technological environment 1

8/4/2019 Technological Environment 1

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Technological Environment


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y Natural and technological environments are theimpulsive factors.

y With these factors as given, the propulsive factors

determine the extent of development potential and thepace, direction and pattern of development of any economy.

Economic &Business Development

Impulsive Factors

Technology

Natural Factors

Propulsive Factors

Economic FactorsSocial / Demographic FactorsPolitical / Government Factors


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Natural Environment

T he natural environment is the source and support of everything used by businesses raw material, energy source, climactic conditions etc.Resource availability is the fundamental factor for every business set-up.

y

Natural Environment: Provides a biological chemical and physicalsystem that enables human life to exist.y Supply of natural resources: Natural environment provides raw

materials and energy for economic production and household activity.y Absorption of waste products: Waste products resulting from

production activity and household activity are absorbed by the naturalenvironment. However there are certain waste products that aredifficult for the natural environment to dispose of safely.

y Supply of amenity services: Natural environment also provides amenity services ie. natural beauty and space for outdoor pursuits.


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Technology

y Among all the segments of macro-environment, technological environmentexerts considerable effect on business. It is one of the top determinants of success of a firm as well as the economic and social development of a nation.

y J.K. Galbraith defined technology as: A systematic application of scientific or other organized knowledge to practical tasks.

F eatures of Technology:y Technology continuously keeps changing. The time gap between idea and

implementation is falling rapidly and the time between introduction andpeak production is shortening considerably.

y Effects of technology are widespread and are reaching beyond the immediatepoint of technological impact.

y Technology is self-reinforcing. T echnology feeds on itself. Technology makes more technology possible. It acts as a multiplier to its own fasterdevelopment .


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Innovation

Innovation maybe defined as the technical, industrial and commercialsteps which lead to the marketing of new manufactured products andto commercial use of new technical process and equipment.Innovation can be classified into:

y Radical Innovation basic technological innovation that establishesa new functionality

y Incremental innovation change in an existing technology system

that does not alter functionality but incrementally improvesperformance, features, safety or quality or lowers cost.y Next generation technology innovation - change in an existing

technology system that does not alter functionality but dramatically improves performance, features, safety or quality or lowers cost andopens up new applications.

Usually, the pattern of early innovations in a new technology basedindustry will be:

Product Innovation : Improving the performance and safety of theproduct

Process Innovation: Improving the production process could make theproduct cheaper and improve the quality of the product


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Technological Leadership and FollowershipThe decision to become a technological leader or follower can be a way of achieving either low cost or differentiation.

Porter points out that the choice of whether to be a technological leaderor follower is based on the following three factors:

y Su stainability of the Technological Lead ie. Degree to which it cansustain its lead over its competitors

y F irst Mover advantage ie advantage that a firm reaps from being thefirst.

y F irst Mover disadvantage ie disadvantages that a firm faces by beingthe first eg. Pioneering costs, high cost of early inputs because of scarcity or ; demand uncertainty etc.

Technology and Competitive advantage : As per Porter, technological change by a firm will lead to sustainable

competitive advantage under the following circumstances:y The technological change itself lowers cost or enhances differentiation

and the firms technological lead is sustainable.y The technological change shifts costs or uniqueness drivers in favor of a

firm.y Pioneering the technological change translates into first mover

advantages.y The technological change improves overall industry performance


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Sources of Technological Dynamics

There are various factors which determine the technologicaldynamics of a company:

y Innovation Drive of the Company. Many companies view technology as a driving force of competitiveness and development.Eg: Pharmaceutical Industry.

y

Customer Needs / Expectations: Technological orientation and R & D efforts of a company could also be influenced by the customerneeds and expectations. If the consumers are highly demanding,companies would be compelled to innovate.

y Demand Conditions: Size of the demand influences the choice of the technological scale. Expected future trend could also be

important.y Suppliers Offerings: Many a time technological changes are

encouraged by suppliers.y Competitive Dynamics: Competition compels the adoption of the

best technology and constant endeavor to innovate. Absence orlack of competition was one of the major reasons for thetechnological backwardness of Corporate India


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Sources of Technological Dynamics (contd.)

y Substitutes: Emergence of new substitutes or technological improvementsof substitutes alter a firms competitive advantage.

y Social F orces: Certain social forces like protest against environmentalpollution or other ecological problems may prompt efforts totechnological developments in certain industries.

y Research Organizations / Technical F acilities: The technologicalenvironment of the business is enriched by research organizations. Eg:

The technology developed by the CF

TRI for making baby food from buffalo milk and its commercialization by Amul was a milestonedevelopment.

