Political

Economic

Social

Technological

Legal

Environmental

Political/Legal

  • A rule of regulation that is legally enforced upon a business can be referred to as a regulation.

Main roles of business legislation

  • Regulate the rights and duties of people carrying out business
  • Protect customers from harmful business activities
  • Ensure employees are treated fairly
  • Provide protection to investors and creditors
  • Deter and prevent unfair competition

Labour Market

Employment Rights

  1. National Living Wage for 23 and over: £10.42/h. At 25, you become eligible for the National Living Wage instead of the National Minimum Wage.
  2. The Equality Act of 2010’s main areas are: (protection from discrimination based on): sexual orientation, age, disability, non-equal pay, race.
  3. The employment Act of 2008 aimed to reform existing laws and protect the rights of workers by more strictly enforcing basic rights such as minimum wage.
  4. The Small Business, Enterprise and Employment Bill 2015 pushes additional liabilities onto company directors as well as ensuring that public sector procurement is effective and efficient. (Makes it easier for smaller business to receive public sector contracts)

Pay - Right to Equality

Regardless of gender, age, religion or any protected characteristic, people are entitled to equal pay for work of equal value.

Industrial Relations

  • Protection from unfair dismissal
  • Employers must recognise union is >50% of staff
  • Regulation of procedures for industrial action
  • Role/powers of Employment Tribunal
  • EU—Works Councils requirements

Task

  1. Explain the general purpose of legislation from the point of view of a business.
  • To protect workers and consumers from unfair or unsafe practices
  • To ensure that business is conducted properly and honestly
  • To prevent exploitative or anti-competitive practices
  • Stop mergers that could give a single business a dominant market position
  1. Explain two advantages of business legislation in relation to competition.
  • Monopolies can be reduced and broken up

    • A monopoly would allow a single business to completely dominate a market, exploiting the consumers by charging any price they want and not having to innovate. Competition regulation tries to prevent the creation of monopolies through large mergers and through a single business rising to dominate the market. Businesses can have mergers blocked and in extreme cases can be broken into smaller competing businesses by a regulator.
  • Anti-competitive agreements can be blocked or removed

    • When large companies in a market agree to conditions to not directly compete with each other, it creates an oligopoly. This is extremely damaging to the competition in the market and the choice of consumers, so regulators will take action to break these agreements up.
  1. Using an example, explain how legislation related to the labour market might affect strategic or functional decision-making in a business.
  • The Small Business, Enterprise and Employment Act reinforces basic employee rights such as minimum wage. This means that businesses are required to pay employees over 25 a national living wage at minimum, leading to increased costs in the business.
  • The business has to comply with these regulations, which may force them to cut costs elsewhere. It could also require them to pay even more than the minimum in order to compete and attract a stronger, more motivated workforce.
  1. Explain two advantages to a business of legislation related to the labour market.
  • Employee happiness will be higher as they know they are entitled to certain rights, meaning that they don’t need to worry as much about mistreatment.
    • This will lead to higher productivity and will make the business’s job of managing employees easier in the long run, because legislature defines how

Competition

Aims of competition policy

  • Promote competition
  • Make markets work better
  • Improved efficiency
  • Ensures
    • Technological innovation which promotes dynamic efficiency in different markets
    • Effective price competition between suppliers
    • Safeguard and promote the interests of consumers through increased choice and lower price levels.

Main elements of competition policy

  • Anti-trust & cartels
    • Elimination of agreements that restrict competition including price-fixing by firms who hold a dominant market position
  • Market liberalisation
    • Introducing competition in previously monopolistic sectors such as energy supply, retail banking, postal services, mobile and telecommunications and air transport
  • State aid control
    • Policy analyses state aid measures such as airline subsidies to ensure that such measures do not distort competition in the Single Market
  • Merger control
    • Investigation of mergers and take-overs between firms which could result in them dominating the market

Regulatory Authorities

  • In the UK, there is the CMA (Competition and Markets Authority) who have enormous powers to force companies to cancel deals, sell parts of themselves and is tasked with moderating the UK market, keeping it competitive.

  • Most countries and blocs (such as the EU) have their own regulators.

  • Other regulators in the UK

    • OfWat - Water regulation
    • Ofcom - Telecoms & Broadcasting
    • FCA - Financial Services
    • ORR - Rail Regulator
    • OfGem - General Energy Markets
    • & many others

What regulators actually do

  • Monitor and regulate prices
  • Standards of customer service
  • Open up markets
  • The “Surrogate Competitor” – Introduce artificial competition

Price Fixing

  • Businesses may not:
    • Agree prices with competitors
    • Share markets or limit production to raise prices
    • Impose minimum prices on different distributors such as shops
    • Agree with competitors what purchase price will be offered to suppliers
    • Cut prices below cost in order to force a smaller or weaker competitor out of the market

Dominant Position

  • A market share of 50% or above indicates that you are dominant
  • Oligopolies behave similarly, however there must be few companies with high market share

Abuses of a dominant position

Whilst in a dominant position, you may not:

  • Impose unfair trading terms such as exclusivity
  • Excessive, predatory or discriminatory pricing
  • Refusal to supply or provide access to essential facilities
  • Tying

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