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Technological Environment

Impulsive Factors

Propulsive Factors

Technology Natural Factors

Economic & Business Development

Economic Factors Social / Demographic Factors Political / Government Factors

y Natural and technological environments are the

impulsive factors. y With these factors as given, the propulsive factors determine the extent of development potential and the pace, direction and pattern of development of any economy.

Resource availability is the fundamental factor for every business setup.Natural Environment ³The natural environment is the source and support of everything used by businesses ± raw material.´ y Natural Environment: Provides a biological chemical and physical system that enables human life to exist. energy source. natural beauty and space for outdoor pursuits. climactic conditions etc. y Absorption of waste products: Waste products resulting from production activity and household activity are absorbed by the natural environment. y Supply of natural resources: Natural environment provides raw materials and energy for economic production and household activity. y Supply of amenity services: Natural environment also provides amenity services ie. . However there are certain waste products that are difficult for the natural environment to dispose of safely.

It acts as a multiplier to its own faster development. y Effects of technology are widespread and are reaching beyond the immediate point of technological impact. Technology makes more technology possible´. . Features of Technology: y Technology continuously keeps changing.K. y Technology is self-reinforcing. It is one of the top determinants of success of a firm as well as the economic and social development of a nation. technological environment exerts considerable effect on business. The time gap between idea and implementation is falling rapidly and the time between introduction and peak production is shortening considerably. y J. ³Technology feeds on itself.Technology y Among all the segments of macro-environment. Galbraith defined technology as: ³A systematic application of scientific or other organized knowledge to practical tasks´.

Innovation can be classified into: y Radical Innovation ± basic technological innovation that establishes a new functionality y Incremental innovation ± change in an existing technology system that does not alter functionality but incrementally improves performance. Usually. features. features. the pattern of early innovations in a new technology based industry will be: Product Innovation : Improving the performance and safety of the product Process Innovation: Improving the production process could make the product cheaper and improve the quality of the product .change in an existing technology system that does not alter functionality but dramatically improves performance. safety or quality or lowers cost. safety or quality or lowers cost and opens up new applications. y Next generation technology innovation .Innovation Innovation maybe defined as ³the technical. industrial and commercial steps which lead to the marketing of new manufactured products and to commercial use of new technical process and equipment´.

Technology and Competitive advantage: As per Porter. y The technological change improves overall industry performance . y Pioneering the technological change translates into first mover advantages. y The technological change shifts costs or uniqueness drivers in favor of a firm. demand uncertainty etc. high cost of early inputs because of scarcity or . 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 firm¶s technological lead is sustainable.Technological Leadership and Followership The 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 leader or follower is based on the following three factors: y y y Sustainability of the Technological Lead ie. Degree to which it can sustain it¶s lead over its competitors First Mover advantage ie advantage that a firm reaps from being the first. First Mover disadvantage ie disadvantages that a firm faces by being the first eg. Pioneering costs.

Expected future trend could also be important. Demand Conditions: Size of the demand influences the choice of the technological scale. Customer Needs / Expectations: Technological orientation and R & D efforts of a company could also be influenced by the customer needs and expectations. Many companies view technology as a driving force of competitiveness and development. companies would be compelled to innovate. If the consumers are highly demanding. Absence or lack of competition was one of the major reasons for the technological backwardness of Corporate India y y y y y . Competitive Dynamics: Competition compels the adoption of the best technology and constant endeavor to innovate.Sources of Technological Dynamics There are various factors which determine the technological dynamics of a company: Innovation Drive of the Company. Eg: Pharmaceutical Industry. Supplier¶s Offerings: Many a time technological changes are encouraged by suppliers.

Some labor abundant countries have a preference for labor intensive technology. In India the policy bias in favor of small industries has resulted in production units of uneconomic size y y y    . Research Organizations / Technical Facilities: The technological environment of the business is enriched by research organizations.Sources of Technological Dynamics (contd«. Eg: A government might favor or disfavor certain types of technologies. access to global technology can help firms improve their competitiveness. Social Forces: Certain social forces like protest against environmental pollution or other ecological problems may prompt efforts to technological developments in certain industries. Governmental Policy: Government is an important actor in the technological environment. Eg: The technology developed by the CFTRI for making baby food from buffalo milk and its commercialization by Amul was a milestone development. Lack of adequate patent protection in many countries was a serious problem for MNCs. Also.) y Substitutes: Emergence of new substitutes or technological improvements of substitutes alter a firm¶s competitive advantage. Government can contribute to the development of technology by its own direct involvement and by setting up research institutes etc.

