EFFECT OF UNLICENSED BUSINESSES ON EFFICIENCY OF COUNCILS A CASE STUDY OF KIKUYU TOWN COUNCIL BY MAHEA TIMOTHY KIMANI L/123/569/2002 A PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE AWARD OF THE DIPLOMA IN BUSINES MANAGEMENT, UNIVERSITY OF NAIROBI AUGUST, 2003 1
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Effect of Unlicensed Business on Efficiency of Councils - Timothy Mahea
Timothy Mahea, This was a my research project which i undertook as part of the requirements for that course. A PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE AWARD OF THE DIPLOMA IN BUSINES MANAGEMENT, UNIVERSITY OF NAIROBI
AUGUST, 2003
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EFFECT OF UNLICENSED BUSINESSES ON EFFICIENCY OF
COUNCILS
A CASE STUDY OF KIKUYU TOWN COUNCIL
BY MAHEA TIMOTHY KIMANI
L/123/569/2002
A PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE
AWARD OF THE DIPLOMA IN BUSINES MANAGEMENT,
UNIVERSITY OF NAIROBI
AUGUST, 2003
1
DECLARATION
This research project is my original work and has not been presented for
a degree or diploma in any University.
NAME : MAHEA TIMOTHY KIMANI
REG NO. : L123/569/2002
SIGNATURE …………………………
DATE …………………………
This research project has been submitted for examination with my
approval as University Supervisor.
NAME : EVANS VIDIJA SAGWA
DESIGNATION : LECTURER
SIGNATURE ………………………….
DATE ………………………….
2
DEDICATION
I dedicate this work to my father Stephen, my mother Margaret who as
my parents enriched me with education and shaped my future to make me
who I am today. I also dedicate this work to my sister Evelyne, my
brothers Mark and Crispus for their support, guidance and
encouragement which enabled me to achieve my goal and above all for
their enduring love to me.
3
ACKNOWLEDGEMENTS
Foremost, I am grateful to God for his care and assistance. I would like to
take this opportunity to thank the following people for their assistance,
which gave value to this project.
Mr. Simon Kamau
Mr. Saruni Ole Kudate, Deputy Town Clerk Kikuyu
Mr. Martin Mukuria
Mr. Joseph Karanja
Mr. Kiruri
Mr. Danson Kahura
Mr. Amos Otuma
I register my profound gratitude and sincere acknowledgements to my
informants, my fellow students who have assisted me in diverse
capabilities. I appreciate the efforts of Martin Mukuria who inspired me
to begin this course.
I also express my indebtedness and special gratitude to Mr. Evans Vidija
Sagwa who was my supervisor. His insightful criticism, scholarly
comments, academic challenges and constructive dialogue were an
invaluable inspiration in the completion and quality of this project.
In the bibliography, I duly acknowledge with gratitude the authors of the
data used.
4
ABSTRACT
The council authorities play a major role in developing a country and
earning it a place compared to the others. They provide essential services
to the society, which are important to us in our day to day lives. The
revenue it earns and external funding aid the services they provide.
Services provided should be of high quality, reliability and convenient.
This research project investigated the effects of unlicensed businesses on
efficiency of the council. The study sought to know the views of the
council, the business owners and the residents of the Kikuyu area who
receive services from the Kikuyu Town Council and also are customers
of the businesses around the area.
To get qualitative information three types of questionnaires were
developed and distributed to all the parties respectively. The responses
were keenly analyzed and the data well recorded in order to know the
views of each party.
Much precaution was applied to ensure that the respondents did not
introduce biasness in the research so as to come up with valid findings
and know the situation as it is on the ground. The findings were analyzed
in pie charts, graphs and tables. Recommendations were given to promote
efficiency in the council and for better provision of services.
