Using legal knowledge to limit liability or maximize opportunities
Companies operate within legal provisions that direct activities and establish how businesses should handle liabilities that threaten profitability. Golding (2017) notes that liabilities may arise out of regulatory or legal risks due to avoidable errors. In such a case, business owners need to know how to handle these risks in a way that limits liability. Beatty, Samuelson, and Abril (2016) assert that the rule of law exists to hold the government, businesses, and individuals accountable for their actions. This accountability translates to an improved business environment that allows for the maximization of opportunities (Davidson and Forsythe, 2017; Spurr, 2019). Legal knowledge is important since it helps businesses to understand their rights towards individuals and other businesses. Pride, Hughes, and Kapoor (2017) note that if a company enters into a contractual agreement with a supplier, the company should understand the obligations of each party.
Legal knowledge is crucial as it helps managers to spot potential legal issues and fix them before that can become liabilities. Bagley (2019) establishes that legal knowledge helps companies to understand their legal and intellectual rights something that allows for expansion. Businesses can apply legal knowledge in human resource management to ensure that they do not contravene labor practices, which would translate to business liability (Pagnattaro, Cahoy, and Magid, 2018). Additionally, legal knowledge is crucial since it is a way of protecting a business’s best interests since the law provides a framework for operating. (Miller, 2018). In such a case, a business will be in a better position to maximize the available opportunities as long as it is operating within the confines of the law.
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Summary of the four business legal strategies
Business legal strategies are the options that can be pursued by companies that are keen on being competitive and retain significant market share. The first strategy is noncompliance, a strategy that is adopted in competitive and uncertain business environments. Melvin and Guerra-Pujol (2018) establish that noncompliance is where businesses choose to flout the law if the costs for complying are grater that the costs for not complying with the law. The other strategy is avoidance where firms exploit grey areas in existing laws or create legal loopholes to minimize costs associated with compliance. The third strategy is prevention where firms minimize potential risks and in this way minimize liabilities. The last legal strategy that businesses use is value creation where businesses generate additional revenue streams allowing them to have a competitive advantage (Melvin and Guerra-Pujol,2018). Businesses are at liberty to choose the most favorable, and cost-effective strategy that would align with their objectives.
References
Bagley, C. E. (2019). Managers and the legal environment: Strategies for business . (9th ed.).Cengage Learning.
Beatty, J. F., Samuelson, S. S., & Abril, P. S. (2016). Business law and the legal environment ). Cengage Learning.
Davidson, D.V., & Forsythe, L. M. (2017). Business in the contemporary legal environment. Wolters Kluwer.
Golding, M.P. (2017). Legal reasoning, legal theory, and rights . Taylor & Francis.
Melvin, S. P., & Guerra-Pujol, F. E. (2018). The legal environment of business, a managerial approach: Theory to practice (3rd ed.). McGraw-Hill Education.
Miller, R. L. (2018). Business law: Text & cases (14th ed.). Cengage Learning.
Pagnattaro, M. A., Cahoy, D. R., & Magid, J. M. (2018). The legal and regulatory environment of business. McGraw-Hill Education.
Pride, W. M., Hughes, L. J., & Kapoor, J. R. (2017). Foundations of business . Cengage Learning.
Sanders, N. R., & Wood, J. D. (2020). Foundations of sustainable business: Theory, function, and strategy (2nd ed.). John Wiley & Sons Inc.
Spurr, S. J. (2019). Economic foundations of law . Taylor & Francis.
