Political Business Strategy

Political business strategy involves navigating a country’s political nuances. It’s important for companies to understand these nuances before expanding into a new country.

Extant research recognizes that politicians and governments are sources of dependency for firms due to their regulatory power. A political business strategy focuses on overcoming this dependency by reducing information asymmetry, constituency building and leveraging tactics.

Understanding the Political Environment

It’s important for businesses to understand the political environment in which they operate. This includes the laws, regulations and policies that affect their business. This can have a negative or positive effect on the business. Understanding the political environment is also important because it can help companies plan for future changes in laws and regulations.

In the context of developing countries, where government policies are less stable and firms must be ready for sudden policy shifts, understanding the political environment can help companies develop and implement a sound political business strategy. Political business strategies can include lobbying, participation in public hearings, campaign contributions, the use of revolving-door personnel, advocacy and nurturing and exploiting political connections.

A firm’s resources and urgency determine which political strategies it employs. Political strategy outcomes also influence strategy choice, as positive or negative performance reinforces or undermines the rationale for political activity. The determinants of strategic choices differ by country and industry.

Developing Principles

Recent research has argued that emerging market institutions have strengthened to the extent that firms can now use a wider array of western-oriented political strategies (Shirodkar and Mohr 2015a). However, many frontier countries still suffer from basic institutional voids that undermine political strategy implementation. For example, many African nations have no formal business-government interfaces for deploying an information strategy, and electoral laws are poorly enforced to make political campaign financing transparent (Liedong 2017).

In such contexts, political influence actions that support strategic initiatives are often more effective than those that do not. Proactive influence actions leverage a firm’s market clout to shape the political environment in its favor, for instance, by influencing proposed legislation that could impose inspection and clearance requirements for imports that would hurt competitors.

The other main type of political influence actions is defensive, which involves proactively seeking to change the political environment to hinder a competitor’s strategy. This strategy is often less successful than proactive efforts because of a lack of market power, and it can be fraught with unethical practices such as bribery and cronyism.

Developing a Strategy

As the political landscape shifts, so must your business strategy. In today’s highly polarized societies, new societal issues such as gender equality, gun ownership, and religion require a more diversified approach to politics that is anchored in your values. And as society becomes more fragmented, the ability of politicians to govern has become increasingly difficult and volatile.

In such a dynamic environment, it’s no surprise that corporate political strategies are becoming increasingly popular. For example, the kinship and pseudo-attribution strategies rely on relationships with politicians to gain access to funds, goodwill and protection. This strategy is especially successful in Africa, where weak institutions allow it to flourish (Liedong and Rajwani 2018). But these relationships are also fraught with unethical practices such as bribery, nepotism and patronage. Moreover, these strategies don’t produce the expected economic benefits. They actually harm business performance by increasing costs and reducing efficiency. They also undermine the credibility of a company and its executives.

Implementing the Strategy

Managing the intersection of politics and business is a tricky task. It’s impossible to anticipate every challenge, including backlash from employees or customers over a new policy (Google’s censor-friendly search engine, H&M’s environmental stance), laws or regulations that conflict with one’s values, or even changes in a company’s core business.

Besides urgency and resource considerations, business groups choose the political strategies they employ based on their scope. The affective strategy targets politicians’ emotional needs, especially their sexual instincts, which can be exploited using pseudo-attribution tactics. The financial strategy, on the other hand, focuses on establishing connections with politicians by giving them preferential financial services beyond loans.

The kinship strategy builds on the latter by recruiting family members of politicians, thus strengthening the ties with the government. However, this strategy can be considered ethically suspect. The scope of political strategies may also influence the outcomes that follow from their use, with positive (negative) results reinforcing or weakening the rationale for doing CPA.

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