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How does new technology change the way a business operates and competes?

Technology and business: the role of technology as an external influence, e-commerce and digital communication, automation in production, social media and digital marketing, and the benefits and drawbacks of technology for a business.

A focused answer to the OCR GCSE Business J204 treatment of technology as an influence, covering e-commerce, digital communication, automation, social media and digital marketing, and the benefits and drawbacks of technology for a business.

Generated by Claude Opus 4.811 min answerUpdated 2026-06-02

Reviewed by: AI editorial process; not yet individually human-reviewed

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Quick answer

Technology is a fast-changing external influence that affects almost every part of a business. E-commerce means selling online, which lets a business reach customers anywhere, trade around the clock and operate from a cheaper location than a prime high street. Digital communication (email, video calls, messaging) speeds up contact with staff, suppliers and customers. Automation uses machines and software to do tasks in production, raising productivity and consistency and lowering the labour cost per unit, though it has a high up-front cost and may replace workers. Social media and digital marketing let a business promote cheaply, target audiences precisely and interact directly with customers. The benefits of technology are lower costs, wider reach, faster communication and better marketing; the drawbacks are the cost of buying and updating it, the risk of breakdowns and cyber-attacks, the impact on jobs, and the fact that competitors can adopt it too.

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What this topic is asking
Technology as an external influence
E-commerce and digital communication
Automation in production
Social media and digital marketing
Benefits and drawbacks of technology
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What this topic is asking

OCR J204 treats technology as an external influence that changes how a business operates, markets and competes. You need to understand e-commerce and digital communication, automation in production, social media and digital marketing, and to weigh the benefits and drawbacks of technology for a business. Technology runs through the whole course (operations, marketing, globalisation), and questions here usually ask you to judge whether adopting it is worthwhile.

Technology as an external influence

Technology is partly within a business's control (it chooses what to buy) but also an external influence, because the pace of change and what customers and competitors expect are set outside the business.

E-commerce and digital communication

The trade-off is the cost of building and running the website, the competition from other online sellers, and reliance on delivery and on customers trusting online payment.

Automation in production

So automation suits a business with the volume to spread the cost and the finance to afford it; for a very small business the cost may outweigh the gain.

The risks are that bad publicity spreads fast online, content must be kept fresh, and competitors use the same tools, so it is not a guaranteed advantage.

Benefits and drawbacks of technology

Whether technology pays off depends on the business: it must weigh the cost against the gain and keep investing as the technology changes.

Weighing an investment in automation

Set out the situation

A business currently uses $5$ workers in packing, each paid $18{,}000$ a year. An automated packing line would cost $120{,}000$ to install and would let it cut to $1$ worker, with running and maintenance costs of $15{,}000$ a year.

Current labour cost

\text{Current cost} = 5 \times 18{,}000 = 90{,}000 \text{ a year}.

Cost after automation

\text{New cost} = (1 \times 18{,}000) + 15{,}000 = 33{,}000 \text{ a year}.

Annual saving and payback

\text{Annual saving} = 90{,}000 - 33{,}000 = 57{,}000.

\text{Payback} = \frac{120{,}000}{57{,}000} \approx 2.1 \text{ years}.

Interpret the result

The automated line saves $57{,}000$ a year and pays back its $120{,}000$ cost in about two years, a strong financial case. But the business must also weigh the up-front cash needed, the redundancy of four workers and the effect on morale, and the risk that the technology dates, which is the balanced judgement OCR rewards.

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Q1. State one benefit of using social media to market a business. [1 mark]

Cue. Any one of low cost, large reach, precise targeting, direct interaction with customers.

Q2. Automation cuts annual costs from $80{,}000$ to $30{,}000$ and costs $100{,}000$ to install. Calculate the payback period. [2 marks]

Cue. Saving $= 50{,}000$ ; payback $= \frac{100{,}000}{50{,}000} = 2$ years.

Exam-style practice questions

Practice questions written in the style of OCR exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.

OCR J204/02 20193 marksExplain one benefit to a business of using e-commerce. (Paper 2, Section A)

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A 3-mark AO1 and AO2 question. One benefit is reaching a far larger market: selling online lets a business sell to customers anywhere, not just those who can visit a shop, which raises potential sales and revenue. It also lets the business trade 24 hours a day and from a cheaper location than a prime high street. One mark for a valid benefit, up to two more for developing it. A common error is to describe a drawback (such as set-up cost or competition) when asked for a benefit, or to confuse e-commerce (selling online) with social media marketing.

OCR J204/02 20216 marksA small retailer is deciding whether to invest in automated technology in its warehouse. Discuss whether the retailer should make this investment. (Paper 2, Section B)

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A 6-mark "discuss" wanting both sides and a judgement applied to the retailer. For investing: automation raises productivity and speed, improves consistency and accuracy, and lowers the labour cost per unit over time, which can cut costs and improve customer service through faster despatch. Against: the technology has a high up-front cost that strains cash flow, it may replace staff (harming morale and bringing redundancy costs), and it can break down or quickly become outdated, needing maintenance and future investment. Judgement: the investment is more likely to pay off if the retailer has enough volume to spread the cost and the finance to afford it; for a very small operation the cost may outweigh the gain. Markers reward a balanced argument applied to the retailer and a supported conclusion.

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Sources & how we know this

OCR GCSE Business (J204) specification — OCR (2017)