The Legal and Natural Environment: Business Environment Analysis

10/10/23
Lecture 6 & 7
The Natural and

Technological
Environment
Lecture SIX: Overview
• Businesses carry out a variety of activities, but their main activity is to

produce goods and services to be sold on the market. In the production
process, inputs are turned into outputs. Key inputs into the production
process are people, technology and natural resources.
1
10/10/23
Lecture Four: Overview

By the end of this lecture, you should be able to:
v illustrate the importance of people, technology and natural resources to

business
v explain what determines the quality of labour in the economy
v demonstrate the effect of technological change on business
v outline the main issues affecting natural resources
Introduction
The main aim of business is to produce goods and services that people want. This
production cannot take place without technology and natural resources. In
economics, these are called the factors of production and are categorised under
the headings of labour, capital and land. This lecture will consider each of these in
turn.
Natural resources can be renewable or non-renewable. Renewable resources
would include labour, water, fishing stocks, soil, air and solar power, even though
many of these might not be renewable for a long period of time. Non-renewable
resources would be most minerals, including oil, iron ore and coal, agricultural land,
forests and electricity (in so far as most electricity is derived from minerals).
2
10/10/23
The Natural Environment

• In economics, natural resources are put under the heading of land as a factor of
production. It would include all natural resources like the soil, minerals, oil,
forests, fish, water, the sun, and so on. The uneven distribution of natural
resources throughout the world means that they can be used as economic and
political weapons.
• Although the area of land in a country is fixed, land as a factor of production is
not completely fixed in supply as more land can be made available through land
reclamation schemes and better irrigation.
• The productivity of agricultural land can be increased by the use of fertilisers. It
is true, however, that our natural resources are in finite supply. And often their
true extent is not known with certainty.
5

• The natural environment determines what can be got done in a society and how
institutions can function. Resource availability is the fundamental factor in the
development of business in societies.”
• Differences in geographical conditions between markets may sometimes call for
changes in the marketing mix.
• Geographical and ecological factors also influence the location of certain
industries. For example, industries with high material index tend to be located
near the raw material sources.
3
10/10/23

• For example: The potential occurrence of dreadful earthquakes would influence
the decision-making in respect location of business. It is also likely to affect the
demand for flats and accommodation in high rise buildings. It could also
influence the choice of building technology, design, material etc.
• Besides, climatic and weather conditions affect the location of certain industries
like the cotton textile industry.
• Weather and climatic factors affect the demand for certain type of products. For
example, in several regions where the temperature is very high in summer, there
is good demand for desert coolers. In regions characterised by very cold climate
in winter and very hot climate in summer, both room heaters and air
conditioners may be in good demand in the respective seasons.
7
• Weather and climatic factors can affect the demand pattern for clothing,
building materials and designs, food, medicines etc. Further, weather and
climatic conditions may call for modifications to the product, packaging, storage
conditions etc.
• Ecological factors have recently assumed great importance. The depletion of
natural resources, environmental pollution and the disturbance of the
ecological balance have caused great concern.
4
10/10/23

Protection of natural Resources and the Environment
• Increased knowledge of the effects of depletion of natural resources has led to
increased environmental awareness among the population. There has been an
increased interest in conservation and recycling and the search for alternative
forms of energy. Most of the population in the most countries has become
‘fairly concerned’ or ‘very concerned’ about the environment.
• The issues that have caused this concern include traffic congestion, global
warming, air and water pollution and depletion of the ozone layer. This change
in public opinion has already had a major impact on the way in which business
operates and is likely to have even bigger effects.

• Government policies aimed at the preservation of environmental purity and
ecological balance, conservation of non-replenishable resources, etc., have
resulted in additional responsibilities and problems for business, and some of
these have the effect of increasing the cost of production and marketing.
Externalities have become a very important problem the business has to
confront with.
• Governments have a variety of targets for environmental protection relating to
issues such as greenhouse gas emissions, biodiversity, renewable energy,
recycling, packaging, and so on. Some of these targets are set through
negotiations with other countries at both international (e.g. Kyoto Protocol) and
supranational levels and hence are influenced by political, economic, social and
technological considerations and by a variety of state and non-state actors 10
10
5
10/10/23

