For this assignment, I will be describing how political, legal and social factors are impacting upon the business activities of Wal-Mart and Tfl. For businesses, this is important because they need to know how these change such as political decisions made by the government or changes to the law or changes that take place in society over time is going to affect their business.
Political factors is an external environment in which a business functions. This is a type of external constraint for a business and are related to actions of governments. This factors can affect how the business operates. Political factors include politicians, who make important decisions. These can be done at national level at the UK parliament. This is because the UK is a representative democracy, who has a member of parliament that are elected. There are political parties who with the most Members of Parliament run the country. This party is led by the Prime Minister who appoints the Cabinet of Ministers in charge of key areas of the government. Political stability is the durability and integrity of a current government regime. This is determined based on the amount of violence and terrorism expressed in the nation and by citizens associated with the state. A stable society is one that is satisfied with the ruling party and system of operations and is not interested in revolutionary or despotic ideas.
For businesses, they hate instability. Businesses operates according to forecasts and scenarios about the future so instability is not what they want. Political stability is important for Wal-Mart because the society is satisfied so that this provides a platform for Wal-Mart to sell their goods. However if the is political instability in the UK, it affects the decision making process and their profits. This is because the confidence in the economy will go down and customers will be less likely to spend. For Tfl, political stability is important because as the organisation budget is paid by the government, if there is instability the money flow will get disrupted. Also when political instability happens there is usually conflict and as Tfl provides a transport service, there could be damage. However in the UK there is a stable political system, so this is the environment for the business to grow and expand. Another political factors which affect a business is the fiscal policy of the business. Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy.
It is the sister strategy to monetary policy through which a central bank influences a nation’s money supply. These two policies are used in various combinations to direct a country’s economic goals. Fiscal policy works by increasing or decreasing tax levels and public spending to maintain the health of the economy. Fiscal policy affects Wal-Mart because by changing the amount of disposable income people have to spend. This can affect the consumer demand. This happens by higher taxes. If taxes are higher than customers will have less money to spend and this will affect the profits of Wal-Mart as less people have money to spend. For Tfl, the fiscal policy will affect the business because as Tfl is a publicly funded, if there is a cut in taxes this will lead to less money for the government. To balance the books, the government will have to cut spending. This directly affects Tfl because their budget will be cut. Another political factor which affects a business is the membership of international trading organisations. For the UK, they are part of the EU or European Union. The European Union, or EU, is known formally as the European Economic and Monetary Union.
It establishes a common market among its 28 member countries. This means that all border controls between members have been eliminated, allowing the free flow of goods and people. The EU common market also means that any product legally manufactured in one member state can be sold in any other member, without tariffs or duties. Taxes have been standardized. Practitioners of most services can operate in all member countries. The cost of airfares, the internet and phone calls have fallen dramatically. By being the EU it affects Wal-Mart because as Wal-Mart is an international company it is easier to operate in the EU because the regulations are same and taxes are similar. Also the EU sets regional policies, so if a country in the EU is struggling and need help the EU will help. This affects Wal-Mart because their investment will be safer because the EU will not let the country collapse. For Tfl, being in the EU helps because as Tfl provides a transport service it needs to import the goods to improve the infrastructure of the London and being in the EU it is easier and with less paperwork to get the goods.
Another political factor which affects a business is the enhancing of the skills of the working population. This means the education of the youngster of the UK, the training of the working population and research. The government can affect this by the spending it does on the education system and apprenticeships. This affects Wal-Mart because as the UK economy recovery there is an increase in the demand of skilled workers. Wal-Mart needs skill workers for the finance, Management and etc. so with the skilled workers the business can expand. For Tfl, it needs skilled worker because as Tfl provides a transport service it needs engineers how there is a shortage as 88% of employers report not being able to find qualified engineers. Also as Tfl is a publicly funded organisation is has a set budget for employees so the business is at a disadvantage because it cannot pay the same as private businesses. So this is why the enhancing of skilled workers is important for businesses.
Finally, another political factor which affects businesses is the government support for different types of organisations. For private businesses, the government gives tax credit to businesses for employing more people or expanding their business. This affects Wal-Mart because this provides a goal because if the grow they will get awarded. Also if Wal-Mart expand they will get bigger profits and with the tax credit, it is easier to grow. For publicly owned companies, the government supports them by paying for part of their budget and the public businesses don’t pay taxes. This affects Tfl because the company doesn’t have to worry about taxes cutting into their profits and as the government pay for their budget, there is less worry about paying for everything. So these are five political factors which affect Wal-Mart and Tfl.
Legal factors are things and laws that the government or higher authorities pass that would have an effect on how business are run. Businesses must operate within the framework of the law. However if the business fails to follow the law then it can lead to fines and even imprisonment of directors. Therefore, businesses give high priority to make sure they comply with the law. There are three main types of laws business follow: Company law – Tow businesses are set up and run
Contract law – The contract that businesses make with employees, consumers, suppliers and so on Competition law – How businesses deal with employees, consumers, suppliers, and so on, and how businesses are allowed to compete with each other.
Company law is providing a framework for businesses. Company law is the field of law concerning companies and other business organizations. This includes corporations, partnerships and other associations which usually carry on some form of economic or charitable activity. One example of a company law is the Companies Act 2006. This is an Act which was passed by the Parliament of the UK. The act provides a rule book for the companies in the UK. This act is an improvement on the Companies Act 1985 because it now it is: To enhance shareholder engagement and a long term investment culture; To ensure better regulation and a ‘Think Small First’ approach; To make it easier to set up and run a company; and
To provide flexibility for the future
The key parts of the act is:
The Act codifies certain existing common law principles, such as those relating to directors’ duties. It implements the European Union’s Takeover and Transparency Obligations Directives. It introduces various new provisions for private and public companies. It applies a single company law regime across the United Kingdom, replacing the two separate (if identical) systems for Great Britain and Northern Ireland. It otherwise amends or restates almost all of the Companies Act 1985 to varying degrees. This affects Wal-Mart because as Wal-Mart has a board of directors, this act states that there must be one person as a director and there cannot be one sole director and the minimum age of the director must be 16 years old.
