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4.1 Production of goods and services
Impact of technology on
production
Technological advances have made it possible for businesses to reduce costs, increase
profits and become more competitive within the market. Production processes have
changed immensely from the very start of product design to the process of producing
the product – an example is the car industry, which is now almost fully automated. The
use of machines for certain tasks, especially dangerous ones, has become common in
production. These are some examples of technology used in production:
CAD (computer-aided design) – This is the use of specific
software to design products. It is used in the R&D
departments (see section 4.1.1 (/study/app/2025-igcse-business-
studies-ig1/sid-181-cid-251207/book/the-meaning-of-production-
id-27962), Table 1) of many large companies to redesign existing
products or create new ones. The software allows the designer to
see the product from all sides and make any changes before it is
produced.
CAM (computer-aided manufacturing) – This is when
computers monitor the production process and control the
machines. For example, on a production line in a car factory,
computers will control the machines that spray paint.
It is not only in manufacturing that technology has changed the production process.
Technology has also been widely implemented in retail businesses and services such as
banking:
EPOS (electronic point of sale) – This is where the operator
scans the code on the product to register the price when we do
our shopping, as shown in Figure 1. It also automatically adjusts
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the inventory and allows the business to monitor these levels and
reorder products when needed.
Electronic payments – This is where customers can pay with
their debit or credit card by using a device. This payment type is
used in many shops that are connected in a network with banks
through advanced technology.
Online banking – This enables people to buy goods or pay for
services online, such as electricity and water.
ATM (automated teller machine) – Many banks are closing
regional offices to reduce costs, and so are relying more on ATMs
where customers can withdraw (take out) money from their
accounts with a bank card and a PIN number.
Figure 1. A store assistant scanning a product using EPOS software.
Credit: andresr Getty Images
These technological changes have led to a number of benefits and limitations in the
production process, as shown in Table 1.
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Table 1. Benefits and limitations of technology in production.
Benefits Limitations
Productivity is improved. There may be job losses,
The need for increased especially among the low-
employee training skilled workforce.
improves motivation and New technology becomes
productivity. outdated very quickly and
Better quality products are needs to be updated,
produced due to improved increasing production costs.
production methods and The high costs of new
quality control. technology forces businesses
Greater ability to monitor to sell larger quantities of
demand for products and products, which may affect
changes in inventory the environment.
means that quicker Employees do not always
production decisions can embrace new technology and
be made. can become demotivated if
Communication is quicker they are required to learn
and more efficient within new skills to perform their
the business. jobs.
Case study
Production at McDonald's
Since it was first founded, McDonald’s (https://www.mcdonalds.com) has been one
of the most significant players in the fast food market. It has faced severe
competition but managed to hold its strong position due to its focus on lean
production.
McDonald’s adopted several strategies to deal with any excess waste:
In its early years, it used to prepare sandwiches in batches and keep them
warm, but there were complaints as waste increased. So it changed to keeping
patties, salad and other sides ready and then making them into a sandwich
when the customer placed their order.
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The use of technology has drastically reduced waiting time at McDonald’s
restaurants. In some countries, the order can be communicated through a
computer system and the highly trained staff, with the use of specialised
equipment, will then quickly prepare the order.
McDonald’s maintains an inventory control system to ensure that it can meet
consumers’ demands at any time. This also helps the business eliminate waste
from over-stocking.
The production process at McDonald’s has been simplified so that defects in
products are avoided and high standards are achieved and maintained.
The focus is for employees to work as a team and for everybody to be involved in
improving processes. Each employee is trained to be multi-skilled, so that the whole
team is aware of every stage of the process.
Source: Adapted from How Did McDonald’s Build Its Sustainable Competitive
Advantage? -The Key Success Factors and Business Strategy
(https://medium.com/@shahmm/how-did-mcdonalds-build-its-sustainable-
competitive-advantage-4a509f2457e1), Shah Mohammed, Medium.
Questions
1. Identify and explaintwo ways in which technology has changed the
production process at McDonald’s. [4 marks]
2. Identify and explain twoadvantages of adopting lean production for a
fast food restaurant such as McDonald's. [6 marks]
3. Do you think that McDonald's should adopt a different production method?
Justify your answer. [6 marks]
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