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Legal factors

Watch this video and read this article where we explore legal factors in a PESTEL analysis.
12.2
The L-factor in the PESTLE analysis, stands for legal. This is the responsibility of businesses to comply with current as well as new regulations or laws within the jurisdictions that they operate. For example, immigration laws have been tightened around the world, not only in UK but in countries like Singapore. Businesses on the right side of the law are said to be good corporate citizens.

Legal factors are often incorporated into political factors because governments create and enforce laws.

Political factors often already cover legal matters such as competition, taxation, employment and health and safety regulations. We have already discussed the national living wage for UK workers over 25 years old, enforced from April 2019, as an example of employment law.

Employment law

Another employment law is the right to work and the minimum conditions in the working environment. There are also trading rules governing trading hours for retailers. Currently, in England and Wales, large shops covering an area of over 280 metres may operate on Sundays, but only for six consecutive hours between 10am and 6pm. They must close on Easter Sunday and Christmas Day, except retailers in airports, railway facilities, and if they provide essential products like medicines, bicycle supplies and accessories.

Enforcement agencies

It’s typical for governments to create and empower dedicated agencies to lay down the law in regulated markets. For example, the National Agency for Food and Drug Administration and Control (NAFDAC) is a government agency responsible for regulating and controlling the manufacture, importation, exportation, advertisement, distribution, sale and use of food, drugs, cosmetics, medical equipment, chemicals and packaged water in Nigeria. Firms trading in any of these products must be NAFDAC-compliant, or risk the withdrawal of their licence.

The key question here is:

  • What specific rules govern our industry?
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