A ‘political-legal environment’ is a term that’s frequently encountered for Business Studies students. For entrepreneurs and companies, these are usually the regulations and laws that have to be followed to ensure safe practice. Failure to follow these guidelines can result in a business losing their ability to trade with consumers, or the imprisonment of owners who sanctioned illegal activity.
In the UK, typical examples of a political-legal environment would include bodies such as the Financial Services Authority or the Competition Commission: Both of which monitor the activities of businesses in the country. In some cases, a business may become dominant in their niche market, such as recent concerns that Tesco were monopolising the supermarket industry. Resultantly, bodies such as the Competition Commission have the ability to intervene to ensure that the trading environment is fair for smaller businesses and for consumers.
This is important because if one company had the ability to control an entire sector, they may be able to set high prices that consumers would have no choice in paying. In contrast, in a usual market such as an oligopoly or where there is perfect competition, a buyer has the ability to distinguish between businesses based on the price points that each individual company offers for their goods and services.
A political-legal environment can vary dependent on the incumbent government that is in power. Whereas one political party may be in favour of big business and privatisation, another may have conflicting views, believing that entrepreneurs should be heavily regulated while facing high taxes. Even though this may result in some businesspeople leaving the country or losing the incentive to work, it may result in more tax revenue for the government that can be spent on public spending. As you can see, political-legal environments can have a large influence on different social groups within a population.
In the UK, typical examples of a political-legal environment would include bodies such as the Financial Services Authority or the Competition Commission: Both of which monitor the activities of businesses in the country. In some cases, a business may become dominant in their niche market, such as recent concerns that Tesco were monopolising the supermarket industry. Resultantly, bodies such as the Competition Commission have the ability to intervene to ensure that the trading environment is fair for smaller businesses and for consumers.
This is important because if one company had the ability to control an entire sector, they may be able to set high prices that consumers would have no choice in paying. In contrast, in a usual market such as an oligopoly or where there is perfect competition, a buyer has the ability to distinguish between businesses based on the price points that each individual company offers for their goods and services.
A political-legal environment can vary dependent on the incumbent government that is in power. Whereas one political party may be in favour of big business and privatisation, another may have conflicting views, believing that entrepreneurs should be heavily regulated while facing high taxes. Even though this may result in some businesspeople leaving the country or losing the incentive to work, it may result in more tax revenue for the government that can be spent on public spending. As you can see, political-legal environments can have a large influence on different social groups within a population.
