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Technology and Innovation play a desire role to

enhance the value and goodwill of Business. Explain
this statement. Write in detail about the feature of
technology effecting business.

Submitted To: -

Submitted By:-

Prof. Pawan Kumar

Vikas Sharma
M.B.A. 1st Semester

Technology and innovation play a very important role in the business environment. It is become
necessary for all business to incorporate technology and innovation otherwise they will be out
from the market due to lack of their technology.
Innovation is the development of new customers value through solutions that
meet new needs, inarticulate needs, or old customer and market needs in new ways. This is
accomplished through different or more effective products, processes, services, technologies, or
ideas that are readily available to markets, governments, and society. Innovation differs from
invention in that innovation refers to the use of a better and, as a result, novel idea or method,

whereas invention refers more directly to the creation of the idea or method itself. Innovation
differs from improvement in that innovation refers to the notion of doing something different
(Lat. Innovare "to change") rather than doing the same thing better.

Innovation may be defined as the technical, industrial and commercial steps

which lead to the marketing of new manufactured product and to commercial use of new
technical process and equipment.

In n o v a tiv e
D y n a m ic s o f t h e
Com pany

D em an
c o n d iti

t itu t

C u s to m e s
n e e d s /e x p e
c tio n s

m ent
p o lic y

S u p p lie r 's
o ff e rin g s

C o m p e tit i
d y n a m ic s

S o c ia
fo rc e

Innovation Drivers

Technology is the making, modification, usage, and knowledge of tools,

machines, techniques, crafts, systems, methods of organization, in order to solve a problem,
improve a preexisting solution to a problem, achieve a goal or perform a specific function. It can
also refer to the collection of such tools, machinery, modifications, arrangements and procedures.
Technologies significantly affect human as well as other animal species' ability to control and
adapt to their natural environments. The word technology comes from Greek (technologa); from
(tchn), meaning "art, skill, craft", and (-loga), meaning "study of-"The term can either be
applied generally or to specific areas: examples include construction technology, medical
technology, and information technology.

The human species' use of technology began with the conversion of natural
resources into simple tools. The prehistorical discovery of the ability to control fire increased the
available sources of food and the invention of the wheel helped humans in travelling in and
controlling their environment. Recent technological developments, including the printing press,
the telephone, and the Internet, have lessened physical barriers to communication and allowed
humans to interact freely on a global scale. However, not all technology has been used for
peaceful purposes; the development of weapons of ever-increasing destructive power has
progressed throughout history, from clubs to nuclear weapons.
Technology has affected society and its surroundings in a number of ways. In many societies,
technology has helped develop more advanced economies (including today's global economy)
and has allowed the rise of a leisure class. Many technological processes produce unwanted byproducts, known as pollution, and deplete natural resources, to the detriment of the Earth and its
environment. Various implementations of technology influence the values of a society and new
technology often raises new ethical questions. Examples include the rise of the notion of
efficiency in terms of human productivity, a term originally applied only to machines, and the
challenge of traditional norms.
Philosophical debates have arisen over the present and future use of technology in
society, with disagreements over whether technology improves the human condition or worsens
it. Neo-Luddism, anarcho-primitivism, and similar movements criticize the pervasiveness of
technology in the modern world, opining that it harms the environment and alienates people;
proponents of ideologies such as transhumanism and techno-progressivism view continued
technological progress as beneficial to society and the human condition. Indeed, until recently, it
was believed that the development of technology was restricted only to human beings, but recent
scientific studies indicate that other primates and certain dolphin communities have developed
simple tools and learned to pass their knowledge to other generations.

According to the UNCTADs Draft TOT Code, Technology should be Described as

systematically knowledge for the manufacture of a product, for the application of products or
for the rendering of service and does not extend transactions involving mere sale or lease of
Technology includes not only knowledge or methods that are necessary to carry on or to prove
the existing production and distribution of goods and services, but also entrepreneurial expertise
and professional know-how.

Technology Performance Parameter

Nature of

New Invention Period

Technology Improvement Period

Mature Technology Period

Technology S Curve

5 Ways Technology Has Changed the Way We Do Business

In technology, its not about the last 10 years. Its about the last 3 years. In the
past 3 years, the rate of change in regards to technology has increased drastically. Businesses
processes have changed and made organizations more efficient. At the same time, technology has
opened lines of communication, allowing businesses to communicate and collaborate beyond
borders with ease. Collaboration is the future of business competitiveness as companies become
more innovative, connect to people better, and overall act faster in the "flattened" marketplace of

today's global, internet economy.

