Political-legal Environment is a collection of factors, such as the general state of politics, the degree of politicalisation of business and economic issues, the level of political morality, the law and order situation, political stability, the political ideology and practices of the ruling party.
The purposefulness and efficiency of governmental agencies, the extent and nature of governmental intervention in the economy and the industry.
Government policies (fiscal, monetary, industrial, labour and export-import policies), specific legal enactments and framework in which the enterprise has to function and the degree of effectiveness with which they are implemented, public attitude towards business in general and the enterprise in particular, and so on.
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There are three important elements in political-legal environment. These elements are as follows:
i) Government:
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.
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ii) Legal:
Business organisations 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 organisations. Businesses must understand the relevant laws relating to companies, competition, intellectual property, foreign exchange, labour, and so on.
iii) Political:
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.