• Given the growing importance of environmental issues in business, it is
important to understand that almost all resources used in business come from
exploitation of nature. Sub-Saharan Africa is well endowed with high- grade
minerals. So, now it is the duty of business to protect this natural environment.
Companies in the industrial or manufacturing industry often work with different
kinds of equipment, machinery and chemical-producing agents. In effect, a
business' day-to-day operations can pose an ongoing threat to the natural
environment. To reduce the likelihood of damage to the environment, federal
and state regulations require businesses consider certain natural environmental
factors in their overall operations plan
11
11

Some of the key steps in protecting the natural environment include:
1. Environmental Regulations: Regulating business activities is one way government

agencies protect the environment. Businesses must meet certain standards that
help to reduce any adverse effects a company's activities have on the environment.
As a result, natural environmental factors, such as clean water and clean air, dictate
how companies conduct their day-to-day operations.
12
12
6
10/10/23

2. Permit Requirements: Companies involved in activities that impact their

surrounding environment typically have to file for operating permits through a
local, state or federal government agency. Business permit requirements enable
government agencies to regulate and keep track of business activities.
These permits serve different purposes, some of which include setting minimal
standards for any air emissions, dictating certain procedures for handling waste and
hazardous materials and regulating how a company's day-to-day operations interact
with nearby water supplies. In effect, natural environmental factors determine the
types of operations a company can engage in within a particular locale or region.
13
13

3. Compliance Requirements: Natural environmental factors affect a business'
operations as well as its ability to expand or take on new operations. In effect,
companies must comply with environmental regulations in all stages of a business'
development. Companies considering purchasing a building should ensure the
building conforms to environmental regulations or risk paying penalties for
noncompliance.
Building expansions must also meet regulatory requirements. Companies that have
a record of noncompliance may risk having their operations shut down on a
permanent basis. Ultimately, natural environmental factors affect a company's
overall costs in terms of ensuring equipment and procedures meet regulatory
requirements.
14
14
7
10/10/23

4. Managing Environmental Contaminants: Businesses that work with hazardous
materials on a regular basis have certain responsibilities when it comes to ensuring
contaminants don't reach or affect the natural environment.
The law even applies for business owners who unknowingly purchase a
contaminated site or purchase an operation that fails to meet compliance
standards. Ultimately, owners, both old and new, must cover clean up costs as well
as the costs of restoring a property to required environmental standards.
15
15
The Technological Environment

Technology is one of the important determinants of success of a firm as well as the
economic and social development of a nation.
Technology is defined as ‘the sum of knowledge of the means and methods of

producing goods and services’. Technology includes the tools – both machines (hard
technology) and ways of thinking (soft technology) – available to solve problems and
promote progress between, among and between societies.”
16
16
8
10/10/23
• Technology is increasingly science based, encompassing subjects such as

chemistry, physics and electronics, and refers to the organisation of production
as well as the actual techniques of production itself.
• “Technology includes not only knowledge or methods that are necessary to carry
on or to improve the existing production and distribution of goods and services,
but also entrepreneurial expertise and professional know-how.” These elements
provide the essential competitive advantage possessed by the technology owner.
17
17

Technological Change
Technological change leads to the introduction of new products, changes in the
methods and organisation of production, changes in the quality of resources and
products, new ways of distributing the product and new ways of storing and
disseminating information.
Technology has a very big impact upon the world of business and has an important
effect on the level and type of investment that takes place in an economy and
therefore the rate of economic growth. It is among the eight factors considered by
the World Economic Forum in evaluating the global competitiveness of nations
18
18
9
10/10/23

Technological Change
There have been massive changes in technology in the past 10 years. This section
will consider a few of these and assess their impact upon business and the
economy.
The Rise of Information Technology: Developments in information technology have
had the effect of transforming existing business activities as well as creating entirely
new ones, involving the collection, handling, analysis and transmission of
information.
• Advances in information technology have many impacts upon business. They are
creating new products and making old products more profitable to produce
through things such as computer-aided design (CAD). The effects they are having
on the different functions carried out by businesses can easily be seen 19
19

Technological Change and Business
One aspect of business where information technology has become particularly
important is in providing opportunities for firms to interact immediately with their
customers and suppliers, whoever and wherever they might be. Concepts such as
e-commerce, e-business and e-markets are now part of the business lexicon.
Other areas of business include:

• Administration. The administration of businesses has been revolutionised by the
introduction of information technology. Most businesses have computer
systems, records have been computerised and analogue/paper-based filing has
become unnecessary.
20
20
10
10/10/23

