THE BUSINESS

ENVIRONMENT
POLITICAL AND LEGAL FACTORS AFFECTING THE
ENVIRONMENT - A3

2020/08/12 Prepared by N Tilo

Learning Objectives

• Explain how the political system and government policy affect

the organisation.
• Describe the sources of legal authority
• Explain how the law protects the employee and the implications
of employment legislation for the manager and the organisation.
• Identify the principles of data protection and security.
• Explain how the law promotes and protects health and safety in
the workplace.
• Recognise the responsibility of the individual and organisation
for compliance with laws on data protection, security and
health and safety.
• Outline principles of consumer protection such as sale of
goods and simple contract.
Environment
•Everything that surrounds an
organisation -Physical & social
•no organisation is likely to
achieve its aims if it fails to take
into account the characteristics
of the environment in which it
operates.
Environmental Analysis
• an input to the strategy making process
An organisation's environment may be examined in different
ways;
• Global/local : some organisations operate worldwide
therefore they will have to be sensitive to the local
requirements of the countries they operate in.
• The general (or macro) environment covers all those
factors influencing all organisations indirectly, for
example: general economic trends, population growth,
new technology.
These factors are known as PEST (political-legal, economic,
social-cultural, technological) factors. (PESTEL)
• The task (or micro) environment includes those areas
which have a direct impact on the organisation, such as
its ability its competitors and its customers.
The political & Legal environment
Legal factors affecting all companies
• general legal framework - basic ways of doing business
• criminal law - theft, insider dealing, bribery, deception
• company law - directors & their duties, reporting
requirements
• employment law - dismissal, minimum wage, equal
opportunities
• health & safety law - fire precautions, safety procedures
• data protection - use of information about employees/
customers
• marketing & sales laws - to protect consumers
• environment - pollution control, waste disposal
• tax law - corporation tax, income tax, sales tax
The Impact of government on economic
structure of an ORG
• Capacity expansion e.g incentives given
to capacitate locals in a particular area
• Demand – government being the major
customer or through subsidies
• Divestment & rationalisation – selling off
or closure of businesses
• Emerging industries – govnt can promote
or damage them
• Entry barriers
 How Businesses can influence
government policies
• They can employ lobbyists to put their case to
individual ministers or civil servants.
• They can give MPs non-executive directorships, in the
hope that the MP will take an interest in all legislation
that affects them.
• They can try to influence public opinion, and hence the
legislative agenda, by advertising.
Political Risk and political change
• The risk that political factors will invalidate the
strategy & perhaps severely damage the
organisation e.g wars , chaos etc
• How stable?
• How long its likely to be in power?
• If there are changes in government and what
Would be expected
• Effects of the expected changes?
• Decision & action should be taken now?
Sources of Legal Authority
1. SUPRA-NATIONAL
• United Nations resolutions
• International Court of Justice
• Other international agreements that apply to
signatories (e.g. The World Trade Organisation
sets rules on trade between member states)
• European Parliament
• European Courts
Sources of Legal Authority
Cont
2. NATIONAL
• National Governments through Acts of Parliament
• Senior Courts (e.g. House of Lords in UK, The Supreme Court in
the USA)
• Other major courts through the principles of case law and the
setting of precedents
3. REGIONAL
• Regional/Federal Government (e.g. Welsh assembly in the UK,
State Government in the USA)
• Local councils can issue by-laws in many countries (a law that
is less important than a general law or constitutional provision)
EMPLOYEE PROTECTION
Legislation