1. Technologyhas made business faster
It is undeniable that technology has made business move much faster than
before.Personal computers and the Internet have revolutionized the way we work.E-mail
interactions have replaced memos, phone calls, and faxes.Smartphones can connect you with
your entire business network while you are out of the office, allowing you to respond
quickly.Workflows and automated tasking systems have cut down on organizational bureaucracy,
streamlining operations.Speed, matched with technology, adds flexibility and responsiveness to
2. Technology has allowed for far-reaching collaboration
The Internet has allowed geographically dispersed teams to virtually meet from
anywhere in the world.Conference calling, video conferencing, e-mail, cloud computing, Skype,
and instant messaging have flattened the world.Additionally, with social networking sites like
LinkedIn, businesses can connect to an even larger business network.The result is greater
productivity and a wider blend of talents, abilities, and viewpoints.
3. Technology has flattened the marketplace
In the same way that technology has allowed for collaboration beyond
geographical borders, technology has also reduced the barriers to entering markets around the
world.This allows buyers and sellers from around the world to connect and do business.Skype,
video conferencing, and online translation services help people to communicate and close deals.
4. Technology in business encourages innovation
Dont like the way something works?Do you notice that customers have a certain
need that is not being met?Do something about it.An example is Zillow, a website created by two
former Microsoft employees that helps people get through the maze of real estate
transactions.When they launched the site, real estate agents were initially against the idea, but
now they collaborate with buyers through the website.The two noticed a need for transparency in
the market.With the site, they have created a way for buyers and sellers to share information on
houses for sale.
As technology advances, the prices are dropping and it becomes more userfriendly.Many people have the tools to design new and innovative software to solve common
problems and improve efficiency.Additionally, technology is becoming more accessible to users
all around the world, including users in developing countries.The next big thing could be in
development at this moment in Rwanda.
5. Technology has changed how we connect and sell to clients
Perhaps the most important change, technology has allowed businesses to connect
and sell to clients in new ways, including mass e-mails, blogs, and recently, Twitter.These tools
allow businesses to stay relevant in a customers mind, and they help prospective customers to

find new companies to do business with.

Advantages & Disadvantages of Technology in Your Business

In todays society, technology is a necessary component of business yet many
businesses are hesitant to take on the additional expense. As technology progresses, older
systems need updating. Implementing new technology within a business, offers many great
opportunities for your company to develop a distinct advantage in a highly competitive market.
Many businesses have recognized this potential and are integrating the latest technologies into
the workplace with a strategic mindset.
To utilize technology to its fullest potential, upgrading can be viewed as an
excellent chance to increase your competitive advantage. Several of the more traditional business
models are changing with the integration of technology and your company can creatively make
use of upgrades, to achieve success from the benefits digital innovation offers.

Advantages New Technology Offers:

Waste Reduction-leads to lower costs and higher profitability.

Reduced Workforce- fewer positions may be required, when previous tasks performed
by personnel become automated. If the existing number of employees is minimal already,
attrition may be the next step.
Increased Profitability-due to increased efficiencies, which reduces expenditures, new
technology allows jobs to be completed quicker and more accurately, to allow a steady
cash flow.
Increased Productivity-among team members coupled with the introduction and
implementation of new technology, creates additional efficiencies and overall production.
Higher Income-the greater the business profits, the greater opportunities there are for
employees to increase their income, via bonuses or raises.
Improved Communications-allows information to be sent, received and responded to
instantaneously, whether through e-mail, computer networks and cell phone use. Long
distance communication of documents and information can be passed along much more
rapidly. Remote based employees have immediate access to staff from cell phones, web
cams, video conferencing and laptop use.
Competitive Advantage-allows a business to reduce product/service costs, while
increasing profit levels, without compromising customer service.

Technology is a broad concept that has come to refer to breakthroughs in science that allow for a
better or automated solution. While the most obvious benefit to technology in small business is
increased productivity--which translates into a lower cost structure--there are some other benefits
that can help the bottom line as well. Improved speed, the ease of sharing and storing
information and a decrease in human error through automation add up to a reduction in costs and
an increase in revenue.

