How Does Technological Change Affect Business?

Technological change affects business by changing how firms produce, sell and compete. AI can automate tasks and help businesses analyse data, while disruptive technology can change what customers expect or make an existing product less attractive. The effect is not automatically positive: it depends on the business’s costs, skills, customers and competitors.

Opportunities

A business might use AI to forecast demand, answer routine customer enquiries or identify patterns in sales data. This could reduce costs, improve decisions and allow staff to focus on more complex work. New technology can also create products and ways to reach customers, giving a business an opportunity to increase sales.

Threats and decisions

Technology can be expensive to introduce. Staff may need training, and a firm that relies on customer data must consider how it uses and protects that data. Automation may also change the jobs employees do. Meanwhile, a competitor that adopts a useful technology sooner could offer lower prices or a better customer experience.

For example, suppose an established retailer faces an online competitor using AI to recommend products. The retailer could invest in its own website and recommendations, but would need to weigh the likely benefits against setup costs and staff training. It could also compete through knowledgeable in-store service. The best response depends on what its customers value and whether the investment is affordable.

Technological change is part of the external environment because developments outside a business can alter its opportunities and threats. The business cannot control those developments, but it can choose how to respond. In an exam answer, avoid claiming that AI will always cut costs or replace staff. Explain the specific effect on the business, then consider a possible downside or limitation.