A Level Business Studies: Legislation Exam Questions

Explain the general purpose of legislation from the point of view of a business (4 marks)

The purpose of legislation from the point of view of the business helps protect businesses with weaker bargaining power, and also ensures competition is fair, employees are treated fairly, that due attention is paid to the environment, that consumers are considered and that health and safety regulations are met. Legislation essentially instructs how a business environment is ran – in an orderly fashion.

Explain two advantages to a business of legislation related to competition (6 marks)

One advantage to a business of legislation related to competition is anti-competitive agreements. Law is put in place to prevent, restrict or distort competition. This prevents the agreement of the fixture of selling prices, agreements that limit production, investment, development and agreements that apply different conditions to similar businesses. In this case, legislation is beneficial as it allows for an even playing field to be created where all businesses have the same chance at success.

Another advantage is that legislation allows for some control over mergers and takeovers. They can be reviewed by either the UK or EU to see the potential impacts on competition. This is also good for a business as it prevents one company dominating the market and controlling the market through having such high market share. It makes it fairer for companies as they will compete against other companies of a similar size.

Using an example, explain how legislation related to competition might affect strategic or functional decision making in a business (4 marks)

Legislation related to competition could affect strategic decision making because it can influence the business’ decision on prices and quality. This is because all companies compete fairly due to the legislation which means firms need to get a competitive advantage through other means to stand out against competitors and fairly win over the market. The type of market to compete in is an example of a decision that could be affected as the firm will be required to think into the future to ensure they are viable and make a profit that is good enough to compete.

Explain two advantages to a business of legislation related to the labour market (6 marks)

One advantage is the equality act – this prevents discrimination within the workforce and protects people from being treated unfairly due to race, sex, disability or age. This ensures everyone in the company is treated equally which prevents potential disputes which can be costly to the business to settle. This can be motivating for staff which will make them more productive, and it can also improve the business reputation. Another advantage is that laws give employees other rights including how they are disciplined, dismissed or made redundant. This gives employees clear guidelines on how they should be treated which helps them know their rights, meaning if they are denied of their rights they can follow it up with appropriate action. This is beneficial to the business as they can better protect their workers which will make them more loyal workers, reducing labour turnover.

Using an example, explain how legislation related to the labour market might affect strategic or functional decision making in a business (4 marks)

Legislation related to the labour market might affect strategic or functional decision making because it helps the business select the ‘best’ candidates for jobs as everyone has a fair chance, ultimately improving efficiency and productivity. A business is more likely to be able to protect the health and well-being of the employee over time. Employees will also be more motivated which attracts better employees in the future as the business will have a good reputation. The legislation also means businesses know how to make decisions regarding dismissal etc.

Explain two advantages to a business of legislation related to the environment (6 marks)

Complying with environmental laws can help a business gain a better reputation. If a business follows these laws then it can likely be perceived by customers as caring about the environment which some people value. This could allow for them to add value to the product and gain a greater profit. Another advantage is that the laws encourage firms to reduce waste which can lead to reduce costs. This means that the profit from each sale will be greater.

Using an example, explain how legislation related to the environment might affect strategic or functional decision making in a business (4 marks)

Legislation related to the environment might affect strategic or functional decision making in a business as it can help promote the company’s products and services and improve its corporate standing. A ban on elements that harm the environment influences operations and marketing decisions and can lead to changes in how the product is made or works e.g. fridges.

Identify and explain two disadvantages to a business of the legislation discussed in this chapter (6 marks)

One disadvantage is that legislation can increase costs, affecting price and profit margins. A business may have to change their operations drastically to comply with new legislation which can be expensive. If the business is breaking the aw then they could need to pay fines which could lead to an expensive legal case against them. This will act as an expense and reduce the profit made from revenue. Another disadvantage is that making employees more aware of their rights can make them realise ill-treatment which again can be costly to the business. Asda for example may have to pay million in higher wages to female staff if the case for equal pay against them is successful.

Explain three ways in which government policy supports enterprise and entrepreneurs

Government policy supports enterprise as they believe in an environment that encourages and supports people who take opportunities and risks is crucial for improving productivity. This is good for growth and prosperity in the economy. It increases competitiveness in markets and allows for new technologies to be more efficient. Another way is through the Department for Business, Innovation and Skills being responsible for promoting economic growth. Local Enterprise Partnerships between local authorities and businesses encourage job creation and growth. They can benefit from tax incentives and simplified planning regulations. A third way is through providing reports on enterprise. For example, these provide advice about start up loans, business rates, employment allowances, growth vouchers etc. This gives entrepreneurs a fair chance with professional advice on how to adequately compete and operate successfully.

Identify three industries in which regulators operate

Communications and Postal services (Ofcom)

Gas and electricity (Ofgem)

Railways (Office of Rail Regulation – ORR)

Explain three ways in which regulators intervene

Regulators intervene as they monitor and regulate prices, ensures no company exploits their power by charging an excessive price. This creates a level playing field and prevents one company being unfair. An example is EU Competition Commission making a ruling on roaming charges maximums. Regulators also ensure that services meet a certain standard of quality. They can fine/take licenses away from businesses that do no meet their expectations. A third is the opening up of market to competitive forces – regulators are required to encourage competition by removing barriers to entry.

Why is a modern and effective infrastructure important for UK business and for the UK economy?

Modern and effective infrastructure is important for UK businesses because spending on new roads and telecommunications etc creates better transport links which can encourage investment in firms. Projects like HS2 can be attractive for investors as this will ultimately benefit businesses and create stronger connections to the main cities, like London, a main financial hub. Good infrastructure leads to multiplier effects as it can create jobs as people build and maintain it and it also gives the country more potential to be productive. 

Explain three ways in which government policy tries to encourage improved infrastructure in the UK

It provides funding. The UK Guarantee Scheme provides financial guarantees from the government for planned projects. This basically enables the projects to go ahead and ensures that they are completed to an acceptable standard. It directs investment and support towards certain projects that the government considers valuable to the UK. This usually prioritises projects that are deemed to have high potential contribution to economic growth, increasing productivity and enabling innovation. It ensures the development of coherent infrastructure systems that require strategic leadership and decisions. This provides jobs to people in the UK and improves infrastructure as the best possible outcome can be worked towards and hopefully achieved.

Identify and explain three benefits of the EU for UK businesses

Increase in market size (a greater number of potential customers) as a result of the freedom of movement of goods and services. UK business can now sell to any of the other fourteen countries without facing extra costs or restrictions on the types of products they can sell.

Greater access to cheap factors of production e.g. raw materials, technology and labour. A business can employ individuals from any part of Europe. Football clubs have certainly benefited from this! The National Health Service has found this a good source of skilled doctors and nurses when they have had shortages of medical staff.

Access to EU government contracts, not just UK government contracts, benefiting businesses who sell goods and services to government departments (e.g. road builders could be "contracted" to provide roads in Spain).