• Communication. This has been eased by the introduction of email. Video
conferencing has contributed to the change in working practices by making it
possible for people to work anywhere.
• Production. The use of CAD will shorten the design and planning phase of the
product and shorten the life cycle of the product. Japan applied this very early
on in the field of consumer electronics and many of the products are withdrawn
from sale and redesigned within a very short period of time.
21
21

• Storage and distribution. The computerisation of stock control has had
implications for the storage requirements of firms. It has made implementation
of the just-in-time method of stock control possible. This is easily seen in the
case of supermarkets where the use of bar-codes on products makes it possible
to carry out a stock check of a whole supermarket in a matter of hours. The
shelves can then be loaded up as the stock check continues. Similarly, the use of
bar-codes with Electronic Point of Sale (EPOS) makes stock control simpler.
• Electronic Funds Transfer at Point of Sale (EFTPOS). This system has also had a
revolutionary effect in the area of retailing. Most retailers have stopped
accepting cheques, but will now accept forms of contactless payment, including
Apple Pay and mobile money. 22
22
11
10/10/23

• The Internet. In 2012 there were an estimated 1.5 billion people wired to the
Internet, in 2015 this figure was 3 billion. The highest percentage population
penetration was in the United States (78.6 per cent), the lowest in Africa (15.6
per cent). There are three projects operating that will provide a cable system
under the Indian Ocean linking African countries. The internet is changing the
way people are (self-)employed and do tasks.
• Artificial intelligence. As the mini case study shows, the developments in this
area have been huge and the growth is exponential. The use of robotisation and
artificial intelligence has implications for many areas of business and law.
23
23

Other Major Technological Developments
• New materials. Technology has reduced on the dependence on nature for raw
materials. The ability to replace nature materials with synthetics.
• Biotechnology. This is expected to have wide-ranging effects on many fields. The
development of new products like computers that can imitate the activity of the
brain can shorten the development process for certain products by speeding up
existing processes.
• Energy. The kind of developments that can take place in this field are the use of
super- conductors to transport electricity and research that might make renewable
energy a viable source of energy.
24
24
12
10/10/23

Technology and Innovation
Innovation is a very important factor that provides competitive advantage and,
consequently, determines success.
Innovation is a driver of economic development. Innovation may take any of the
following forms:
q the introduction of a new product;
q the use of a new method of production;
q the opening of a new market;
q the conquest of a new source of raw material supply; and
q the reorientation of an industry.
Our concern here is technological innovation; some of the above, obviously, do not
represent technological innovation. 25
25

There are two types of innovation that can occur as a result of technological
change: product innovation and process innovation.
1. Product innovation is the development of new products, such as the

microprocessor, which will have far-reaching effects on business. New products
impact upon the industrial structure of a country, as new industries grow and old
industries disappear. This in turn will lead to changes in the occupational structure
of the workforce, as we have seen. It has even had the effect of reducing the
benefits large firms derive from economies of scale in cases where the
technological change can be exploited by small firms as well as it can by large firms.
26
26
13
10/10/23

2. Process innovation, on the other hand refers to changes that take place in the
production process, such as the introduction of assembly-line production in the
manufacture of cars. The two types of innovation are related, as the above
examples show. The microprocessor (product innovation), which is a new product,
has led to massive changes in the way that production and offices operate (process
innovation).
27
27

In the business context, innovation may be defined as “the technical, industrial and
commercial steps which lead to the marketing of new manufactured products and to
commercial use of new technical processes and equipment.”
Innovations are classified based on how big an impact a technology change makes.
1. Radical Innovation—a basic technological innovation that establishes a new
functionality (e.g., steam engine or steamboat).
2. Incremental Innovation—a change in an existing technology system that does not
alter functionality but incrementally improves performance, features, safety, or
quality or lowers cost (e.g., governor on a steam engine).
28
28
14
10/10/23

Innovations are classified based on how big an impact a technology change makes.
3. Next-generation Technology Innovation—a change in an existing technology

system that does not alter functionality but dramatically improves performance,
features, safety, or quality or lowers cost and opens up new applications (e.g.,
substitution of jet propulsion for propellers on airplanes).
29
29

Product and Service Innovation
The pattern of early innovations in a new-technology-based industry will be, first,
product innovations (improving the performance and safety of the product); later,
innovations shift to improving the production process to make the product cheaper
and with better production quality. This is depicted in Figure 6.3.
30
30
15
10/10/23

