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Understanding the Technological Environment

The document discusses the significance of the technological environment as a key determinant of a firm's success and national development, encompassing both hard and soft technologies. It highlights the role of innovation in gaining competitive advantage and the 'S' curve of technology progress, which illustrates the varying rates of technological advancement. Additionally, it outlines how technological change can influence competitive forces and economic effects, emphasizing the need for companies to adapt to technological dynamics.

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Rishi
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163 views9 pages

Understanding the Technological Environment

The document discusses the significance of the technological environment as a key determinant of a firm's success and national development, encompassing both hard and soft technologies. It highlights the role of innovation in gaining competitive advantage and the 'S' curve of technology progress, which illustrates the varying rates of technological advancement. Additionally, it outlines how technological change can influence competitive forces and economic effects, emphasizing the need for companies to adapt to technological dynamics.

Uploaded by

Rishi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Technological Environment

• It is one of the important determinants of success of a firm


as well as the economic & social development of a nation.
• It included tools – both machines(hard technology) & ways
of thinking ( soft technology) – available to solve problems
& promote progress between, among & between societies.
• According to UNCTAD, Technology should be described as,
“a systematic knowledge for the manufacture of a product,
for the application of a process or for rendering of a service
and does not extend to transactions involving mere sale or
lease of goods.
• It also includes entrepreneurial expertise & professional
know how.
Technological Environment
• Innovations may help companies to increase
market share, capture new markets, create new
market segments or even create entirely new
industries and markets.(Joseph Schumpeter’s
theory)
• Although innovation is expected to give a
company a competitive advantage or success in
the market, it is not uncommon that some other
company or substitute product steals away the
show
Technology ‘S’ curve
• It is observed that the different rates of progress of
technology over time through technology stages of
invention, improvement and maturity generally
produce a ‘S’ shaped curve
• According to Pearson, with the use of technology, in
due course, the rate of improvement slows down as it
approaches its limit which may be:
1. Technological (some physical limit on performance)
2. Economic (diminishing returns from R & D)
3. Social ( production of undesirable products)
• It thus shows an initial exponential rate, slowing to a
linear rate and turning off towards a natural limit.
Technology ‘S’ curve

Technology
performance
parameter

New Technology Mature


invention improvement technology
period period period
Technology & Competitive Advantage
• According to Michael Porter, technological change is “one of the
principal drivers of competition. It plays an important role in
industry structural change as well as in creating new industries.”
• According to Porter, technological change by a firm will lead to
sustainable competitive advantage under the following
circumstances:

a. The change lowers cost or enhances differentiation.


b. It shifts costs / uniqueness drivers in favour of a firm.
c. It improves overall industry structure.
d. It act as an entry barrier
e. It alters the bargaining power of the buyers & suppliers
Technology & Competitive Advantage
• Thus technology can help influence all the five
competitive forces viz: inter-firm rivalry,
threat of new entrants, threat of substitute
products, bargaining power of suppliers &
bargaining power of Buyers.
• However Porter cautions that technological
change may destroy competitive advantage
also.
Technology & Competitive Advantage
Economic Effects of Technology
• Impact on Operating Costs
• Securing Sensitive Information
• Improved Communication Processes
• Increased Employee Productivity
• Broaden Customer Bases
• Need for Highly Professionalized and
Knowledgeable Personnel
• More Intellectual and Upgraded Jobs
Sources of Technological Dynamics
1. Innovation drive of the Company
2. Customer needs / expectations
3. Demand conditions
4. Supplier’s offerings
5. Competitive dynamics
6. Substitutes
7. Social Forces

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