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TABLE OF CONTENTS
PAGE PAGE NOTitle Page ……………………………………………… (i)Declaration ……………………………………………. (ii)Dedication …………………………………………….. (iii)Acknowledgements …………………………………… (iv)Abstract ………………………………………………. (v)Table of contents ……………………………………… (vi)List of tables…………………………………………… (viii)1.0 CHAPTER ONE – INTRODUCTION
1.1 Introduction ……………………………………… 11.2 Statement of the Problem…………………………… 21.3 Purpose and Significance of the Study ……………… 21.4 Research Questions/Hypothesis/ Objectives of the Study 51.5 Scope and Limitations of the Study ………………… 61.6 Basic Assumption …………………………………… 71.7 Defination of Terms ………………………………… 81.8 Organization of the Study …………………………… 9
2.0 CHAPTER TWO – LITERATURE REVIEW
2.0 Literature Review ……………………………………. 112.1 Regulation of Business ……………………………… 112.2 Provision of Services ……………………………….. 122.3 Customer Satisfaction ………………………………. 132.4 Consumer Protection ……………………………….. 142.5 Service Standards ………………………………….. 152.6 Employee Motivation ……………………………… 162.7 Economic Conditions ……………………………… 182.8 Political (Legal Environment) ……………………... 192.9 Business and Society ………………………………. 202.10 Awareness of Major Social Problems …………….. 212.11 The Problem of Corruption…………………………. 22
3.0 CHAPTER THREE – RESEARCH METHODOLOGY
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3.0 Research Methodology ……………………………… 243.1 Research Design …………………………………….. 243.2 Sources of Data ……………………………………… 243.3Target Population…………………………………….. 243.4 Sampling Design ……………………………………. 253.5 Instruments of Data Collection ……………………... 253.6 Data Collection Procedure ………………………….. 273.7 Data Analysis Procedure ……………………………. 27
4.0 CHAPTER FOUR – DATA ANALYSIS
4.0 Data Analysis and Findings ………………………. 284.1.1 Customers Perception of Small Businesses
around Kikuyu Area ……………………………. 29a) Purchase from Small Business Operators ……. 29b) Reasons of Purchase from Small Business Operators 30c) Satisfaction …………………………………. 31d) Importance of Unlicensed Businesses ………. 32e) Prevention of Unlicensed Businesses ……….. 33
4.1.2 Views of Small Business Traders ………………... 34a) Period of Operation ………………………….. 34b) Rate of Consumers Served …………………… 34c) Major Problems Encountered ………………... 35d) Services Received ……………………………. 36
4.1.3 Views of kikuyu Town Council …………………. 38
5.0 CHAPTER FIVE – SUMMARY AND CONCLUSIONS
5.0 Summary and Conclusions ………………………… 415.1 Findings of the Study ………………………………. 415.2 Recommendation …………………………………… 435.3 Recommendations for Further Research ……………. 46
BIBLIOGRAPHY ……………………………………………. 47APPENDICES:Appendix I Questionnaire I……………….. …….. 48Appendix II Questionnaire II……………………... 50Appendix III Questionnaire III ……………………. 52Appendix IV Time Plan ……………………………. 55Appendix V Budget Plan ………………………….. 56
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LIST OF TABLES
Table Number Title Page No.
4.0(a) Purchase from Small Business Operators ……… 29
4.0 (b) Reasons for Purchase from Small Business Operators 30
4.0(c) Satisfaction ……………………………………… 31
4.0 (d) Importance of Unlicensed Businesses ………….. 32
4.0 (e) Prevention of Unlicensed Businesses ………….. 33
4.0 (f) Period of Operation …………………………….. 34
4.0 (g) Rate of Customers Served ………………………. 35
4.0 (h) Major problems Encountered…………………… 35
4.0 (i) Rating of Services Received ……………………. 37
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CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Study
Within the Republic of Kenya, for many years, there have been
unlicensed businesses operating with the members of the public
being aware of their existence. Some members of the public have
been customers of unlicensed businesses knowingly or
unknowingly. Out of the revenue collected, the Councils
Authorities are supposed to spend some of the amount on cleaning
the environment through garbage collection, provision of basic
infrastructure like water resources, roads and markets, and also
save some amount which can be used in future intended projects
like construction of schools, hospitals, sanitations and security
provisions.
