Legal Regulation

Definition: 

Once government policy has passed parliament it has become statutory law; it has become part of the legal framework that businesses must operate within. Legislation is enforced and businesses must comply of face penalties (costs). 

Once legislation is in place, courts determine the outcome of legal challenges. Court decisions set precedents (standards based on previous decisions) that guide future legal decisions. This is common law.

The overall aim is to promote safety and fairness in business activity.

How it can influence operations:

• Compliance costs; the costs associated with ensuring business activity is legal. This can be expensive (reducing profitability)

• Time and effort in compliance; it is the legal responsibility of the Operations Manager to be aware of all relevant laws and comply

• Legal regulation can change; forcing businesses to alter their processes if in breach of new legal code

The legal framework rests upon the ethical values of society. Laws are designed to promote overall social benefits. Businesses that break laws face financial penalties and damage to brand. 

Businesses can go ‘above and beyond’ the law to pursue ethical standards higher than that set by the law. This can be done to differentiate the business, or simply because the owners are more ethical in their business conduct.