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P6 – Describe how political, legal and social factors are impacting upon the business activities of the selected organisations and their stakeholders.€5,52
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Learning Aim 4: Task 5
Describe how political, legal and social factors are impacting upon the business activities
of the selected organisations and their stakeholders.
Businesses are impacted by political, legal and social factors. This can not only affect the businesses
but the stakeholders within them also. Businesses use the PESTLE analysis in order to analyse the
environment that they are operating in. PESTLE stands for: Political, Economic Socio-cultural,
Technological, Legal and Environmental. These are the factors that businesses look at in order to get
a full analysis of their external environment. Businesses also use this analysis to make important
decisions and plan future strategies. It is specifically used to understand risks within the associated
markets, the growth and decline of the market the business is working in and also the position and
potential for individual businesses. They have now updated it to STEEPLED but PESTLE is the one I will
be looking at.
As said, there are 6 main factors involved in the PESTLE analysis. Political factors include having
political stability, government support, taxations, direct support, providing infrastructure, enhancing
the skills within the population, organisations to support businesses and membership of international
trading communities. At an international level, Britain is a member of the European Union. The EU
makes political decisions that affect what can be done within each of the member states. At national
level the UK is governed by the political party that secure the most MP’s in a general election. The
ruling party is led by the Prime Minister. At a local level, councils are the representatives of their
populations and make decisions regarding local issues on their behalf. Political decisions involve
making choices that affect a large number of people and businesses.
Political stability is good for businesses. When a new political party is elected to office, they begin
putting their manifesto into place. As plans from the manifesto are made public in order to gain
votes, businesses are able to identify changes that are likely to occur and can work out how these will
affect them. It provides the business with certainty because they are able to know what changes are
going to occur and can react to this quickly with a strong plan.
Governments support businesses differently depending on the type of business that they are. In the
private sector, the government tries to create an environment where all businesses can all compete
with equal chance despite their size. The government also provides grants to start up new enterprise.
In the voluntary sector, government support includes a number of cash grants such as those from the
National Lottery Commission for activities that benefit the wider community and tax relief on
premises owned by these organisations. Charities also receive similar support. In the public sector,
the government ensures cover for the losses made by government-owned organisations. The
government supports a number of non-profit-making activities such as maintaining roads or ferry
services and funding welfare, education and health services.
Taxes are imposed by the national government and local governments. Taxation helps the
government to raise revenue and it also allows them to encourage some business activity and not
others. An example of this would be higher taxes on cigarettes to discourage smoking and high fuel
consumption cars to discourage pollution. Businesses believe that taxes eat into their profits and are
therefore interested in what the government is changing surrounding tax rates. Smaller businesses
have to fill out a large amount of paperwork and this can be a burden. For larger businesses the
paperwork won’t necessarily be an issue as they are likely to have its own accounting department.
There are different types of taxes that can affect businesses. These are corporation tax, income tax,
national insurance, VAT and customs duty.
, Jordan Blacker
The government also offers direct support to certain types of businesses and for specific business
activities in the forms of grants and loans. A grant is an amount of money that the government gives
to a business and they don’t repay it. The government gives the grant to businesses because business
activity supports government policy. The government also give loans to businesses for specific
purposes. Government loans have a much lower interest rate than those in banks, building societies
or other lenders.
The government provides the main infrastructure of the economy. They build and maintain
motorways and other major transport links. The local government is responsible for the roads in their
area. The government also owns and maintains the rail lines and stations. The government provides
supports to make sure that these facilities are provided for everyone. The government have also paid
for internet facilities to be installed in libraries and other public locations to make internet accessible
to households that can’t afford to have internet at home.
The government runs a variety of organisations designed to support businesses. One of these is
called Business Link. It provides business people with a large amount of information about business
such as setting up, naming the business, etc. The government runs Business Link offices in many
regions of the UK. It is free and was made to help businesses become more efficient and offer a
source of support.
Another political factor affecting business is creating international links, particularly in relation to
trading. The UK is a member of the EU and the UK imports and exports more within the EU than in
the rest of the world. EU countries such as France, Italy and Germany have advanced industrial
economies which buy the complex modern goods that the UK produces. The UK benefits largely from
being a part of this trading group. In the EU there is free movement of goods, capital and labour.
British businesses benefit from being able to transport goods without lots of paperwork. They also
benefit from workers coming into the UK to find jobs.
Tesco have been affected by their political environment due to several combined factors. They have
been affected at a local and national level by the government. At a national level, there have been
changes to pensions and this affects the Tesco employees as they may need to save even more
money and put it towards their pension. At a more local level, Tesco can be affected by planning
permission. Tesco have to ask the government for planning permission and if they don’t get the
permission then they become unable to open new stores. The minimum wage has been raised and
this is beneficial to the employees of Tesco because they are getting paid more for the amount that
they work. Tesco are also affected by trade in the EU because the UK as whole import and export
within the EU than from anywhere else in the world. Tesco can import and export with a small
amount of paperwork and this is beneficial for quick trade and easily getting stock into their
business. Tesco can also be affected by the government providing infrastructure. By building roads
and rail lines the government are providing people with more access to larger stores such as Tesco.
This helps Tesco as they can gain an income from people who couldn’t necessarily reach them before.
Taxation also affects Tesco because when VAT rises then their products become more costly and
customers may not be happy with this. They may also be affected due to corporation taxes. These
rise and fall often so the impacts will fluctuate between being positive and negative for the business.
Meopham School has also been affected by their political environment. The government fund
education for people under 18 and so Meopham School receive funding. If the government decides
that they want to reduce the income that schools receive, then this will affect the schools ability to
budget. The government also provides inspections via Ofsted to ensure that schools are working to a
good standard. If they are found to be in need of help then the government provide advice and
support for the school to help them gain a good mark from Ofsted. The government also helps create
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