The Councils Authorities are often faced with the problem of
dealing with unlicensed businesses, which are increasing rapidly,
and the situation has proved to be deterring the efforts of the
Council. For instance, the Kikuyu Town Council has been forced
to destroy kiosks and illegal structures constructed at matatu stages
and along roadsides. The Council askaris have also been involved
in constant running battles with hawkers in an effort to eliminate
the hawking business. In a previous survey carried out in the
Kikuyu area, which is under Kikuyu Town Council, it was found
that most of the unlicensed businesses deal with illegal products
like illicit brews and counterfeit products. The Council has also
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had to cultivate a good relationship with members of the public so
that they can help them know the businesses existing illegally so
that appropriate action can be taken. Councils ought to ensure that
they put in place measures that help it earn the revenue it is
supposed to earn and closely monitor businesses to attain the best
results, and a realistic projection of its financial obligations and
services to its residents.
1.2 Statement of the Problem
Efficiency of the Councils has not been fully achieved despite their
efforts. One of the major hindrances is thought to be the unlicensed
businesses that are increasing rapidly. These businesses are
considered a security threat, environmental risk and have an impact
on the society in various ways since most of them do not satisfy
the required set standards. For the Councils to be efficient, they
have to ensure that they take all the measures in the best way
possible. These issues concretize the important point of eliminating
unlicensed businesses. The researcher intends to establish ways of
keeping such businesses in check.
1.3 Purpose and Significance of the Study
The purpose and significance of the study was: -
a) To investigate how unlicensed businesses came into
existence, why they came into existence and how they
can be eliminated.
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b) To establish the kind of customers this businesses target
and their social status.
c) To find out ways of ensuring that this kind of businesses
do not have room for existence in future.
The result of this study will be important to various groups of
people in various ways: -
Consumers
In most cases, consumers are often faced by problems of buying
substandard goods, imitated and defected products. The findings of
this study will create awareness of the unlicensed businesses
existence and educate them on their effects. They will also be able
to know the best places to shop their items.
Businessmen.
With the knowledge attained concerning unlicensed businesses and
substandard products by the genuine businessmen, it will help
them supply to consumers the products that are from licensed
businesses and that are up to the set standards. It will also enable
them to exercise extreme caution especially when buying products
to ensure they attain those that are of high quality and
performance.
Councils
Unlicensed businesses are a threat to efficiency of the Councils.
The Councils will benefit from the result because they will get
information that will help them in tackling the problem and putting
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measures in place to prevent such businesses from operating in
future. The revenue collection would be greatly improved and
security and environmental pollutions manageable.
Government
Through legislations the government will be able to formulate
ways of dealing with unlicensed businesses and the offenders of
the law who lie in that category. Loss of revenue will be put under
control.
Investors
The investors will benefit when unlicensed businesses are
eliminated because they will be sure that there will be no
counterfeiting of their products. This will go a long way in helping
acquire the revenue they deserve and the consumers will have the
right perception of their products.
Society
When the councils are efficient, they are able to create a condusive
environment for investors and the society at large. The society will
benefit from the good services that the Councils will offer and
from investors who may invest in the area through improvement of
infrastructure and through employment.
Research
The findings of the study will also contribute much to the available
literature, which can further be used in future research references.
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1.4 Research Questions/Hypothesis /Objectives of the Study.
The following research questions were used as a guide to the
study: -
a) What is the view of members of the public regarding the
existence of unlicensed businesses in their society?
b) Are the customers of unlicensed businesses satisfied with
the kind of products or services that are offered?
c) What effect do unlicensed businesses have on the area
they operate in, the customers and competition in the
market?
The hypothesis of this study included the following: -
a) Lack of awareness among consumers has promoted the
existence of unlicensed businesses.
b) Efficiency in the Councils can be achieved if much effort
is put in to deal with the problems encountered.
The main objective of this study was to establish the main reason
leading to the existence of unlicensed businesses. Specific
objectives included the following: -
a) To find out why consumers of the products prefer buying
from unlicensed businesses rather than buying from licensed
businesses.
b) To investigate how the Kikuyu Town Council has dealt with
previous problems of unlicensed businesses and the
penalties given if any.
c) To offer suggestions on measures that can be put in place to
eliminate unlicensed businesses.
