Technological Change
→ Technological change refers to the development and adoption of new technologies that change how businesses produce, market, sell and deliver goods and services.
→ Technology can affect almost every area of a business:
→ Production
→ Marketing
→ Finance
→ Human resources
→ Distribution
→ Communication
→ Customer service
→ Decision-making
Impact on Production
→ New technology can increase the efficiency of production.
→ Automation and machinery can:
→ Increase output
→ Reduce production time
→ Improve consistency
→ Reduce waste
→ Reduce labour requirements
→ Improve product quality
Example
→ A manufacturer introduces automated machinery → production becomes faster → output per worker ↑ → unit costs may ↓.
→ However:
→ Machinery requires investment → initial costs ↑ → employees may need training → maintenance costs may ↑.
Automation and Artificial Intelligence
→ Automation involves using technology to perform tasks with limited human intervention.
→ Artificial intelligence (AI) can analyse information, recognise patterns and perform tasks that traditionally required human judgement.
Possible business uses include:
→ Customer service chatbots
→ Stock management
→ Fraud detection
→ Demand forecasting
→ Personalised marketing
→ Quality control
→ Data analysis
Business impact
→ Automation/AI → productivity ↑ → operating costs may ↓ → output capacity ↑.
→ But:
→ Investment costs ↑ → training requirements ↑ → some jobs may be reduced → businesses may need to retrain employees.
Impact on Marketing
→ Technology has changed how businesses communicate with customers.
Businesses can use:
→ Social media
→ Websites
→ Search advertising
→ Email marketing
→ Online videos
→ Influencer marketing
→ Data analytics
→ Personalised advertising
Benefits
→ Large audiences can be reached quickly.
→ Advertising can be targeted at specific customer groups.
→ Businesses can measure customer responses.
→ Digital marketing may be cheaper than some traditional forms of advertising.
Example
→ A small business uses social media to advertise its products → reaches customers beyond its local area → potential market size ↑.
E-Commerce
→ E-commerce involves buying and selling goods and services online.
→ Businesses can sell through:
→ Their own websites
→ Online marketplaces
→ Mobile applications
→ Social-commerce platforms
Benefits
→ Wider geographical market
→ 24-hour availability
→ Lower need for physical stores
→ Greater convenience for customers
→ Access to customer data
Problems
→ Website and technology costs
→ Cybersecurity risks
→ Online competition ↑
→ Delivery and logistics challenges
→ Dependence on technology
Impact on Communication
→ Digital technology allows businesses to communicate rapidly with:
→ Employees
→ Customers
→ Suppliers
→ Investors
→ Businesses can use:
→ Video conferencing
→ Messaging platforms
→ Cloud-based systems
→ Online collaboration tools
→ Faster communication → quicker decision-making → potentially greater efficiency.
Impact on Human Resources
→ Technology can change the number and types of workers required.
→ Automation may reduce demand for some routine jobs.
→ At the same time, demand may increase for workers with skills in:
→ Data analysis
→ Software
→ Cybersecurity
→ Digital marketing
→ AI
→ Engineering
Training
→ New technology → employees may need new skills → training costs ↑.
→ Effective training → employee productivity ↑ → benefits from technology may increase.
Impact on Finance
→ Technology can improve financial management through:
→ Accounting software
→ Online banking
→ Digital payments
→ Automated payroll
→ Financial forecasting
→ Real-time financial information
→ Faster and more accurate financial information → better business decisions.
Impact on Inventory and Supply Chains
→ Technology can improve the management of inventory and supplies.
Examples:
→ Barcode systems
→ RFID technology
→ Inventory management software
→ Automated warehouses
→ Real-time tracking
→ Better information → stock levels can be monitored more accurately → risk of overstocking or stockouts may ↓.
Impact on Customer Service
→ Businesses can use technology to provide faster and more convenient customer service.
Examples:
→ Chatbots
→ Online help centres
→ Mobile applications
→ Automated order tracking
→ Personalised recommendations
→ Better customer service → customer satisfaction and loyalty may ↑.
