Political Factors

Government regulations and legal issues affect a company’s ability to be profit- able and successful, and this factor looks at how that can happen. Issues that must be considered include tax guidelines, copyright and property law enforcement, political stability, trade regulations, social and environmental policy, employment laws and safety regulations. Companies should also consider their local and federal power structure and discuss how anticipated shifts in power could affect their business.

HRM professionals can assess the political factors by examining a country’s labor laws, property rights, and patents. When Lincoln Electric, the Ohio-based welding company, for example, started operations in Brazil, they could not offer their yearly bonus program based on performance because any bonuses paid for two consecutive years became a legal entitlement

Property rights in many countries are poorly protected by governments. Who- ever has the political power or authority can seize others’ property with few or no repercussions. Civil unrest can also lead to the poor enforcement of property rights. Businesses have less incentive to invest in countries or locate factories in countries experiencing strife. Another issue that has implications for global companies relates to the intellectual property rights—rights related to patents, trademarks, and so forth.