NATURAL & TECHNOLOGICAL ENVIRONMENT

What is the core of social system• The core is natural environment & availability of technology.

How it defines the environment Natural environment through resource availability Technology through the tools and process.

There is a well defined link between the two-called the production possibility frontier-going outside the frontier requires augmenting natural resources through technology.

There is a mutually reinforcing relationship. On the one hand, technology is used for augmenting natural resources and on the other, technology is effective to the extent of current availability of natural resources.

Technological environment defined• Technology includes tools-both machines (hard technology)

and ways of thin king (soft technology). • United Nations Committee on Trade and development

(UNCTAD) defines technology as follows:

“ systematic knowledge for the manufacture of a product, for the application of a process or for rendering a service.

Technology also includes entrepreneurial experience and professional knowhow. These two turns out to be the key differentiator or competitive advantage.

Technology is one of the factors considered by the World Economic Forum to evaluate nations’ competitiveness.

India’ s Rank in latest Global Competitiveness Report by WEF is ranked 60th among 152 countries. Shows we need to go a long way in technology adoption and adaptation.

WEF Global Competitiveness Report 2013-14 ranks2013-14 rankings 2012-13 rankings

Switzerland 1 1Singapore 2 2Finland 3 3Germany 4 6United States 5 7Sweden 6 4Hong Kong SAR 7 9Netherlands 8 5Japan 9 10United Kingdom 10 8China 29 29

India 60 59

Role of Innovation

How Innovation helps companies.• To increase market share• Capture new markets• Create a new market segment• Create an entirely new industry or market

Technology can be classified into the following types depending on its impact

1. Radical innovation- a technological innovation that establishes a new functionality

2. Incremental innovation- A change in an exisitng technology that does not alter the functionality but incrementally improves performance features.

3. Next gen technology-A change that does not alter functionality but dramatically improves performance fawetures or lowers costs.

Are all innovations really successful? Types of innovation- product innovation & process innovation.

All innovations may not lead to commercial success due to the following reasons

1. Improper assessment of demand: A product may be highly innovative but there may not be enough demand for it to justify the costs.

2. Inadequate coordination between various SBUs: For instance, there may be poor coordination between marketing and fiann ce leading to inadequate budget for ad spends and promotional campaigns.

3. Inadequacy of incremental innovation: In certain instances, the innovations may not meet customer expectations.

4. Pricing issues: The price of end product may eb too high to generate enough returns for the prodeuct leading to slow take off or even absence of a take off.

Determinants of technological dynamics:

The factors influencing technological change may be internal or external. According to Porter, technological leaders in industries with key external source of technology must capture the best of those through JVs, collaborations or through technological adaptation. The various factors influencing technological dynamics are

1. Innovative drive of the co0mpany

2. Customer expectations

3. Demand conditions

4. Competitive dynamics

5. Substitutes- This is the most common impact of technology on industry structure.

6. Social forces

7. R& D facilities in the country etc.

8. Government policy towards technology for eg GM technology by Monsanto-green revolution during 1960s etc

Schematic representation

Innovative dynamics of the

Co

Customer needs

suppliers offerings

Social forces

Competitive dynamics

Innovations by R&D units

Govt policy

Substitutes

Demand conditions

Technology lags and technology appropriateness• Time lags in technology adoption exists between countries. For

instance, television arrived late in India. Even when TY.V arrived, it started with black & white T.V.

• When technology comes with a lag, the particular product may fail to reap the full advantage since by that time this particular technology might have become obsolete.

• Technology lag may also lead to dumping. For instance, developed countries might dump obsolete technology in developing country markets- a case of dumping.

• Appropriateness is equally important. For instance, the msot modern technology need not be the most appropriate for a country. Developing countries often require intermediate technology.

• Factors like income levels, product awareness, absence of complementary products etc may also impact technology adoption.

BUSINES ETHICS These refer to ethical/normative practices to be followed by business houses.

