Legal factors include organizational law, labor law, consumer law, advertising law, product and service standards law, banking law, antitrust law, and intellectual property law. Not only do internal affairs decide the fate of a company, but many external factors also have the same effect. A country`s political situation, technological developments, environmental factors, legality of actions, economic and social factors all play an important role. Companies are aware of this fact, so they use an economic tool – PESTLE analysis. Taken together, the above six factors can have a profound impact on risks and opportunities for businesses. It is imperative that the analyst community recognizes them and attempts to quantify them in their financial models and risk assessment tools. Product transportation, profit margins and the viability of certain markets are examples of legal factors that can be affected. Apart from these laws/rules, companies maintain their own rules and regulations that an employee must abide by. Legal analysis therefore takes into account both perspectives and the forms of strategies that take them into account. A PESTLE analysis is often used as a broad fact-finding activity. It helps an organization identify external factors that could affect decisions within the organization.
By understanding the impact that these external factors can have on an organization, it becomes convenient for organizations to plan better. You can develop strategies to minimize threats and maximize opportunities for yourself. At the time of writing, the U.S. and China are negotiating a new trade deal. One of the key factors in the deal is the violation of U.S. intellectual property laws by the Chinese, who do not recognize U.S. patent laws. This considerable disagreement affects both political factors (trade policy) and legal factors (copyright and patent law). A government`s rules and regulations – its laws – will always have a macroeconomic impact on a company`s success. And for companies operating under the jurisdiction of multiple governments, executives need to be aware of the legal factors in each location. Example of a policy factor: A multinational company closes several facilities in a higher-tax jurisdiction in order to relocate its operations to a location with lower tax rates and/or where the government provides greater support and support opportunities. Political factors tend to be overarching issues such as tax policy, trade policy, or foreign trade policy, while legal factors tend to be more specific and relate to issues such as discrimination laws, antitrust laws, or intellectual property laws.
However, they overlap. Take, for example, labour law, which we see as a political factor, and occupational health and safety laws, which we see as a legal factor. It doesn`t matter if you consider the factor legal or political. It is important that you consider these factors in your PESTEL analyses and, if necessary and appropriate, consult a lawyer. It`s also important to remember that these legal (and political) factors vary from country to country, state to state, and even city to city. Take legal factors, for example: A rating agency looks at the creditworthiness of a tech company that has significant growth prospects in emerging markets. The analyst must balance this growth trajectory with the inherent risk of intellectual property theft in some countries with weak legal infrastructure. Intellectual property theft can seriously compromise a company`s competitive advantage. As used in this article, the term „government” can refer to a national, state, municipal, provincial or other body that has the capacity to enact laws, rules and regulations.
If your business operates from one or more locations and sells its products to buyers in other locations, your business is subject to the laws of more than one government. This is why legal factors must play an essential role in the preparation of your PESTEL analysis. A framework for assessing political, economic, social, technological, environmental and legal factors Environmental factors proved to be a useful complement to the original PEST framework when the business community began to recognize that changes in our physical environment can pose significant risks and opportunities for organizations.