7.4 analysing the external environment: political and legal change

Question 1

what is the political environment

Answer 1

local, national and international authorities that affect the activities of a business, this could be shown in ways such as: encouraging enterprise, the regulation of markets, the country’s infrastructure, issues relating to the environment and international trade

Question 2

what are policies affecting enterprise

Answer 2

• an enterprise friendly business environment- encourage people and organisations to develop their ideas as well as to establish and expand their businesses
• financial support for enterprises- new enterprise allowance, start up loans, enterprise finance guarantee
• non-financial support for enterprises- reducing number of regulations which constrain business activity, reducing tax for new and smaller businesses, supporting innovation by creating collusion, government offers a range of schemes to help entrepreneurs and businesses to develop new products and processes

Question 3

how does infrastructure affect businesses

Answer 3

determine competitiveness, good infrastructure usually lowers costs, opportunity for firms in construction, new job opportunities and businesses to expand, new infrastructure could mean that the old roads (for example) are used less which mean that business could decrease, new infrastructure could also help rivals more than your business creating a competitive disparity

Question 4

how does the natural environment affect businesses

Answer 4

regulations for business to follow involve costs and limitations due to the law

Question 5

how does international trade affect trade

Answer 5

helps increase revenue and increase employment, free trade is when goods are able to move freely between countries with no barriers such as tariffs, volume of trade increased due to globalisation, generally global trade has risen more quickly than the worlds GDP meaning that global trade is becoming more important component of the political environment in which businesses operate, removing barriers to trade increases trade

Question 6

legal environment relating to competition

Answer 6

protect businesses from anti-competitive practices, free and fair competition brings benefits to consumers and businesses,

Question 7

3 illegal anti-competitive practices

Answer 7

• cartel activity- two or more businesses work together to limit the competition of a market by all charging the same price
• abuse of monopoly- 1 business imposing unfair purchasing or selling prices or other unfair conditions, limiting production, inconsistent terms on different trading partners
• other anti-competitive practices- such as agreements with suppliers not to sell below a certain price, limiting production to drive up price, agreeing not to sell to a competitor’s customer

Question 8

environmental legislation affect on businesses

Answer 8

media takes great interest in business activities relating to the environment, when firms are found guilt they usually receive bad publication, society’s standards have risen in recent years

Question 9

relation between legal environment and decisions making

Answer 9

changes in the legal environment have the potential to affect both functional and strategic aspects of a business, businesses may have different responses depending on: the type of business and its corporate objectives and the nature of the legal change

Question 10

role of regulators

Answer 10

regulation is the enforcement of principle rules that result from the passing of a law or series of laws

• aim of creating free and fair competition
• certain high-profile industries, banking
• privatised monopolies to protect consumers and other businesses
• self-regulation by businesses

Question 11

how are individual workers protected by the law

Answer 11

• limit the maximum working hours employers can insert to 48
• minimum wage
• employment equality, no discrimination against certain people like age, race, gender, etc