Product and Service Innovation
The rate of product innovations peaks about
the time of introduction of a design standard
for the new-technology product.
Thereafter, the rate of innovations to
improve the product declines, and the rate
of innovations to improve production
increases.
This occurs because until the product design
has been standardised manufacturer cannot
focus on improving the production processes
that produce such a design. 31
31

The Technology S-Curve
• According to the commonly observed

pattern in the development of
technologies, the rate of progress in a new
technology follows an S-shaped curve,
with an initial exponential rate, slowing to
a linear rate, and turning off toward a
natural limit.
32
32
16
10/10/23

• At first, all new basic inventions for a new technology show poor performance, are
awkward and dangerous to use, and are costly to produce.
• Yet the opportunities for technical improvement begin as inventors and engineers
seek ways of overcoming the limitations of the original invention. There is usually a
rapid flush of new ideas that provides exponential increase in performance.
Eventually, and rather soon, all the obvious ideas get tried.
• Further progress in the new technology gets harder. Thus, begins the linear phase of
technology progress on the S-curve.
33
33

• In due course, the rate of improvement slows down as it approaches its limit,
which may be technological, economic or social.
• At this point, there will be considerable economic and competitive benefit in
changing to an alternative technology to which the limit does not apply, and
consequently in due course a new technology will emerge and be adopted.
34
34
17
10/10/23

The Technology and Competitive Advantage
• As Michael Porter points out, technological change is “one of the principal
drivers of competition. It plays a major role in industry structural change, as well
as in creating new industries. It is also a great equaliser, eroding the competitive
advantage of even well-entrenched firms and propelling others to the forefront.
• Great firms grew out of technological changes. Of all the things that can change
the rules of competition, technological change is among the most prominent.
• On the other hand, “innovation is the key weapon in achieving a sustaining
competitive advantage.
35
35

• To compete successfully, it is vital to use the most appropriate technology to
produce and distribute your product or service. Generally, using the latest
technology, incorporates more features, higher performance, greater quality or
lower costs.
• The relationship between technological change and competition points out that
“technological change is not important for its own sake, but is important if it
affects competitive advantage and industry structure”.
• Not all technological change is strategically beneficial; it may worsen a firm’s
competitive position and industry attractiveness. High technology does not
guarantee profitability.
36
36
18
10/10/23

Technology can alter the nature and basis of rivalry among existing competitors in
several ways.
vTechnology affects competitive advantage if it has a significant role in
determining relative cost position or differentiation.
vIt can also alter the bargaining power of the suppliers and buyers.
vTechnology, in several instances, is an entry barrier. Thus, technology can
influence all the five competitive forces
37
37

• If the technology employed in a value activity becomes widespread, it would be
an important determinant of overall industry structure. “Technological change
that is diffused can potentially affect each of the five competitive forces, and
improve or erode industry attractiveness.
• Thus, even if technology does not yield competitive advantage to any one firm, it
may affect the profit potential of all firms.
• Conversely, technological change that improves a firm’s competitive advantage
may worsen structure as it is imitated. The potential effect of technological
change on industry structure means that a firm cannot set technology strategy
without considering the structural impact
38
38
19
10/10/23

According to Porter, technological change by a firm will lead to sustainable
competitive advantage under the following circumstances, which he calls the tests
of a desirable technological change.
v The technological change itself lowers cost or enhances differentiation
and the firm’s technological lead is sustainable.
v The technological change shifts costs or uniqueness drivers in favour of a
firm.
v Pioneering the technological change translates into first mover
advantages besides those inherent in the technology itself.
v The technological change improves overall industry structure 39
39

Sources of Technological Dynamics
According to Porter, technological change by a firm will lead to sustainable
competitive advantage under the following circumstances, which he calls the tests
of a desirable technological change.
v The technological change itself lowers cost or enhances differentiation
and the firm’s technological lead is sustainable.
v The technological change shifts costs or uniqueness drivers in favour of a
firm.
v Pioneering the technological change translates into first mover
advantages besides those inherent in the technology itself.
v The technological change improves overall industry structure 40
40
20
10/10/23

