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AQA A-Level Business

7.6.5 Technological Change and its Strategic Impact

Technological change transforms how businesses operate, influencing decisions across operations, HR, marketing, and finance while shaping long-term strategic direction.

Definition and Examples of Technological Change

Technological change is the process by which new technologies are developed and adopted in business operations, replacing or enhancing existing processes. This can include the creation of completely new products, improved production techniques, or entirely new ways of interacting with customers and stakeholders. Technological change is continuous and plays a critical role in maintaining a competitive advantage in dynamic markets.

Key Examples of Technological Change:

  • Automation – The use of machines, control systems, and information technologies to handle repetitive tasks with minimal human intervention. Examples include assembly line robots and automated warehousing systems.

  • Artificial Intelligence (AI) – Systems that mimic human intelligence to perform tasks such as recognising speech, making decisions, and learning from data. AI is widely used in customer service (chatbots), fraud detection, and predictive analytics.

  • Digital platforms – Online systems that allow users to interact, buy, sell, or access services. These include e-commerce websites, streaming platforms, and social media channels.

  • Cloud computing – The delivery of computing services (servers, storage, databases, networking, software) over the internet, allowing businesses to access scalable and flexible resources without owning physical infrastructure.

These technologies allow businesses to operate more efficiently, deliver better customer experiences, and develop innovative products or services that meet evolving consumer expectations.

Impact of Technological Change on Functional Areas

Technological advancements affect every part of a business. Below is a detailed breakdown of the strategic impact on each key functional area.

Operations

Technology has transformed operations by increasing productivity, improving product quality, and enabling greater flexibility in production and delivery.

Impacts on operations include:

  • Enhanced Efficiency and Speed:

    • Automation technologies such as robotics streamline production processes by performing tasks faster and more accurately than human workers.

    • This reduces production time, lowers labour costs, and increases output without compromising quality.

  • Greater Precision and Consistency:

    • Advanced manufacturing tools, such as computer numerical control (CNC) machines, deliver consistent product quality and reduce the margin of error.

  • Supply Chain Optimisation:

    • Technologies like Radio-Frequency Identification (RFID) tags and ERP systems enable real-time tracking of goods and inventory.

    • Forecasting tools powered by AI help predict demand, optimise stock levels, and avoid delays or excess inventory.

  • Customisation and Flexibility:

    • 3D printing and modular production systems allow businesses to customise products for individual customers without massive cost increases.

Example: Amazon’s fulfilment centres use robots to move products around warehouses, reducing delivery times and improving operational efficiency.

Human Resources (HR)

Technological change has led to a shift in how businesses manage their workforce, recruit talent, and monitor performance.

Key changes include:

  • Remote Working and Flexibility:

    • Cloud-based collaboration tools like Google Workspace and Microsoft Teams enable employees to work from various locations, improving work-life balance.

    • Remote work policies must be supported by robust IT infrastructure and cybersecurity protocols.

  • Evolving Skill Requirements:

    • There is a growing demand for digital literacy and tech-savviness, especially in fields like data analytics, cybersecurity, and AI.

    • Training programmes and continual learning are required to upskill employees and keep them relevant.

  • Recruitment and Onboarding:

    • AI is used to scan CVs and shortlist candidates based on job descriptions, reducing administrative workload and increasing objectivity.

    • Virtual onboarding through e-learning platforms ensures consistency in training.

  • Performance Monitoring and Management:

    • HR software allows for real-time performance tracking, goal setting, and feedback, improving transparency and accountability.

    • Digital surveys and analytics provide insights into employee satisfaction and engagement.

Example: A software development company may use an AI-powered recruitment tool to hire developers, then provide online training platforms to teach coding languages relevant to current projects.

Marketing

Digital technology has completely reshaped marketing strategies, customer engagement, and promotional methods.

Key impacts include:

  • Personalised Advertising:

    • Businesses use consumer data to target advertisements based on demographics, interests, and browsing history.

    • Programmatic advertising automates the buying of ads in real-time to maximise reach and relevance.

  • Search Engine Optimisation (SEO):

    • Businesses optimise website content with relevant keywords and backlinks to improve their ranking on Google and other search engines.

    • This boosts organic traffic and improves brand visibility.

