To explain a technology or market change, follow a chain of three steps: the change, its effect on this business, and the response the owner could make. Each step must use a detail from the case.
This lesson is part of the business environment cluster. If the word “external” is still unclear, start with classifying internal and external factors.
What does the change, effect, response chain look like?
The chain has three links, and each one answers a short question.
- Change: what is new or different outside the business?
- Effect: what does it do to customers, costs or competition here?
- Response: what can the owner do about it?
The effect link is where most marks are won. It must say what happens in this business, not in businesses in general.
Worked example: an invented laundry
Dobi Segar is a fictional laundry near a college. Until now, students walked in to drop off clothes. A rival laundry starts online ordering with pick-up from hostels.
Change: a competitor offers online ordering. This is both a technology change and a market change. Effect: Dobi Segar had 200 customers each month, and after the rival starts it loses 30 of them.
That is 30 ÷ 200 × 100 = 15% of customers. At RM25 a customer each month, the monthly loss is 30 × RM25 = RM750.
Response: Dobi Segar could add a simple ordering option by messaging, and offer pick-up on two days a week. This keeps the personal service that the rival lacks.
The mistake of the vague answer
The common slip is to write a statement that fits any business. “Technology is changing so the business must adapt.”
This is true of every business and proves nothing about this one. The applied version uses the case: “The rival’s online ordering took 15% of Dobi Segar’s customers, or RM750 each month, so Dobi Segar should add ordering by message and offer pick-up.”
Check yourself
Dobi Segar has 160 customers each month at RM25 each. A new student housing block opens next door with 80 residents. The owner expects 1 in 4 of them to become customers. What is the market change, the effect in RM and a response?
Answer
Change: a new block of 80 residents, which enlarges the market. Effect: 1 in 4 of 80 is 80 ÷ 4 = 20 new customers, which adds 20 × RM25 = RM500 each month.
Response: advertise near the block and check that the laundry can handle 180 customers, with enough machines and staff.
What to study next
The next step is to tie an external change to a business decision in one answer. Continue with applying a simple environment analysis to a case, then try the practice set.
The business case answer planner has a box for each link of the chain. For a teacher to read your explanations, see online one-to-one Business tuition.