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A
business can be defined as an organization
that provides goods and services to others
who want or need them.
 A business (also called a company, enterprise
or firm) is a legally recognized organization
designed to provide goods and/or services to
consumers.
Business environment is a set of Political, Economic,
Social, Technological and Legal forces that are
largely outside the control and influence of a
business and that can potentially have both a
positive and a negative impact on the business.
Layers of the business environment
Macro-environment – PESTEL (1)
Macroenvironment – PESTEL (2)
Political
• Government stability
• Taxation policy
• Foreign trade
regulations
• Social welfare
policies
Economic
•
•
•
•
•
•
•
Business cycles
GNP trends
Interest rates
Money supply
Inflation
Unemployment
Disposable income
 The
external environment contains numerous resources
upon which the organisations rely.
 Organisations
are inevitably affected by what goes on in the
environment.
 Opportunities
and threats exist in the environment;
opportunities refer to favorable conditions in the
environment that could produce rewards for the organization
if acted upon properly. Threats refer to conditions or barriers
that may prevent the firms from reaching its objectives.
 This
involves factors outside of the direct control
of the business.
 These macro-factors such as the economy,
government policy and social change can have a
significant effect on a firm's success.
 Rapid
changes taking place in the external
environment, requires increasing attention from
the managers.
 These
refer to government policy such as the degree of
intervention in the economy. Like:
What goods and services does a government want to
provide?
 To what extent does it believe in subsidizing firms?
 What are its priorities in terms of business support?

 Political
decisions can have an impact on many
vital areas for business such as the education of
the workforce, the health of the nation and the
quality of the infrastructure of the economy
such as the road and rail system.
 These
include interest rates, taxation changes,
economic growth, inflation and exchange rates. For
example:


higher interest rates may deter investment because it costs
more to borrow
a strong currency may make exporting more difficult
because it may raise the price in terms of foreign currency
 inflation
may provoke higher wage
demands from employees and raise costs
 higher national income growth may boost
demand for a firm's products.
 Changes
in social trends can impact on the
demand for a firm's products and the
availability and willingness of individuals to
work.
 There are basically three types of social
factors: Demographic (size, structure &
distribution of population), social and
lifestyle.
 New
technologies create new products
and new processes. MP3 players,
computer games and high definition TVs
are all new markets created by
technological advances.
 Online shopping, bar coding and computer
aided design are all improvements to the
way we do business as a result of better
technology.
 Technology
can reduce costs, improve quality
and lead to innovation.
 These developments can benefit consumers
as well as the organizations providing the
products.
 Environmental
factors include the weather and
climate change.
 With major climate changes occurring due to
global warming and with greater environmental
awareness; the growing desire to protect the
environment is having an impact on many
industries such as the travel and transportation
industries (for example, more taxes being placed
on air travel and the success of hybrid cars)
 The
general move towards more environmentally
friendly products and processes is affecting demand
patterns and creating business opportunities.
 These
are related to the legal environment in which
firms operate.
 Legal Framework ensures compliance to rules &
regulations
 A firm must operate within the LAW.
 Knowing legal environment helps businesses identify
Opportunities and Threats.
 Firms must be aware of changes in legal environment
to do business effectively
 Legal
changes can affect a firm's costs (e.g.
if new systems and procedures have to be
developed) and demand (e.g. if the law
affects the likelihood of customers buying
the good or using the service).
Macroenvironment – PESTEL (3)
Sociocultural
Technological
• Population
demographics
• Income distribution
• Social mobility
• Lifestyle changes
• Attitudes to work and
leisure
• Consumerism
• Levels of education
• Government spending on
research
• Government and industry
focus on technological
effort
• New discoveries
/developments
• Speed of technology
transfer
• Rates of obsolescence
Macroenvironment – PESTEL (4)
Environmental
• Environmental
protection laws
• Waste disposal
• Energy consumption
Legal
•
•
•
•
Competition law
Employment law
Health and safety
Product safety

In a typical democracy, the central institutions for
interpreting and creating law are the three main
branches of government, namely an impartial
judiciary, a democratic legislature, and an
accountable executive.