There was a debate as to what exactly are the overriding foundation of a business-is it profit maximization alone or there has to be a balance between profitability and social obligations. Obviously, recent debate has tilted to be latter.

The common terminology used at present is Corporate Social Responsibility (CSR).

According to new company law, corporates have to spent 2% of net profit towards CSR activities in an year. Also referred to as corporate citizenship. A corporate is accountable not just to shareholders but alos to its stakeholders.

A major instance of violation of business ethics- Bhopal Gas tragedy. The compensation was also poor and came after endless litigation.

Social responsibility divided into two categories

1. The manner in which the business carries out own activities

2. The additional welfare activity it undertakes for the society.

The first view (classical view) holds that business should work within the framework of rules & regulations of a country, create wealth and maximize shareholder returns and expand economic activity by expansion in backward areas.

The modern view, however, is broader and holds that business has an onerous obligation to maximize social welfare as well. A reasonable approach to social responsibility should include the following.

3. Profitability and social obligations must go hand in hand

4. Business should recognize that in long run, social good benefits everyone

5. Social responsibility is related to size of the company

6. Should tackle only those problems in which it has competence.

7. Sholud assume its share of burden and bear reasonable social costs

Social responsibility models

I. Carroll’s model- 4 obligations of a firm-Carroll’s pyramid

1. Economic Fundamental; responsibility

2. Legal (classical view)

3. Ethical

4. Discretionary r contingent responsibility

(modern view)

Economic: Achieving operational efficiency, rewarding shareholders and generating surplus

Legal- fundamental in nature since a company is bound to obey laws of the land.

Ethical- Norms which the society expects business to do though not mandated by law. Like staying away from bribing.

Discretionary- voluntary contribution top social causes like community development initiatives etc.

II. Halal’s return on corproate performance model

• Recognizes that no corporate social posture is value free which makes CSR very difficult.

• According to him, there will be inevitable conflicts- such as between social obligations and shareholder wealth maximisation.

III. Ackerman’s model-

3 phases in the development of social responsiveness which are Recognition of a social problem by the top management Company appointing staff and consultants to study it and suggest

ways Implementation of the social responsibility programme.

Most notable example of CSR initiative in india is TISCO when it amdended Articles of Association to outline CSR and even conducted a social audit in the 1970s.

Depending on the extent of social orientation, corporates divided into the following.

1. Anti social: With no responsibility and even violating the laws

2. Indifferent: Only legal and economic responsibilitis- clasical view

3. Peripheral: A shade better than indifferent category .

4. Socially oriented: high level of commitment but constrained by resources

5. Committed: High social role with enough resources at their disposal

Anti socialperipheralIndifferent

Socially oriented

very committed & active

Factors affecting social orientation

1. Promoters and top management

2. Board of Directors

3. Stakeholders and internal power relations

4. Societal factors

5. Industry & Trade Associations

6. Government & laws

7. Political factors

8. Competitors

9. Ethical influences and internal regulations in this regard.

Five ethical standards in vogue narrated by Lacznaik

1. The Golden Rule- Act the way you expect others to act

2. Utilitarian principle: act in a way lead to greatest good for greatest number

3. Professional ethic: Actions that a professional panel of colleagues would view as proper

4. The TV Test: Would it be comfortable explaining to a TV audience why the action was taken

5. Categorical Imperative: Actions done as per universal rule under the given circumstance.

Forms of social responsibilities

No generally accepted definition- The most common are as given below:

1. Responsibility to shareholders: This involves not only wealth creation but also the image of the company

2. Responsibility to employees:

3. Responsibility to consumers as regards quality, product choices etc.

4. Responsibility to the community

social responsi

bility

shareholder

Employee

Case Study Questions

1. Evaluate Porters’ Five Forces model as it applies to Coke in India

2. Given two segments of India market-rrual and urban- what possible strategies can Coke adopt for effective brand penetration and positioning?

3. Briefly describe the internal and external environment in which Coke functions

4. Provide a comprehensive SWOT analysis of Coke and strategies required to address weakness