External environment illustration External environment theory

Reasons for regulating business activity

Regulation means providing rules and frameworks for business and other activity. Some aspects of business activity are self-regulating - for example the Advertising Standards Authority provides a voluntary code of practice for the regulation of advertising in this country. However, in many areas it is important to establish some form of compulsory regulation backed up by legal sanctions such as fines, and even prison sentences for directors (and employees) for malpractice.

Today we are bound by European Union regulations which are directly binding on all Member States without the need for national legislation to put them in place.

Regulation takes place:

  • to guarantee minimum standards e.g. of consumer protection, health and safety at work etc
  • to protect the weak against the strong e.g. small companies against larger companies or groups of companies that work together to fix prices
  • to provide benchmarks of good practice for business to set as minimum standards
  • to provide an appropriate framework for ethical business behaviour
  • to create standards where none exist.

In a number of industries that were formerly under government control, regulators have been appointed to make sure that prices are fair, and that there are no restrictive practices carried out by the newly privatised businesses that operate in these markets e.g. OFWAT is the official regulator for the water industry.



Supporting Documents

These downloads will help to put external-environment theory into context using real world examples from real businesses.

The use of social media in promotion
National Trust logo

Discover how National Trust used external-environment theory to succeed in the non-profit industry by downloading our premium case study.

Using sponsorship to increase brand awareness
Infiniti logo

Learn how Infiniti employed external-environment theory to succeed in the automotive industry by downloading our premium case study.

Creating the right marketing mix
Motorola logo

Discover how Motorola used external-environment theory to prosper in the telecommunications industry by downloading our premium case study.

Sponsorship as part of the marketing mix
Ford logo

Find out how Ford employed external-environment theory to thrive in the automotive industry by downloading our premium case study.

Innovation in infant nutrition
Cow & Gate logo

Discover how Cow & Gate employed external-environment theory to thrive in the food & drink industry by downloading our premium case study.