PESTEL ANALYSIS

LEGAL ENVIROMENT

SUBMITTED BY:

ADITI NAYYAR
ANKITA CHANDEL
EKAS SINGH
MOHAMMAD ANAS
ankita chandel
PALLAVI BAHL
A PESTEL analysis is a framework or tool used by marketers to analyze and monitor the macro-
environmental (external) factors that have an impact on the operations of an organization
Organizations that successfully monitor and respond to changes in the macro-environment are able
to perform in the dynamic business environment and create a competitive advantage.
The various external factors affecting the business are the Political factors, Economic factors,
Social Factors, Technological Factors, Environmental factors & Legal Factors.

The legal factors affecting the organization have been discussed in length below.

LEGAL ENVIRONMENT

The legal environment constitutes the laws and various legislations that are passed by the
government of a country. The legal environment has a dominating position over all the decisions
taken by the businessperson running the organization.
The legal factors include - health and safety, equal opportunities, advertising standards, consumer
rights and laws, product labeling and product safety.
As all business policies are highly influenced by government, it is important for the decision maker
to have thorough knowledge of these policies, as the non-implementation of the legal policies will
result in heavy fines, penalties & punishments.
An organization must understand what is legal and allowed within the territories they operate.
They also must be aware of the changes in the legislation and the impact of these changes on their
business operations.

Some aspects of the legal environment are:

1) Various Laws and legislative acts

2) Legal polices relating to licensing and foreign trade.

3) Statutory warnings essential to be printed on labels.

4) Foreign Exchange Regulation and Management Act.

1) Competition Laws
2) Company Laws
3) Labour Laws
4) Import Laws
5) Export Laws
6) Contract Laws
7) Consumer Protection Laws

COMPETITION LAW
Competition law is a law that promotes or seeks to maintain market competition by
regulating anti-competitive conduct by companies and it is implemented through public and
private enforcement.
The history of competition law reaches back to the Roman Empire. The business practices of
market traders, guilds and governments have always been subject to scrutiny, and sometimes-
severe sanctions. Since the 20th century, competition law has become global.
Modern competition law has historically evolved on a country level to promote and maintain fair
competition in markets principally within the territorial boundaries of nation-states.
Competition law, or antitrust law, has three main elements:

 Prohibiting agreements or practices that restrict free trading and competition between businesses.
 Banning abusive behavior by a firm dominating a market, or anti-competitive practices that tend
to lead to such a dominant position
 Supervising the mergers and acquisitions of large corporations, including some joint ventures.

COMPANY LAW
Company law is the body of law that applies to the rights, relations,
and conduct of persons, companies, organizations and businesses. It studies
how corporations, investors, shareholders, directors, employees, creditors, and
 other stakeholders such as consumers, the community, and the environment interact with one
another.
Types of modern companies include
 Corporation
 Limited company
 Unlimited company
 Limited liability partnership
 Limited partnership
 Not-for-profit corporation
 Company limited by guarantee
 Partnership
 Sole Proprietorship
The four defining characteristics of the modern corporation are
 Separate legal personality of the corporation (access to tort and contract law in a manner similar
to a person)
 Limited liability of the shareholders (a shareholder's personal liability is limited to the value of
their shares in the corporation)
 Shares (if the corporation is a public company, the shares are traded on a stock exchange)
 Delegated management; the board of directors delegates day-to-day management of the company
to executives

EMPLOYMENT LAW

Employment law is also known as labour law. It indicates how the companies should treat its
employees.
It includes:
 Minimum Wages
 Occupational safety
 Exploitation
 Dismissal Provisions
 Medical benefits
 Work environment
 Labour relations etc.

 Minimum wage laws can limit the various different employment possibilities a company
can offer,
 Child labour laws can affect the way tight-knit home businesses in third world countries
operate,
 Dismissal laws can restrain firing employees a little harder.

These laws help employees such that it:

IMPORT LAWS
The Indian Trade Classification (ITC)-Harmonized System (HS) classifies goods into three
categories:
 Restricted
 Canalized
 Prohibited

Goods not specified in the above-mentioned categories can be freely imported without any
restriction, if the importer has obtained a valid IEC. There is no need to obtain any import license
or permission to import such goods. Most of the goods can be freely imported in India.

 LICENSED (RESTRICTED) ITEMS

Restricted items can be imported only after obtaining an import license from the relevant regional
 licensing authority. The goods covered by the license shall be disposed of in the manner specified
by the license authority, which should be clearly indicated in the license itself. The list of restricted
goods is provided in ITC (HS). An import license is valid for 24 months for capital goods, and 18
months for all other goods.

 CANALIZED ITEMS

Canalized goods are items which may only be imported using specific procedures or methods of
transport. The list of canalized goods can be found in the ITC (HS). Goods in this category can
be imported only through canalizing agencies. The main canalized items are currently petroleum
products, bulk agricultural products, such as grains and vegetable oils, and some pharmaceutical
products.

 PROHIBITED ITEMS

These are the goods listed in ITC (HS), which are strictly prohibited on all import channels in
India. These include wild animals, tallow fat and oils of animal origin, animal rennet, and
unprocessed ivory.

EXPORT LAWS

Just like imports, goods can be exported freely if they are not mentioned in the classification of
ITC (HS). Below follows the classification of goods for export:
 Restricted
 Prohibited
 State Trading Enterprise

 RESTRICTED GOODS

Before exporting any restricted goods, the exporter must first obtain a license explicitly
 permitting the exporter to do so. The restricted goods must be exported through a set of
procedures/conditions, which are detailed in the license.

 PROHIBITED GOODS

These are the items, which cannot be exported at all. The vast majority of these include wild
animals, and animal articles that may carry a risk of infection.

 STATE TRADING ENTERPRISE (STE)

Certain items can be exported only through designated STEs. The export of such items is subject
to the conditions specified in the EXIM policy.

CONTRACT LAWS

The Law of Contract is one of the most important areas of law which businesses must become
familiar with. Every natural person, juridical person, or business entity enters into contracts. A
contract is a voluntary arrangement between two or more parties that is enforceable by law as a
binding legal agreement. Contract is a branch of the law of obligations in jurisdictions of the civil
law tradition. Contract law concerns the rights and duties that arise from agreements.
A contract arises when the parties agree that there is an agreement. Formation of a contract
generally requires an offer, acceptance, consideration, and a mutual intent to be bound. Each party
to a contract must have capacity to enter the agreement. Minors, intoxicated persons, and those
under a mental affliction may have insufficient capacity to enter a contract. Some types of contracts
may require formalities, such as a memorialization in writing. Contracts are widely used to govern
a business relationship. Non-performance of the terms or a significant breach imposes legal
obligations on the parties and economic consequences on the business entity.
CONSUMER PROTECTION LAW

Consumer protection law or consumer law is considered an area of law that regulates private law
relationships between individual consumers and the businesses that sell those goods and services.
Consumer protection covers a wide range of topics, including but not necessarily limited to product
liability, privacy rights, unfair business practices, fraud, misrepresentation, and other
consumer/business interactions. It is a way of preventing fraud and scams from service and sales
contracts, bill collector regulation, pricing, utility turnoffs, consolidation, personal loans that may
lead to bankruptcy.

Besides, the above legislations, the following also constitute the legal environment of a business.

1) Provisions of the Constitution: The provisions of the Articles of the Indian Constitution,
particularly the rights & duties of the citizens and the legislative powers of The Central and the
State government also impact the business operations.

2) Judicial Decisions: The judiciary has to ensure that the legislature and the government
function in the interest of the public and act within the boundaries of the constitution.