Impact of Technology Technology Social Implications Plant Level Changes Economic Implications .

Technology reaches People through business Social Changes Social Implications High expectation of customers System Complexity .

Organizations and business houses spend considerable amount of resources. New discoveries would remain mere ideas. High expectations of customers: Technology has contributed to the emergence of affluent societies and in today¶s world consumers demand more of many things than more of same things. financial and human on Research and Development. Society depends on business to benefit from new discoveries flowing into useful goods and services for all mankind.Social Implications y y y y institution through which man expects discoveries to be converted into goods and services. superior in quality. The desire is for: new varieties of products. more safe and customer friendly products. New discoveries mean very little unless there are competent business units to produce for people. Also. Technology reaches people through Business: Business is an y y   System Complexity: Technology has become highly complex and the need is for specialized personnel. there is inter-dependence of systems. A localized problem can escalate 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 . sketches on paper but for business institutions. free from pollution.

use media and work are also affected by technology. Technology flows to developing countries through MNCs. .Social Implications y y y y Social Change: Technology has a considerable impact on the social life. New terms continue to emerge as new products are introduced. lifestyle of families changed. Eg : Impact of BPOs on the Indian economy. Status differences are likely to be created by technological advancement in developing countries. the environment for such families have become 24*7 lifestyle. It led to increase in jobs in the NCR. the way we communicate. Finally.

Rise and Decline of Products and Organizations Increased Productivity Insatiable Demand for Capital Need to spend on R & D Economic Implications Increased regulation and stiff competition Multiprofessional Managers Jobs become intellectual Problem of techno structure Business Boundaries Redefined .

Productivity improvements lead to rise in real wages and decline in prices of some products. Six sigma is a statistical term which means 3. Organizations need to take decisions on: Need to Spend on R & D: Research and Development assumes considerable 3.Economic Implications y 1. Time factor: Time between innovation and commercialization is getting considerably reduced. Increased Productivity: With technological innovations the expectation is of increased productivity in terms of both quality and quantity. Time to market. the beneficial economic effects of technology are throughout the social system. Organizations need to decide on its own R & D or to outsource technology. Companies can no longer assume that competitors will allow them time to recoup their initial investment. 2. Allocation of resources to R & D. The process of old replaced by new is called technological discontinuity.5 errors per million. old becomes redundant. Thus. is an important consideration as 60% of successful innovations have been imitated within 4 years at 65% of the total cost. . relevance in organizations as technology advances. 4. With the introduction of Six sigma methodology. the focus is on producing more goods in a short period of time and with minimal defects. 3. As new technology comes in.5% of its GNP. India spends only 1% of its GNP on R & D as against the US which spends 2. 2. y 1.

2. Though the organization can boast of a progressive and modern outlook of its personnel it also has some negative outcomes like: Motivation for such employees is a difficult task Retaining of such employees is again a mammoth task. y 1. organizations and government to provide educational and training facilities to its people.Economic Implications 1. even the people tend to become highly professional and knowledgeable. 2. 3. 3. y 1. Need for Multiprofessional managers: Technocrats. Later process innovation takes over wherein the objective is to improvise on the current process. Problem of Technostructure: Not only do the jobs become more intellectual. with technology advancement. need to be qualified in management education in addition to the expertise that they have acquired in their chosen field of specialization. Jobs to become more intellectual: The requirement in today¶s date is of higher skilled people. Introduction of new technology dislocates some workers unless they are up-trained to handle the new technology. who assume reigns of administration. reduced prices and increased real wages. there is equal responsibility on the people. y . Therefore. Working class in general reaps the benefit of technological advancement through increased productivity. product innovation is more important because the product¶s physical attributes and capabilities affect financial performance. Technostructure tries to control the organization through influencing management¶s decision-making. Decision on product innovation or process innovation : In the early stages.

Products like mortals have lifecycles : Introduction. educating and training of managers. maturity.Economic Implications y technological advancement is the ever increasing regulation imposed on business by the Government of the land and stiff competition from the public. Technological advancement is inviting opposition from those who fear that new innovations are a threat to ecology. location of industrial plants that eject harmful effluents etc. decline and abandonment . privacy and the human race. People oppose the construction of high rise buildings. Increased regulation and stiff competition: A by-product of y Insatiable demand for Capital: Technology necessitates massive investment of money on R & D. but the mobilized funds are to be used judiciously. Business organizations should not only raise huge funds. y Rise and decline of Products and Organizations: Technological changes is a norm and not an exception. Schumpeter has defined technology as a force for ³Creative Destruction´. growth.

