It refers to the influence from government institutions, strategies of political parties, policies of state and local government and relationship between government and business. Mangers must know about political environment because:

  • It imposes certain legal constraint on the business.
  • It establishes a market atmosphere that maybe pro-business or anti-business.
  • It has the potential to provide stability needed for long-term planning.

For systematic study of political system, a business firm should, first of all, analyze the national constitution, major political parties, form or structure of government, the mechanisms designed to guide a transition of power from one leader to the next, key power blocks, and the extent of popular support.

Components of Political Environments:

1. Political Ideologies:

They refer to the set of ideas ‚ principles and philosophy which are concerned with allocation of power and offer political and cultural The major political ideologies are democratic and totalitarian.

i. Democratic:

The political ideology under which the nation is governed by the people representatives. The power lies in the hand of people. There is always the freedom to speak, political rights, civil liberties. Besides there is the existence of multiparty and private sector has greater role in national economy.

ii. Totalitarian:

Totalitarian is an ideology under which total power is vested in a single person, or a group or a government. Totalitarianism aims at regulating all aspects of public and private life. Freedom, political rights and civil liberties are restricted. Only one party system exists.

Democratic V/S Totalitarian






A government type that permits no individual freedom

Government for the people, by the people and of the people


A government type with

A type of government of


oppressive                                 rule originated in 4th century B.C

5th century BC

Place of origin


Athens, Greece

Famous leaders

Adolf     Hitler,              Joseph Stalin

Aristotle,                          Franklin

Roosevelt,                         Mahatma Gandhi


Faster process for the system, Law making process, simpler ,less room for corruption

Freedom, majority rule, People’s right, power of voting.


Single rule

Majority rule


Neither    Heritance               nor Elective








2. Constitution:

It is a fundamental guideline or law under with nation functions. It affects the development of business in the country directly. Nepal is being ruled by the new constitution 2072 after promulgated on 3rd of Aswin 2072 (20th September 2015).

The major directive principles stated by new constitution are:

  1. The political objective of the state is to establish federal democratic republican system to ensure the use of democratic rights by keeping sovereignty‚ independence and integrity at the highest level.
  2. The socio-culture objective of the state is to end all forms of discrimination ‚ exploitation and injustice based on religion‚ culture‚ custom‚ tradition and usage by respecting cultural diversity.
  3. The economic objective so the state is to develop sustainably through equitable distribution of resources and promote participation of the public cooperative and private sectors.
  4. The international relations of the state are directed towards enhancing the dignity of the nation in the international arena.

The major features of the new constitution are:

  1. 7 states in Nepal (Name to be given later with the help of special committee)
  2. Discussion to continue on contentious issues and amend of some provision until the final one. 
  3. Vote of dissents are not a part of the draft but put there for further discussion
  4. Citizenship by Father Name or mother name.
  5. Citizenship to NRN (Non-resident Nepalese).
  6. 60 percent FPTP and 40 PR in state assemblies as well.
  7. Secularism to continue with freedom of any religion.
  8. Bicameral legislation    (275   Parliament    and   45 National      assembly members)
  9. New Prime Minister, President and Parliament head election to be held within a month after promulgation of new constitution.
  10. Five unchangeable provisions.

(Note: Changes on constitution is underway so students are advised to updated the changes)

3. Political Parties:

Political parties are the building blocks of democratic system. They act as representatives of people and address their problems. Through legislation‚ they attempt to form government and rule the nation according to their ideology and policies.

There are more than 100 political parties in Nepal. Out of them 25 parties have representation in the legislative assembly. The major political parties of Nepal are:

  1. Nepal Congress
  2. Communist Parity of Nepal (Unified Marxist-Leninist)
  3. Unified Communist party of Nepal ( Maoist)
  4. Rastriya Prajatantra Party Nepal
  5. Mesdhesi Jana Adhikar Forum Nepal (Loktantrik)
  6. Rastriya Prajatantra Party
  7. Mesdhesi Jana Adhikar Forum Nepal
  8. Tarai-Madhesh Loktantrik

4. Government and Its Branches:

  1. Legislative: Legislative is formed by the representative of people. It is also called parliament. Its main responsibility is formulation and enactment of law.

According to new constitution ‚the legislature of Nepal is divided into three levels:

  1. Federal Legislature: It is the legislature at the central level.  It consists of the houses‚ namely the House of Representatives and the National Assembly. The House of Representative consists of 275 members. National assembly consists of 45 members and is a permanent house. One third of members retire in every two years.
  2. State Legislature: Each state has legislation called state assembly. Unlike federal legislation‚ it has a single house. 
  3. Local Legislature: The legislative rights at local levels are entrusted  to village council (Gaon Palika) and municipal council. They can make laws according to state laws.

b. Executive: It refers to the organ of the state that is responsible for the overall administration of the nation. It is composed of the government and its organs as bureaucracy‚ army‚ police etc.

According to new constitution ‚the executive of Nepal consists of the following:

  1. Federal Government: It is the central government. The form of governance will be multiparty competitive federal democratic republican parliamentary system based on pluralism. The Council of Ministers led by the Prime Minister has the executive power of Nepal.  It is responsible for issuing general directives ‚controlling and regulating the administration.
  2. State government: The executive power of the state shall be inherent in the council of ministers of the state led by the chief  minister.
  3. Local government: Village council and municipality and district assembly will remain under the local government.

c. Judiciary: It refers to court of law. It is responsible for settling disputes and interpreting the rules and laws if It serves as the watchdog of law and constitution.

According to new constitution‚ the judiciary of Nepal is divided into four levels:

  1. Supreme Court: Supreme Court is an apex court in judicial hierarchy. It may inspect‚ supervise and give directives to its subordinates courts and other judicial institutions.
  2. High Court: There shall be one High court in each state.
  3. District Court: There shall be one district court in each district. It has jurisdiction over local level cases.
  4. Specialized courts: They are established for the purpose of hearing special types of cases. They may be judicial bodies or tribunals.

Other constitutional bodies in Nepal according to new constitution 2072 are:

  1. The commission for the Investigation of Abuse of Authority.
  2. Office of the Auditor General
  3. Federal Public Service commission.
  4. Election commission.
  5. National Human Rights commission
  6. National Natural Resources and Fiscal commission.
  7. National Women commission.
  8. National Dalit commission.
  9. National Inclusive commission.