Intervention from Governments can occur in many ways and also for many reasons. The main reasons for policy intervention are; to correct for market failure, to achieve a more equitable distribution of income and wealth and to improve the performance of the economy. When we have to evaluate the effects of the legislations put in place by the government it is important to consider the type of legislation implemented, its size and also the type of market that it is placed into as there will be different benefits and drawbacks for every business. That is why one of the most important factors to consider is the people who are being impacted within the business to see whether the government legislation is desirable.
Regulation may be used to introduce fresh competition into a market. When a new business (competitor) enters a market, which may already contain businesses with high market share it can be extremely hard to attract and keep consumers. In order to provide opportunity and a chance to new businesses the government will help them for example breaking up the existing monopoly power of a service provider. An example of this is the attempt to introduce more competition for British Telecom, with businesses such as talktalk, Sky and plus net. This is known as market liberalisation. Here it shows it depends on which business in the market to see whether it does provide a level playing field and if it is desirable. For the new businesses this intervention from the government is priceless as it provides them with a great opportunity to survive and grow. However to the high market share businesses it is most likely to be seen as unfair as they had to grow and work hard to get where they are today with the high market share. Resulting in a level playing field for one business for an un-level playing field for the other.
Often market failure occurs due to consumers suffering from an absence of information about the costs and benefits of the products available in the market place. Government action can have a part in refining information to help consumers and producers value the ‘true’ cost and/or benefit of a good or service. There are many ways in which the government have done this. They have made it compulsory for cigarette companies to have labelling on cigarette packages with health warnings to reduce smoking and also anti-speeding television advertising to reduce road accidents and advertising campaigns to raise awareness of the risks of drink-driving. These programmes are really intended to change the “perceived” costs and benefits of consumption for the consumer. They don’t have any direct effect on market prices, but they seek to influence “demand” and therefore output and consumption in the long run. Increasingly adverts are becoming more hard-hitting in a bid to have an effect on consumers. This government intervention provides an un-level playing field as it provides the opposite product a boost in consumer demand. For example adverts on drink driving prevent people from purchasing alcohol and instead buy non-alcoholic beverages reducing demand creating an unfair playing field as the government can be seen to be siding with one side.
Government legislations can be created and implemented to affect employment within the universal business environment. The business environment areas which this employment legislation can effect are; the level of the national minimum wage, discrimination laws (employment of workers) and changes in regard to the right of employees. HSBC is a business which has been affected by their enforcement of employment legislation. They received threats from trade unions of employees of strikes after they announced job cuts of 1000 employees earlier this year. The government legislation gives employees the right to join unions and the diplomatic right to undertake industrial action. With this example of HSBC, government intervention in the form of enforcement of employment rights is desirable for the employees of HSBC. The right provides them the ability to increase the right to protest HSBC's proposed changes to the number of people employed, as well as the proposed changes to pensions and holiday pay.