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1.5 Scope and Limitations of the Study
(a) The scope
The study was carried out at Kikuyu Town Council, at random
selected businesses and randomly selected residents in the area. It
was also stretched to Nairobi City Council, which is in charge of
the Capital City of Kenya. The respondents in this study included
businessmen, the governing body of the councils and members of
the public who are also the consumers.
(b) Limitations.
There are some factors that limited the progress of the study. They
included: -
Respondents
The researcher had a difficult time when gathering information
from the respondents. Some of them might have not fully provided
the required data due to fear of intimidation. Some of the
respondents ignored the most sensitive questions while others did
not fill all the questions in the questionnaire.
Finance
The study involved traveling to various areas to gather
information. It also involved preparation and distribution of
questionnaires. After information gathering, arrangement and
analysis of data and the preparation of the final report was
required. Large sums of money were required which were not
14
available since the amount financing the project had to be properly
budgeted to sustain all the requirements up to its completion.
Data sources
There was lack of documented information in some areas required
to be studied and most information to be gathered was from the
respondents. Some of the respondents may have introduced
biasness in the study if they gave incorrect information. Also in
some areas the data sources were scarce and this might have
affected the study since the project had a time limit.
Time
The project was carried out within a period of six months. The
time might not have been sufficient for exhaustive investigation
and survey.
1.6 Basic Assumptions
The study was based on the following assumptions: -
a) That unlicensed businesses exist illegally.
b) The Councils are devoted to eliminating illegal
businesses in the market.
c) That the Councils would like to deliver the best services
to members of the public and work to everyone’s
satisfaction.
d) That members of the public have a good perception of
the Council where it shows commitment to provision of
good services to the society.
15
e) That where Councils have eliminated unlicensed
businesses there is improved efficiency and a good
relationship with members of the public developed.
f) That efficiency is achieved where an organization clearly
defines its objectives and works towards the realization
and achievement of their intentions through working
together and all members of the organization feeling
responsible at their level of operation.
1.7 Definition of Terms
Unlicensed Businesses
Any business operating without a valid license from the government.
It may take place in two ways: either it may have acquired a license
initially but after it expired, it was never renewed or it may have
never acquired a license because the owner does not want to acquire
one or the business is not legal according to the law therefore cannot
be licensed.
Town Councils
These are elected governing bodies of towns. They have the power to
make by laws, rules, regulations and decisions for towns and
enforcements.
Kikuyu Town Council
An elected governing body of Kikuyu Town in Kiambu District.
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Council Askaris
They are people who are employed and trained by the Council to
undertake, among other duties, apprehension of people who in their
course of business break the by laws made by the Council.
Hawkers
Individuals who carry out their businesses on temporary or moveable
structures. They carry out their businesses on pavements in the
streets, at the roadsides and in undeveloped government or public
utility land.
Kiosks
These are business structures similar to constructed shops, which deal
with various items depending on the objectives of the owner, but
usually have few items and are small-scale businesses.
1.8 Organization of the Study
The organization of the study was as follows: -
A financial budget was set out to cover transport, stationeries,
photocopying, binding and other overhead costs. Questionnaires were
constructed and distributed to owners of unlicensed businesses, to
members of the public around the Kikuyu area and outskirts centers
of Nairobi and one questionnaire to the governing body of Kikuyu
Town Council.
17
Interviews were carried out with the Kikuyu Town Council governing
body and with some of the employees in that organization. Also
interviews were conducted with members of the public who are the
main customers of the items supplied by various businesses.
Where possible, some of the customers of unlicensed businesses were
observed as they purchased various items without fear or hesitations.
The responses that were received from Kikuyu Town Council
governing body, members of the public and owners of unlicensed
businesses were analyzed through editing, coding and tabulation
methods. The findings and recommendations were done based on the
data that was analyzed. Recommendations were given to benefit the
parties involved and for further research.
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CHAPTER TWO
2.0`LITERATURE REVIEW
The researcher reviewed literature related to the research as
follows: -
2.1 Regulation of Business
In a newspaper supplement in the Daily Nation of May 6. 2003,the
Nairobi mayor Mr. Joe Akech observed that, “…. constant running
battles between the hawkers and Council Askaris does not help
much in streamlining business in the Central Business District
Area”.
