The political environment refers to the actions taken by the government, which potentially affect the daily business activities of any business or company. According to the Law Dictionary, such actions occur on a local or international scale depending on the governmental institution's authority.
When a political institution passes a new law, businesses must consider the impact it will have on their operations. In some instances, companies may need to develop new strategies or processes in order to comply with initiatives imposed through legislative laws. For instance, the Waste Electrical and Electronic Equipment regulations, which are designed to reduce electronic waste going to landfill sites, may force companies to change elements of their supply chain and manufacturing process in order to reduce the amount of waste produced.
The political system of the country also has an influence on political environments. As defined by Robert Dahl, a political system is a "persistent pattern of human relationship that involves, to a significant extent, control, influence, power, or authority." Political systems such as democracies tend to protect the rights of individuals and organizations more than oppressive totalitarian and dictatorship political systems do. Consequently, the political environments in democracies tend to conform to higher standards of regulation and efficiency than the environments of opposing political systems.