1.5

• Technological Change


  • Advantages:
  • Products purchased more often
  • Competitive advantage
  • Increase productivity
  • Lower average costs
  • Fewer workers required
  • Flexibility
  • Internet provides a larger market
• Technological Change


  • Disadvantages:
  • Expensive to research and develop new products
  • Old firms will lose sales and market share
  • Expensive production methods
  • Retraining required
  • Fall in motivation of labor
  • Reduce personal contact with customers
• How to Introduce Technological Change

  1. Involve workers in change

  2. Workers encouraged to make suggestions
• Social Responsibility


  When a business takes decisions that may benefit stakeholders other than shareholders
• Against Protecting Environment


  • Expensive, reduces profit
  • Increase prices to pay for environmental friendly policies
  • Lose sales to un-environmentally friendly firms
  • Consumers will buy less due to higher prices
  • Government should pay to clean pollution
• In Favor Of Protecting Environment

  • It is our social responsibility
  • Leaves less raw material for the future generations
  • Increased social awareness
  • Marketing advantage if environmentally friendly
  • Pressure groups may take action
• Laws Passed by Government


  • Illegal to:
  • Locate in environmentally sensitive areas
  • Dump waste
  • Making unrecyclable products
• Financial penalties and pollution permits

  1. Pollution permits are licenses to pollute up to a certain level

  2. If a company produces more than the permit allows, it must either buy more permits from 'clean' firms or pay heavy fines

  3. This encourages firms to produce goods in less polluting ways

  4. Other financial penalties could be additional taxes on goods or factories that lead to pollution
• Consumer action and pressure groups

  • Most likely to work when:
  • They have public support
  • Consumer boycotts occur
  • It is well organized and financed
• Consumer action and pressure groups

  • Most likely to fail when:
  • Firm is not doing anything illegal
  • Cost of business changing is more than the possible cost of poor image and lost sales
  • Firms sell to other firms, not to consumers
• Cost-Benefit Analysis


  The valuation by a government agency of all external and private costs and benefits resulting from a business decision
• External Cost


  Costs paid by the rest of society due to a business decision
• External Benefits


  Benefits to the rest of society due to a business decision
• Private Cost


  Costs paid by the business due to a business decision
• Private Benefits


  Benefits to the business due to a business decision
• Social Cost


  Private cost added to the external costs of a business decision
• Social Benefit


  Private benefit added to the external benefits of a business decision