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chapter 3 technology

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Sofy Carayannopoulos

Chapter 3 Technological Factors Learning Objectives • Understand what technology is and where it comes from • Recognize the impact of shifts in technology • Understand the opportunities and threats that can be created by technological factors • Understand central technology concepts and their strategic significance • Explain the concept of disruptive technologies/innovations • Discuss why successful firms sometimes fail • Understand how companies may avoid failure • Explain the relationship between technology factors and concepts and the Critical Success Factors, Diamond- E, and Porter’s Five Forces How does technology affect your financial success, creating an advantage, meeting customer needs How might technology help me be innovative and creative? Link back to critical success factors Sometimes firms fail because they didn’t recognize the value of the technology a competitor had PEST-Technology 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 * 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 Constantly be looking for technologies and development in other areas Affects who we can sell to Information is more vulnerable (ex. Visa – credit card numbers) are shorter than they used to be takes you to complete an activity – because of the improvement in technology, cycle times 20 years ago it took a long time to make a new car model, but now it takes a short amount of time to create a new car model with technology An opportunity because you can build faster, and a threat because your competition can do the same thing Technology can produce threats and opportunities on every level Companies are constantly scanning for new technologies that can potentially affect them What is technology? • Advancements in equipment and its uses -Often substitutes for/magnifies human efforts -Includes human knowledge, work methods, equipment, business processing systems • Includes information technology -the various devices for creating, storing, exchanging, and using information -Consumers use it daily, i.e ATM, shopping -Companies use it to gather and share information and execute activities Companies use facebook to target their customers -> if you search hotels, you will have hotel advertising on your facebook page Where does technology come from? • Comes from human ingenuity -formal and informal research & development (R&D)! -Basic R&D – knowledge without focus -Applied R&D – specific problem in mind - -Technology transfer – out of the lab and into the world Comes from the human brain Pay people to find solutions Uncertain activity Basic-focused on basic knowledge and foundation Basic research tends to be done by universities Applied is focused on a specific research problem - research company looking to develop a smaller quicker computer chip, or a pharmaceutical company is looking to develop a drug for a cure for cancer You need basic and applied R&D to be successful Technology transfer – taking the knowledge in the lab and being able to get it into the market Technology Shifts -Electricity -Trains/Ships -Assembly Line -Internal Combustion Engine – Autos, mass transit -Airplanes -Mass Media -Telecommunications -Computers -Internet Shifts are the significant changes Shifts allow us to explore distant parts of the world The harder it is to travel and get to discount stores, that discount is irrelevant Trains allowed rural areas of NA to be populated because it was fast and cheap We are able to travel more with autos – Walmart exists because many people can drive from all over in order to take advantage of the Walmart discounts Technology creates a social threat: Instead of interacting with people, people are on their phones or have headphones in Our information is more vulnerable than it was years ago before technology Opportunities • Products – innovation, uniqueness, value • Management and Organizational Processes -Instant access to information -Better service through coordination -Leaner organization -Improved operations efficiency i.e. CAD, ERP -Greater independence of company & workplace How you develop the products Value - How long the products last, how much does it cost to repair it? How does instant access to info link back to critical success factors – understand what customers need and meet their needs Allows us to build better products/services because for example, technology at a doctors office – they can serve you better as a result of the information they get through technology if one drug doesn’t go well with another – customer needs When we have access to information and feel confident about what you are doing, you feel more productive as a result (employee loyalty), and therefore meets customer needs Leaner organization: don’t need as many people because technology replaces people: meets which critical success factor? Financial performance CAD computer assistance design, help you become more efficient at building products therefore you are able to build quality products, and meet customer needs because you are able to provide them with what they need and therefore you achieve financial performance Greater independence …You don’t have to be sitting at your desk to do your job, can be using your time at an airport to do work. Reduces the amount of space a company needs, improves efficiency, gains employee commitment, achieves financial performance. People put more work into their job, in a companys perspective, employees are putting in more time (people using their technology during evenings