Learn how to do External Analysis of a company (with examples)

Marketing Management Course
AllAssignmentHelp Academy
  • 33 lessons
  • 10 quizzes
  • 10 week duration

2.1 What is political factor analysis?

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Politics drives the people, and vice-versa.

Political factors refer to everything that comes from the government. The government of a country makes policies that affect the businesses and the lives of millions of individuals living in a country.

The actions of the head of the country determines the lives and future of the country. It is important for the businesses to know what rules are being made and what agendas are on the horizon.

The government can make decisions related to any facets of a country such as economic decisions, financial decisions, regulatory decisions, and others. All these aspects impact the way people conduct their life.

Let us understand this concept with our current example of Robert’s smartphone business. If Robert wants to establish a manufacturing unit at a location, he has to know what policies are in place so that he can follow those policies properly. He may end up forfeiting his fortune if he does not comply by the government policies. Government holds enough authority to seal a manufacturing plant whenever it wants if there is lack of compliance.

Political factors involves following eight areas that determine the future:

  • Actors
  • Motivations/Interests
  • Participation
  • Resources
  • Strategies and Tactics
  • Influence
  • Action Channels

Take liquor business for example. Government puts heavy taxes on liquor items. There are several form of taxes that are imposed on this kind of business such as excise tax, sales tax, and others. Liquor is considered as socially undesirable product and therefore attracts heavy taxes from the government. One logic behind these taxes can be to reduce the consumption of this product in the market. Also, the government tries to earn higher taxes on these products if someone chooses to purchase these.

You might be knowing that increase in the taxes increase the cost of a product. So if a liquor company wants to sell the product, it has to sell it at higher price. It means that it can sell its products only to those customers who can afford this product. It further means that the company will have lower number of target customers due to the affordability issue.

So here you can see that the lesser number of customers of liquor products is due to the policy of the government. The intention of the government is not to shut down the businesses but to reduce the number of people who consume alcohol as it is not good for health and life.