Government-Business Relations in Global Business

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  • 0:01 Government-Business…
  • 0:54 Fiscal Policy
  • 1:44 Monetary Policy
  • 2:55 Social Services Policy
  • 3:46 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Lombardo
Government-business relations have an impact on international businesses. In this lesson, we will discuss how businesses can work collaboratively with governments and the civil sector to address global issues.

Government-Business Relationships

Neon Garb, the maker of nostalgic 1980s clothing, has been attacking the overseas market with great success. With each new global success come unique challenges due to how government has impacted their business. Let's examine how Neon Garb has dealt with government's impact on their international business. In addition, we will look at how businesses can work collaboratively with governments and the civil sector to address global issues.

In many instances, government and business's objectives are not the same. This breeds conflict. In addition, many countries that Neon Garb initially targeted for expansion had governments with questionable power, and the company refused to conduct business in those environments. There are specific ways that government and business can work together to improve relationships and help society.

Fiscal Policy

A government uses public policies to pursue objectives that can help a large part of a country's citizens. Policies can cover many different areas. The government utilizes these policy tools to create a society that flourishes for the public and business. The effects of the policies are born from government relations. The first type of policy is fiscal policy and deals with taxation and spending decisions that are used to help the economy. A government's taxation policy can drastically affect Neon Garb's business strategies. For example, in a few global nations such as Belgium and Finland, taxes are high, which can impact Neon Garb's overall profits. However, the higher taxes for countries, such as Finland, create superior services such as health care for their society.

Monetary Policy

Monetary policy, or how a government manages the supply, demand, and valuation of currency, also impacts Neon Garb's international business. A higher valuation of a country's money means that Neon Garb's American dollars are not worth as much. For instance, currently in 2014, the exchange rate of Euro (1.00) is equal to .80 in American money, but in India, 1 American dollar would be equal to 62 rupees. Countries with a lower exchange rate can attract international investment, which can lead to more jobs for the country's citizens. For example, Neon Garb might be attracted to build a factory in India due to the exchange rate which would bring industrial jobs to the country.

Economic Policy

Another public policy that influences business is the economic public policies, which can include industrial development of specific industries and trade policies to help block or increase trade with countries. Neon Garb was attracted by Europe's open trade policies that provided new business and jobs.

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