Institutions in Business Strategy Essay Example | Topics and Well Written Essays - 1000 words

Institutions in Business Strategy - Essay Example As the discussion declares in business, both formal and informal institutions are influential in domestic and foreign business operations. In Muslim societies, social norms and practices dictate that people of the Islam faith are religiously prohibited from consuming pork foods and alcoholic drinks among other products. Any business organization that markets pork products or alcoholic drinks in Muslim societies will hardly realize profits because the informal institution of Islam dictates that certain norms and practices must be observed by Muslim consumers. With respect to formal institutions, constitutions, trade agreements and legal courts define and interpret the operational frameworks that both domestic and foreign business entities exercise their business practices. Legal systems determine the level of taxes that organizations pay to revenue authorities, and legal systems also arbitrate issues between business organizations and other stakeholders within a business environment.T his paper discusses that  business entities are more interested in market certainties than they are interested in profitability. Market uncertainties increases business risks, thus correspondingly increasing business costs. As elaborated earlier, institutions enhance certainty and predictability of interactions within a business environment. Formal institutions like judicial systems and investment laws play a critical role during entry and operation within a foreign market.