  • Use of CRM Systems:

    • Customer Relationship Management systems track consumer interactions and purchase histories to tailor communications and offers.

    • This data-driven approach improves customer retention and satisfaction.

  • Omnichannel Marketing:

    • Integration of online and offline marketing channels ensures a consistent customer experience.

    • Examples include coordinated messaging across websites, social media, email campaigns, and physical stores.

Example: A fashion brand may use CRM data to offer personalised discounts to customers via email, then follow up with targeted social media ads based on previous purchases.

Finance

The finance function has undergone major changes due to digital tools and automation.

Impacts on finance include:

  • Financial Technology (Fintech):

    • Online payment gateways (e.g. Stripe, PayPal), digital wallets, and mobile banking apps simplify transactions and reduce reliance on cash.

    • Peer-to-peer lending and crowdfunding platforms offer alternative sources of finance.

  • Advanced Forecasting and Analytics:

    • AI tools use historical data to project revenue, manage risks, and detect anomalies.

    • Predictive analytics allows more accurate budgeting and strategic financial planning.

  • Process Automation:

    • Software automates repetitive tasks such as invoicing, payroll, tax filing, and reconciliation.

    • This reduces errors, saves time, and allows finance teams to focus on strategic issues.

  • Data Visualisation Tools:

    • Tools like Power BI and Tableau transform complex financial data into easily understandable charts and dashboards.

    • Managers can make informed decisions based on real-time insights.

Example: A small enterprise may use cloud accounting software like Xero to manage cash flow, track expenses, and comply with HMRC reporting requirements.

Strategic Impact on Business Models and Strategy

Technological change influences not only functional areas but the overall direction and structure of businesses.

Innovation and Business Model Evolution

  • Product Innovation:

    • Businesses can create smarter, more sustainable, and customised products to meet changing consumer needs.

  • New Business Models:

    • Subscription-based services (e.g. Netflix), platform-based ecosystems (e.g. Airbnb), and sharing economy models (e.g. Zipcar) rely heavily on technology.

    • These models reduce physical infrastructure needs and increase scalability.

Example: Fintech startups challenge traditional banking models by offering app-only services with lower fees and faster transactions.

Speed and Responsiveness

  • Agility:

    • Businesses that adopt technology can respond faster to market trends, competitor actions, or global disruptions.

  • Faster Product Development:

    • Agile methodologies and digital prototyping tools speed up innovation cycles and reduce time-to-market.

Example: A food delivery service using app-based ordering can quickly update its menu and pricing based on customer demand and competitor activity.

Customer Engagement and Experience

  • Personalised Service:

    • AI enables businesses to deliver tailored content and recommendations, increasing customer satisfaction.

  • Real-Time Support:

    • Chatbots and automated customer service systems provide instant responses to queries.

  • Mobile Accessibility:

    • Businesses ensure their services are accessible via smartphones, improving customer convenience and loyalty.

Example: Banks offering mobile apps for deposits, transfers, and spending insights enhance customer autonomy and satisfaction.

Challenges of Technological Change

While technology offers many opportunities, it also introduces several complex challenges that businesses must address.

High Implementation Costs

  • Capital Expenditure:

    • Investing in new systems, training, and integration can strain financial resources.

  • Long Payback Periods:

    • The benefits of technology often take time to materialise, especially in industries with longer product cycles.

Example: A manufacturing firm investing in robotics may not see cost savings until after several years of operation.

Organisational Resistance

  • Cultural Barriers:

    • Employees may resist new systems out of fear of redundancy or discomfort with change.

  • Training Needs:

    • Staff need sufficient time and resources to adapt, or productivity could decline temporarily.

Example: Introducing a new digital HR system without staff training can cause confusion and delay administrative processes.

Cybersecurity Threats

  • Data Breaches and Hacking:

    • Increased reliance on digital platforms heightens exposure to cyberattacks.

  • Legal and Ethical Risks:

    • Businesses must comply with data protection laws such as GDPR and ensure responsible use of consumer data.

  • Business Continuity Risks:

    • Cyberattacks can lead to system shutdowns, reputational damage, and legal liabilities.

Example: In 2017, the WannaCry ransomware attack affected NHS systems, highlighting the risks of outdated or unsecured software.

