Unit 7 - Section 4 Analysing The External Envirnonmenr Political And Legal Changes Flashcards
Political decisions
Actions taken by local, national or international authorities that affect the activities of a business
This includes:
Encourage enterprise
Regulate markets
Effect the countries infrastructure
Relate to how businesses treat the environment
Promote or restrict the international trade
Regulation
Enforcement of principles or rules
Single market
An area where there is no restriction on trading activity
Infrastructure
The physical and organisational structure required for an economy to work affectively e.g transport and utilities
Privatisation
The process of transferring state and organisations to privately owned concerns
Monopoly
Where there is only one supplier of a good or service
The law
A framework of rules governing behaviour
Anti-competitive practices
The action is taken by a business to limit the extent of rivalry that exists in the market
Cartels
Two or more businesses collude to control prices and limit supply
Dominant market position
A firm which has high market share is able to prevent effective competition in the markets in which it operates
Merger
When two businesses become one new business
Takeover
When one business buys a controlling number of shares in another
Individual labour law
Rules governing how employers treat their employees
Collective labour law
Laws governing the behaviour of organised groups of workers, usually trade unions and how businesses must treat them
Trade unions
Organisation set up to promote the interests of a group of employees
Policies affecting enterprise
I’m the UK:
The British business bank
Schemes:
Enterprise allowance - a combination of a grant and a loan for those who wish to set up their own business
Funding for lending - scheme to encourage banks to lend to firms by the Bank of England, lending them money at a low rate
Enterprise finance guarantee - this is a loan guarantee scheme
The department for business innovation and skills (DBIS) - concern for enterprises in the UK
The growth voucher scheme
Business is assisted with advice on: Funding and cash flow Staff Leadership and management Attracting and keeping customers Making the most of technology
The role of regulators
Regulation is the enforcement of principles or rules in the UK
Regulation for free and fair competition – imposing windfall taxes
(on excessive profits), restricting price rises, restricting R0CE, allowing new entrants to have access to facilities that may restrict competition
Regulations for high profile industries
Regulation for privatised monopolies to protect consumers
Encouragement of self regulation. Voluntary code of conduct e.g supermarket industry
Policies affecting infrastructure
This refers to the physical and organisational structure required for an economy to work effectively e.g transport, broadband, and utilities
Policies affecting the natural environment
Development of renewable energy source
Mainly covered by regulation through laws
International trade
Government department - international trade and investment
Trade fairs
Brings exporting business together
Financial support for exporters
The Uk is also a member of the world trade organisation. This organisation works together to remove barriers
EU
28 member states
It gives access to a single market with free movement of: labour, capital and resources
Positive effects for business EU
505 million customers
Economies of scale
Increase competition = increase efficiency lower costs and the drive for better innovation
European merges and joint ventures
Better opportunity to inward investment e.g Toyota in derby
Mobility of labour
Movement of production to other lower cost EU countries
Negative effects for business (EU)
Increased legislation
More competition from firms locating in lower cost locations
Inward investment can be more attracted to Eastern Europe
The cost of membership- funds are used to run the EURO and to help areas economically. Typically the UK puts in much more than it gets out
BREXIT
Key issue is that the effects are unknown
This means that UK based business are nervous and unsure of the future
The pound has weakened (have to pay more for imports)
Investment in the U.K. has been placed on hold in some instances until the full exit deal is known
Some foreign businesses are indicating that they may move out of the U.K.
Types of law affecting businesses
Consumer Competition Employment (Individual and collective) Health and safety Environment
Competition law
Intended to protect business and consumers from the affects of anti-competitive practices
Anti-competitive practices are actions taken by businesses to limit the extent of rivalry that exists in a market
U.K. competition laws
The competition act 1998
This prohibits cartels and the abuse of dominant market positions
Penalties can be up to 10% of worldwide sales
EU competition law
For mergers and takeovers the EU has jurisdiction if the impact extends across Europe
The legal environment and business decision making
The impact of laws will be different for different businesses
New laws take time to come into force so businesses can plan. They should prepare for the changes in advance
If businesses are unhappy about legal changes they can protest through CBI, trade organisations or lobbying MPs
