GOVERNMENT INTERVENTION

Government Intervention in Global Business

Government Intervention in Global Business

Introduction

The paper centres on the government intervention policies, which are commonly practiced by governments of European and Asian continent in the global business environment. The paper discusses various types of government interventions by providing examples from literature and journals. Finally, a conclusion is drawn based on the analysis of differences and similarities between government interventions of Asian and Europe.



Discussion

Research Question

“What are differences and similarities of government's intervention in global business in Europe and Asia?”

Government Interventions in Global Business

Government interventions are referred to as interruption of actions, which are taken based on the decision of an entity such as regulatory interventions that are concerned with economic and social issues (Balck, n.d., p. n.d.). According to a report published by Grant Thornton (2011, p. 1), government interventions are inclusive of royalty arrangements, economic empowerment policies, direct and indirect taxes, and nationalism, as well as regulatory compliance with other business criteria, government and environmental standards (Grand Thornton, 2011, p. 1).

Harding (2009, p. n.d.) argues that there has been a screeching halt to government interventions in the business, which was on a decreasing trend for the last 20 years. In his view, resurgence in these interventions is driven by various factors, and reaction to global recession is one of the major reasons of momentum shift in the government interventions. Moreover, this revival of government intervention can be demonstrated by the need of infrastructure improvement after several years of overlook (Harding, 2009, p. n.d.).

Government interventions can have severed effects on and challenges for companies operating in the global arena because every country is governed by its own set of laws related to taxation, compliance, corporate formation and human resource. Since each of these laws and government regulations may vary from region to region, sentence for non-compliance could be stiffening (Harding, 2009, p. n.d.).

Types of Government Interventions

Governments may intervene in various markets, even those that are highly competitive. A government may take interventions in various forms such as:

Taxation

Government may impose various kinds of taxes on imports and exports. For example, excise tax that was levied by governments on specific goods. Excise tax can be further explained by a sub type of tariff, which is imposed on imported goods and products (Price Controls, n.d., p. 4). Nevertheless, taxes and tariffs are interventions tools that can reduce quantity while increasing prices of goods and services. In 1990, government imposed a luxury tax on expensive boats (Price Controls, n.d., p. 4). Since manufacturers of board were levied, there was an upward movement in the curve of supply by the tax amount. In this particular case, there was an increase in the price of extensive boats whereas, the quantity demanded and quantity supplied was fallen (figure 1) (Price Controls, n.d., p. 4).

Figure 1: Effects of Excise Tax on Quantity and Price (Price Controls, n.d., p. 5)

Regulation

A government may intervene or influence the behaviour of firms by passing various mercantile laws and business regulations. For instance, government may pass a law in ...