System Integration and Maintenance

  • Compatibility Issues:

    • New technologies may not integrate easily with legacy systems, leading to inefficiencies or data silos.

  • Ongoing Maintenance:

    • Continuous updates, security patches, and vendor support are necessary to keep systems running smoothly.

Example: A retailer installing new payment systems may face transaction delays if they are not integrated properly with inventory software.

Technological Obsolescence

  • Short Life Cycles:

    • Rapid advancements mean that systems may become outdated quickly, requiring further investment.

  • Strategic Planning Challenges:

    • Businesses must continuously scan the external environment for emerging technologies and reassess their long-term strategies.

Example: A video rental business that failed to embrace streaming technology (like Blockbuster) was overtaken by digital-first companies (like Netflix).

FAQ

Technological change enhances decision-making speed by providing real-time data through integrated systems like ERP and cloud platforms. Managers can access financial reports, sales trends, or operational performance instantly, allowing them to respond quickly to market changes or internal issues. AI-powered analytics help identify patterns or anomalies, improving forecasting accuracy and risk assessment. As a result, decisions that previously took days—such as adjusting stock levels or pricing—can now be made within hours, improving agility and competitive positioning in dynamic markets.

Technological change creates competitive advantage by enabling businesses to differentiate through innovation, improve cost efficiency, and respond faster to customer needs. Companies using advanced technologies such as AI, automation, or data analytics can deliver personalised services, reduce waste, and launch products more quickly than rivals. For instance, predictive maintenance using IoT sensors can reduce downtime and operating costs, giving manufacturers a lead over less technologically advanced competitors. First-mover advantage in adopting emerging tech can also strengthen brand perception and market share.

Some businesses fail to adapt due to a combination of organisational inertia, limited capital, poor strategic foresight, and lack of technological expertise. Resistance from staff, outdated infrastructure, and an underestimation of competitors’ innovations can delay necessary investments. Small businesses may struggle with the high cost of implementation or fear disrupting existing processes. Additionally, failure to align technology with long-term strategy often leads to fragmented systems or unproductive changes that do not improve efficiency or profitability, putting the firm at risk of falling behind.

Technological change influences risk management by both introducing new risks and offering tools to manage them more effectively. On one hand, reliance on digital systems increases exposure to cyber threats, data breaches, and system failures, requiring investment in cybersecurity and backup systems. On the other hand, advanced technologies such as predictive analytics and automated monitoring systems allow firms to anticipate operational issues, fraud, or market disruptions. Risk dashboards, real-time alerts, and AI modelling improve proactive responses, helping firms to safeguard operations and reputation.

Leadership plays a crucial role by setting a clear vision, allocating resources, and guiding cultural transformation. Successful technological change requires top-down commitment—leaders must communicate the strategic benefits, address employee concerns, and champion digital literacy. They must also ensure cross-functional collaboration between IT, HR, operations, and finance to align technology with business goals. Leaders who encourage innovation, tolerate calculated risk, and model adaptability foster a culture where staff are more likely to embrace change, making implementation smoother and more effective over time.

Practice Questions

Analyse how technological change might influence the operations and HR functions of a manufacturing business. (10 marks)

Technological change can improve efficiency in operations through automation and robotics, allowing faster production with fewer errors. This reduces labour costs and increases output. In HR, it may shift the skills required, prompting investment in training or restructuring. For example, employees may need to upskill to work alongside automated systems. It may also support remote working and digital recruitment. However, resistance to change or redundancies could affect morale. Overall, technology drives productivity but requires strategic HR planning to manage workforce implications and ensure employees are equipped to adapt effectively within a technologically evolving environment.

Assess the impact of technological change on a business’s long-term strategy. (12 marks)

Technological change shapes long-term strategy by enabling innovation, improving customer engagement, and opening new revenue streams. For example, a retailer may invest in e-commerce platforms to expand online presence, changing its distribution model. Digital tools allow faster decision-making and responsiveness to market trends, enhancing competitiveness. However, high costs, cybersecurity risks, and constant upgrades present challenges. Businesses must balance technological investment with long-term goals and financial capability. Failure to adapt may lead to obsolescence, as seen with Blockbuster. Overall, technology can be a source of strategic advantage if integrated carefully into planning and resource allocation.

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