3.7.4 Analysing the external environment to assess opportunities and threats: political and legal change

• What is the primary impact of political and legal factors on a business?

  Strategic direction
• Political factors encompass government stability, taxation policies, trade restrictions, and environmental regulations
• Government stability and policies are examples of political factors.
• Changes in government stability can lead to shifts in trade agreements.
• Adapting to political changes is crucial for effective long-term planning.
• Understanding political and legal factors is crucial for strategic planning.
• A change in government or major policy shifts can impact a business's operating environment
• Stricter environmental laws may require businesses to invest in costly upgrades
• Match the business function with its potential impact of political changes:

  Operations ↔️ Trade restrictions disrupt supply chains

  Finance ↔️ Changes in taxation affect profitability

  Marketing ↔️ Political instability impacts consumer confidence

  Strategy ↔️ Policy shifts require re-evaluation
• What is one opportunity legal changes can create for businesses?

  New markets
• Businesses must monitor the external landscape for shifts in government policies, regulations, and laws
• Investing in compliance management ensures ongoing adherence to legal frameworks.


  True
• What is one example of a political factor that could affect a business?

  Government stability and policies
• How can a trade war affect businesses?

  Increase tariffs on imported goods
• Which business function may be affected by changes in environmental regulations?

  Operations
• Alterations to taxation policies can affect profitability and cash flow.


  True
• Anticipating political changes is crucial for effective long-term planning.


  True
• Contract law provides rules for forming and enforcing legal contracts.

  True
• Failure to comply with legal frameworks can lead to fines and reputational damage.


  True
• Compliance with new regulations can provide a competitive advantage.


  True
• Changes in employment laws can disrupt workforce management practices.


  True
• What are political and legal factors in the business environment?

  Government policies and laws
• Understanding political and legal changes is crucial for strategic planning.

  True
• What are some examples of legal factors in the business environment?

  Employment laws ||| Contract law
• What is the potential impact of changes in government stability on a business?

  New regulations
• How can alterations to taxation policies affect a business's profitability?

  Changes in tax rates
• Political factors include government stability, trade restrictions, and environmental regulations.


  True
• How can new environmental regulations affect a business's operations?

  Costly upgrades
• Increases in corporate tax rates can decrease a business's profitability.


  True
• Changes to government funding and incentives can affect a business's growth capabilities.


  True
• What is an example of a legal factor that affects businesses?

  Employment laws
• Match the legal change with its potential opportunity or threat:

  Relaxed Trade Barriers ↔️ Expand into new international markets

  Increased Environmental Regulations ↔️ Develop and market eco-friendly products

  Data Protection Laws ↔️ Build consumer trust by protecting user data
• What is the purpose of scenario planning for businesses?

  Develop contingency plans
• Political and legal factors refer to government policies and laws
• Understanding political and legal factors is crucial for strategic planning.

  True
• A new government may introduce stricter environmental regulations, requiring businesses to adapt
• Stricter emission standards may necessitate new equipment
• Trade restrictions could disrupt supply chains and access to materials
• How can political instability affect consumer confidence?

  Creates uncertainty
• What is an example of a legal factor that affects businesses?

  Employment laws