Legal environment must be feasible to run a business. Legal factors relate to the role of law in society and its role in business relationships. This can be assessed in terms of the following:
Systemic factors: How effective is the legal system at enforcing contracts? To what extent are legal decisions likely to be interfered with by politicians i.e. are the courts independent of government? How easy is it to get hold of legal advice? How speedy are the courts? To what extent is regulation delegated? Are rights of private property genuinely enforceable?
Cultural factors: To what extent are business relationships conducted formally or informally? The USA is regarded as a litigious society; in Japan (partly because the small size of the legal profession), business is widely believed to be based more on long-term relationships.
Context and regulatory factors: cover civil and criminal law, laws relating to consumer protection and advertising, employment and so forth. Furthermore, to what extent is competition promoted, regulated and enforced? Intellectual property rights are examples of specific issues which need to be considered.