How non-economic factors like politics, conflicts, social factors also affect business

The realm of business is impacted by a variety of elements, including political, social, environmental, and technical considerations and not confined within economic factors only. Businesses can be impacted by non-economic factors in a variety of ways, including shifts in customer behavior, changes in public image, new rules imposed by the government, and new environmental policies.

Across the globe, tackling such issues have become more critical for the CEOs to ensure competitive advantage and long term suitability. To elude any dire consequences of socio political conflicts, corporates are engaged to design non-market strategies more diligently in which they compete

The business sector is heavily influenced by the plethora of variants of non-economic elements, with political influences being among the most important of them. Laws, rules, and policies are all crafted by governments, and they can have direct or indirect effects on enterprises. It is possible, for instance, for alterations in tax policy, trade agreements, and labor regulations to have an impact on the profitability and operations of a company. The capacity of companies to function efficiently in a country can be negatively impacted by factors such as political instability and corruption.

The recent trade war that has been going on between the US and China is a great illustration of how political considerations may influence businesses. As a result of the trade war, taxes have been placed on items imported from China, which has made it more expensive for firms to import goods. Because of this, some companies have been compelled to seek new suppliers, while others have been forced to raise their prices, which has resulted in a decrease in the demand for their products. This could eventually create new opportunities to the corporate world. India could nicely brought the concept of Atmanirbhar Bharat to boost India as global manufacturing hub by creating opportunities to conglomerates through Make in India programme. NSWS, PLI Scheme got introduced to support the growth strategy.

Another example of a political issue is the fight that broke out between Russia and Ukraine at a time when the rest of the world was still trying to recover from the horrible events that occurred during COVID-19. This conflict was referred to as a “massive and historical energy shock,” which was the terminology that was used to describe it.

According to a report published by the OECD in November 2022, the conflict was one of the primary factors that contributed to the weak development of the economy in 2022, which was just 3.1 per cent. The invasion of Ukraine by Russia on February 24, 2022, which resulted in widespread suffering, shortages of grain, fertilizer, and energy, as well as increased inflation and economic uncertainty, is still having an influence on the international economy, which is currently working through the aftermath of the invasion. The conflict initially caused a significant drop in grain exports from Ukraine, but the Black Sea Initiative assisted in bringing about a partial recovery in those shipments. There will be significant drops in the exports of agricultural goods, such as a loss of 50 per cent in sunflower oil exports, a drop of 25 per cent in maize exports, and a drop of 10 per cent in wheat exports.The environment in which businesses operate is significantly influenced by a variety of social issues as well. Alterations in societal attitudes and patterns of behavior have the potential to either present new possibilities for enterprises or substantial obstacles. For instance, the increasing demand for items that are better for the environment has resulted in the creation of a new market for companies that manufacture sustainable products.The use of social media by companies as a valuable tool for communicating with their clients has grown increasingly common. Businesses are now able to connect with a larger audience and interact with their consumers in real-time thanks to social media platforms such as Facebook, Twitter, and Instagram. On the other hand, unfavorable attention on social media may be detrimental to a company’s reputation, which in turn can result in a drop in sales and earnings.

In today’s corporate world, consideration of environmental considerations is becoming an increasingly vital activity. Changes in the climate, the accumulation of pollutants, and the deterioration of the natural environment are all big problems for companies, governments, and society as a whole. Companies that do not take environmental concerns seriously run the danger of alienating their client base and seeing their market share eroded by competitors that are more environmentally sensitive.

Environmental rules and regulations can, in turn, have an impact on the operations of businesses and the profits they make. For instance, Climate Change and Global Warming is driving the rules regarding carbon emissions that in turn can drive up the cost of manufacturing for firms that rely on fossil fuels, but policies about green energy might open up chances for enterprises that produce renewable energy. The target of achieving net zero has highly impacted the energy, automobile and other sectors.

The operational excellence of Industry 4.0 has significantly influenced the use of technology and impacted corporate world to use value based technology that is not based on simple economics. The development of new business models and the disruption of old businesses have both been brought about by advancements in technology that creates value for competitive advantage and long term sustainability. The ongoing revolution of Industry 4.0 based on IoT, AI, Robots & Drones, Cloud Computing 5G-6G Networks, 3D Printing, Virtual & Argument Reality, Block Chain will drive the future technology. On the other hand, the proliferation of e-commerce has revolutionized the retail sector by making it simpler for companies to communicate with their target audiences online.

The method in which organizations are run is also being impacted by the growing prevalence of automated processes. Automation has the potential to boost production and cut down the expenses of manufacturing. However we need to assess the potential job losses and social impacts.

In conclusion, factors which apparently take back seat in driving the business strategy can have a huge influence on the business world. The political, social, environmental, and technical context in which a corporation works can either bring innovative opportunities or severe problems, depending on how each of these factors interacts with one another. In the dynamic scenario, businesses are aware of the elements discussed above and modify their company plans accordingly to have a greater chance of achieving financial success in the dynamic modern marketplace.

(The writer is from Arizona State University, US)


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