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business environment Understanding government & public policy Discuss the governments role in its relationship with business Explore the interactions among business, government, and the public List major reasons for regulation, the types, and issues arising out of regulation

Understanding Business Environment

Environment is the total of several external and internal forces that affects the functions of business. Every business organisation principally consists of internal environment factors and set of external environmental factors. Environment factors influence to business directly and indirectly that control, manage and administration of business activities in the organisation. (Hirriyapa, 2008)

Components of Business Environment (Hirriyapa, 2008)

Component business environment of firm

Internal environment Micro

External environment


Macro environment

External Environment

Micro environment of business enterprise refers to study on small area or immediate periphery of the business organisation. Micro environment directly or regularly influence to business organisation. Macro environment is largely external to the business enterprise. Macro environment factors are uncontrollable factors and beyond the direct influence and control of the organisation.

Macro environment

The macro/remote environment principally consists:

Economic environment Political environment Legal environment Socio-cultural environment Demographic environment Natural environment Physical and technological environment Technological Environment Global or International environment

Understanding Government

Government is specialised institutions for allocating resources Its central features are the ability to make collective decisions and the capacity to enforce them The core functions of government are thus to make law (legislation), implement law (execution), and interpret law (adjudication) (Heywood, 2002)

Governments Public Policy Role

Public policy: a plan of action undertaken by government officials to achieve some broad purpose affecting a substantial segment of a nations citizens Public policy inputs shape a governments policy decisions and strategies to address problems Public policy goals can be broad and high-minded or narrow and self-serving Governments use public policy tools involving combinations of incentives and penalties to prompt citizens to act in ways that achieve policy goals Public policy effects are the outcomes arising from government regulation (Lawrence, 2011)

Business-Government Relations

of the role that nonmarket factors play in competitive strategy and firm performance Firms actively utilise political strategies to influence government policy and obtain an advantage (Shaffer & Hillman, 2000)


Governments Role in Influencing Business

Prescribes the rules of the game for business. Purchases business products and services. Uses it contracting power to get business to do things it wants. Is a major promoter and subsidizer of business. Is the owner of vast quantities of productive equipment and wealth. (Bakhsheshy, n. d)


Is an architect of economic growth. Is a financier. Is the protector of various interests in society against business exploitation. Directly manages large areas of private business. Is the repository of the social conscience and redistributes resources to meet social objectives


Interaction of Business, Government, and the Public

Regulations and Other Forms of Persuasion


Political Process Voting Interest Groups Contributions

Advertising Public Relations


(Bakhsheshy, n.d)


Government Regulation of Business

Regulation: the action of government to establish rules of conduct for citizens and organizations. It is a primary way of accomplishing public policy.

Reasons for regulation

Market failure Negative externalities Natural monopolies Ethical arguments: achieve social goals


Roles of Government and Business: Clash of Ethical Systems

Business Beliefs

Government Beliefs

Maximizes concession to self-interest Minimizes the load of obligations society imposes on the individual (personal freedom) Emphasizes inequalities of individuals

Subordinated individual goals and self-interest to group goals and group interests Maximized obligations assumed by the individual and discouraging self-interest Emphasized equality of individuals
(Bakhsheshy, n.d)


Types of Regulation: Economic

Economic regulations: aim to modify the normal operation of the free market and the forces of supply and demand
Includes regulations that: Control prices or wages Allocate public resources Establish service territories Set the number of participants Alocate resources
(Bakhsheshy, n.d)


Types of Regulation: Social

Social regulations: Aimed at such important social goals as protecting consumers and the environment and providing workers with safe and healthy working conditions Includes regulations which apply to all businesses:

Pollution laws Safety and health laws Job discrimination laws

And others that only apply to certain businesses

Consumer protection laws for businesses producing and selling consumer goods

(Bakhsheshy, n.d)


Benefits of Regulation

treatment of employees Safer working conditions Safer products Cleaner air and water

(Bakhsheshy, n.d)


Costs of Regulation

innovation Reduced investment in plant and equipment Increased pressure on small business

(Bakhsheshy, n.d)


Individual Assignment

Short essay on business-government relations Analyse one of the following topics based on empirical study: Government regulations on minimum wage Government regulations on child labour Government regulations on workers welfare (safety and health issues) Government regulations on natural environment The essay must focus on: problems identification; the costs of compliance; the firms strategy to comply with the regulations


Individual Assignment (contd)

The length of the essay is between 1.000 1.500 words (or 4 5 pages, Times New Roman, 12 fonts, 1,5 lines) Essay must be submitted on 1 March 2013