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Ch 7 Notes.docx

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Valerie Irie

Chapter 7: Technological Factors Learning Objectives • Understand the opportunities and threats that can be created by technological factors • Understand central technology concepts and their strategic significance – Standards, installed base, lock-in, switching costs, complementary goods, network effects • Explain the concept of disruptive technologies/innovations • Discuss the pattern of disruptive innovation in the retailing industry and the implications for internet retailing • Discuss why successful firms sometimes fail • Understand how companies may avoid failure • Recognize the impact of shifts in technology PEST – Technological Factors Elements: • Internet affects buying, selling, communication • Information technologies affects information access, inter-firm cooperation, cycle times • Computer technologies have changed our products and how we design and build • Not limited to computers and information • Challenge is that technology changes so quickly and unpredicably • Hardest for managers to understand and get head around * Affects what we produce/what it can do, affects how we produce and sell, how we manage and run organization * Demands constant learning and scanning Opportunities -Video is talking about sixth-sense technology, over coming limitations of tech, paper interface • Products – innovation, uniqueness, value • Technology allows for products to keep evolving • Merging physical and digital world • Management Processes – Instant access to information  Much easier and open access to information through technology (i.e. inventory levels)  Using gift cards, can access information such as purchasing trends, consumer info, allows managers to plan  Sales records – previous sales, profits  Inventory levels  Client info/data – Better service through coordination  Can better coordinate service by knowing what consumers want and what they do  Coordinate in order to provide more customized service – Leaner organization  A lot of activities have been sourced out to customers  Allows for smaller employment, less costs in part of company  Companies figure out how to eliminate/simplify processes to cut down on costs – Improved operations efficiency i.e. CAD, ERP  CAD: computer assisted design o Can design and test things in simulation, before actually creating product  ERP: Enterprise Resource planning o Need enough materials before manufacturing, not too little or too much  Quantity and timings o Maximize efficiency and minimize costs – Competitiveness  Creates barriers to entry; cooperation with other firms  Use barriers to prevent other companies from entering your industry  Connect with other firms to collaborate and prevent firms from entering – Communication and Collaboration  Within firm and with customers  Better decision making with better communication o Ability to make important decisions quicker and more effectively o Keep costs low  Access to increased information allows for inceased decision making on the go  Allows for customers to connect with the company much easier  When connected, push some of the work onto the customers  Greater variety of input, get it in faster time frame  Can market to customers in a different way at fraction of cost  Moved from tv ads (pricey) to online ads (cheap) – Customization  Allows for increased customization of products  -Moved to a society where many things are customized (social trend)  Easier as machinery now is much more adaptable and customizable  Firms that specialize in customization, not very practical in the past  Huge trend in last 15-20 years  Machinery much more flexible/adaptable  Multi-purposed  Much less human error  Internet sites allow for human customization to find what they like – Greater independence of company & workplace  Can connect and interact with companies abroad easier and cheaply, easy to be independent  Companies can jump on all opportunities, don’t have to pass one up for another Threats • Imitation – Information costly to develop but cheap to share – Products costly to develop – Can be very cheap and easy to imitate • New technologies in unfamiliar areas – Disruptive technologies challenge the value of organizational capabilities and resources – Can drastically change and impact industries – Change the way things are done • Unpredictable evolution – VHS vs. BetaMax – Blu-Ray vs. DVDs – Sometimes better product doesn’t win, other issues that affect it • Need for constant learning and scanning – Hardest factor to understand of all PEST – Requires much money and time to understand, difficult and costly – Unpredictability a major threat – Must be learning, looking ahead • Information overload – Quick advancement and obesity of info put a lot of strain on managers – Hard for customers as well, as so much information about products and firms available – So much information available, urgency to find a use for all of it – Overwhelming for customers, as they feel more bombarded than ever • Greater independence of company & workplace – Challenge for society is that increased mobility can lead to increased productivity, but where are the boundaries? (i.e. working while on vacation) Distraction or Hunch Helper? • What do you think? • Is technology making us more distracted or are we leaning towards more innovation through our ‘hunches’? • Easier to find answers • More connected with machine in front of us, less connection with people around us • Technology Standards • Standards wars – Battles between incompatible technologies – Can determine survival of companies involved – Not limited to information technology • In many different industires, a standard is created for a technology • Many times, two standards appear at the same time, and a battle ensues for which becomes the dominant standard • HD DVD and Blu-Ray ( ) • Industry shifted (Toshiba HD), and Sony put a blu-ray player into the PS3, put blu ray in way more households • Industry support is what wins standards wars Important Technology Terms • Installed base – # of users – Bigger = greater influence – Sony and Blu-Ray • Lock-in – size of investment – Larger = greater resistance to switch – Investing in a standard, and value drops to 0 if you switch/no longer use this standard • Switching costs – cost of moving – Entry barrier; makes lock-in worse – The actual cost of moving to the new format - financial or intagible costs (learning curve)  The hassle/ inconvenience • Complementary goods – needed for value; creates vicious or virtuous cycle – The goods for services that drive up the value of the initial system/product – Adds value to the product, makes it more attractive/valuable  Ex. Apps for a cellphone/ tablet • Network effects – value depends on users – Occurs when value of product enhanced by number of users using the product – Positive effects - value of the product is increased  Ex. Facebook, online video games, BBM Key Assets & Strategies • Control over installed base of users – First-mover advantages - preemption  Getting a lead in custoemrs makes it much harder for competitors to steal customers – Expectations management  Keep customers up to date on what you are doing  Keep them attracted to your product, make sure they aren't tempted to leave – Offer customers a migration path  Can you give partial upgrades now to tide customers over?  Show customers why they should stay with you • Intellectual property rights – Slows imitation or requires cooperation – May enlarge market share, or they may have to pay us to use our technology • Ability to innovate – Stay on your guard – Can't be content to stay where you are now • Strength in complements – use alliances – Want allies to want to work with you – Keeps driving value to your device/standards On the outside looking in? • Lower customer switching costs – Make your product cheap or easy (Firefox)  First free web browser  No switching costs/upfront fees – Build in an adapter (apple) • Offer a leap in performance for price (sporting goods) – Offer something way better than competitors – Enough of a performanc
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