From this experience it follows other Town Councils have to learn
how to come up with better ways of conducting business. This may
involve the licensing of the hawking business and allocation of
areas where individuals can conduct their businesses. This helps in
keeping the central business area clean and also ease congestion of
vehicles and individuals. Accessibility is also enhanced to the
convenience of customers since they are able to access the
products they want easily.
The Councils need to create areas where businesses can be
performed in an effort to give a permanent solution since the
hawkers want to carry out business like other individuals. With
their small capital and in a combined effort, the Council can be
able to provide business premises spaces and at the same time have
a revenue source.
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2.2 Provision of Services
The service received by individuals from the Council goes a long
way in creating a perception in individuals about the Council.
Whether the perception is good or bad depends on the kind of
services they get. In a newspaper supplement in the Daily Nation
of May, 6,2003, the City Council of Nairobi Town Clerk, Mr. Jack
Mbugua noted that “…. The major changes undertaken are to de-
congest the paying halls, and to ensure that the pay-in counters are
well marked……………. The revenue collection has also
improved”.
This follows that the customers will be able to easily identify the
counters and pay their bills and taxes comfortably and
conveniently. The customers will have a good perception of the
Council and will see an improvement to the right direction. The
quality of service received is what determines people’s loyalties
and satisfaction. Whenever the services expected are received and
to the satisfaction of the people, good communication is achieved
such that whenever there is a problem hindering the provision of
the services, people will understand and will not complain. When
individuals are satisfied they become advocates of the organization
through their comments.
According to Watkins (1997), the quality of service depends not
only upon the efficiency of the methods and physical facilities, but
it is also heavily reliant upon the knowledge, skills, enthusiasm
and loyalty of the staff. It is important to have very qualified
personnel to enable efficient service provision. Each member of
20
staff should feel part of the organization and feel responsible at his
level of operation.
2.3 Consumer Satisfaction
Consumer satisfaction is attained when consumers get products or
series that are of high quality. When a consumer gets a product of
high quality and performance, and the product benefits him to the
fullest, the consumer feels satisfied. The same case applies to a
service which when provided in the best way possible leaves the
consumers satisfied. Consumer satisfaction is determined by many
factors like: -
i. Where the product or service is received,
ii. The manner in which it is given,
iii. The quality and performance of the product or service,
iv. The convenience of getting it,
v. Whether it satisfies the required needs.
These factors need to be considered if consumer satisfaction is to
be achieved. The person dealing with customers who are also
consumers should be having the required skills and knowledge to
ensure that communication between them is done in the right way.
They should be able to treat the consumers in a way they feel
comfortable (Samuelson and Nordhaus, 1995).
21
2.4 Consumer Protection
The government has supported and also put in place measures to
protect consumers from being exploited by the producers and
retailers. The kind of protection given is divided into two
categories: -
1) Regulations- this are prescribed by the status and
administered by the central government and the
local government.
2) Activities initiated and directed by voluntary
organizations to exert pressure on manufactures and
distributors to remedy defects or redress genuine
complains, improved trade practices and standards,
and initiate legal action for redress.
Consumer protection plays an important role in the society. Most
consumers are not aware of their rights. Those who know their
rights and they are infringed, do not know the proceedings to
follow, or, they are not willing to spend their resources in terms of
time and finance on law suits. It therefore follows that it is
important for the government to take action to protect consumers.
The basic functions of consumer protection are: -
a) To protect consumers against sale of goods of
poor quality.
b) Protect consumers from being sold products
that do not indicate ingredients used in
manufacturing a product.
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c) Protect consumers from being provided with
services that are of inadequate nature.
d) Protect consumers from being sold items that
are of the right weight and measures.
e) Protection from the failure of retailers or
producers to uphold conditions set out or
implied in contracts, executed for goods and
services.
This protection keeps the producers on their toes because they
know they have to follow the laid down procedures. Since they
know the remedy, they try and observe the law and this ensures
that the consumers get the best (Samuelson and Nordhaus, 1995).
