Technological Environment

2009
 Impulsive Factors Propulsive Factors

Technology Economic Factors

Economic &
Social / Demographic Factors
Natural Factors Business Development Political / Government Factors

 Natural and technological environments are the impulsive factors.

 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 set-up.”
 Natural Environment: Provides a biological chemical and physical system that enables human life to
exist.
 Supply of natural resources: Natural environment provides raw materials and energy for economic
production and household activity.
 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.
 Supply of amenity services: Natural environment also provides amenity services ie. natural beauty and
space for outdoor pursuits.
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 Geographical and ecological factors influence the location of industries.
 Topographical factors may affect the demand pattern and may call for differences in marketing mix.
 Weather and climactic factors affect the demand for certain type of products. Eg: In cold climate areas,
demand for woolen clothing is higher, building materials etc.
 Ecological factors – Environmental pollution, depletion of natural resources etc.
 Technology
 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.
 J.K. Galbraith defined technology as: “A systematic application of scientific
or other organized knowledge to practical tasks”.
 Technology is one of the eight factors considered by the World Economic
Forum to evaluate the global competitiveness of nations.

Features of Technology:
 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.
 Effects of technology are widespread and are reaching beyond the immediate
point of technological impact.
 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:
 Radical Innovation – basic technological innovation that establishes a new
functionality
 Incremental innovation – change in an existing technology system that does
not alter functionality but incrementally improves performance, features,
safety or quality or lowers cost.
 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:

 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, 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:
 The technological change itself lowers cost or enhances differentiation and the
firm’s technological lead is sustainable.
 The technological change shifts costs or uniqueness drivers in favor of a firm.
 Pioneering the technological change translates into first mover advantages.
 The technological change improves overall industry performance
 Sources of Technological Dynamics
As Porter suggests: Technological Leaders in industries with key external sources
of technology must capture the best of those sources through coalitions or
exclusive arrangements in order to sustain their lead, or have a superior
ability to adapt externally developed technology to the industry.

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.
 Supplier’s 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
 Sources of Technological Dynamics (contd….)
 Substitutes: Emergence of new substitutes or technological improvements of
substitutes alter a firm’s 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
Social Changes
People through business

Social Implications

System Complexity
High expectation
of customers
 Social Implications
 Technology reaches people through Business: Business is an
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 today’s 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.

 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
 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

Business Boundaries
Problem of techno structure
Redefined
 Economic Implications
 Increased Productivity:
1. With technological innovations the expectation is of increased productivity in
terms of both quality and quantity.
2. 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.
3. 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.

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

relevance in organizations as technology advances. Organizations need to take
decisions on:
1. 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.
2. Process of technology transfer from an idea stage to the implementation and
execution state.
3. 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.
4. As new technology comes in, old becomes redundant. The process of old replaced
by new is called technological discontinuity.
5. 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 product’s 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:

1. With technological advancement, jobs tend to become more intellectual or upgraded.
The requirement in today’s date is of higher skilled people.
2. 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.
3. 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:
1. Motivation for such employees is a difficult task
2. Retaining of such employees is again a mammoth task.
3. Technostructure tries to control the organization through influencing management’s
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.
 Economic Implications

 Increased regulation and stiff competition: A by-product of

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.
People must be enlightened that technology is not always unidirectional in its
effects.

 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 life-cycles :
Introduction, growth, maturity, decline and abandonment
 Economic Implications

 Business Boundaries Re-defined:

1. Technological change is a potent force in the reconfiguration of
industry boundaries. It may broaden or narrow generally accepted
industry boundaries.
2. 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.
3. Technological change gives rise to product substitution or product
differentiation.
4. Technological change can also bring about process change
5. Technological change may have multiple impact and can either
create new synergies across businesses or make obsolete
existing ones.
 Technology and
Total Quality Management
Organization Structure

Flexible Manufacturing
Fear of Risk Plant Level Changes Systems

Business Process
Resistance to Change
Reengineering
 Plant Level Implications
 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
 Resistant to change: Resistance to change is purely psychological and stems
from:
1. Psychological and social commitments to existing products, processes and
organizations.
2. Sizable capital investments
3. Complacent top management
4. Lack of successful entrepreneurial models to emulate
5. 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. 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:
1. Meet the customer’s requirements on time, the first time 100% of the time
2. Strive to do error free work
3. Manage by prevention and not correction
4. Measure the cost of quality.
5. In short do it right the first time.
 Plant Level Implications
 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 organisation’s processes.

 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
bottom-up 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:

 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 society’s capability to raise the
standard of living without causing irreparable damage to the earth’s
biosphere.

 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.

 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.
 At the same time rapid industrial development was required to keep pace with
the developed countries.

Technology Policy:
Hon'ble then President of India, Dr. A.P.J. Abdul Kalam
 “Today India has become one of the strongest in the world in terms of scientific manpower
in capability and maturity. Hence, we are in a position not only to understand the
technologies that we may have to borrow, but also to create our own technologies with
extensive scientific inputs of indigenous origin.
 Basically we have come a long way since our independence, from mere buyers of
technology to those of who have made science and technology as an important contributor
for national development and societal transformation. In a world where the powers are
determined by their share of the world's knowledge, reflected by patents, papers and so
on, the WTO starts to play a crucial role in the economic development. It is important for
India to put all her acts together to become a continuous innovator and creator of science
and technology intensive products".
Aims:
 Basic objective of the technology policy is the development of the indigenous 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.

THE NEW VISION

 To build a new and resurgent India that continues to maintain its strong democratic and
spiritual traditions, that remains secure not only militarily but also socially and
economically, it is important to draw on the many unique civilization qualities that define
the inner strength of India; this has been intrinsically based on an integrated and holistic
view of nature and of life. The Science and Technology Policy 2003 will be implemented so
as to be in harmony with our world view of the larger human family all around. It will ensure
that science and technology truly uplifts the Indian people and indeed all of humanity.