This affects Wal-Mart because it needs to employ more individuals to help run the business and this will affect the profits of the business. For Tfl, this act affects the business because as a part states that accounts must be submitted within 9 months of the year end and this is a change from within 10 months. This affects Tfl because now it needs to spend money reorganising the structure of the business so that it can submit the account on time. Furthermore, a failure to do some will lead to a fine.
Contract law is the protection of consumers and employees. This is a body of law that governs verbal or written agreements relating to exchanges of goods and services, money, and properties. Businesses form contract with many different individual, groups and bodies outside the business. This include:
Suppliers of stock
Suppliers of equipment
Sellers of land and building
For contract law there is two main types. These are contracts with consumers, and contract with employees. However I will be doing contracts with employees. The legislation I will discuss is employment law. Employment law is the legal relationship between the worker and employer. A key component of employment law is the creation of a contract. A contract of employment should include details such as names of employer and employee, job title and job description, date employment starts, the place of work, the address of the employer, amount of pay and how it will be paid, hours of work, holiday pay entitlement and notice period required. The contract is legally binding and if the employer or employee breaks the law they can get sued.
This affects Wal-Mart because a part of employment law is the minimum wage, which is currently at £6.50 per hour for workers aged 21+. This is the lowest Wal-Mart can go in payment, this affect the choice of Wal-Mart because they cannot decide how much they want to pay but it is forced upon them. For Tfl, the employment law affect them because of parts such as the EU directive call the Working Time Directive. This set out that there should be a minimum rest period of 11 consecutive hours in every 24-hours period. So Tfl have to give their employees this, even if they are falling behind in work, they have to employ a new set of worker to catch up.
Competition law is a set of rules that promotes or seeks to maintain market competition by restricting anti-competitive practices by businesses. Also these are laws governing how businesses can compete with each other. For example law against restricting business practices to reduce competition such as two or one businesses agreeing to a set price. Also laws against monopolies and mergers to stop businesses from dominating a particular market. This affects Wal-Mart because this company is one of the largest in the world, so they can investigated by the UK’s Competition Commission because they don’t want Wal-Mart to be dominate.
This affects Wal-Mart because it restrict them to the amount they could grow. For Tfl, the competition law affects them because as Tfl is in the tertiary sector of the economy, it offers contracts to supply them. This law states that Tfl must review all the bids to make it fair. This adds to the time and costs because it will take a longer period of time to process the bids and accept one.
Social factors relate to changes in the behaviour, taste and lifestyle of communities on the local, national and international scale. Over time many changes take place in society which are relevant for business organisations, such as in:
Households and families
Attitudes to work
Changes in structure of the society
One social factor is the demographic issues. For the UK, they are experiencing population growth. Currently, the UK population is 64.1 million and it grow by 400,000 last year. This is 0.63% increase from the previous year. For businesses this can be a good thing because there will be an increase in demand. Also population growth also means economic growth. For Tfl, population grow has pros and cons. this is because with population grow will mean there is an increase on the amount of people who use the services. So Tfl will have to spend more money to reduce the strain on the service. This affects the profits of the business. However because of the increase in the population there is going to be an increase in revenue because it costs money to use the service. For Wal-Mart, population growth is a good thing because more individuals will use their products. This will increase their profits. Another social factor is the changes in structure in the society. Social structure is the distinctive, stable arrangement of institutions whereby human beings in a society interact and live together.
Social structure is often treated together with the concept of social change, which deals with the forces that change the social structure and the organization of society. For businesses, one way the social structure changes is the ageing of the society. Currently, the UK population is ageing. For Tfl, this affects them because as the population ages, there will be less engineers and such to run the services or build it. For Wal-Mart this affects them because there will be less workers to run the business so Wal-Mart will have to spend more on employees to get the best. Another social factor is education. The average level of education in a society affects the interests and sophistication of consumers. For example, in a community in which a high percentage of potential customers have some form of post-secondary education, small-business owners might use more details and explanations while advertising and promoting products. For Tfl, this affect them because most of Tfl’s jobs are high skilled, so an educated society is important and required to expand. However they can get around it by getting employees around the world.
For Wal-Mart it is not as important because they need less educated employees because most of their employees are cashiers and shop assistants. However they need mangers. The UK does have an educated society so the business need not worried. Another social factor for businesses is attitudes to work. This is the way society thinks, feels or behaves to work. For businesses, this is important because businesses need employees who are motivated so that they care about. For the UK, the attitude of work is good because this society is a individualistic. This means individuals care about themselves and how they are going to a success. For Tfl, this is important because they want employees to work hard but also care about the people who is going to use the service. This is going to improve the customer experience because if they don’t care than the service will not be the best it could be. For Wal-Mart, the attitudes of work is important because the more they care the better the business is.
This will affect the profits of the business because customers will like the business because employee will show passion. Another social factor of the business is the attitudes to male and female roles in business. Gender roles are society’s concepts of how men and women are expected to act, and are shaped by cultural norms. For the UK, male role and females are one of the most equal in the world. However in some jobs males get more money than females for doing the same job. This affects Tfl because if there is inequality than female will not become engineers and such, which leads to less engineers and Tfl will need to pay more for engineers. So this affects their profits. For Wal-Mart, the gender role affects them because there will be less workers because females will be discouraged to work. Also if females work this will boost the economy and more people will spend on their business.