→ However, excessive automation may reduce the personal interaction some customers prefer.
Impact on Business Costs
Technology can have both positive and negative effects on costs.
Possible Cost Reductions
→ Automation → labour cost per unit may ↓
→ Better production technology → waste ↓
→ Digital marketing → advertising costs may ↓
→ Online distribution → some physical-store costs ↓
→ Inventory software → stockholding costs may ↓
Possible Cost Increases
→ Initial investment ↑
→ Employee training costs ↑
→ Software subscriptions ↑
→ Maintenance costs ↑
→ Cybersecurity costs ↑
→ Technology upgrades may be required regularly.
Impact on Productivity
→ Productivity measures output produced relative to the resources used.
→ New technology can increase productivity.
Better technology → more output from the same resources → productivity ↑ → unit costs may ↓
→ Higher productivity can make a business more competitive.
Impact on Quality
→ Technology can improve product quality by making production more accurate and consistent.
→ Automated quality-control systems can identify defects more quickly.
→ Fewer defects → less waste → lower costs → customer satisfaction may ↑.
→ However, technology does not automatically guarantee quality. Poorly designed systems or incorrect data can still produce poor results.
Technological Change and Competition
→ Technology can increase competition.
→ Online platforms allow customers to compare:
→ Prices
→ Quality
→ Reviews
→ Features
→ Businesses may therefore need to innovate continuously.
Technological change → competition ↑ → pressure to innovate ↑ → investment in technology ↑
→ Businesses that fail to adapt may lose market share.
Technological Change and Innovation
→ Technology can allow businesses to develop:
→ New products
→ New production methods
→ New distribution channels
→ New business models
Example
→ Streaming technology changed the way consumers access entertainment.
→ Businesses moved from physical products and scheduled broadcasting towards digital, on-demand services.
Risks of Technological Change
High Investment Costs
→ New technology may require substantial initial investment.
→ This can be particularly difficult for small businesses.
Rapid Obsolescence
→ Technology can become outdated quickly.
→ Businesses may need to replace equipment or software before the end of its expected life.
Cybersecurity
→ Greater use of digital systems increases exposure to:
→ Hacking
→ Data theft
→ Fraud
→ Ransomware
→ Businesses may therefore need to invest in cybersecurity.
Employee Resistance
→ Employees may resist new technology because they:
→ Fear job losses
→ Lack the necessary skills
→ Are comfortable with existing systems
→ Training and communication can reduce these problems.
Dependence on Technology
→ Technology failure can interrupt business operations.
→ Examples:
→ Website failure
→ Payment-system failure
→ Internet disruption
→ Software failure
→ Businesses may need backup systems and contingency plans.
Impact on Business Decisions
Investment Decisions
→ Businesses must decide whether the benefits of new technology justify its cost.
Technology investment → initial cost ↑ → productivity/capacity may ↑ → unit costs may ↓ → long-term profitability may ↑
→ A business may delay investment if:
→ Technology is too expensive
→ Benefits are uncertain
→ Technology is changing very quickly
Production Decisions
→ Businesses may decide to:
→ Automate production
→ Introduce new machinery
→ Change production methods
→ Increase capacity
→ Reduce labour-intensive processes
Human Resource Decisions
→ Technology may lead to:
→ Recruitment of skilled employees
→ Employee training
→ Redeployment of workers
→ Reduction in some jobs
→ Creation of new jobs
Marketing Decisions
→ Businesses may decide to:
→ Increase digital advertising
→ Use social media
→ Sell online
→ Use customer data
→ Personalise marketing
→ Develop mobile applications
Location Decisions
→ Technology can reduce the importance of physical location for some businesses.
→ E-commerce businesses may reach customers globally without large numbers of physical stores.
→ However, location remains important for businesses that depend on:
→ Customer footfall
→ Transport networks
→ Warehouses
→ Skilled labour