Political Factors That Affect International Business

While Global businesses operate in overseas markets there is often a risk, the risk is referred to as political environment risk, and these factors can facilitate or hinder business operation. Some of the political factors that affect international business include† (Justin Ervin. Zachary Smith A.2008). One significant political environmental factor that influences international business operation is trade agreements. Countries frequently enter into trade treaties to further facilitate trade between themselves. Case in point, a European Union consisting of countries like France, Germany and Italy where the organizations of these member states can with few legal requirements, these international business have a greater advantage while†¦show more content†¦Global Interest rates disrupts the level of investments and savings in the economy .In international businesses fiscal policies affects the cost of borrowing. The rise and fall of interest rates affect business and consequently should be conscious of the rate before borrowing. Overall low interest rates signifies the existence of cash in the economy, the result is echoed in the prices of services and goods. Worldwide buying power affects all aspects of the economy, the value of a countries currency conveyed in term and the quantity of good and services is that one unit of money. International organizations ought to be apprehensive of this fiscal policy. The result of inflation and purchasing power cuts the volume of goods a company can purchase. When currency purchasing power decrease due to excessive inflation it has serious undesirable results e.g. escalation in cost of goods and services and the rise in interest rates. Political environment affect the currency of a country When these international businesses engage in business deals such as importing, salaries and wages payment and exporting they affect the currency .Organization must compare the value of currency in the country they operate in with the standardized dollar currency of trade so as to avoid fluctuation which affect purchasing power and operating cost. Foreign exchange rate can lead to heavy lossesShow MoreRelatedPolitical And Business Risks By Withglobal Business1310 Words   |  6 PagesRunning head: POLITICAL AND BUSINESS RISKS Last Name 1Prepare a paper that addresses the political and business risks and the rewards associated withglobal business operations.Include a discussion of the impact of monetary exchange rates oncorporate profits. 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