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Technological Change
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Teaching Business
Technological Change
A clear guide to technological change, covering how developments such as automation, AI, e-commerce, data analytics and digital platforms affect business functions, strategy, competitiveness and decision-making.
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Created by an experienced Head of Business and examiner
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AQA | Edexcel | Cambridge | Eduqas | WJEC | OCR | GCSE
KEY POINTS
Technological change refers to developments in tools, systems, processes and digital methods that affect how businesses operate and compete.
It can affect all functional areas, including marketing, operations, finance and human resources.
Examples include automation, robotics, artificial intelligence, e-commerce, data analytics, cloud systems, apps and digital payment systems.
Technological change can improve productivity, quality, speed, customer service and access to data.
It can create new business models, such as online platforms, subscription services and digitally enabled delivery.
It can also increase pressure on businesses because competitors may use technology to lower costs or improve customer experience.
Technology often requires investment, staff training, systems integration and careful change management.
There are risks linked to cyber security, data protection, job losses, resistance to change and rapid obsolescence.
Strong exam answers explain whether the technology creates a real competitive advantage for the specific business.
The best judgement depends on cost, timing, customer acceptance, staff capability, risk and strategic fit.
KEY DEFINITION
Technological change
Technological change is the development or adoption of new tools, systems, processes and digital methods that affect how businesses produce, sell, communicate, manage data and compete.
Main Explanation
Technological change is an important external influence because it can alter how businesses operate, compete and make decisions. It includes developments such as automation, robotics, artificial intelligence, e-commerce, mobile apps, cloud systems, data analytics, digital payment systems and online communication tools.
Technological change can affect every functional area of a business. In marketing, businesses may use websites, social media, search advertising, customer relationship management systems and data analytics to target customers more effectively. This can help a business understand customer behaviour, personalise promotions and improve customer retention.
In operations, technology can improve productivity and efficiency. Automation, robotics, stock-control systems and digital supply-chain platforms can reduce waste, speed up production and improve consistency. This may lower unit costs or improve quality, especially where tasks are repetitive, data-heavy or require high levels of accuracy.
In finance, technology can improve the speed and accuracy of financial information. Digital accounting systems, forecasting tools, online payments and financial dashboards can help managers monitor cash flow, costs and performance more effectively. However, new technology may also require significant investment, so managers need to consider payback, risk and affordability.
In human resources, technological change can alter job roles, training needs and workforce planning. Some employees may need new digital skills, while others may feel threatened by automation or changes to working practices. Technology can also support flexible working, online recruitment, digital training and improved communication, but it may increase the need for careful change management.
Technological change can create major opportunities. A business may use technology to improve customer experience, reduce costs, launch new products, enter online markets or respond faster to customer demand. Businesses that adopt effective technology before competitors may gain a competitive advantage through lower costs, better service, stronger data or faster innovation.
However, technological change also creates threats. Competitors may use new technology to disrupt existing markets. A business that fails to adapt may lose customers if its products, processes or customer service seem outdated. Technology can also increase vulnerability to cyber attacks, system failures, data breaches and reputational damage.
Another issue is cost. New technology may require investment in equipment, software, training, cyber security, maintenance and specialist staff. This can place pressure on cash flow and may be risky if the technology becomes outdated quickly or if customers do not value the change.
Technological change can also create ethical and social concerns. Automation may reduce the need for some job roles, while data collection can raise concerns about privacy and responsible use of customer information. Businesses need to consider whether the benefits of technology justify the impact on employees, customers and wider stakeholders.
Overall, technological change is not automatically beneficial. It can improve efficiency, innovation and competitiveness, but only if the business has the resources, skills and strategy to use it effectively. The impact depends on the type of technology, the pace of change in the market, customer expectations, competitor actions and the business’s ability to manage risk.
✎ EXAMINER TIP
When answering questions on technological change, avoid simply listing examples of technology. Explain how the technology affects specific business functions, costs, customer experience, productivity, competitive advantage and long-term strategy.
KEY FORMULAS(s)
Profit and Profitability Formulas
These key formulas help you calculate different profit measures and profitability ratios used in business.
Gross Profit
Gross profit = Revenue − Cost of sales
The profit made after deducting direct costs.
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Remember: profit shows how much money has been made, while profitability shows how efficiently revenue is being turned into profit.
DATA TABLE
Income Statement for North Coast Coffee Ltd
This statement shows how revenue is converted into gross profit, operating profit and net profit.
Revenue
£250,000
Output
Fixed Costs
Variable Costs
Total Costs
Revenue
Profit / Loss
0 candles £1,200 £0 £1,200 £0 -£1,200
Net profit is the final profit remaining after all costs and expenses have been deducted from revenue.
Technological Change: Opportunity, Risk and Strategic Fit
This chart compares the opportunities created by technological change with the risks of investment, implementation, cyber security, staff resistance and rapid obsolescence.
WORKED EXAMPLE
Worked Example: North Coast Coffee
How many coffees must be sold to break even?
Fixed Costs
£1,800
equity + long-term debt
Break-even output = Fixed costs ÷ Contribution per unit
Contribution per unit = Selling price − Variable cost
£3.50 − £1.10 = £2.40
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Step 1: Calculate contribution
£3.50 − £1.10 = £2.40
Contribution per unit is the amount each coffee contributes towards fixed costs.
BREAK-EVEN OUTPUT:
750 coffees per month
EXAM TIP
Always explain what the number means for the business. Do not just calculate the break-even point.