y Governmental Policy: Government is an important actor in thetechnological environment. Government can contribute to thedevelopment of technology by its own direct involvement and by setting

up research institutes etc. Eg: A government might favor or disfavorcertain types of technologies.Some labor abundant countries have a preference for labor intensivetechnology.Lack of adequate patent protection in many countries was a seriousproblem for MNCs. Also, access to global technology can help firms improve their

competitiveness. In India the policy bias in favor of small industrieshas resulted in production units of uneconomic size


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Technology

Social Implications

Economic Implications

Plant Level Changes

Impact of Technology


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Social Implications

Technology reaches

People through business

High expectationof customers

System Complexity

Social Changes


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Social Implicationsy Technology reaches people thro u gh B u siness : Business is an

institution through which man expects discoveries to be converted into

goods and services.y Organizations and business houses spend considerable amount of

resources, financial and human on Research and Development.y New discoveries would remain mere ideas, sketches on paper but for

business institutions.y Society depends on business to benefit from new discoveries flowing into

useful goods and services for all mankind. New discoveries mean very

little unless there are competent business units to produce for people.y H igh expectations of c u stomers : Technology has contributed to the

emergence of affluent societies and in todays world consumers demandmore of many things than more of same things. The desire is for: new varieties of products, superior in quality, free from pollution, more safeand customer friendly products.

y S ystem Complexity :Technology has become highly complex and the need is for specializedpersonnel. Also, there is inter-dependence of systems. A localized problem canescalate into larger issues. Eg : In Rajasthan there was the Gujjar strike which led to an impact on the industries / offices in the Gurgaon region which in turn led to major impact globally


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Social Implications

y S ocial Change : Technology has a considerable impacton the social life. Eg : Impact of BPOs on the Indianeconomy. It led to increase in jobs in the NCR, lifestyleof families changed, the environment for such families

have become 24*7 lifestyle.y Status differences are likely to be created by

technological advancement in developing countries.y Technology flows to developing countries through

MNCs.y F inally, the way we communicate, use media and work

are also affected by technology. New terms continue toemerge as new products are introduced.


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Increased Productivity

Jobs become intellectualMultiprofessional Managers

Insatiable Demand for Capital

Need to spend on R & D

Problem of techno structure

Increased regulation andstiff competition

Rise and Decline of Products and Organizations

Business BoundariesRedefined


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Economic Implicationsy I ncreased Prod u ctivity :

1. With technological innovations the expectation is of increased productivity interms of both quality and quantity.

2. With the introduction of Six sigma methodology, the focus is on producing moregoods in a short period of time and with minimal defects. Six sigma is astatistical term which means 3.5 errors per million.

3. Productivity improvements lead to rise in real wages and decline in prices of some products. Thus, the beneficial economic effects of technology arethroughout the social system.

y N eed to S pend on R & D: Research and Development assumes considerablerelevance in organizations as technology advances. Organizations need to takedecisions on:

1. Allocation of resources to R & D. India spends only 1% of its GNP on R &D as against the US which spends 2.5% of its GNP.

2. Time factor: Time between innovation and commercialization is gettingconsiderably reduced. Companies can no longer assume that competitors will allow them time to recoup their initial investment. Time to market, isan important consideration as 60% of successful innovations have beenimitated within 4 years at 65% of the total cost.

3. As new technology comes in, old becomes redundant. The process of oldreplaced by new is called technological discontinuity.

4. Organizations need to decide on its own R & D or to outsourcetechnology.


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1. Decision on product innovation or process innovation : In the early stages, productinnovation is more important because the products physical attributes andcapabilities affect financial performance. Later process innovation takes over whereinthe objective is to improvise on the current process.

y J obs to become more intellect u al :1. The requirement in todays date is of higher skilled people.2. Introduction of new technology dislocates some workers unless they are up-trained to

handle the new technology. Therefore, with technology advancement, there is equalresponsibility on the people, organizations and government to provide educational andtraining facilities to its people.

3. Working class in general reaps the benefit of technological advancement through increasedproductivity, reduced prices and increased real wages.

y Problem of Technostr u ct u re : Not only do the jobs become more intellectual, even thepeople tend to become highly professional and knowledgeable. Though the organization can

boast of a progressive and modern outlook of its personnel it also has some negativeoutcomes like:

1. Motivation for such employees is a difficult task 2. Retaining of such employees is again a mammoth task.3. Technostructure tries to control the organization through influencing managements

decision-making.

y N eed for M u ltiprofessional managers : Technocrats, who assume reigns of administration, need to be qualified in management education in addition to the expertisethat they have acquired in their chosen field of specialization.