There are a number of factors which determine the technological dynamics of a company.
The source of technological change may be internal or external. The important factors
which determine the technological dynamics of a company are:
q Innovative Drive of the Company: Many companies view technology as a driving force
of competitiveness and development and give great importance to R&D. Recognising
the critical role of R&D should be followed by considerable investment
q Customer Needs/Expectations: Technological orientation and R&D efforts of a
company may also be influenced by the customer needs and expectations. In several
cases, the customer and the supplier have a collaborative relationship to develop
products or solutions. If the consumers are highly demanding, companies would be
compelled to be innovative.
41
41

q Demand Conditions: The size of the demand influences the choice of the
technological scale. Expected future trend could also be important. For example, a
fast growing trend of demand would encourage adoption/development of
technology of large scale. It would also encourage R&D efforts.
q Suppliers’ Offerings: Technological changes are encouraged by the suppliers of a
company, like capital goods suppliers and other technology suppliers etc. In many
process industries, for example, the key source of technology is construction
engineering firms that design production processes and build plants.
42
42
21
10/10/23

q Compe;;ve Dynamics: CompeIIon compels the adopIon of the best technology and
constant endeavour to innovate. CommunicaIon companies have, generally, a high
degree of technological orientaIon. Absence of/lack of compeIIon is a major reason
for the technological backwardness.
q Subs;tutes: Emergence of new subsItutes or technological improvements of
subsItutes which alter a firm’s/industry’s compeIIve advantage vis-à-vis the
subsItutes is a compelling reason for technological change. Technological change
creates enIrely new products or product uses that subsItute for others, such as
fiberglass for plasIc or wood, word processors for typewriters, and microwave ovens
for convenIonal ovens. It influences both the relaIve value/price and switching costs
of subsItutes.
43
43

q Social Forces: Certain social forces like protest against environmental pollution or
other ecological problems, demand/preference for eco-friendly products, the need
to tackle certain social problems etc. may prompt efforts to technological
developments in certain direction. The technological environment has some other
social/cultural dimension too.
q Research Organisations/Technical Facilities: The technological environment of the
business is enriched by research organisations, including research departments of
universities, which develop new technologies and provide other technical inputs.
44
44
22
10/10/23

q Government Policy: Technology policy of the government is a very important element
of the technological environment. Government may favour or disfavour certain types of
technologies. Government’s policy towards foreign technology is also a criIcal factor.
• Some labour-abundant countries have a preference for labour-intensive technology.
MechanisaIon and automaIon may be opposed in such countries. Such a situaIon
may adversely affect the business.
• Lack of adequate patent protecIon is a serious problem for technology development.
The absence of product patent protecIon allows other firms to copy patented
products. This demoIvates technological advancement
• Overemphasis on indigenous technology had led to high costs and distorted
developments. 45
45

46
46
23
10/10/23

Time Lags in Technology IntroducDon
• Considerable hme lags have been observed between countries in respect of
introduchon or absorphon of technologies. This lag is not explainable in terms of
the developed versus developing countries difference alone.
• The hme lags in the introduchon of technologies may even result in some products
not being able to reap the market. The typewriter became popular before it could
penetrate the market. However, it saw the end of its hme with the advent of the
computer.
• Many companies in advanced countries have considered the developing countries
as a market for their obsolete technology. Several developing countries even import
second hand plant and machinery.
47
47

Time Lags in Technology Introduction
• Considerable time lags have been observed between countries in respect of
introduction or absorption of technologies. This lag is not explainable in terms of
the developed versus developing countries difference alone.
• The time lags in the introduction of technologies may even result in some products
not being able to reap the market. The electronic typewriter became popular in
India before the electric typewriter could penetrate the market. The electronic
typewriter could not achieve growth because of the advent of the computer.
48
48
24
10/10/23

Time Lags in Technology IntroducDon
• There is oken a hme lag between countries in the adophon and diffusion of
technologies. The developing countries generally lag behind the developed ones.
Even among the developed countries the technology absorphon is not simultaneous
and similar. The hme lag has, however, been diminishing in several cases.
• Technological environment of the use facilihes etc. also have very important
implicahons for business. For example, advances in the technologies of food
processing, packaging and preservahon, transportahon etc. have facilitated product
improvements and introduchon and have considerably improved the marketability
of products.
49
49