Technology helps the business to enhance the goodwill of the business. Goodwill is an
accounting concept meaning the value of an asset owned that is intangible but has a quantifiable
"prudent value" in a business for example a reputation the firm enjoyed with its clients
Goodwill is an intangible asset derived from other assets of the business. Its existence depends
upon proof that the business generates and is likely to continue to generate earnings from the
use of the identifiable assets, locations, people, efficiencies, systems, processes and techniques of
the business.
The factors/reason which affect the goodwill and value of business are as follows.

Speed and Time

Small businesses compete with large businesses by being more swift and agile. Additionally, a
small business can respond to change faster than a large business. A hundred years ago,
electronic mail did not exist, and the only way to communicate with someone else in another
geographical location was by postal service--the farther away your client or supplier, the longer
the communication took. Today, with the advent of information technology, information is shared
at an astounding rate. This saves time, offering the ability to make decisions faster.

Easier Storage
Technology eliminates the need for double or triple entry systems and reduces the need to file
large amounts of paperwork. Now, contracts and customer information can be stored in virtual
data warehouses and accessed in minutes, which cuts down on the need to purchase or rent
storage space.

Improved Sharing of Information

Technology allows information, whether written or broadcast, to be shared more quickly and
with fewer resources. Marketing can be accomplished by placing ads that reach millions of ready
buyers on the Internet or through social networking sites. E-learning and other forms of online
training have reshaped the readiness of the average small business workforce as employees can
listen to classroom lectures and share ideas with classmates from the comfort of their home or
office. This eliminates the need for small business to hire training staff.

Technology allows small businesses to automate certain functions that historically have required
the need to hire an employee. For instance, bookkeeping functions now can be handled by
software applications such as Quicken and Quickbooks. The sales function is automated through
contact management sites such as SalesForce. This gives the small business owner the ability to
focus on strategy and cut down on labor expenses.

Better Reporting Functions

Companies that have multiple locations, whether nationally or globally, have used
technology to implement better communication services and software modules that
communicate to a home base via the Internet. This allows companies to penetrate new
economic markets without sacrificing the needs of communication or financial and

operational reporting. Additionally, companies can improve their management information

system (MIS) to capture information for specific locations when making business decisions.
Financial reporting has also benefited greatly from technology; rather than
sending external auditors to multiple locations, it is possible to create a centralized accounting
office to record and report financial transactions. This improves financial reporting and
lessens the expense related to external audits.

Increased Employee Productivity

Computers and business software packages have exponentially increased employees'
productivity by allowing them to provide data entry functions or review automated reports.
Companies have automated several traditional manufacturing processes; instead of using
manpower to manually create and assemble goods, machines and/or robots now complete
these functions. While these improvements may increase capital expenditures, they lessen the
impact of consistent labor expenses related to productions. Fewer employees are needed to
monitor the machines and ensure they are working properly.
Other areas, such as customer service, accounting and administrative support, have
also seen an increase in employee productivity. Employees now review and report
electronically collected data to ensure they are accurate and timely, rather than manually
gathering information.

Improved Business Mobility

Technology has also improved companies' sales and service departments by allowing
employees to use personal electronic devices to create sales displays and transmit orders and
customer information to the home office. These electronic devices shorten the lead time
companies spend on receiving and delivering goods or services, creating an instant
competitive advantage in the industry. Companies can also send sales representatives to
multiple markets at the same time, allowing them to penetrate multiple markets with few
overhead costs. Companies may allow their internal employees to work from home using a
company Internet connection, reducing the fixed overhead expenses from a large corporate

Disadvantages of New Technology:

Managements Decision-to upgrade with new technology can be extremely

difficult. Do you buy now or wait for the next technological advance? The
decision to do so can and usually is an expensive one. Whats more, the
integration of and training required among the workforce, is a whole other task in
its self.
Regular Maintenance-of new technology will be required to keep efficiencies
flowing. More importantly, questions that must be answered in advance are, if the
machinery on a production line breaks down, will this cease all production? What
alternatives are available that can be immediately implemented, if this occurs?
Costs-will be reduced if integrated properly and therefore, the decision is whether
or not the extra capital is available to purchase the new technology.
Additional Time-will be required for training and if you have to reorganize the
workplace to accommodate the new technology. This is an important decision that

must be taken into consideration, if your business works within tight deadlines.
Furthermore, any IT issues that occur will need to be resolved quickly, to ensure
the transition is as seamless as possible.
Abuse-of the technology made available to employees on their job can be
excessive and very costly to a company, i.e. constant instant messaging, personal
use of social media, non-work related emailing, inappropriate use of information
on the web.

