Legal Business Environment

Legal Business Environment

Legal Business EnvironmentBusiness is an organization formed with the aim of selling goods and services to the public with the intention of making a profit that benefits the owner or owners of the business. However, nothing in the world operates in a vacuum.  Similarly, companies too do not operate in a vacuum but are governed by some things. Some of them include the customers; the other businesses and the legal environment that comprises of the laws made by government agencies .they regulate the formation, operation, their governance as well as the lending of money by the lending organizations. The laws also control how businesses make contracts, how the contracts are structured and their enforcement. The rules also govern the collection of debts, protection of consumers, promotion of competition as well as the ascertain action of property rights(Melvin, 2011).

It is important for any individual or group that is aiming to start a business organization, therefore, to understand the legal environment of then business. Commercial laws are the name usually used to refer to legislation in a country that governs the firms in that country. However, some laws encourage external investors who in some states the laws may be discouraging outside investment and in contrast be encouraging private investment. Most growing countries try to for commercial legislation that advantages their local businesses in a disadvantage of the external ones so as to ensure that the small businesses in the country by helping them avoid big completion from already established significant foreign companies.

Legislation passed by the parliament also form part of the legal business environment. The parliament of a country contains by members elected by the public to represent their ideas at the national level. Therefore, what the legislature decides is deemed to be chosen by the people. In this way, laws passed by the parliament hence bound everyone in the country as well as those coming in the country from other nations. The businesses established by the citizens of the country itself or by outside people who move from another country to come and invest in the country will, therefore, allow themselves to be guided and controlled by the legislations made by the parliament of that country(Cross F. B., 2012).

However, it is important to note that there also exists the general environment. The general environment is the most critical dimension of the business as it cannot be changed by the industry people himself or herself but has to change his or her plans and policies according to the changes that may be taking place in the general environment. There also exists the economic environment.  The economic environment consists of income level nationally, gross domestic income, per capita level, profit earning rate and industrial and fiscal monitories of the government. The economic factors have the direct impact on the business requiring businesspeople to assess well the economic factors before setting up the business. However, the economic factors can be advantageous to the firm or disadvantageous. Therefore, it is the businessman to check that the disadvantages so that his or her business can have the upper hand in the operating field as well as the competition factor. When the disadvantages of these factors exceed the advantages, the company shall be overtaken by the others in the same area and in this way the dream of the business man of making a profit will have ceased to exist.

After the new economic policy of 1991 however, lots of opportunities are offered by the economic factors to the businessman. Some factors have led to the development in the economic environment. One of the factors that have resulted in the elaboration of the economic factors such as, the banking sector reform where banks are now offering loans at very minimal interest rates and with a limited number of official documents required. There have also been changes in the economic and fiscal policies that have encouraged both local and external investors. There are also lots of reforms in the leasing and financing institutions. The private sector has also been allowed their way into the investment industry. These are some of the other parts of the business environment.

In the legal context again, there are current legislations that include the trademarks act, weight Act, essential commodity Act, and the measures act. Some of the aspects of the legal environment are such as mentioned earlier, various laws and statutes. Rules formed by the constitution or acts that are already passed by the parliament and approved to be laws. Legislation laws are passed solely by the house. Another aspect is policies regarding licensing. These are systems developed by the agencies of the government to make sure that there is control of how businesses will be permitted. The companies should give the minimum requirements for licensing and to also give the businesses that will be eligible for licensing and those that are not.

There is an established right policy that is related to foreign trade. The agencies of the government in any country formulate policies that govern external trade. Any person intends to start a business in that country from outside the country or a citizen of that country starting their business in the foreign country will be guided by these policies(Halbert, 2014). The involvement of the government in external activities is also be governed by the same policies. There are also statutory warnings that they should print on labels of the products a business offers. According to this regulation,  companies offering products such as cigarettes that have effects on the human body have to print warnings on the labels of their products so as to inform the consumer some of the effects of taking the product of the human body. There has been a witness of rotted teeth and damaged lips on cigarette packets that show some of the consequences of cigarette. Therefore, the company that produces smoke is one of the businesses that have obeyed one of the factors of the legal business environment.

There are also foreign exchange regulations that are part of the legal business environment.  These are policies adopted by the government to govern the sharing of the country’s currency with another country’s currency. The policy aims at ensuring consistency in the exchange of foreign so that the businesses in the country can have better conditions to operate without being interrupted by fluctuations in exchange rates. The policy is also supposed to control the value of other products and services from external countries when they enter the economy of that country. The businesses of the local country and those that started by the foreign individuals or groups should also adhere to these policies on exchange rates provided the host country.  Failure by the businesses and other international organizations to adhere to these policies on the exchange may lead to them expelled in the host country. However, it is important also to note that an international regulation also exists. Therefore, hen any country is making their international rules, the agencies of that country should make sure that the policies adopted by the state are in agreement with those of the international arena(Hamilton, 2015).

Another aspect of the legal business environment is the aspect of the policies regarding deregistration of industries. The main aim of this factor under the legal business environment is to ensure that there are agencies that make sure there are policies on how industries should get expelled from the list of companies. The aim of every country is to have as many industries and businesses in the country as possible to improve the income of the country as well as provide employment to the citizens of the country. It does not matter whether these businesses or industries are internally grown or externally. However, there are some of the industries that despite them passing the test of licensing they are unable to perform to the expectations of the country’s policies or some even break the laws of the country once they begin operations in the country. Due to reasons such as these, it is necessary to have a body in the country that will deal with the de-licensing or de-registration of such companies that fail to follow some of the other factors of the legal environment in the country. This body, therefore, is tasked with coming up with reasons under which a company can lead to deregistration and the process of deregistering among many other things concerning the same. In the simplest form, the above are some of the aspects of the legal business environment. Companies and other business organizations are deemed to take care of these factors and perform as required and as well check for the conditions that they fit most.


Cross, F. B. (2012). The legal environment of business: Text and cases : ethical, regulatory, global, and corporate issues. . Mason, OH: South: Western Cengage Learning.

Cross, F. B. (2018). The Legal Environment of Business: Text and cases.

Halbert, T. &. (2014). Law and ethics in the business environment. ?Boston: Cengage Learning;.

Hamilton, L. &. (2015). The international business environment. New York : Oxford university press .

Melvin, S. P. (2011). The legal environment of business: A managerial approach: theory to practice. . New York: : McGraw-Hill/Irwin.

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