Appropriate Technology and Adoption
• When different technologies are available, it needs to be ensured that the technology
chosen is the most appropriate for the company/country. The technology suitable in
one environment may not be appropriate in a different environment.
• This could be due to differences in natural factors such as topographical conditions,
climatic/weather condition, soil conditions etc.; differences in income levels, scale of
operation, demand conditions, use facility characteristics, and customer characteristics.
• It is pointed out that much of Japan’s successful growth has been due to her systematic
purchase of appropriate technologies from abroad. The choice of technologies was
aided by the fact that Japan possessed a body of competent scientists and engineers
who for the most part were employed by the government and worked in government
laboratories
50
50
25
10/10/23

Appropriate Technology and AdopDon
• The latest or highly sophishcated technology may not be the appropriate
technology in several environments. The concept of appropriate technology (which,
in this context, oken implies intermediate technology) became popular in the
developing world.
• Intermediate technology, which oken means a technology which combines
elements of tradihonal technology with elements of modern technology, gained
importance in the developing countries. Thus, the sophishcated capital-intensive
technologies in use in the developed countries are not acceptable in some sectors
in several of the developing countries.
51
51

IT revolution and Business
The computer, considered “the machine that changed the world,” and the rapid
changes in the related technologies have been making the business environment
immensely dynamic.
As Lucas observes, IT:
v Provides new ways to design organisations that can lead to structure like the T-
Form organisation.
v Creates new relationships between customers and suppliers who electronically
link themselves together.
v Enables tremendous efficiencies in production and service industries through
electronic data interchange to facilitate just-in-time production. 52
52
26
10/10/23

IT revoluDon and Business
As Lucas observes, IT:
v Changes the basis of compehhon and industry structure, for example, in the
airline and securihes industries.
v Provides mechanisms through groupware for coordinahng work creahng a
knowledge base of organisahonal intelligence.
v Contributes to the produchvity and flexibility of knowledge workers.
v Provides the manager with electronic alternahves to face-to-face
communicahons and supervision.
53
53

IT revolution and Business
There are a number of recent trends that have drastically altered the way organisations
use technology. These trends make it imperative that a manager becomes familiar with
both the use of and control of technology in the organisation. The following five major
trends:
1. The use of technology to transform the organisation: The cumulative effect
technology in transforming the organisation to allow new types of organisational
structures. This ability of information technology to transform organisations is one
of the most powerful tools available to a manager today.
2. The use of information processing technology as a part of corporate strategy: Firms
that prosper in the coming years will be managed by individuals who are able to
develop creative, strategic applications of the technology.
54
54
27
10/10/23

IT revoluDon and Business
3. Technology as a pervasive part of the work environment: From the largest
corporaIons to the smallest business, technology is used to reduce labour, improve
quality, provide beXer customer service, or change the way the firm operates.
Factories use technology to design parts and control producIon.
4. The use of personal computers as managerial worksta@ons: The personal computer,
when connected to a network within the organisaIon and to external networks like
the Internet, it provides a tremendous tool for knowledge workers.
5. The evolu@on of the computer from a computa@onal device to a medium for
communica@ons: For many people today, the communicaIons aspects of computers
are more important than their computaIonal capabiliIes.
55
55

IT and Globalisation
• Technological advances have tremendously fostered globalisation. Several
technological developments become a compelling reason for internationalisation.
• Technological breakthroughs are substantially increasing the scale economies and
the market scale required to break-even.
• Global sourcing was encouraged not only by trade liberalisation but also by
technological developments which reduced transport costs. Advent of
containerisation and super tonnage cargo ships drastically reduced transport costs.
• Technology monopoly, like possession of patented technology, encourages
internationalisation because the firm can exploit the respective demand without any
competition.
56
56
28
10/10/23

IT and GlobalisaDon
• Technology has accelerated globalisahon. Technological revoluhon in transport
and communicahon, have contributed to globalisahon by reducing of the
disadvantages caused by natural barriers like distance and cost. The IT revoluhon
has made an enormous contribuhon to the emergence of the global village.
• The developments in the field of transportahon has fostered globalisahon by
enabling quick and safe transportahon of sensihve goods (like perishables and
goods subject to quick changes in fashion/taste). The steep fall in the cost of
transportahon and communicahon have considerably accelerated pace of
globalisahon. All these have contributed to the drashc transformahon of the
logishcal and global distribuhon of the value chain system. The internet has a
stupendous impact on globalisahon.
57
57

