How does the political environment specifically affect organisations?

The political environment has a significant impact on organizations, particularly through the incorporation of laws and regulations that apply to specific trading locations. This is crucial for organizations, as they must comply with various legal requirements that can affect their operations, such as labor laws, trade regulations, tax policies, and environmental laws. These regulations not only dictate how businesses operate but also influence their competitive strategies and market opportunities.

For instance, a change in government policy could introduce new compliance requirements, affecting how an organization conducts its business. Additionally, the stability or instability of the political environment can impact investment decisions and the overall business climate, influencing both risks and opportunities within a market. Understanding these laws and regulations ensures that organizations can operate legally and effectively, avoiding potential penalties or disruptions caused by non-compliance.