The key to deciding whether or not to upgrade your business with new
technology lies in your ability to fully understand the culture of your workplace. This is
an important aspect of managing any workplace. The culture of your organization is
critical in hiring and retaining effective employees. Culture involves how workers feel
about the organization and how they feel about their jobs. Create an environment thats
aligned with the companys overall objectives and mission. A culture where employees
not only trust their leaders, but are willing to follow them, even when theyre uncertain
about change.

Importance of Goodwill
Just as a good reputation is vital for the social standing of a person, goodwill is vital to the longterm success of any business. Some of the ways in which business goodwill affects a business are
mentioned below.
Goodwill in a business increases the number of return customers and recommendations based on
their pleasant experiences.
A well-established business goodwill increases the chances of loan sanctions from a bank and the
interest of potential investors.
It strengthens the business networks, opens new avenues and creates opportunities for expansion
in business.
In case of a blunder or mistake, people are more forgiving to a business based on the goodwill it
garners, much like the mistakes of an individual with a 'good name' will be given the benefit of
In any business, goodwill provides ammunition against resistance and sabotage.
The equity value and the accounting value of a business are greatly affected by the goodwill of
that business.
As mentioned in the beginning of this article, goodwill is one of the major intangible assets of
any business. Greater the goodwill of a business, greater the value of its intangible assets and
thus, greater the acquisition price in a takeover.
How to Develop Goodwill
Goodwill in a business takes a considerable amount of time, efforts and resources to be
developed. The key factors for developing goodwill in a business are listed below:
Quality Product and Services: Nothing is more important for the life of goodwill in a business
than the standard and quality of the products and services it offers.
Unique Selling Proposition: A good business always has a USP by which it is identified - there
has to be something in the business for people to be attracted to it.
Satisfied Customer Base: A customer is more likely to return or recommend the services of a
business if he/she has a pleasant and satisfactory experience in the first instance. Following good

business ethics goes a long way in impressing customers and investors.

Marketing and Advertisements: A business which is under the spotlight for the right reasons
creates goodwill for itself. Offers, discounts and even Samaritan deeds in a business ensures its
place in the good books.
Strategy and Management: Goodwill has to be deliberately developed and it is possible to do so
only if the employees are well-trained, reputed and capable. A good strategy or 'game plan' is
essential to keep the business on track and motivated.
Innovation and Expansion: For a business to be viewed as valuable, it has to be one step ahead of
its competitors. Though it sounds clichd, stagnancy has no place in the goodwill of a business.
Profits and Gains: Customers and investors are more willing to deal with a business if it is
profitable or if they believe that it has the potential of making profits (given a chance).
Once goodwill has been developed, there is a constant need to keep up and protect it from
becoming stagnant or turning negative. But the benefits of goodwill in business make all the
efforts worthwhile and satisfying. The adage 'the whole is greater than the sum of its parts'
reinforces the importance of goodwill in a business - even a business with low real value can
increase its market value if it can boast about a significant value of goodwill in the business.

goodwill must be of an enduring nature;

goodwill is attributable to cash flows expected from future business activity; and

goodwill must have commercial value (i.e., must be transferable to a third party).

Goodwill by its very nature cannot exist independently of the business which created and
maintains it.
goodwill is not something which can be conveyed or held in gross: it is something
which attaches to a business. It cannot be dealt with separately from the business with
which it is associated. Barwick CJ in Geraghty v. Minter[1979] HCA 42 at 181
The value of goodwill is tied to the fortunes of the business in terms of its profitability and
cashflow and the value of the net tangible assets utilized in the business. The value of goodwill
will therefore fluctuate with the performance of the business.
It should be noted that the legal definitions of goodwill and the accounting definitions of
goodwill are very different. A legal definition may result in a finding that the business has
goodwill but an accounting definition may result in the goodwill having no value.
Goodwill can be derived from one or more of the following sources:

Location: based on the notion that a companys success is, to some extent, based on the
physical location of the premises;

Product/Service: where a particular product/service offered by the company has

developed name brand recognition/reputation in the market place, the favourable attitude
of consumers often results in incremental cash flow to the company; and

Operations: a company which has fostered a superior working relationship with its
employees and lenders, investors, suppliers and customers, or has assembled a superior
management team, etc. is at a competitive advantage vis--vis other companies in the

industry. This competitive advantage often results in incremental cash flow to the
In general, goodwill is classified as commercial or personal.

