Legislation

Business: BTEC Level 3 National Extended Diploma, topic 6.1.6

Political and Legal Change

Changes in the external environment include political and legal changes.

Political and legal changes can present businesses with opportunities and threats.
Political and legal changes can affect decision making at the corporate level and functional or departmental level.
For example, the introduction of the National Living Wage presented a threat for many businesses as total costs increased.

Legislation about competition and competitive practices can affect a business. Competition laws ban businesses from acquiring or taking over other businesses if competition will be substantially reduced.
Legislation about employment regulations can affect a business. Working time regulations and the equality act state provisions a business must make for supporting and protecting employees.
Legislation related to environmental protection can affect a business. Laws around pollution provide guidance in terms of the pollution created by businesses and these laws must be complied with.

VW was accused of an environmental scandal which failed to comply with environmental regulations.
In 2016 Three’s takeover of mobile operator, O2 was banned on the basis that competition would be reduced substantially and this could lead to the exploitation of consumers.

Enterprise is a political factor which involves national and local schemes to support new, start-up businesses.
Regulators exist to ensure businesses are following industry rules so that consumers are not taken advantage of. Infrastructure is a political factor and relates to the transport systems and communications networks used to support trade and supply.
International trade is a political factor and refers to the trading of goods and services internationally.

For example, the government provides a scheme for those wishing to access a loan for the purposes of starting a new business.
For example, the Financial Conduct Authority is a financial regulator which can intervene in banking and lending products to ensure customers are receiving a fair and transparent deal.