Political & Legal Environment – Marketing decisions

Marketing decisions are strongly affected by developments in the political and legal environment. This environment is composed of laws, government agencies, and pressure groups that influence and limit various organizations and individuals. Sometimes these laws also create new opportunities for business. For example, mandatory recycling laws have given the recycling industry a major boost and spurred the creation of dozens of new companies making new products from recycled materials. Two major trends deal with the increase in business legislation and the growth of special interest groups.

Increase in Business Legislation: Business legislation has three main purposes to protect companies from unfair competition, to protect consumers from unfair business practices, and to protect the interests of society from unbridled business behavior. A major purpose of business legislation and enforcement is to charge businesses with the social costs created by their products or production processes. A central concern is this: At what point do the costs of regulation exceed the benefits? The laws are not always administered fairly; regulators and enforcers may be lax or overzealous. Although each new law may have a legitimate rationale, it may have the unintended effect of sapping initiative and retarding economic growth.

Legislation affecting business has increased steadily over the years. The European Commission has been active in establishing a new framework of laws covering competitive behavior, product standards, product liability and commercial transactions for the 25 member nations of the European Union. The United States has many laws on its books covering such issues as competition, product safety and liability, fair trade and credit practices, and packaging and labeling.

Several countries have gone further than the United States in passing strong consumer protection legislation. Norway bans several forms of sales promotion like trading stamps, contests, premiums as inappropriate or “unfair” instrument for promoting products. Thailand requires food processors selling national brands to market low price brands also, so that low-income consumers can find economy brands. In India, food companies need special approval to launch brands that duplicate what already exists on the market, such as another cola drink or brand of rice.

Marketers must have a good working knowledge of the major laws protecting competition, consumers, and society. Companies generally establish legal review procedures and promulgate ethical standards to guide their marketing managers, and as more business takes place in cyberspace, marketers must establish new parameters for doing electronic business ethically.

Growth of Special Interest groups:

The number and power of special interest groups have increased over the past three decades. Political action committees (PACs) lobby government officials and pressure business executives’ rights, women’s rights, senior citizens’ rights, and minority rights.

Many companies have established public affairs departments to deal with these groups and issues. An important force affecting business is the consumerist movement – an organized movement of citizens and government to strengthen the right and powers of buyers in relation to sellers. Consumerists have advocated and won the right to know the true interest cost of a loan, the true cost per standard unit of competing brands (unit pricing) the basic ingredients in a product, the nutritional quality of food, the freshness of products, and the true benefits of a product.

With consumers increasingly willing to swap personal information for customized products from firms as long as they can be trusted privacy issues will continue to be a public policy hot button. Consumer concerns are that will be robbed or cheated; that private information will be used against them; that someone will steal their identity; that they will be bombarded with solicitations; and that children will be targeted. Several companies have established consumer affairs departments to help formulate policies and respond to consumers complaints. Companies are careful to answer their e-mail and to resolve and learn from any customer complaints.

Clearly, new laws and growing numbers of pressure groups have put more restraints on marketers. Marketers have to clear their plans with the company’s legal, public relations, public affairs, and consumer affairs departments. Insurance companies directly or indirectly affect the design of smoke detectors; scientific groups affect the design of spray products by condemning aerosols. In essence, many private marketing transactions have moved into the public domain.