2.5.2 Legislation

Consumer protection

🔗 Designed to ensure that consumers are treated fairly and prevent the unfair selling practices of businesses. E.g. if the product has a misleading description or isn't fit for purpose.

• Good PR tool as it portrays the business as law-abiding, strengthens the brand image and attracts more ethically conscious customers, higher sales
• Legislation has to be followed regardless, won't generate positive PR as it is expected businesses follow the law
• Failing to comply, bad media coverage, tarnished brand image, lower reputation, reduced customer retention, lower sales, lower revenue, reduced market share

Employee protection

• May help workers be more motivated and productive, fixed costs spread over a wider range of output, lower cost per unit
• Good PR tool as it portrays the business as law-abiding, strengthens the brand image and attracts more ethically conscious customers, higher sales
• Legislation has to be followed regardless, won't generate positive PR as it is expected businesses follow the law
• Failing to comply, bad media coverage, tarnished brand image, lower reputation, reduced customer retention, lower sales, lower revenue, reduced market share

Health and Safety

• May help workers be more motivated and productive, fixed costs spread over a wider range of output, lower cost per unit
• Good PR tool as it portrays the business as law-abiding strengthens brand image and attracts more ethically conscious customers, higher sales
• Legislation has to be followed regardless, won't generate positive PR as it is expected businesses follow the law
• Failing to comply, bad media coverage, tarnished brand image, lower reputation, reduced customer retention, lower sales, lower revenue, reduced market share

Environmental protection

• Good PR tool as it portrays the business as law-abiding strengthens brand image and attracts more ethically conscious customers, higher sales
• Legislation has to be followed regardless, won't generate positive PR as it is expected businesses follow the law
• Failing to comply, bad media coverage, tarnished brand image, lower reputation, reduced customer retention, lower sales, lower revenue, reduced market share

Competition policy

🔗 Tries to keep competition, bans businesses taking over if competition will be reduced

• Lower barriers to entry, encourages more firms to enter the market, encourages businesses to be more productive and efficient due to more available substitutes, may benefit from economies of scale, with less mistakes and wastage, lower cost per unit
• Prevents collusion and large mergers, could have enabled a business to wipe out competition and maximise profits

The business cycle

🔗 The business cycle shows the amount of GDP during each phase of the cycle in an economy

• In a Boom/peak benefits for businesses are: High consumer confidence, customers spending more, higher profits for businesses, more finance to invest in future developments
• In a Recession drawbacks for businesses are (opposite to boom) – Falling confidence, falling profits, falling investment
• Trough – Low confidence, low profits, low investment
• Expansion/recovery – Rising confidence, rising profits, rising investment

Pros and cons

• Helps firms determine their prices during different stages of the cycle where demand changes (dynamic pricing) to maximise sales
• Helps firms plan their operations accordingly (E.G Workforce, stock levels, investment and marketing activities)
• Different economies have different economic cycles. Some may be in boom and recovery for longer than others, the economic cycle does not take into account the time period
• Freak occurrences or external shocks can occur which can immediately put an economy into recession. Can't be planned for, unpredictable

Uncertainty

• Causes consumer confidence to fall -> Reduces demand for desirable goods and services in an economy -> Lower sales for firms -> Lower profits
• Also reduces the willingness of banks to lend and firms to reinvest -> Stagnation on the international scale