Monday, August 31, 2009

Legal Issues for Entrepreneurs

It is important for the manager, particularly the manager of a new venture, to understand and use the law as a tool in corporate strategy. Law is too vital and strategic to be left to the legal department or external counsel alone. A company should cultivate compliance strength.

It is vital to appreciate and understand the role of the law in the value creation chain. Expertise in the rules [of any game] provides a competitive advantage. In business, legal knowledge helps organisations gain profits in three ways:
· Property – Law which usually penalises monopolies is quite generous in granting ‘legal monopolies to encourage innovation and development. Copyright – the form of intellectual property at the heart of the Napster case – provides a great example of the evolution of modern property rules and their growing importance to business.
· Rules defining Markets – The law creates competitive advantage by defining the boundaries of markets.
· Legal capabilities – The development of specialised legal capabilities – resources and skills allows a company to spot opportunities, take initiatives and fend off attacks especially well, relative that is, to rivals.

Five Factors [as developed by Michael E Porter] for enterprise success continue to be the legal touchstone –
· The Merits;
· Public Legitimacy;
· Strategic Position;
· Resources;
· Access.

Here is my list of ten points [relating to the law] that entrepreneurs should keep in mind -
· Understand the Law – contemplate legal risk in any action;
· Know the Rules [and play by them];
· Cultivate Compliance for Strategic Strength [Comply with all laws, commercial or general, including and especially environmental ad waste management related laws];
· Use Contracts to Define and Strengthen Relationships;
· Use the Intangible Edge [Capture the Value of Intellectual Capital];
· Protect the Brand [Corporate Reputation, Brands, Trademarks and Domain Names];
· Harness Human Capital – Be mindful of employment law and especially of problem areas like sexual harassment. Design fair and effective human resource policies;
· Manage Disputes – Do not always litigate or rush to arbitration, deploy mediation and other conciliatory measures;
· Be Open to good legal advice – cultivate an attorney-client privileged relationship;
· Develop a legal sense – Spot legal issues before they become legal problems.


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