Business Studies Revision Notes Chapter 5: Technological and Environmental Influences on Businesses.

Technological change can impact the goods that businesses make and the machinery they use.

Advantages of Technological Change

• Consumers buy more frequently if new better goods are offered (e.g. mobile phones)
• Being first to offer a new product will give a firm a competitive advantage over its competitors
• Hi-tech machinery raises productivity and lowers costs which will boost profit
• Fewer workers will be required so labour costs will fall
• Internet has allowed firms to access potential consumers more directly and in more countries

Disadvantages of Technological Change

• Research and Development of new products is expensive and not always successful
• New production methods using robots and computer electronics are expensive and may become out-of-date and obsolete
very quickly. Firms will face the cost of constantly updating their capital
• Workers may require retraining or new skilled workers will need to be recruited and this is expensive. They may demand
higher wages as they have new skills
• Making workers redundant will be expensive and could cause problems and disruption from trade unions

Successful technological change depends on as smooth a transfer as possible. Managers should use a selection of strategies:
1. Talk with workers to explain the need for change and the danger of not adapting in the face of competition
2. Point out that a successful business raises job security for its workers
3. Highlight the opportunities that learning new skills in regard to technology will bring for workers
Business Impact on the Environment may be considerable. Many businesses create waste materials which are expensive to treat
properly. Firms may be tempted to keep their costs down (and their profits up) by dumping waste into the atmosphere, seas, rivers,
lakes etc. Businesses can also create noise pollution, light pollution and they add to the congestion on roads and business’ heavy
lorries damage roads too. It is a common question to ask:

Should private sector businesses show Social Responsibility?

Yes:
1. Businesses have a responsibility to other stakeholders as well as owners
2. Businesses use of scarce natural resources affects us all and so they should be used with care
3. It would be wise of businesses to show real concern for the environment as consumers are more favourable to such
businesses and would support them more
4. Pressure groups are well organised and would create bad publicity for firms who create large scale pollution
No:
1. Businesses must only keep to the law. It is for government to set appropriate laws for firms to keep.
2. Being environmentally friendly is expensive for businesses and they will have to raise their prices this will mean consumers
will not be able to afford as much and will lower living standards
3. Higher prices will give an advantage to firms from other countries who do not respect the environment. Jobs will be lost in
domestic businesses and imports will rise as exports fall
4. Government should use tax revenue to clean up the environment

Methods to force firms to be more environmentally friendly

1. Govt. can pass laws that force firms to clean up waste, stop location near sensitive areas, promote firms that recycle
2. Pressure groups and consumer action can be encouraged to highlight bad (and good!) behaviour by firms. This will make
firms be more aware as they will wish to avoid bad publicity
3. Fines can be introduced for high levels of pollution which are higher than the cost of getting clean
4. Pollution permits in an industry can be issued. These can then be bought and sold by businesses in the industry as they will
know best whether they should get clean or pay for permits. This system rewards clean firms as they will have spare permits
to sell and earn revenue from while it punishes dirty firms who will face higher costs as they need to buy permits

Private Costs – costs resulting from business activity paid by consumer/firm (eg wages)
External Costs – costs paid by, or suffered by third parties, not buyer or seller (eg pollution)
Social Costs – the entire costs of an activity. Private costs plus external costs
Private Benefits – benefits enjoyed/satisfaction gained by buyers and sellers (eg profit for a firm)
External Benefits – benefits gained by third parties following a business activity (eg job creation/higher tax revenue)
Social Benefits – the entire benefits resulting from a business activity

Cost-Benefit Analysis is a procedure performed by government where the entire social benefits of a proposed business idea are
compared to the entire social costs to consider whether a project should be allowed to proceed. Projects such as the building of a new
airport, the development of an underground system or the proposed holding of an event such as the Olympic Games might be assessed
in this way. It is necessary as private businesses and consumers only consider their private costs and benefits when making decisions
but the government will consider social (that is the entire) costs and benefits. However these can be difficult to identify, to value, and
the fact that often the benefits come after the costs.