The Importance of Digital Strategy (AQA A Level Business): Revision Note

The purpose of a digital strategy

• A digital strategy is a business's plan for using digital technology to achieve its overall objectives across the whole organisation

Typical elements of a digital strategy

Why is digital strategy important?

• Digital behaviour has permanently shifted

  • Internet sales made up around 28% of total retail sales in Great Britain in 2026, up from just 19.2% before the pandemic in 2019

  • A strong online presence is no longer optional for most consumer-facing businesses

• There is a widening digital divide between large and small firms

  • 75% of the largest UK law firms and 68% of large accountancy firms now use AI, compared with just 15% of small firms

  • Businesses without a clear digital strategy risk falling further behind more digitally capable competitors

• Adoption without strategy risks wasted investment

  • 77% of UK SME leaders say they lack the skills needed to successfully implement new technology

  • Simply buying digital tools is not enough - a strategy is needed to use them effectively

The value of digital strategy

Improves efficiency and reduces costs

• Automating processes and digitising record-keeping reduces manual work and human error

• This frees up staff time for higher-value tasks

Improves customer experience

• Digital tools such as apps and personalised recommendations improve convenience and engagement

• This helps build customer loyalty

Example

Domino's Pizza's app allows customers to order and track their pizza in real time, creating a smoother, more engaging experience than a traditional phone order

Enables data-driven decision-making

• Digital systems generate large amounts of data that can inform more accurate marketing, HR, finance and operations decisions than judgement alone

Supports the introduction of new revenue streams

• Digital technology can allow a business to sell in entirely new ways, rather than simply digitising its existing approach

Example

Adobe shifted from selling one-off physical software licences to its subscription-based Creative Cloud service

This created a more predictable and ultimately more profitable revenue stream

Improves communication and collaboration

• Shared digital tools help coordinate decisions across functional areas and international sites

• This reduces communication diseconomies of scale

Helps build and protect competitive advantage

• A strong digital strategy helps a business avoid falling behind more digitally capable rivals

• This reduces the risk of strategic drift

Digital strategy and functional areas

• A digital strategy doesn't just affect the IT department

  • The same piece of technology often changes how a business runs across marketing, finance, HR and operations

• Digital strategy needs to be planned for the whole business, not treated as just an IT or marketing job

Digital strategy and competitiveness

• A strong digital strategy can become a genuine source of competitive advantage

  • Through faster response to customer needs, lower costs from automation, and the ability to reach customers globally without physical expansion

• Businesses that fail to invest in digital capability risk falling behind more agile, digitally focused competitors

Example

Comet, once one of the UK's largest electrical retailers, collapsed into administration in 2012, having failed to develop a competitive online retail strategy

At the time rivals such as Amazon and Currys were rapidly growing their digital sales

• Digital platforms can also lower barriers to entry for smaller rivals

  • New competitors can challenge established businesses without needing large-scale physical facilities of their own

  • E.g. Small independent brands can now compete directly with major retailers by selling through platforms such as Shopify or TikTok Shop, without needing to build their own stores or warehouses

• A well-developed digital strategy can even become a product in its own right

  • This can create an additional competitive advantage beyond a business's core operations

Example

Tesco developed its own customer data and loyalty analytics system, originally built to support its Clubcard scheme, into a separate business called Dunnhumby

This business now sells data analytics services to other retailers around the world