External Influences On Business Activity: Political And Legal (Copy)
6.1 External Influences On Business Activity
6.1.1 Political And Legal
Privatisation
| Aspect | Key Points | Example |
|---|---|---|
| Meaning | Transfer of ownership from public sector (government) to private sector. | British Telecom (UK), PTCL (Pakistan). |
| Advantages | • Increases efficiency due to profit motive | |
| • Encourages competition → better services | ||
| • Raises revenue for government (sale of assets) | ||
| • Attracts private investment & innovation | British Airways (privatised in 1987) became more profitable. | |
| Disadvantages | • Higher prices to consumers | |
| • Job losses due to cost-cutting | ||
| • Social welfare may be ignored | ||
| • Private monopolies may exploit customers | PTCL privatisation led to service and employment concerns. |
Nationalisation
| Aspect | Key Points | Example |
|---|---|---|
| Meaning | Transfer of privately owned businesses/industries into state ownership. | UK railways nationalised in 1948; Pakistan nationalised banks in 1970s. |
| Advantages | • Protects employment | |
| • Ensures essential services for all | ||
| • Government controls key industries | ||
| • Profits used for public projects | NHS in the UK ensures free healthcare. | |
| Disadvantages | • Inefficiency due to lack of competition | |
| • Bureaucracy slows decisions | ||
| • Fewer incentives for innovation | ||
| • Losses funded by taxpayers | Nationalised steel industry in the UK faced inefficiency. |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Business Full Scale Course
Government Use Of Laws To Control Businesses
| Area of Law | Purpose | Example |
|---|---|---|
| Employment Practices | Prevents unfair dismissal, discrimination, promotes equal opportunities | Equal Pay Act, Anti-Discrimination laws |
| Conditions of Work | Ensures employee health, safety, working hours | Health & Safety at Work Act, minimum working hours |
| Wage Levels | Protects workers’ pay & ensures fair minimum wage | Minimum Wage Act in UK |
| Marketing Behaviour | Prevents false/misleading advertising & ensures consumer protection | Ban on misleading food labelling |
| Competition | Prevents monopolies, ensures fair competition | EU fines against Google for anti-competitive practices |
| Location Decisions | Regulates where businesses can operate, protects environment | Zoning laws, industrial zones |
| Particular Goods/Services | Restricts harmful/dangerous products | Ban on drugs, tobacco advertising restrictions |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Business Full Scale Course
Impact Of Political And Legal Factors On Business Decisions
- Increased costs due to compliance (safety, training, pollution control)
- Changes in marketing strategies due to advertising restrictions
- Adjustments in production methods to meet environmental laws
- Influence on location choice (e.g., tax incentives in special zones)
- Impact on employment decisions (e.g., minimum wage laws, labour rights)
- Government policies create opportunities (privatisation, subsidies)
- Risks of uncertainty when governments change policies suddenly
Quick Examples For Revision
| Factor | Business Example |
|---|---|
| Privatisation | British Airways became more efficient after 1987 privatisation. |
| Nationalisation | UK Railways nationalised in 1948 for public control. |
| Employment Law | Ban on child labour protects minors from exploitation. |
| Wage Law | UK minimum wage ensures workers earn a fair basic income. |
| Competition Law | Microsoft & Google fined for monopoly practices in the EU. |
| Location Regulation | Tax incentives for factories in underdeveloped areas. |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Business Full Scale Course
Exam Focus
- Always define privatisation & nationalisation clearly.
- For evaluation, consider both financial and social impacts.
- Use real business examples to support answers.
- Link to stakeholders: government, consumers, employees, community.
- Remember political/legal changes create both opportunities & threats.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Business Full Scale Course