• Within many countries, the national

government have passed legislation which
protects employees from unfair treatment by
their employers,
• All forms of termination of employment must
be treated with care (retirement, resignation,
dismissal, redundancy etc)
 Retirement
• stop working because you have reached a
particular age.
• Legislations clearly stipulate the age that
employees should retire (protection of the
employees)
Resignation
• People resign for many reasons, personal and
occupational therefore there should be clear procedure
to protect even the employer.
• The period of notice required for the employee to leave
should be set out in the contract of employment.
Dismissal
3 forms
• The termination of an employee's contract by
the employer
• The ending of a fixed-term contract without
renewal on the same terms:
• Resignation by the employee where the
employer's conduct breaches the contract of
employment
DISMISSAL TYPES
• Constructive dismissal – employee resigns because
their employer has breached the terms of their contract
of employment e.g. the employer may have reduced the
employee’s wages without agreement
• Unfair dismissal – if an organisation is unable to prove
that a dismissal was fair, e.g pregnancy, joining a trade
union, discrimination over an employee’s religion,
ethnicity, gender or sexuality.
• Wrongful dismissal – when the employer breaks the
terms of an employee’s contract during the dismissal. It
is not the same as unfair dismissal.
Redundancy
• Redundancy is dismissal under two circumstances.
(a) The employer has ceased to carry on the business at all or in
the place where the employee was employed.
(b) The requirements of the business for employees to carry out
work of a particular kind have ceased or diminished or are
expected to.
• Compensation is a legal entitlement, and encourages employees
to accept redundancy without damage to industrial relations.
• The employee is not entitled to compensation in three
circumstances.
(a) The employer has made an offer of suitable alternative
employment and the employee has unreasonably rejected it.
(b) The employee is of pensionable age or over, or has less than
two years' continuous employment.
(c) The employee's conduct merits dismissal without notice.
Procedure for handling
redundancies
• Choose less competent
• Apply LIFO
• Counselling
• Aid with job search
• Training in job search
 DATA PROTECTION & SECURITY
Principles of data protection
• As the business world becomes more complex, organisations
are holding increasing amounts of data about individuals.
• Privacy is the right of the individual to control the use of
information about them, including information on financial
status, health and lifestyle (ie prevent unauthorised disclosure).
• Data protection is concerned with protecting individuals against
the misuse of this information.
• Everyone responsible for using personal data has to follow strict
rules called ‘data protection principles’.
• In the UK, the current legislation covering that area is the DATA
PROTECTION ACT 1998.
Data protection principles
• Personal data shall be processed fairly and lawfully in accordance
with the Act.
• Personal data shall be obtained only for one or more specified and
lawful purposes, and shall not be further processed in any manner
incompatible with that purpose or those purposes.
• Personal data shall be adequate, relevant and not excessive in
relation to the purpose or purposes for which they are processed.
• Personal data shall be accurate and, where necessary, kept up to date.
• Personal data processed for any purpose or purposes shall not be
kept for longer than is necessary for that purpose or those purposes.
• Personal data shall be processed in accordance with the rights of
data subjects under this Act.
• Appropriate technical and organisational measures shall be taken
against unauthorised or unlawful processing of personal data and
against accidental loss or destruction of, or damage to, personal data.
• Personal data shall not be transferred to a country or territory outside
the European Economic Area unless that country or territory ensures
an adequate level of protection for the rights and freedoms of data
subjects in relation to the processing of personal data.
HEALTH AND SAFETY

• There are a number of potential hazards in any

workplace.
• Some examples include unsafe electrics, torn
carpets, poor lighting, wet floors and top-heavy
filing cabinets.
• The law typically puts the responsibility for
health and safety on both the employer and the
employee.
HEALTH AND SAFETY CONT.

IMPORTANCE OF MAINTAINING HEALTH AND

SAFETY:
• An employer has legal obligations under UK &
EU law therefore must comply
• The accidents and illness cost the employer
money
• The company’s image in the marketplace and
society may suffer
 Employers’ Duties
• All work practices must be safe.
• The work environment must be safe and healthy.
• All plant and equipment must be maintained to the necessary standard.
• Information, instruction, training and supervision should encourage safe
working practices.
• The safety policy should be clearly communicated to all staff.
• Employers must carry out a risk assessment, generally in writing, of all work
hazards.
• Assessments should be continuous.
They must assess the risks to anyone else affected by their work activities.
They must introduce controls to reduce risks.
• They should revise safety policies in the light above
• They must identify employees who are especially at risk.
• They must employ competent safety and health advisers.
 Employees Duties
• Take reasonable care of themselves and others
• Allow the employer to carry out their duties (including
enforcing safety rules)
• Not interfere intentionally or recklessly with any
machinery or equipment
• Inform the employer of any situation which may be a
danger
• Use all equipment properly
Accident & safety policies
Accidents are expensive;
• Time lost
• Disruption/damage/repairs
• Compensation
• Legal costs
• Increased premiums
• Reduced output
• Recruiting & training replacement
Breaches of health and safety

• If employers fail to provide a safe and healthy

working environment, they may be in breach of
common law, enabling employees to make a
civil claim against them.
• In addition, they may be guilty of a criminal
offence and be open to prosecution.
CONSUMER PROTECTION laws
• designed to ensure fair trade competition and
the free flow of truthful information in the
marketplace.
• may provide additional protection for the weak
and those unable to take care of themselves.
• are a form of government regulation which aim
to protect the rights of consumers.
 Sale of Goods & Services
In the UK, there is a Consumer Rights Act (2015). This has many
features, but there are several key principles built into the Act. These
include:
• The seller must have legal title to, or ownership of, the item they are
selling
• The goods sold must be of satisfactory quality and fit for their
intended purpose
• When a buyer makes a purchase based on the description of an item,
the goods must correspond with this description
• When digital content (e.g. online films, games, e-books) is faulty,
consumers given a clear right to repair or replacement.
• In addition, this legislation also extends to the provision of services
– not just goods.
• This requires services provided to be:
Carried out with reasonable skill and care
Completed within a reasonable length of time
Completed at a reasonable price
 Simple contracts
• a contract is a legally enforceable agreement
between two or more parties.
• A contract is known as ‘simple’ if it is not required
to be in any particular form.

Simple contract must have the following features in

order to be valid:
• AGREEMENT – the parties must have agreed on
the terms of the contract
• CONSIDERATION – both parties usually have to get
some value from the contract. Each party must
offer some consideration to the other.
Simple contracts cont.

• INTENTION TO CREATE LEGAL RELATIONS – both parties

must clearly intend their relationships to be legally binding.
• CAPACITY AND LEGALITY – each party to the contract
must have the capability to enter to contract. In many
countries, individuals under the age of 16 cannot enter a
legally binding contract.
In addition, contracts cannot be formed for the purposes
of an illegal act.
THANK YOU