Technology, Competitors and Suppliers (Cambridge International A-Level Business)

The impact of technological change on business

Why digital technology matters

• Keeps firms competitive

  • Rivals that adopt new technology can cut prices, deliver faster and win customers

• Widens markets

  • An online store is open 24/7 and can reach buyers worldwide

• Turns data into decisions

  • Software spots patterns humans miss, guiding price decisions and determining stock levels

Key ways technology is used

Opportunities created for businesses

• Lower costs

  • Automated warehouses and AI scheduling reduce waste and staffing bills

• Faster service

  • Next-day (or same-day) delivery builds customer loyalty

• New revenue streams

  • Subscription apps, online adverts or selling data licences can increase business income

• Global reach for small firms

  • Even a start-up can sell on marketplaces such as Amazon or Etsy, or its own website

• Flexible, data-driven pricing

  • Software raises or lowers prices in minutes to match demand

Challenges for businesses

• High set-up costs

  • Robots, servers, recruiting specialist staff or training need large upfront spending

• Technical failures

  • System breakdowns halt production or crash websites, affecting customer service

• Cybersecurity risks

  • Hackers may steal customer data or stop operations

• Job losses and morale issues

  • Staff may fear redundancy
  • Training is essential but may be resented if jobs change significantly

• Legal and ethical concerns

  • Using personal data without clear consent can breach privacy laws and damage reputation

The impact of competitors on business decisions

• Competition describes how many rival businesses operate in a market and how strong they are

  • In a monopoly market, there is one dominant seller (e.g. a local water company)
  • In an oligopoly market, there are usually four to seven large rivals (e.g. UK supermarkets)
  • In a perfectly competitive market, there are many small firms, none of which have significant power (e.g. bubble tea outlets)

The level of competition

Monopoly and oligopoly markets are the least competitive

How competitors affect business costs

1. Price wars force cost-cutting

• Carrefour’s rivalry with E.Leclerc in France involves frequent price-matching campaigns
• Both grocers squeeze suppliers for lower prices and continuously look for ways to reduce overheads

1. Higher marketing spend

• An increase in rivals usually requires more promotional activities such as advertising and loyalty schemes
• E.g. US mobile network Verizon offers “unlimited calls/data” deals to attract customers from rivals AT&T and T-Mobile

1. Need for product innovation

• Chinese smartphone brand Xiaomi pours billions into R&D each year to stay ahead of rivals like Huawei in the oligopoly smartphone market

1. Bulk-buy savings for big players

• Size gives dominant businesses bargaining power, lowering their costs
• E.g. Walmart’s global scale helps it negotiate lower unit prices from manufacturers, keeping its own costs below those of smaller supermarket chains

1. Regulatory costs

• Monopolies often face price caps that restrict their ability to maximise profits
• E.g. the UK government imposes a maximum amount that suppliers such as British Gas can charge households for each unit of energy they use

How competitors affect demand

1. Price elasticity of demand

• When customers can choose substitutes, a small price rise often sends them to rival businesses (read more on PED here)

1. Customer choice

• With many rival businesses to choose from, buyers can switch for convenience, features or ethics
• In a monopoly, there is little consumer choice

1. Brand loyalty matters in crowded markets

• E.g. Nike retains demand despite many trainers in the market by investing in image and sponsorships

The impact of suppliers on business decisions

• In most industries a business is only as strong as the suppliers that feed its production line
• The price, quality and punctual delivery of raw materials all influence how the business sets its own prices, designs its products and organises day-to-day operations

How suppliers influence business decisions