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y I ncreased reg u lation and stiff competition : A by-product of technological advancement is the ever increasing regulation imposed on business by the Government of the land and stiff competition from the public. Technologicaladvancement is inviting opposition from those who fear that new innovations are athreat to ecology, privacy and the human race. People oppose the construction of high rise buildings, location of industrial plants that eject harmful effluents etc.

y I nsatiable demand for Capital : Technology necessitates massiveinvestment of money on R & D, educating and training of managers. Businessorganizations should not only raise huge funds, but the mobilized funds are to beused judiciously.

y Rise and decline of Prod u cts and Organizations :Technological changes is a norm and not an exception. Schumpeter has definedtechnology as a force for Creative Destruction. Products like mortals have life-cycles : Introduction, growth, maturity, decline and abandonment


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B usiness B oundaries Re-defined : 1. Technological change is a potent force in the reconfiguration of

industry boundaries. It may broaden or narrow generally acceptedindustry boundaries.

2. Technological change can have a significant impact on thedefinition of individual companies. Companies may findthemselves in a different business due to technological changesthat they or others have effected.

3. Technological change gives rise to product substitution or productdifferentiation.

4. Technological change can also bring about process change5. Technological change may have multiple impact and can either

create new synergies across businesses or make obsoleteexisting ones.


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Plant Level Changes

Technology andOrganization Structure

Resistance to Change Business ProcessReengineering

Total Quality Management

Fear of RiskFlexible Manufacturing

Systems


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Plant Level Implications

y Organization S tr u ct u re: Companies with fast changing technology usually have a matrix structure. Along with technology, history and background of a company, personalities of people also have an impact onthe organization structure. In case of specialized processes decisionmaking gets decentralized and delegated.

Any technological advancement co u ld res u lt in:Expanded availability of a range of products and servicesSubstitution of capital for labor leading to higher productivity andlower costsIncrease in sales or power for the innovating organizationInitiation of changes in behavior of customer, suppliers, employeesSide effects on the quality of physical environment

y F ear of Risk


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Plant Level Implications

Resistant to change : Resistance to change is purely psychological and stems

from:

1. Psychological and social commitments to existing products, processes andorganizations.

2. Sizable capital investments3. Complacent top management4. Lack of successful entrepreneurial models to emulate5. Powerful labor resistance

Total Quality Management: This refers to deep commitment of anorganization to quality wherein each step of the Companys processes is subjectedto intense and regular scrutiny. Managers are required continuously to search for process improvements. TQM requires that the company maintain the qualitystandard in all aspects of the organization. Principles of TQM are :

1. Meet the customers requirements on time, the first time 100% of the time2. Strive to do error free work3. Manage by prevention and not correction4. Measure the cost of quality.5. In short do it right the first time.


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Plant Level Implicationsy Bu siness Process Reengineering (BPRE): This involves

considering how things would be done if the organization were to start allover from scratch. The key to BPRE is for organizations to look at their business processes from a "clean slate" perspective and determine how they can best construct these processes to improve how they conduct business. It is the radical redesign of an organisations processes.

TQ M and BPRE have identical objectives of Search for Excellence inserving customers. TQ M seeks to improve what is good but BPREseeks to reject what is irrelevant and start afresh. TQ M is a bottom-up approach while BPRE is a top-down approach.

y F lexible Man u fact u ring S ystems ( F M S ): Under F MS, machines aredesigned to produce batches of different products. Thus, the machinescan produce low volume products at a lesser cost and on reprogrammingof the same machine aid in producing a different product. With flexiblemanufacturing, when management wants to produce a new product, itdoes not change machines it needs to change the computerprogramming. F or such processes, highly skilled workers are requiredand there should be decentralization of authority


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Constraints of Technological Growth :

y Poll u tion : Pollution is an unavoidable consequence of industrialproduction. Smoke, smell, noise effluents and dust are generated by industrial establishments. A critical issue today is societys capability to raisethe standard of living without causing irreparable damage to the earths biosphere.

y I nd u strial reso u rce base : This comprises of minerals, different forms of energy, water supplies, skilled labor force etc. The same is fast depletingHowever, technology does have the potential to discover new materials,substitutes for existing ones.

y S ocial I nstit u tions : Social values and institutions may be inconsistent with the full productive potential that is present in technology.


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S tat u s of Technology in I ndia:

y Attained political independence after prolonged colonial rule and exploitation.y Country entered the modern world in a state of economic backwardness and poverty.y Technology was meant to attend to basic problems of food, clothing, health and

housing of people.y At the same time rapid industrial development was required to keep pace with the

developed countries.

Aims:y Basic objective of the technology policy is the development of the indigenous

technology and efficient absorption and adaptation of imported technology appropriate to national priorities and resources:y Attain technological competence and self reliancey Provide maximum employment to all strata of society.y Use traditional skills and capabilities making them commercially competitivey Ensure maximum development with minimum capital outlay y Identify obsolescence of technology and arrange for modernization of equipment

and technology y Develop internationally competitive technologiesy Enhance quality and reliability of products through technological innovationsy Reduce demand on energy y Ensure harmony with environmenty Recycle waste materials and make full-utilization of by-products.

technological environment 1

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