Technological change can have a significant impact on the definition of individual companies. 5. Technological change gives rise to product substitution or product differentiation.Economic Implications Business Boundaries Re-defined: Technological change is a potent force in the reconfiguration of industry boundaries.  1. 4. 2. . 3. Companies may find themselves in a different business due to technological changes that they or others have effected. Technological change can also bring about process change Technological change may have multiple impact and can either create new synergies across businesses or make obsolete existing ones. It may broaden or narrow generally accepted industry boundaries.

Technology and Organization Structure Total Quality Management Fear of Risk Plant Level Changes Flexible Manufacturing Systems Resistance to Change Business Process Reengineering .

history and background of a company. In case of specialized processes decision making gets decentralized and delegated. employees  Side effects on the quality of physical environment y Fear of Risk . suppliers. Along with technology.Plant Level Implications y Organization Structure: Companies with fast changing technology usually have a matrix structure. personalities of people also have an impact on the organization structure. Any technological advancement could result in:  Expanded availability of a range of products and services  Substitution of capital for labor leading to higher productivity and lower costs  Increase in sales or power for the innovating organization  Initiation of changes in behavior of customer.

Managers are required continuously to search for process improvements.Plant Level Implications  1. 5. 4. 2. . 3. Resistant to change: Resistance to change is purely psychological and stems from: Psychological and social commitments to existing products. processes and organizations. 5. Principles of TQM are: Meet the customer¶s requirements on time. 4. 1. 2. 3. In short do it right the first time. TQM requires that the company maintain the quality standard in all aspects of the organization. Sizable capital investments Complacent top management Lack of successful entrepreneurial models to emulate Powerful labor resistance  Total Quality Management: This refers to deep commitment of an organization to quality wherein each step of the Company¶s processes is subjected to intense and regular scrutiny. the first time 100% of the time Strive to do error free work Manage by prevention and not correction Measure the cost of quality.

y Business Process Reengineering (BPRE): This involves considering how things would be done if the organization were to start all over from scratch. For such processes. the machines can produce low volume products at a lesser cost and on reprogramming of the same machine aid in producing a different product. it does not change machines ± it needs to change the computer programming. With flexible manufacturing. when management wants to produce a new product. TQM is a bottomup approach while BPRE is a top-down approach. TQM seeks to improve what is good but BPRE seeks to reject what is irrelevant and start afresh. highly skilled workers are required and there should be decentralization of authority .  Plant Level Implications TQM and BPRE have identical objectives of Search for Excellence in serving customers. y Flexible Manufacturing Systems (FMS): Under FMS. 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. Thus. machines are designed to produce batches of different products. It is the radical redesign of an organisation¶s processes.

Constraints of Technological Growth: y Pollution: Pollution is an unavoidable consequence of industrial production. substitutes for existing ones. . skilled labor force etc. smell. y Social Institutions: Social values and institutions may be inconsistent with the full productive potential that is present in technology. different forms of energy. A critical issue today is society¶s capability to raise the standard of living without causing irreparable damage to the earth¶s biosphere. noise effluents and dust are generated by industrial establishments. The same is fast depleting However. Smoke. water supplies. technology does have the potential to discover new materials. y Industrial resource base: This comprises of minerals.

y y y Aims: y Basic objective of the technology policy is the development of the indigenous y y y y y y y y y y technology and efficient absorption and adaptation of imported technology appropriate to national priorities and resources: Attain technological competence and self reliance Provide maximum employment to all strata of society.Status of Technology in India: Attained political independence after prolonged colonial rule and exploitation. y At the same time rapid industrial development was required to keep pace with the developed countries. health and housing of people. Country entered the modern world in a state of economic backwardness and poverty. . Use traditional skills and capabilities making them commercially competitive Ensure maximum development with minimum capital outlay Identify obsolescence of technology and arrange for modernization of equipment and technology Develop internationally competitive technologies Enhance quality and reliability of products through technological innovations Reduce demand on energy Ensure harmony with environment Recycle waste materials and make full-utilization of by-products. clothing. Technology was meant to attend to basic problems of food.