Functions:
 Legislature : Makes the Law
 Executive : Enforces the Law
 Judiciary
: Interprets the law /
Resolves disputes
 An
officially elected or otherwise selected
body of people vested with the responsibility
and power to make laws for a political unit,
such as a state or nation.
 It shapes politics, economics and society in
numerous ways and serves as a primary social
mediator of relations between people.
 To implement and enforce the law and
provide
services
to
the
public,
a
government's bureaucracy, the military and
police are also vital.
 The
judiciary system is the system of
courts that interprets and applies the
law in the name of the sovereign or
state.
 The
judiciary also provides a
mechanism for the resolution of
disputes.
 This branch of government is often
tasked with ensuring equal justice
under law.
It
usually consists of a court of final
appeal (called the "supreme court" or
"constitutional court"), together with
lower courts.
The term "judiciary" is also used to
refer collectively to the personnel,
such as judges, magistrates and other
adjudicators, who form the core of a
judiciary (sometimes referred to as a
"bench"), as well as the staffs who
keep the system running smoothly.



The executive branch of government is that part of
government that has sole authority and
responsibility for the daily administration of the
state bureaucracy.
The separation of powers system is designed to
distribute authority away from the executive
branch.
The executive officer is not supposed to make laws,
or interpret them.

The role of the executive is to
enforce the law as written by the
legislature and interpreted by the
judicial system.

The organizational structure of the
executive branch will determine the
relationship between the heads of
state and government respectively.
 Aristotle
(greek philiospher) defined law as
“The reason unaffected by desire” and that “
The law is a form of order, and good law
means good order.
 Law is simple rules governing individuals and
their relationships in a society.
 Law
is the body of principles recognised and
applied by the State in the administration of
justice (Salmond)
 Law is rules of civil conduct prescribed by the
supreme power of state commanding what is
right and prohibiting what is wrong
(Blackstone)
 Law is a system of social rules usually
enforced through a set of structured
institutions
29
 Law
is a command of the sovereign
(Austin)
 Law: characteristics:
 It
is
a
system
of
rights
and
duties/obligations: these rights and
obligations are inter se as members of the
society and in relation to the government
 The force and sanctions of the State are
behind such system
30
 Law
gives us basic freedoms, rights and
protection
 Without
a law, or this consistent framework
of legal boundaries, our would be a society
of chaos and confusion
 Keeping
of order
 Influencing conduct
 Honoring Expectations
 Promoting equality
 Law as a great compromiser
There are 4 types altogether.
 Constitution: It exist at the state and federal
levels.
 It has two functions.
1. Set up the structure of government for the
political unit.
2. To prevent other units of government from
taking certain actions or passing certain law.
 Statutes:
laws created by state legislature.
 It is stated in authoritative form in statute
books or codes
 Uniform acts when enacted by a legislature
becomes statutes. For example business
corporation act or revised uniform
partnership act.
 Common
Law: It is also called Judge made
law or case law.
 They are made and applied by judges as they
decide cases not governed by statutes or
other type of law
 It emerged in medieval England.
 Equity:
Equity has traditionally tried to do
discretionary(open, flexible) rough justice,
but where?
 Where common law have produced unfair
results.
 Unfair decisions in common law
 King’s executive officer in England started
hearing cases
Hence equity courts emerged to listen to all those
cases.
I. Injunction was provided only by equity courts
 Injunction means to order a party to do some act or
not to perform /forbid an act.
11. Specific performance. Where a party is ordered to
perform act in terms of the contract
111.Reformation. Courts rewrites the terms of
contract to reflect the party’s real intention.
1V.Recision. A cancellation of a contract in which the
parties are returned to their pre-contractual position

 There
are 3 common classification of law
 This classification involve distinction
between
1. Criminal law and civil law
2. Substantive law and procedural law
3. Public law and private law
 Criminal
Law: it is the law under which
government prosecutes someone for
committing a crime
 It create duties that are owed to the public
as a whole.
 For example A sues B for hitting his car
 Civil
Law. Mainly concerns obligations that
private parties owe to other private parties.
 It is applied when one party sues another
party because the second private party does
not fulfill the legal duty owed to first private
party.
 City may sue or be sued by a contractor.





Substantive Law. Sets the rights and duties of people as
they act in the society.
Procedural Law. Controls the behavior of the government
bodies(mainly courts).
E.g LB corporation has breached its contract to buy 3000
units from JV corporation . Now JV has the SUBSTANTIVE
right to expect performance and collect damages for
breach by bringing suit.
The LAW governing how LB suit is brought and the trial
process are procedural law.
The SUBJECT Matter and the issues of litigation are the
SUBSTANTIVE Law.

Public Law: It concerns the power of government and the
relation between government and private parties for
example constitutional law, criminal law

Private Law: it is developed between 2 individuals e.g
landlord and tenants.