and weekends for more work, when they otherwise would not be in the office) • Competitiveness create barriers to entry; cooperation with other firms; reduced cycle times • Communication and collaboration within firm and with customers • Customization Once you are in, it gives you a chance to find ways to keep others out Fostering relationships with other organizations can allow you some pretty good opportunities, how quickly you can respond to customers, you gain employee commitment, you build product quality Communication and collaboration- gain employee commitment when you work together “feel part of a team” Customization- building Creates a certain amount of innovation Companies don’t have all the “know how” so they need to co-operate with others in order to be successful As a car manufacturer, they can look at their suppliers products over the internet Reduced cycle times- able to respond to complaints/suggestions/anything faster, meets customer needs, achieves financial performance Helps build innovative products because customers are giving you ideas, meets customer needs by communicating with them and finding out what makes them happy As a result of technology, it can allow our customers to have customized goods Threats • Imitation Information costly to develop but cheap to share • New technologies in unfamiliar areas Disruptive technologies challenge the value of organizational capabilities and resources • Unpredictable evolution VHS vs. BetaMax Blu-Ray vs. DVDs Imitation -a lot of copying, costs a lot to protect it, critical success factor (distinctive competitive advantage) Unpredictable evolution-has to be compatible Its not about quality its about promotion too A threat for the organization that creates the information, because they spend so much time/money creating it and there is no return If there is no copyright or patents, a competitor will likely take it Think of the music industry A concert costs money – you can’t share that experience like you can music online • Need for constant learning and scanning • Information overload • Greater independence of company & workplace Not easy for companies to stand above the rest when customers have many different companies available to them You can’t supervise your employees when they are not in the office, companies can lose their sense of atmosphere and sense of community – it is important to collaborate and to know each other. If people do not feel a sense of connection with their company, they could go to the competition. Employees are less likely to go to a different company if they feel a connection to the one they are at Howdoestechnolog yim pact criti calsuccessfactors? Factor Opportunity Threat Achievingfi nancial performance Meeti ngcustomerneeds Buildingqualityproducts andservices Encouraginginnovati on andcreati vity Gainingemployee commitment advantagei vecompeti ti ve 09/30/13 12 Technology Standards Standards wars battles between incompatible technologies Can determine survival of companies involved Not limited to information technology Blu-Ray vs. (HD) DVD If you chose one you are locked in Hd is cheaper to produce However the blue ray is supported Who ever has the bigger/stronger roof is what people are going to go with Technology standards are important because they determine … People that create apps need to decide which market they want to be on: Apple, Blackberry or Android? Swiffer jet mop is still a technology Whenever your product has to be compatible with something else, standards matter because you are asking someone to accompany your product If you invent something and at the same time someone else invents a different standard, you are asking the market to take your side. If you don’t switch over to the winning standard, your gone Plugs for example need to be the same Important Technology Concepts -Installed base – # of users - bigger = greater influence -Lock-in – size of investment -Larger = greater resistance to switch -Switching costs – cost of moving -entry barrier; makes lock-in worse -Complementary goods – needed for value; creates vicious or virtuous cycle -Network effects – value depends on users CAN YOU SEE THE LINKS TO PORTER’S FIVE FORCES? Its all about keeping competitors out and controlling the market Complementary- eg phone aps make phone more valuable If there are more blue ray owners than dvd owners, then blue ray will take over just because of numbers Lock in – the size of investment that the consumer makes -> if you have a specific razor handle, you are locked into buying that specific type of blade - creates a barrier to entry for anyone that wants to enter that market Having a large installed base is important because you want to have a large market, which gives you financial performance, you have greater influence on the market because you have loyal buyers Locked in – cell phone companies. If you leave early there is a financial penalty. You hold customers tighter, making it hard for the competition to take buyers away Switching costs – how much it will cost to leave the old one and go to the new one If lock in and switching costs are high, the chances of changing companies is low Lock in affects competition, buying power, switching costs, entry to barrier Complementary goods add value to the good or service that you already have Many complementary good are not produced by the original producer of the good or service: ex. The apps that are available on smart phones are not created by bberry, apple and samsung, but are developed by developers. Cell phone app developers are looking for compa
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