ICT and Marketing
• Advances in information and communications technology are revolutionising the
modus operandi of marketing and the business system. The business internet and
cyberspace are changing the way of contacting customers; order receiving and
processing; and networking and integrating business system.
• The internet has become the centre of the commercial universe. Electronic markets
are eliminating the need for intermediaries and that direct contact between
manufacturer and customer bringing down the cost of transactions.
• The internet has evolved into an interconnected electronic marketplace
(cyberspace) bringing buyers and sellers together to facilitate commercial
exchanges.
58
58
29
10/10/23

ICT and MarkeDng
• Revoluhonary changes in informahon technology have been sweeping across the
global business. Developments in telecommunicahons and informahon
technologies have reduced the barriers to hme and place in doing business. It is
now possible for customers and suppliers to transact business at any hme in any
part of the globe, without having to come together physically.
• Effechve use of informahon technology helps a company to idenhfy and profile
customers, reach out to customers quickly and more effechvely, and make
inventory management and distribuhon system more efficient.
59
59

ICT and Marketing
ICT has been significantly transforming the distribution system. Xavier points out that
effective use of ICT in distribution can help companies:
q Reduce inventories
q Reduce delivery time/unproductive waiting time
q Reduce stock-outs/lost sales
q Respond faster to market changes
q Reduce rush orders
q Cut down overproduction
q Reduce unnecessary movement (forwarding and back-tracking)
q Reduce paperwork and wasteful processing
q Plan production better
60
60
30
10/10/23

Technology Transfer
Technology transfer is the process by which commercial technology is
disseminated. This will take the form of a technology transfer transachon, which
may or may not be a legally binding contract, but which will involve the
communicahon, by the transferor, of the relevant knowledge to the recipient.
• Broadly, there are two forms of TT, viz., internalised and externalised forms of
technology transfer. Internalised forms refer to investment associated TT, where
control resides with the technology transferer.
• The transferer, normally, holding the majority or full equity ownership.
Externalised forms refer to all other forms, such as joint ventures with local
control, licensing strategic alliances and internahonal subcontrachng.
61
61

Levels of Technology Transfer(TT): A simplified treatment of the subject would
suggest four levels of TT.
v Operational Level: At the bottom level are the simplest ones, needed for operating a
given plant. These involve basic manufacturing skills, as well as some more
demanding troubleshooting, quality control, maintenance and procurement skills.
v Duplicative Level: At the intermediate level are duplicative skills, which include the
investment capabilities needed to expand capacity and to purchase and integrate
foreign technologies.
v Adaptive Level: At this technological self-reliance level, imported technologies are
adapted and improved, and design skills for more complex engineering learned.
v Innovative Level: This level is characterised by innovative skills, based on formal
R&D, that are needed to keep pace with technological frontiers or to generate new
technologies. 62
62
31
10/10/23

Channels of Technology Flow:
The most important channels for the flow of technology are Foreign Investment and
Technology Licence Agreements and Joint Ventures.
1. Foreign Investment: TradiIonally, the flow of technology to developing countries
has been an integral part of direct foreign investment.
MulInaIonal corporaIons and other firms have resorted to foreign direct
investment for a variety of reasons like protecIon and development of foreign
markets, uIlisaIon of local resources (in the host country) including cheap labour,
overcoming or lessening of the impact of tariff restricIons and tax laws.
The flow of sophisIcated technology, in parIcular, has thus been associated with
direct investment.
63
63

Channels of Technology Flow:
The most important channels for the flow of technology are Foreign Investment and
Technology Licence Agreements and Joint Ventures.
2. Technology Licence Agreements and Joint Ventures: Technology transfer has been
taking place on a significant scale through licensing agreements and joint ventures.
There has been a fairly rapid growth of joint ventures, encouraged by government
restrictions on foreign investment and foreign trade or the perceived advantages of
such ventures.
64
64
32
10/10/23

Methods of Technology Transfer:
Transfer of technology takes a variety of forms depending on the type, nature and
extent of technological assistance required. The following are the important methods
of technology transfer:
1. Training or Employment of Technical Expert: Fairly simple and unpatented
manufacturing techniques/processes can be transferred by imparIng the requisite
training to suitable personnel. AlternaIvely, such technology can be acquired by
employing foreign technical experts.
2. Contracts for Supply of Machinery and Equipment: Contracts for supply of machinery
and equipment, which normally provide for the transfer of operaIonal technology
pertaining to such equipment, is oben quite adequate for manufacturing purposes not
only in small-scale projects but also in a number of large-scale industries where the
nature of technology is not parIcularly complex. 65
65

