works without praise or blame.
Role of bureaucracy in India
1. Implementation of Policy -
It is the most important and fundamental function of civil servants. They execute laws and policies to attain the goals of welfare state that is social equity economic development and so on.
2. Formulation of Policy-
Formulation of Policy is the function of political executive. But civil servants have also come to play role in it. They aid and advise the ministers in policy making. Political executives being amateurs cannot understand the technical complexities of policies and hence depend upon the expert advice of professional civil servants.
3. Delegated Legislation-
This is a quasi legislative function performed by the civil service. Due to lack of time, pressure of work and increased complexities of legislation the legislative makes laws in skeleton form and delegate's power to the executive to fill in the details. Thus, civil servants make the sub-laws, rules and regulations, but within the limits of the parent law enacted by the legislature. Delegated legislation is also known as executive legislation or subordinate legislation.
4. Administrative Adjudication-
This is a quasie judicial function performed by the civil service. The civil servants settle disputes between the citizens and the state. For this purpose, the Administrative Tribunals with judges are established. The Income Tax Appellate Tribunal, Industrial Tribunals, Rent Tribunals and Railway Rates Tribunals are some of the examples of such tribunals in India. These tribunals function outside the ordinary court system.
In addition to the above, the civil service also performs the following functions-Administrative planning, Administration of public enterprises a Assisting the ministers in fulfilling their responsibilities towards the parliament and its committees, handling financial operations of the stat reforming and improving administration through O and M and public relations.
E) POLITICAL SYSTEM
A 'political-legal environment' is a term that's frequently encountered for Business Studies students. For entrepreneurs and companies, these are usually the regulations and laws that have to be followed to ensure safe practice. Failure to follow these guidelines can result in a business losing their ability to trade with consumers, or the imprisonment of owners who sanctioned illegal activity.
A political system is a complete set of institutions, interest groups (such as political parties, trade unions, lobby groups), the relationships between those institutions and the political norms and rules that govern their functions (constitution, election law).
A political system is composed of the members of a social organization (group) who are in power.
A political system is a system that necessarily has two properties: a set of interdependent components and boundaries toward the environment with which it interacts.
A political system is a concept in which theoretically regarded as a way of the government makes a policy and also to make them more organized in their administration.
There are three important elements in political-legal environment. These elements are as follows:
A business is highly guided and controlled by government policy. Hence the type of government running a country is a powerful influence on any business; a strategist has to consider the changes in the regulatory framework and their impact on the business.
Taxes and duties are other critical areas that may be levied and that affect the business. For example, introduction of FBT (Fringe Benefits Tax) has a major impact on the business.
Business organizations prefer to operate in a country where there is a sound legal system. However, in any country, businesses must have a good working knowledge of the major laws protecting consumers, competitions and organizations. Businesses must understand the relevant laws relating to companies, competition, intellectual property, foreign exchange, labor, and so on. There are hundreds of legal systems in the world. At the global level, international law is of great importance, whether created by the practice of sovereign states or by agreement among them in the form of treaties and other accords. Some transnational entities such as the European Union have created their own legal structures. At the national level there are over 180 sovereign states in the United Nations Organization. Many of these are federal or nonfederal, and their constituent parts may well have their own law.
But, despite this great variety, it is important to begin by emphasizing one great division: that into religious and secular legal systems. Each side of this split holds quite different views as to law, in its source, scope, sanctions, and function. The source of religious law is the deity, legislating through the prophets. Secular law is made by human beings, and one of its most famous examples begins with the words 'We, the people'. It follows from this difference in their source that religious laws are perceived to be eternal and immutable, while secular rules can be changed by their makers. Religious law tells people what to believe as well as how to behave, whereas secular law deals with our external actions as they affect others. In a religious legal system disputes are usually adjudicated by an officer of that religion, so the same person is both judge and priest. In a secular system, by contrast, the office of judge is separate, and is often reinforced by guarantees of judicial independence. A further difference lies in the enforcement of the laws: in a secular system sanctions are imposed in this world, and its severest punishment (the death penalty) amounts to forcible removal from the jurisdiction. The sanctions and rewards of a religious system may also occur in this world, but are often to be felt most keenly in the next.
Apart from Govt, and Legal factors there are several other political pressures that influence and limit organisations. Political uncertainty, political movements against certain products, service and organisations, politicalisation of trade unions, etc., put a lot of pressure on business organisations. Checks can be made on the legal/political system as to its ideology, nationalism, stability and international relations.
Ideology: A country's ideological leaning may be capitalism, socialism, a mixture or other form. In the last years remarkable changes have been taking place in the ideologies of many countries. The most dramatic example has been the collapse of the communist USSR and Eastern Europe and its replacement with market led policies and ideologies. Similarly, many African countries are abandoning their centrist leanings in favors of market led economies, for example, Zimbabwe and Tanzania.
Nationalism: Much was said about nationalism in the previous section. Whilst, primarily a phenomenon of the developing countries, Yugoslavia has shown it is not entirely so. Nationalism can lead to expropriation of foreign held assets.
Stability: Changes in regime, violence and cultural divisions based on language or other factors can lead to a very uncertain environment in which to conduct business. The current uncertainty in Liberia and Rwanda, the violence of Somalia and Yugoslavia increase the risk and diminish the confidence of doing business in these countries.
International relations: In general international relations have improved over the last twenty years. The development of GATT, NATO and the EU has gone a long way to reduce the element of "foreignness'".
Assessing political vulnerability
Political vulnerability should be assessed by using a systematic checklist. Such a checklist should include the following:
The firm's own country's relations with other countries
Sensitivity of the product or industry
Size and location of operation - the bigger the more vulnerable
Visibility of firm - is it high profile say via advertising?
Host country's political situation
Company behavior - is it a good corporate citizen?
Contribution to host country, for example, employment
Localization of operations Subsidiary dependence.
Depending on the answers to these checkpoints, the amount of risk, real or perceived, can be assessed and fed into the investment discussion.