Legal Influences on Business

Activity
A-Level Business Studies
Political and Legal Factors
Government intervention in the economy
- Governments in diverse economies have implemented policies to reduce the
state’s role in the economy to allow markets and businesses to operate with the
maximum degree of freedom. This process is called privatisation.
- In turn, governments take a laissez-faire approach to grant more freedom to
business.
- However, in order to safeguard the interest of the community, governments may
ban or limit the production of certain goods and services.
Analysing governments taking a laissez-faire
approach
Advantages
- Government intervention tends to raise
costs, and so business benefit through less
interference in their activities.
- This would be a disadvantage for highly
price-competitive markets where small cost
differentials can lead to substantial loss of
sales. Having a laissez-faire approach
prevents that.
- Helps attracts overseas producers due to the
lack of regulations.
- Helps to promote an entrepreneurial society,
encouraging businesses to be creative and
innovative and look after their economic
welfare.
Disadvantages
- Since privatised businesses are likely to be
profit-based, it does not tackle issues of
heavy unemployment and poverty in poorer
regions. Thus, some argue that it is vital that
governments support struggling industries in
poorer regions.
- Businesses may exploit workers due to being
minimally regulated, through low wages and
poor working conditions.
- Businesses may also exploit consumers by
charging excessive prices.
Legal influences on business activity
Consumer Laws
Common Requirements
- Product Safety
- Right to refund or replace
- Accurate weights & measures
- Accurate advertising
Costs to business
- Higher product development
costs
- Higher quality costs
- Cost of refunds & replacements
Benefits to business
- Consumers are more confident
about product safety and quality
- Gained consumer loyalty
- Consumer confidence in
promotional & advertising
campaigns
Employment Laws
Common Requirements
- Minimum wage level
- Health & Safety at work
- Employment conditions such as
holidays & pensions
- Employment contracts
- Anti-discrimination in
employment
- Trade Union rights
Costs to business
- Higher product development
costs
- Higher quality costs
- Cost of refunds & replacements
Benefits to business
- Consumers are more confident
about product safety and quality
- Gained consumer loyalty
- Consumer confidence in
promotional & advertising
campaigns
Competition Laws
Common Requirements
- Not engaging in monopolistic and
anti-competitive practices.
Costs to business
- Not able to ‘fix’ prices
- Limits to mergers and
acquisitions as monopolies may
be illegal or investigated.
Benefits to business
- Customers will prefer to deal with
businesses that are thought to be
competing fairly.
- Less risk of smaller firms being
forced out of business by
dominant firms
Planning & Environmental Laws
Common Requirements
- Restrictions on location of
industry, for example, in
towns/cities or in areas of natural
beauty
- Control business developments
that damage the environment
Costs to business Benefits to business
- Less risks of businesses being
- Cheaper sites may not be
accused of damaging resident’s
available for construction
health and/sor the environment
- Additional costs to adhere
- Can promote the business as
planning laws, such as waste
being ‘environmentally friendly’,
disposal methods
attracting more customers in the
- Applications for planning take
process.
time
Employment Legislation
Protection of workers
What is Dismissal
- Occurs when an individual is fired from the
job due to indiscipline and/or
insubordination.
- An employee is dismissed from the job if the
employer thinks that the employee’s
behaviour in unreasonable/unacceptable.
- It should be noted that the reason for
dismissal should be fair.
- When the employee is dismissed due the
their own fault, no financial benefit is given.
Reasons for Dismissal
- Inability to do the job
- Continuous negative attitude towards work
- Deliberate destruction of an employer’s
property
- Bullying of other employees
- Unethical practices
Unfair dismissal
- Occurs when a worker is
dismissed for discriminatory
reasons such as race, gender, and
religion.
- This is the sort of dismissal
when no warning is given
beforehand.
- An employee can report to
relevant organisations such as
the trade unions and labour
court about their unfair
dismissal
Redundancy Reasons for Redundancy
- Occurs when an employer has to lay off - To save on costs
employees in order to save costs. - The job is no longer required, as they have
- Occurs when a job is no longer required, resorted to using capital intensive resources.
making the person who does the job
unnecessary.
- They are given compensation for the loss of
income.
- When making workers redundant, they use
the LIFO method (Last In, First Out).