How Technological Change Affects Business Functions
This diagram shows how technological change can affect marketing, operations, finance, human resources and overall business strategy.
APPLICATION
Ocado Group
Ocado Group provides a useful real-world example of technological change because the business is closely linked to online grocery, fulfilment, logistics, automation, robotics and artificial intelligence.
Technology is central to Ocado’s business model. The company’s systems are designed to help manage the complexity of online grocery, where businesses must handle varied customer orders, delivery timing, stock availability, temperature-controlled products and high expectations for convenience.
This shows how technological change can affect operations. Automation and robotics can help improve the speed and accuracy of fulfilment. If technology allows orders to be picked, packed and processed more efficiently, it may improve productivity and help the business manage high order volumes.
Technology can also affect strategy. Ocado is not only an online grocery retailer; it also develops technology solutions for grocery and logistics. This shows how technological change can create new business opportunities and business models, not just improve existing processes.
However, the example also shows that technological change can be complex and risky. Advanced technology may require high investment, specialist staff, reliable systems and continuous development. If implementation is slow, costly or difficult to scale, the expected benefits may take time to appear.
The Ocado example shows that technological change can be a source of competitive advantage when it improves efficiency, customer service and strategic capability. However, the final judgement depends on whether the benefits of automation, data and digital systems outweigh the costs, risks and complexity of implementation.
This independent educational case study is not affiliated with, endorsed by or sponsored by Greggs plc. Any financial figures used alongside this example should be treated as simplified or hypothetical estimates created for teaching purposes.
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ANALYSIS
EXAM FOCUS
Analysis questions require you to examine a business concept or issue in detail, breaking it down into its component parts. You should explain how and why something happens and consider its impact on the business.
How to Approach Analysis Questions
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Identify the key issue or concept
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Break it down
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Explain how and why
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Reach a reasoned conclusion
Read the question carefully and highlight the focus of the analysis.
Consider the different factors, causes or impacts related to the issue.
Provide clear explanations using business terms and links points to context.
Evaluate the overall implications for the business.
Example Analysis Question
North Coast Coffee is considering using break-even analysis before opening a second café.
Advantages
• Sales forecasts may be inaccurate.
• Assumes costs and revenue remain constant.
• External factors may reduce reliability.
• Ignores qualitative business factors.
Disadvantages
• Sales forecasts may be inaccurate.
• Assumes costs and revenue remain constant.
• External factors may reduce reliability.
• Ignores qualitative business factors.
Key Exam Tip
If you find it difficult to expand your answer and show the type of depth that an examiner is looking for in a top response, consider using the 'so what' approach.
Tesco carry out market research - so what? - this allows them to better understand customer needs - so what? as a result Tesco can provide goods more likely to sell - so what? - this will increase Tesco profit and ensure higher levels of customer satisfaction - so what? this means that customers are likely to become more loyal to Tesco.
Avoid These Exam Traps
Students often lose marks on calculation and analysis questions by making these mistakes. Watch out for them in your exam!
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Helvetica Light is an easy-to-read font, with tall and narrow letters, that works well on almost every site.
Helvetica Light is an easy-to-read font, with tall and narrow letters, that works well on almost every site.
Tip:
Helvetica Light is an easy-to-read font, with tall and narrow letters, that works well on almost every site.
2
Helvetica Light is an easy-to-read font, with tall and narrow letters, that works well on almost every site.
Helvetica Light is an easy-to-read font, with tall and narrow letters, that works well on almost every site.
Tip:
Helvetica Light is an easy-to-read font, with tall and narrow letters, that works well on almost every site.
3
Helvetica Light is an easy-to-read font, with tall and narrow letters, that works well on almost every site.
Helvetica Light is an easy-to-read font, with tall and narrow letters, that works well on almost every site.
Tip:
Helvetica Light is an easy-to-read font, with tall and narrow letters, that works well on almost every site.
Be precise. Read the question carefully. Show your working.
Small mistakes can cost big marks.
EXAM PRACTICE
Practice Question
Apply your knowledge of profit and profitability to answer this exam-style question.
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MINI CASE STUDY
North Coast Coffee Ltd is a premium coffee business which sells freshly roasted coffee beans through its online store and a small chain of independent cafés. The business has experienced strong sales growth due to increasing demand for high-quality speciality coffee products.
The business generates annual revenue of £250,000. Its cost of sales, including coffee beans, packaging and direct production costs, totals £100,000. North Coast Coffee Ltd also faces operating expenses of £80,000, including marketing, employee wages, rent and administration costs. In addition, the business pays £20,000 in interest and taxation each year.
The owner, Mia Thompson, is reviewing the company’s profitability because rising wage costs and increased competition in the premium coffee market have started to place pressure on operating profit margins. She is considering increasing prices slightly in order to protect profitability while still maintaining customer demand.
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EXAM QUESTION
Analyse the possible reasons for BrightBite’s falling profit margins and evaluate strategies it could use to improve profitability.
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HOW TO ANSWER
P
Point
E
Explain
A
Apply
C
Consequence
H
However...
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MODEL ANSWER
P
Point
Increasing prices could improve the profitability of North Coast Coffee Ltd because each sale would generate a larger amount of revenue and potentially increase profit margins.
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EXAMINER TIP
For full marks, make sure you analyse causes rather than just listing them, and evaluate realistic strategies with clear judgement. THINK: Which strategy would have the biggest impact and why?
CALCULATOR
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Technological Change
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