2.5 Service Standards
Duty performance – a duty is a responsibility that is entrusted to
an individual or to a group of individuals. A duty well done is
satisfaction to everyone. The way a duty is done determines many
other factors that follow after. It also tells people something about
the person who performed the task. If a duty is poorly done, people
may think that the person performing the duty is lazy or is
demotivated or not committed to his job. But when a duty is well
done, it shows that the person doing it is committed to the job or is
hard working or he enjoys doing it. Something well done is eye
catching and attraction to many people. For instance, when an
individual takes his vehicle to a car washer and it is cleaned
thoroughly, he will notice that and will feel like always wanting to
have his vehicle cleaned at that place. This helps a lot in winning
the confidence of people.
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Handling complaints – any complain resulting from delivery of
services should be handled with a lot of seriousness. Ways of
solving the problem should be immediately established and a
permanent solution be put in place to prevent that from recurring in
future. The staff dealing with the customers and who handle the
complaints should have the necessary skills needed in dealing with
people. They should be able to handle complainants and
appropriate action taken to solve the problem (Watkins, 1997).
2.6 Employee Motivation.
The primary task of an organization is to ensure productivity as
such the primary task of the management therefore is to ensure that
this objective is achieved by seeing that subordinates staff work
efficiently and produce results that are beneficial to the
organization. Various things can be done to motivate employees.
They include: higher pay, prestigious title, nametag praise,
recognition and responsibility. Studies carried out have shown that
motivated employees perform better than demotivated employees.
Therefore, to induce people so that they can contribute efficiently
and effectively, motivation is necessary if at all the goals of an
organization are to be achieved. The management needs to
understand the behaviour of their subordinates. The driving force
that makes employees work is the desire to satisfy a need. But if
they work and their needs remain unsatisfied they may result in
irrational behaviours. This may include:
a) Aggression – This is a destructive behaviour such as
hostility (physical/verbal) and striking out. The feelings
24
of rage or hostility are directed against the person or
object that is felt to be the cause of frustrations.
b) Rationalizing – means making excuses such as blaming
someone else for inability to accomplish a goal.
c) Regression – means not acting one’s age by resulting to
immature acts e.g. unreasonable complaining or crying.
d) Fixation – occurs when a person exhibits the same
behaviour pattern several times even though the
experience has shown that it can accomplish nothing.
Research has shown that frustration can maintain old and
habitual responses and prevent the use of new and more
effective methods.
e) Resignation (apathy) – occurs when people lose hope of
accomplishing their goals and withdraw from reality and
the source of their frustrations. It involves complete
surrender and borders on serious mental disorders. This
phenomenon is characteristic of people in boring, routine
jobs, where they resign themselves to their goals.
The organizations should create an environment in which people
feel the burning desire for work and the willingness to exert high
levels of effort to achieve a predetermined reward or goal (Stewart
and McGoldrick, 1996).
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2.7 Economic Conditions
Development is brought about by the growth of the economy.
When the economic situation of a country is registering good
performance, people’s standards of living improve and they
become independent. In a developed economy people are assured
of the basic needs, therefore they get a chance to plan their future
and their way of survival. On the contrast, in the case of a poor
performing economy, things are usually negative people standards
of living are low and poverty is evident. The rate of unemployment
is very high and some of those employed get little pay that just
enables them to survive but they cannot do anything beyond that to
better their lives. In such a case, insecurity increases and people
tend to break the law in order to survive. People usually in such
circumstances, would do anything or do any kind of business in
order to get money. This leads to an increase in theft, corruption,
violence, increase in the black market and sale of illegal items. It
also leads to increase in small illegal businesses like sale of illicit
drugs and illicit brews, loss of self-esteem and degrading of human
value.
The economic conditions in a country, such as level of
development, natural resources, income distribution, availability of
technical personnel, supply of power, development of transport and
communication and other infrastructure are important factors to
consider in an economy. Some of the economic policies that
government applies have major setbacks and a negative impact on
the growth of an economy.
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2.8 Political (Legal Environment)
Political - legal environment has direct economic impact on
business firms. The government can play a supportive role to
encourage business enterprise and regulative role to control
business enterprises in the interest of public good. For example, the
Local, State and Central Government can undertake many steps to
encourage or protect business enterprises through tariffs, tax