The change is fixed, the response is a choice: technology

1. An external influence starts outside the firm, so no owner can prevent it and the only decision left is what to do about it.
2. Marks in the exam sit on that decision and its consequences, not on describing the change a second time.
3. A change in technology, taught in guide 1.5.2, leaves a business three responses, and each carries a different cost.
   1. Adopt it: launch e-commerce or buy the new equipment, which needs money up front, perhaps £4,000 for a website plus the training to run it, but protects sales that would otherwise go to an online rival.
   2. Adapt the offer around it: keep the shop and add click and collect alongside it, as Tesco and Sainsbury's do, so online orders still bring shoppers through the door.
   3. Do nothing and compete on what technology cannot copy: personal service and expert advice cost nothing extra now, which makes this the cheapest response today and the riskiest one later.

Responses to new legislation: deciding who carries the cost

1. New legislation, such as a rise in the National Living Wage or tighter safety rules, adds a cost the business must pay, so the real question is who ends up carrying it.
   1. Comply and absorb the cost: profit per unit falls, but the price on the shelf stays the same, so no customers are lost over it.
   2. Comply and pass the cost on: raising prices recovers the money, yet price-sensitive shoppers may move to a rival who chose to absorb it instead.
   3. Change how the business works: buying equipment that cuts the labour hours needed, or retraining staff to work more accurately, spreads the higher wage rate over more output, though the equipment has to be paid for first.

Responses to the economic climate: downturn, recovery and a weaker pound

1. The economy, taught in guide 1.5.4, moves in both directions, so a business needs a plan for falling demand and a plan for the recovery that follows.
   1. In a downturn: cut costs, delay expansion and keep more cash back, so wages and suppliers can still be paid through a long spell of weak sales.
   2. Change the offer, not only the price: a cheaper range, smaller pack sizes and short promotions hold customers who would otherwise switch to Aldi or Lidl.
   3. When conditions improve: expand, recruit and widen the range, and borrow while interest rates are low, because repayments on the same loan cost less.
   4. When a weaker pound raises import costs: find a UK supplier, buy in bulk for a discount, or raise prices and accept that some customers will buy less.
2. A cheaper range protects sales volume but pulls the average selling price down, so the firm gives up profit per unit to keep customers who will spend more again once incomes recover.

Judging a response: moving fast against moving carefully

1. Responding early can protect customers and market position, but it risks spending before the change is proven; responding late saves cash at first but may leave rivals with customers that are expensive to win back.
2. The right timing depends on how permanent the change looks, how directly it affects the business, how quickly competitors are moving and what the business can afford.
3. Overall, financial strength gives a business more choice over its response, while a cash-limited firm may be forced towards the cheapest short-term option even when it is not the strongest long-term response.