Commercial Goodwill
Commercial goodwill refers to goodwill which is sellable and which will provide the
investor/purchaser with future economic benefits (measured in terms of cash flow). Since the
economic benefit supporting the calculation of commercial goodwill is transferable to third
parties, commercial goodwill is a valid consideration in the determination of value.

Personal Goodwill
Personal goodwill pertains to the favorable attitudes of customers, suppliers, etc., which are
derived from the efforts of a particular individual in the business. In many cases, personal
goodwill can be transferred to a potential purchaser through client introductions, and so on. This
is a common operating model for the sale of service businesses, including medical practices and
accounting practices. In some cases, goodwill associated with a particular individual may also be
secured using non-compete contracts, management contracts or other prudent business
arrangements. In these cases, personal goodwill as it is transferable would be commercial
Personal goodwill resides with the individual and technically cannot be transferred. Personal
goodwill would apply for example to the skills, training and reputation of medical specialists,
barristers, sports people and celebrities.
Related Terms: Business Appraisers
Goodwill is a type of intangible business asset. It is defined as the difference between the fair
market value of a company's assets (less its liabilities) and the market price or asking price for
the overall company. In other words, goodwill is the amount in excess of the company's book
value that a purchaser would be willing to pay to acquire it. A combination of advertising,
research, management talent, and timing may give a particular company a dominant market
position for which another company is willing to pay a high price. This ability to command a
premium price for a business is the result of goodwill. If a sale is realized, the new owner of the
company lists the difference between book value and the price paid as goodwill in financial
The sale of a business may involve a number of intangible assets. Some of these may be
specifically identifiable intangiblessuch as trademarks, patents, copyrights, licensing
agreementsthat can be assigned a value. The remaining intangibleswhich may include the
business's reputation, brand names, customer lists, unique market position, knowledge of new
technology, good location, and special skills or operating methodsare usually lumped into the
category of goodwill. Although these factors that contribute to goodwill do not necessarily have
an assignable value, they nonetheless add to the overall value of the business by convincing the
purchaser that the company will be able to generate abnormally high future earnings.
Although goodwill undoubtedly has value, it is still an intangible asset and as such is not
recorded on a company's books. In fact, many companies use a value of one dollar for goodwill
in their everyday accounting procedures. Many companies could be sold for a premium price
based on the good reputation they have established. But such goodwill is never recorded on the
books until an actual acquisition occurs. The acquisition price determines the amount of goodwill

that is recorded following the purchase of a company. For example, if a small business with
assets of $40,000 is purchased for $50,000, then the purchaser records $10,000 of goodwill.
In general, determining the sales price of a business begins with an assessment of its equity,
which includes tangible assets such as real estate, equipment, inventory, and supplies. Then an
additional amount is added on for intangible assets (sometimes called a "blue sky" amount),
which may include things like patent rights, a trade name, a non-compete clause, and goodwill.
Experts note that in small business sales, the combined total of "blue sky" additions should rarely
be more than a year's net income, because few purchasers are willing to work longer than that for
free. For public companies, the amount of goodwill is often dependent on the vagaries of the
stock market. Since the share price determines the purchase price, the value attributed to
goodwill may fluctuate wildly during the course of an acquisition.
Standard accounting procedures state that, following an acquisition, the purchaser should
amortize goodwill over a period of 15 years using the straight-line method. In other words, onefifteenth of the original amount attributed to goodwill is deducted each year. Since this writeoff
period is longer than that required for most tangible assets, it is usually a good idea to allocate as
much of the purchase price as possible to business equipment. The shorter depreciation period
would enable the purchaser to accelerate deductions and thus achieve earlier tax savings.
On occasion, the goodwill booked after the sale of a business may be written down or reduced.
Such occasions usually occur because of some larger shift within the market in which the
business is active, a shift that causes a reevaluation of the business. An example of such is the
mobile phone market. During the 2000s the market grew quickly, as many new companies
entered the market, and many mergers and acquisitions occurred. In late 2005 and early 2006 TMobile and Vodafone announced large write-downs of the goodwill on their books in order to
more accurately reflect the competitive marketplace in which they operate.
Over the years, there has been some dissatisfaction expressed with the way that goodwill is
handled for accounting purposes. First, since goodwill is sometimes a huge component of a
company's acquisition price (particularly in the case of large public companies), the amortization
of goodwill can have a significant negative effect on the purchaser's net income. Second, the
treatment of goodwill under U.S. law differs from many other countries, which sometimes puts