Topic 4

• GOVERNMENT

  • Establish many regulations and policies that guide businesses.

  • Businesses need to be flexible enough to respond to changing rules and policies.
• GOVERNMENT’S INFLUENCE ON BUSINESS

  • Policy as a Market Catalyst
  • Political Stability & Political Culture
  • Government Taxation & Spending
  • Setting Interest Rates
  • Regulations & Permits
• GOVERNMENT’S INFLUENCE ON BUSINESS: Policy as a Market Catalyst

  • Gov can implement a policy that changes the social behavior in the business environment.
• GOVERNMENT’S INFLUENCE ON BUSINESS: Political Stability & Political Culture

  • Gov policy will always depend on the political culture of the moment.

  • Policy in a politically stable country will be different that formed in an unstable country.
• GOVERNMENT’S INFLUENCE ON BUSINESS: Government Taxation & Spending

  • Govs get money to spend from taxation.

  • Increased spending requires increases in taxes or borrowing

  • More spending-> more taxes-> discourage investors-> less investment

  • More spending-> eats LIMITED savings pool-> less money for priv investments->shrinking of prod of goods & services-> elimination of jobs
• GOVERNMENT’S INFLUENCE ON BUSINESS: Setting Interest Rates

  • Gov policy can influence interest rates, a rise in which increases the cost of borrowing in the business community.

  • Higher interest rates -> less customer spending

  • Lower interest rates-> attract investment as business increase prod
• GOVERNMENT’S INFLUENCE ON BUSINESS: Regulations & Permits

  • Trade regulations, the federal minimum wage, & the reqs for permits/licenses have effects on business.

  • Fair/effective regulations promote business growth
• GOVERNMENT’S INFLUENCE ON BUSINESS: Regulations and Permits

  Example:

  • Periodic health inspections must be carried out in restaurants
  • Businesses might spend a lot of money and time to comply with regulations that ultimately prove to be ineffective & unnecessary.
• GOVERNMENT’S INFLUENCE ON BUSINESS: Policy as a Market Catalyst

  Example:

  • Gov can levy taxes on the use of carbon-based fuels and grant subsidies for businesses that use renewable energy.
  • Gov can underwrite the development of new technology that will bring the necessary change.
  • Imposing more taxes/duties on a sector than necessary will make the investors lose interest.
  • Similarly, tax & duty exemptions on a sector trigger investment & may generate growth.
• GOVERNMENT’S INFLUENCE ON BUSINESS: Political Stability & Political Culture

  Example:

  • Stable Political System
  • Can make business-friendly decisions that promote local businesses & attract foreign investors.
  • Unstable systems
  • Presents challenges that jeopardize the ability of government to maintain law & order & negatively affects the business envi.
• GOVERNMENT’S INFLUENCE ON BUSINESS: Setting Interest Rates

  Example:

  • Gov can influence interest rates in the short run by printing more money, might eventually lead to inflation.
  • Business doesn’t thrive in high inflation
• Businesses don't thrive in high inflation.
• BUSINESS & GOVERNMENT RELATIONS

  • Businesses and government relations is with business in partnership with government in addressing societal matters.

  • This is in contrast to government being the regulator to ensure businesses act in a socially responsible manner.
• TYPES OF BUSINESS RESPONSES

  • Confrontation
  • Participation
  • Anticipation
• TYPES OF BUSINESS RESPONSES: Confrontation

  • May aggressively attack either the message/the messenger, & in extreme cases, business has felt justified to sue its critics for libel.
• TYPES OF BUSINESS RESPONSES: Participation

  • Business may develop coalitions or partnerships with NGOs
  • McDonald’s did with Environmental Defense Fund (EDF)
• TYPES OF BUSINESS RESPONSES: Anticipation

  • Business may adopt issues mgmt programs to forecast emerging issues & to adjust/change business practices in advance of the passage of stringent laws or regulations.
• TACTICS THAT BUSINESSES USE TO INFLUENCE GOVERNMENT:

  • Lobbying

  • Political Contributions

  • Interest Group Politics
• TACTICS TO INFLUENCE GOVERNMENT POLICY: BUSINESS LOBBYING

  • Lobbying of Congress & state legislatures & executive branch agencies directly through its own gov relations specialists, through an industry trade assoc, through consultants / through a combination of all those avenues.
• Types of Business Lobbying:

  • Indirect/Grassroots Lobbying
  • Reactive Defense Lobbying
  • Interactive Lobbying
  • Social Lobbying
• Types of Business Lobbying: Indirect/Grassroots Lobbying

  • By appealing to its own employees, stakeholders/the gen public to make their views known to policymakers.

  • In order to build a broad grassroots constituency, business may manage “issue advertising” campaigns on top-priority issues/ purchase issue ads in media outlets that target public policymakers.
• Types of Business Lobbying: Defense Lobbying

  • Defending its own freedom from government regulation
• Types of Business Lobbying: Interactive Lobbying

  • Partnering with interest groups on policies that the firm can benefit from
• Types of Business Lobbying: Social Lobbying

  • Showing willingness to join public interest coalitions can gain reputational rewards from NGOs, the media, & public policymakers.
• TACTICS TO INFLUENCE GOVERNMENT POLICY: POLITICAL CONTRIBUTIONS

  • Campaign contributions to support their position and to try to influence public policies that can help them increase profits.
• TACTICS TO INFLUENCE GOVERNMENT POLICY: INTEREST GROUP PARTICIPATIONS

  • Interest groups play a key role in all democratic systems of government.

  • Businesses will encounter interest groups that may support or conflict with their position on an issue.
• TACTICS TO INFLUENCE GOVERNMENT POLICY: POLITICAL CONTRIBUTIONS

  • The most transparent and legitimate is that of forming a political action committee (PAC)
  • Voluntary contributions of employees are amassed & given in legally limited amounts to selected candidates.
• TACTICS TO INFLUENCE GOVERNMENT POLICY: POLITICAL CONTRIBUTIONS

  • Beyond contributing directly to political candidates, firms can also advertise on ballot measure campaigns.
  • Subject to NO legal limitations
• Political Contributions: Political Action Committee

  • Volunatry contributions of employees are amassed and given in LEGALLY limited amounts to selected candidates.
• Political Contributions: Advertise on Ballot Measure Campaigns

  • Subject to NO legal limitations