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.

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

Technology
y Among all the segments of macro-environment, technological environment

exerts considerable effect on business. It is one of the top determinants of success of a firm as well as the economic and social development of a nation. y J.K. Galbraith defined technology as: A systematic application of scientific or other organized knowledge to practical tasks.

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

implementation is falling rapidly and the time between introduction and peak production is shortening considerably. y Effects of technology are widespread and are reaching beyond the immediate point of technological impact. y Technology is self-reinforcing. Technology feeds on itself. Technology makes more technology possible. It acts as a multiplier to its own faster development.

Innovation
Innovation maybe defined as the technical, industrial and commercial steps which lead to the marketing of new manufactured products and to commercial use of new technical process and equipment. 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, features, safety or quality or lowers cost. y Next generation technology innovation - change in an existing technology system that does not alter functionality but dramatically improves performance, features, safety or quality or lowers cost and opens up new applications.

Usually, 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

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 its 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, high cost of early inputs because of scarcity or ; demand uncertainty etc.

Technology and Competitive advantage: As per Porter, technological change by a firm will lead to sustainable competitive advantage under the following circumstances: y The technological change itself lowers cost or enhances differentiation and the firms technological lead is sustainable. y The technological change shifts costs or uniqueness drivers in favor of a firm. y Pioneering the technological change translates into first mover advantages. y The technological change improves overall industry performance

Sources of Technological Dynamics

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

y y

Sources of Technological Dynamics (contd.)

y

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

  

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

Social Implications
y
y y y

institution through which man expects discoveries to be converted into goods and services. Organizations and business houses spend considerable amount of resources, financial and human on Research and Development. New discoveries would remain mere ideas, sketches on paper but for business institutions. Society depends on business to benefit from new discoveries flowing into useful goods and services for all mankind. New discoveries mean very little unless there are competent business units to produce for people. High expectations of customers: Technology has contributed to the emergence of affluent societies and in todays world consumers demand more of many things than more of same things. The desire is for: new varieties of products, superior in quality, free from pollution, more safe and customer friendly products.

Technology reaches people through Business: Business is an

y
 

System Complexity:
Technology has become highly complex and the need is for specialized personnel. Also, 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

Social Implications
y

y y y

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

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

Economic Implications
y
1. 2.

Increased Productivity:
With technological innovations the expectation is of increased productivity in terms of both quality and quantity. With the introduction of Six sigma methodology, the focus is on producing more goods in a short period of time and with minimal defects. Six sigma is a statistical term which means 3.5 errors per million. Productivity improvements lead to rise in real wages and decline in prices of some products. Thus, the beneficial economic effects of technology are throughout the social system.

3.

y 1. 2.

relevance in organizations as technology advances. Organizations need to take decisions on:

Need to Spend on R & D: Research and Development assumes considerable

3. 4.

Allocation of resources to R & D. India spends only 1% of its GNP on R & D as against the US which spends 2.5% of its GNP. Time factor: Time between innovation and commercialization is getting considerably reduced. Companies can no longer assume that competitors will allow them time to recoup their initial investment. Time to market, is an important consideration as 60% of successful innovations have been imitated within 4 years at 65% of the total cost. As new technology comes in, old becomes redundant. The process of old replaced by new is called technological discontinuity. Organizations need to decide on its own R & D or to outsource technology.

Economic Implications
1.

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

y 1. 2.

3.

1. 2. 3.

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, privacy and the human race. People oppose the construction of high rise buildings, location of industrial plants that eject harmful effluents etc.

Increased regulation and stiff competition: A by-product of

Insatiable demand for Capital: Technology necessitates massive

investment of money on R & D, educating and training of managers. Business organizations should not only raise huge funds, but the mobilized funds are to be used judiciously.

Rise and decline of Products and Organizations:

Technological changes is a norm and not an exception. Schumpeter has defined technology as a force for Creative Destruction. Products like mortals have lifecycles : Introduction, growth, maturity, decline and abandonment

Economic Implications
Business Boundaries Re-defined: Technological change is a potent force in the reconfiguration of industry boundaries. It may broaden or narrow generally accepted industry boundaries. Technological change can have a significant impact on the definition of individual companies. Companies may find themselves in a different business due to technological changes that they or others have effected. Technological change gives rise to product substitution or product differentiation. 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.

 1.

2.

3. 4. 5.

Technology and Organization Structure

Total Quality Management

Fear of Risk

Plant Level Changes

Flexible Manufacturing Systems

Resistance to Change

Business Process Reengineering

Plant Level Implications

y

Organization Structure: Companies with fast changing technology usually have a matrix structure. Along with technology, history and background of a company, personalities of people also have an impact on the organization structure. In case of specialized processes decision making gets decentralized and delegated. 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, suppliers, employees  Side effects on the quality of physical environment

Fear of Risk

Plant Level Implications


1. 2. 3. 4. 5.

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

from: Psychological and social commitments to existing products, processes and organizations. 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 Companys processes is subjected to intense and regular scrutiny. Managers are required continuously to search for process improvements. TQM requires that the company maintain the quality standard in all aspects of the organization. Principles of TQM are: Meet the customers requirements on time, the first time 100% of the time Strive to do error free work Manage by prevention and not correction Measure the cost of quality. In short do it right the first time.

1. 2. 3. 4. 5.

Business Process Reengineering (BPRE): This involves

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


Plant Level Implications

TQM and BPRE have identical objectives of Search for Excellence in serving customers. TQM seeks to improve what is good but BPRE seeks to reject what is irrelevant and start afresh. TQM is a bottomup approach while BPRE is a top-down approach.

Flexible Manufacturing Systems (FMS): Under FMS, machines are designed to produce batches of different products. Thus, the machines can produce low volume products at a lesser cost and on reprogramming of the same machine aid in producing a different product. With flexible manufacturing, when management wants to produce a new product, it does not change machines it needs to change the computer programming. For such processes, highly skilled workers are required and there should be decentralization of authority

Constraints of Technological Growth:

y Pollution: Pollution is an unavoidable consequence of industrial

production. Smoke, smell, noise effluents and dust are generated by industrial establishments. A critical issue today is societys capability to raise the standard of living without causing irreparable damage to the earths biosphere.
y Industrial resource base: This comprises of minerals, different forms of

energy, water supplies, skilled labor force etc. The same is fast depleting However, technology does have the potential to discover new materials, substitutes for existing ones.
y Social Institutions: Social values and institutions may be inconsistent

with the full productive potential that is present in technology.

Status of Technology in India:

Attained political independence after prolonged colonial rule and exploitation. Country entered the modern world in a state of economic backwardness and poverty. Technology was meant to attend to basic problems of food, clothing, health and housing of people. y At the same time rapid industrial development was required to keep pace with the developed countries.
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. 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.