3.9.4 - assessing greater use of digital technology

what is digital technology

The use of digital systems to improve communication, connectivity, data analysis and decision-making within a business.

Pressures to adopt digital technology:

• Changing customer behaviour (online shopping, mobile use)

• Competitors adopting digital systems

• Need for faster decision-making using data

• Demand for convenience, speed and personalisation

• Globalisation and 24/7 markets

what is digital transformation

• When a business fundamentally changes how it operates by integrating digital technology.

• Driven by customer behaviour as much as technology itself.

• Can create competitive advantage but involves risk and uncertainty.

what is e-commerce

Buying and selling goods or services electronically via the internet (B2C or B2B).

key features of e-commerce

• Must be mobile-friendly (apps, responsive websites)

• Used by businesses of all sizes

• Allows firms to access national and global markets

what are the models of e-commerce

1. Sales model – customers buy directly from a website.

2. Advertising model – free content funded by selling ad space.

3. Subscription model – users pay for access to content or services.
   (Some firms use a mix.)

value/ advantages of digital technology

Cost effectiveness

• Lower premises costs

• Flexible staffing

• Reduced inventory and storage costs

Flexibility

• Centralised stock and delivery

• Click-and-collect systems

• Better inventory management

Increased demand

• Larger customer base

• Global reach

• Greater accessibility for customers

Improved efficiency

• Production matched to demand

• Less waste

• Lower average unit costs

Higher profit margins

• Removal of intermediaries

• Direct-to-consumer sales

Marketing benefits

• Data allows personalised marketing

• More cost-effective promotions

• Better customer insight

disadvantages of digital technology

Increased competition

• Low barriers to entry

• Market saturation

• Pressure on prices and margins

High setup and running costs

• Website and app development

• Digital marketing costs

• Distribution and logistics requirements

Customer experience issues

• Lack of physical interaction with products

• May reduce appeal for some goods (e.g. clothing, perfumes)

benefits of digital technology to customers

• Wider choice

• Greater convenience

• Better information

• Lower prices