Impact of New Technology on Birdseye?
The answer below looks at Birdseye and what the impact of new technology could have on a business like this:
The introduction of new technology to a company like Birdseye can bring a lot of benefits.
The company operates in the market of fast moving consumer goods. Usually associated with this are economies of scale, i.e. bulk buying of large quantities of materials at discounted rates. The demand for these type of products are high and are always being brought up in supermarkets and so need a constant flow of products coming off of the production line. New technology would allow the business for automated production where materials are put in at one end and come out as completed, fully packaged goods ready to be sold. This would provide the business with a continuous flow of production. In the long run it would lower costs of production via saving on wage costs and so lead to either increased profits and/or being able to lower the price of the goods that it sells to make them more competitive. As there are many competitors out there it might be worth lowering its prices so that it gets higher demand for its product – as there are many substitutes out there consumers will easily switch to Birdseye to save money.
New machinery can also lead to better quality of products. Machines are usually precise when setup and so should lead to less defected products. All of the products coming off of the production line will all be 100% identical.
As well as saving on labour costs you must not forget that machines don’t need to take breaks etc and so the new machinery would be able to continue to produce products non stop.
This increase flow of production will eventually lead to increased economies of scale and so save on the average cost per unit. (due to the increase in the amount that’s being produced).
Of course there are some downsides to introducing such technology. There will be extremely high research and development costs of this new technology and may present a short-term opportunity cost for the business where the money could be better spent on advertising perhaps.
As there’s no need to have as many staff the business will experience high redundancy costs when paying off workers, again this money could be better spent elsewhere and may be considered to be a waste. By decreasing the workforce also decreases the amount of skills you have in a business and so may mean that when a problem arises they wont have the experienced staff to sort out such problems.
Some existing workers will need to be re-trained on the operation of the new machinery and so again presents a ‘start-up cost’.
It can also have some external costs to communities where you’ll see rising in regional unemployment. This will have a negative multiplier affect on these communities as more and more people are out of work there’s less money/demand for goods and services in these affected areas. The Government will also experience loss of revenue from ‘income tax’ and so can’t spend as much on the public health sector. Although argued that if Birdseye does start selling more the Gov will just get back the loss tax revenue in corporation tax (tax on profits).
