Political and Legal Influences on Business

32 flashcards covering privatisation, nationalisation, employment law, consumer protection, and competition law concepts from the lecture notes.

What is privatisation?

The transfer of ownership of state-owned industries into the private sector by creating public limited companies and selling their shares on the stock exchange.

Give three well-known European companies that were privatised.

British Airways, Deutsche Telekom and Škoda.

Why do supporters argue that privatisation increases efficiency?

Because private-sector businesses must operate under market forces, face profit pressure, and are not cushioned by state subsidies, leading to quicker, less bureaucratic decision-making.

How can privatisation motivate managers and employees?

Responsibility for success shifts to them, creating a sense of empowerment and stronger incentives tied to profitability.

In what way can privatisation raise money for governments?

Sale of nationalised industries generates revenue that can be spent on other state projects.

Why might privatisation lead to higher investment in an industry?

Private businesses gain access to private capital markets, enabling increased investment.

State one argument against privatisation related to essential services.

Essential industries may focus on shareholder returns rather than societal needs, risking service cuts to unprofitable areas.

How might privatised natural monopolies exploit consumers?

By charging high prices in the absence of effective competition or regulation.

Why can breaking up nationalised industries reduce economies of scale?

Splitting one large operation into several smaller firms removes cost-saving synergies such as bulk purchasing and shared infrastructure.

What is nationalisation?

The purchase of privately owned businesses by the state so they become publicly owned and operated.

List two arguments for nationalisation.

1) Government control allows integrated industrial policy. 2) Merging firms can create economies of scale and prevent private monopolies exploiting consumers.

Give two arguments against nationalisation.

1) Reduced profit motive can lower efficiency and lead to subsidies. 2) Political interference may distort business decisions and the purchase cost can be very high.

Name four main categories of legal constraints on business activity.

Employment practices, marketing behaviour/consumer rights, competition, and location of businesses.

State the two main objectives of employment laws.

To prevent exploitation of workers and to control excessive use of trade-union collective action.

Give three areas employment laws usually cover.

Recruitment/contracts/termination, health and safety at work, and minimum wages.

Why is a written contract of employment important?

It informs employees of pay, working conditions and disciplinary procedures, legally protecting their rights.

What does EU law say about age discrimination?

It is illegal to discriminate against employees or applicants on the basis of age.

Which region offers some of the world’s most protective maternity and paternity leave legislation?

The European Union (EU).

Provide an example of how working-hour limits differ internationally.

The maximum week is 52 hours in the Central African Republic but only 37 hours in Denmark.

List two typical workplace health and safety requirements.

Providing protective equipment and ensuring safe machinery, plus adequate washing and toilet facilities.

What are the two main aims of a minimum wage?

To prevent exploitation of low-paid workers and to reduce income inequality.

State one criticism of minimum wage systems.

They can raise labour costs, potentially making firms uncompetitive and leading to redundancies.

Mention one positive impact for businesses that exceed legal employment standards.

They can attract and retain the best employees, boosting motivation and productivity.

Give two reasons governments enact consumer protection laws.

Consumers are weaker than firms with large marketing budgets, and products are increasingly technical and hard to assess.

What are the three core conditions of the Sale of Goods Acts?

Goods must be safe and defect-free, suitable for their intended purpose, and perform as described.

What is the key requirement of the Trade Descriptions Act?

Businesses must not give misleading descriptions or claims about their products.

State the two main provisions of the Consumer Protection Act.

Firms are liable for damage caused by dangerous or defective products, and misleading pricing is illegal.

Name one direct cost to firms of complying with consumer protection laws.

Redesigning products to meet safety standards or rewriting advertisements to ensure accuracy.

How can strong consumer protection benefit a firm’s reputation?

By demonstrating fairness and reliability, leading to improved customer loyalty and long-term sales.

List three benefits of competition for consumers.

Wider choice of goods/services, lower prices, and improved quality and innovation.

How do governments promote competition through law?

By investigating and controlling monopolies and banning uncompetitive practices such as collusion.