Digital Technology and Small Business (AQA Paper 1 2020, Q20)

Here's a suggested answer for a 9-mark question on the problems that might arise for a small business from the growth of digital technology.

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Possible response

Digital technology is growing so fast, a small business may struggle to access or afford the skills and talent needed to keep up. For example, many products and services are now delivered or supported by mobile-device apps and customers expect those apps to keep improving. There is a shortage of coders and other app developers, thereby increasing the cost of app development, with larger businesses more likely to be able to source and/afford these crucial skills. This is a problem because, if a small business operates in a market where mobile apps are increasingly popular or required to compete, it may find that the cost of developing suitable technology is no longer viable, a consequence of which is that it may lose competitiveness compared with better-resourced, larger rivals.

Another problem is that digital technology is increasingly regulated by government with increasing risks costs for a small business if data is misused. There is much greater scrutiny of how personal data is captured and used. The GDPR law is a good example of how all businesses – small and large – are now restricted in how they can use personal data for marketing. This a problem because GDPR has restricted the ability of a small business to undertake email marketing, which in turn may reduce sales revenue generated using this method of promotion. Potentially significant fines for failing to comply with data protection legislation add to the problems that might arise for a small business if it fails to manage the risks of handling digital data.