Methods of Technology Transfer:
3. Licensing Agreements: Licensing agreements, under which the licensor enters into
an agreement with a licensee in another country to use the technical expertise of the
former, is an important means for the transfer of technology. Licensing agreements are
usually entered into when foreign direct investment is not possible or desirable.
4. Turnkey Contracts: Transfer of complex technology often takes place through turnkey
project contracts, which include the supply of such services as design, creation,
commissioning or supervision of a system or a facility to the client, apart from the
supply of goods.
Many times, a combination of two or more of the above-mentioned methods is used.

Turnkey contracts, obviously, are the most comprehensive of such combinations. 66
66
33
10/10/23

Technology: PromoDon and RegulaDon
Areas of Regula;on
A number of regulatory measures have been taken by different countries to ensure
that the technology chosen is the best available, appropriate to domesIc condiIons
and that indiscriminate and unnecessary import of foreign technology is not
undertaken. The following are the aspects of technology commonly regulated.
1. The Extent and Terms of Equity Par@cipa@on: These are generally determined by the
prioriIes of the technology-using industry in the naIon’s economy, supply condiIons
of the technology and its type and nature.
67
67

Technology: Promotion and Regulation
Areas of Regulation
2. Phasing of Domestic Manufacturing: Where foreign technology is employed, many
governments, including that of Uganda, insisted upon indigenisation on a phased
manner. The Government of Uganda in the past also insisted that suitable provisions
should be made for the training of Ugandans in the field of production and
management. Further, there should be adequate arrangements for research and
development, engineering design, training of technical personnel and other measures
for the absorption, adaptation, and development of the imported technology.
3. The Appropriateness of the Technology: Permission to import a particular technology
is generally based on considerations such as suitability of the technology to the socio-
economic and ecological conditions in the country and the priority of the technology
using industry in the national economy. 68
68
34
10/10/23

Technology: PromoDon and RegulaDon
Areas of Regula;on
4. Payment Terms and Foreign Exchange OuSlow: Most governments take measures to
ensure that disproporIonately high payments are not paid for any technology.
RestricIons were imposed also on dividend payments and pricing.
5. Restric@ve Terms in the Agreement: Technology imports with highly restricIve terms
on the imporIng parIes are not generally favoured. For instance, according to the
Government of Uganda’s policy, to the fullest extent possible, there should be no
restricIons on free exports to all countries.
69
69

Technology: Promotion and Regulation
Promotion Measures. To take full advantage of the positive role of foreign technology,
it is necessary to take certain promotional measures. These include:
1. Assessing technological requirements of various sectors and identifying areas
where foreign technology is required.
2. Dissemination of information in foreign countries regarding foreign investment
potentials and scope for technical collaboration in the domestic economy,
government policy and regulation in respect of foreign capital and technology,
institutional assistance and infrastructural and other facilities for industrial
development.
3. Provision of advisory services to Ugandan entrepreneurs in respect of foreign
technology including the techniques and process of technology transfers. 70
70
35

The Legal and Natural Environment: Business Environment Analysis

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

The Legal and Natural Environment: Business Environment Analysis

Uploaded by

Copyright:

Available Formats

10/10/23

The Natural and

Lecture SIX: Overview

• Businesses carry out a variety of activities, but their main activity is to

Lecture Four: Overview

v illustrate the importance of people, technology and natural resources to

The Natural Environment

The Natural Environment

The Natural Environment

The Natural Environment

The Natural Environment

The Natural Environment

The Natural Environment

The Natural Environment

Some of the key steps in protecting the natural environment include:

1. Environmental Regulations: Regulating business activities is one way government

The Natural Environment

2. Permit Requirements: Companies involved in activities that impact their

The Natural Environment

The Natural Environment

The Technological Environment

Technology is defined as ‘the sum of knowledge of the means and methods of

The Technological Environment

• Technology is increasingly science based, encompassing subjects such as

The Technological Environment

The Technological Environment

The Technological Environment

Other areas of business include:

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

1. Product innovation is the development of new products, such as the

The Technological Environment

The Technological Environment

The Technological Environment

3. Next-generation Technology Innovation—a change in an existing technology

The Technological Environment

The Technological Environment

The Technological Environment

• According to the commonly observed

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment

The Technological Environment