Technological Environment

by Sree Rama Rao on December 19, 2010

Technological factors represent major opportunities and threats that must be taken into account while formulating strategies. Technological breakthroughs can dramatically influence the organization’s products, services, markets, suppliers, distributors, competitors, customers, manufacturing processes, marketing practices, and a competitive position. Technological advancements open up new markets, result in proliferation of new and improved product change, the relative cost position in an industry and render existing products and services obsolete. Technological changes can reduce or eliminate cost barriers between businesses create shorter production runs, create shortages in technical skills and result in changing values and expectations of customers and employees.

Characteristics of technological changes:

Key characteristics>>

1) Technology is changing fast.
2) Technology is getting cheaper.
3) Technology is becoming easily available
4) Technology is touching lives in more and more areas

Effects>>

1) Customers will expect and accept new ideas
2) Competition will come from unexpected quarters.
3) Product life cycles will be shorter.
4) New things will make old product skill knowledge obsolete necessitating continuous change.

Technological advancements can create new competitive advantages that are more powerful than existing ones. Recent technological advances are well know in computers, lasers, robotics, satellite networks , fibre optics, biometrics cloning, and other related areas and have paved the way for significant operational improvements. Manufacturers, banks, and retailers for example have used advances in computer technology to carry out their traditional tasks at lower costs and higher levels of customer satisfaction. Consider the case of an old economy giant. Ford Motor, company which is morphing into a new economy animal using web based technologies to the beat advantage (Anand) thanks to the internet. The old days of being able to concentrate only on the nuts and bolts of the business seem to be over. The winners are going to be companies that move closer and connect well with customers. Take the stunningly successful case of MP3 a freely available standard for the compression and transmission of digital audio. The big guns of the music business – Sony , RCA and the rest — were so confident about their control over the music industry that they couldn’t see the threat posed by a tiny player like MP3.com, which quietly spun its own B web. The company didn’t try doing everything the B web had a combination of content companies (like MP3) manufacturing such as S3 maker of the Rio MP3 player) distribution technologies (like Napster) and of course hundreds of thousands of teenagers who swore by the music but couldn’t pay for it.

Technological change thus, can create or even decimate existing businesses or even entire industries since it shifts demand from one product to another. Examples of such change include the shifts from vacuum tubes to transistors from steam locomotives to diesel and electric engines, from fountain pens to ball points from propeller aero planes to jets and from typewriters to computer based word processors ( Wright) .

Effects of technological changes on Enterprises:

Marketing : Television fax

Effect of the changes>>

The way in which customers are targeted, approached, convinced.

R&D: CAD, Solid modeling, Advanced materials

Effect of the changes>>

Wider possibilities faster development times.

Manufacturing: CNC, Microelectronics, Micro- hydraulics robotics

Effect of the changes>>

Shrinking of the factories, manpower reduction, lower cycle times.

Material management

ERP systems , Communication technology

Effect of the changes>>

Comprehensive planning systems, systematic rigidity, Global sourcing changes in motivating, offerings to employees.

HRD: Communication technology

Effect of the changes

Changes in motivating offerings to employees.

Systems: faster computers, smarter applications

Effect of the changes

Extremely fast obsolescence

Finance: communications technology.

Effect of the changes

Global financing. Rapidly fluctuating market.

Source: Strategic Management





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