How does the political environment consider a barrier to entrepreneurial development?

Without a doubt, society and culture have a direct impact on our behaviour because we are born and raised within the norms and belief systems that they have established (Hofstede, 1980). They have an impact on people's personal values as well as their actions. These influences emanate from the social system's grassroots and have a bottom-up effect on people's behaviour. Societal and cultural traditions that have been practised for generations have useful knowledge and practises that can be used to start businesses.

The emergence and development of entrepreneurship is not a spontaneous phenomenon, but rather a result of various environmental factors. Positive influences create facilitative and conducive conditions for entrepreneurship growth, whereas negative influences create inhibiting conditions for entrepreneurship growth and development.

The political environment influences people's entrepreneurial behaviour from the top down through bureaucracy, economic policy, and governance in general. People's short and long-term expectations about their well-being are influenced by these elements of the political environment, and they act accordingly. As a result, the formal and informal influences of the social-culture-political environment can encourage or discourage entrepreneurial behaviour at the individual level (Hayton et al. 2002, Zhao et al. 2012). They can be beneficial at times and detrimental at others. In this post, I will discuss how the social-cultural-political environment affects entrepreneurship.

Affects political environment considers entrepreneurial development

Politics in modern society is defined as all activities and systems that have a direct impact on how power and authority are allocated and used. Changes in these machinations can affect your company's fortunes in a variety of ways, regardless of its size or reach.

A political element could be an increase or decrease in taxation. Your government may raise taxes on some businesses while lowering them on others. The decision will have an immediate impact on your company. As a result, you must always be aware of such political developments

The political environment is one of the most unpredictable aspects of the business environment. As democratic governments must seek re-election every few years, a cyclical political environment emerges. The effects of pressure groups are included in this external aspect of the business. Government policies are often changed as a result of pressure groups.

How Politics Affects Entrepreneurs

Taxation: Changes in government can have a significant impact on how businesses operate. The most visible impact changes in laws and regulations that affect your business. For example, Donald Trump's election in the United States has resulted in some of the largest tax cuts in history, which is fantastic news for businesses in that region. If you live in a region where the ruling party has established high corporate tax rates, you may want to consider relocating your business.

Demographic information: Politicians often mirror images of who we are as a people. When the political party that controls Congress or the presidency changes, it often represents the rise or fall of a specific demographic, which can be useful information for an aspiring business owner. For example, a large part of Trump's victory is attributed to the participation of working-class white people—a demographic that has previously felt ignored or underserved by politicians. Learning to accommodate or target these spotlight demographics could be beneficial—but don't forget about the truly underserved demographics, who may be struggling under the new administration.

Regulations and Compliance: Increased compliance regulations can have an impact on the overall ease of doing business. Governments frequently initiate these changes in response to problems that arise in other parts of the PESTLE framework. In recent years, for example, global warming has emerged as a critical social and political issue. Changes in financial reporting and auditing are even more important from a business standpoint.

Excitement over new developments: Elation at new developments Consumers, on the other hand, maybe enthused about new advancements, and their wants may vary in a variety of ways. For example, if customers expect their wages to rise, they may spend more on luxury things; if they expect the stock market to rise, they may be more likely to invest in securities, which may influence how you organise your organisation.

Why is the political environment so challenging?

The most serious issue with political considerations is that they are frequently unpredictable. Take, for example, Brexit. Few would have raised an eyebrow when then-UK Prime Minister David Cameron declared an EU membership referendum to appease his party's fringe Eurosceptics. However, the accompanying uncertainty has been considered for both British and EU-based businesses since the Brexit decision. Despite repeated warnings from industry organisations that political indecision is severely limiting companies' capacity to operate successfully, business owners are being compelled to undertake costly contingency plans.

These scenarios might be extremely aggravating if you own a business. While you can try to be proactive rather than reactive, the reality is that you can't sufficiently prepare for the unknown - a position made much more frustrating when politicians neglect the realities of businesses "on the ground." Political developments can be both morally and emotionally draining for an entrepreneur because they might render you powerless.

Final Thoughts

Political issues can have a wide range of effects on business. The political element is an external environmental component that increases risk and can result in large economic losses. This can also influence the outcome, which is why businesses should be more careful when interacting with politics both locally and internationally. Many businesses have dedicated employee who deals with lawmakers and political objectives.

Another critical factor is foreign investment and firms in a country. If the political environment is unfavourable for foreign investment, it can lead to a loss of internal business, and investments can have an indirect impact on domestic players.

Remember that politics are to business what winds are to sailing. When they blow favourably, you must take advantage of them to the maximum, but when they inevitably reverse direction, you must be able to react fast.

 What are your thoughts? What else can the political environment do to your business? Please share your thoughts in the comments section below.