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Chapter 6 Technological Factors.

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Sofy Carayannopoulos

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Keith Diaz Chapter 6: Technological Factors  The internet affects buying, selling, and communication - Now we can buy from anywhere around the world because of the internet - Who we sell to and how we choose to sell is influenced - Ex: Facebook  communication has changed dramatically  who/how we connect is important  Information technologies affect information access, inter-firm cooperation, cycle times - We used to have to contact and place the order between firms, but now we can access their systems and place the order ourselves - Cycle time: how long it takes to develop a new product  faster as we don’t need to actually build them from scratch; computer simulators do all the work  reduces cycle time - Releasing new product  before iPhone 4 was released, Apple was already working on iPhone 5 so that they could let as many people buy iPhone4s as possible, maximize profits, then release.  Computer technologies have changed our products and how we design and build - New technologies and products  smart phones, cars that park themselves  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  Challenge: requires constant learning and actively investing - Widening expertise - Anticipating next knowledge piece - Scan environment constantly for next technological breakthroughs Opportunities  Improved products: innovation, uniqueness, value  improved production processes: efficiency - Increase efficiency - Employees can talk to one another - use computers and have customers access data instead of us giving it to them  banking online  improved competitiveness: create barriers to entry, cooperate with other firms - technology can be a barrier  ex: patents - concepts like lockout and switching costs - inventory systems: cooperating with suppliers (for instance) means your supplier can keep track of your inventory levels and before you even place the order, they are preparing products - suppliers sent right to where you need them  reduces handling costs, etc.  efficiency  improved communication and information: within firm and with customers - increase employee commitment - there is information that helps them do their job better - increase customer satisfaction employees look and feel better if they help the customers well - communication with customers: serve them better - walk into a bookstore and the sales person notices what you like and suggest other things  now this is possible over the internet Threats  imitation - information is costly to develop but cheap to share figure out a way to prevent free sharing Keith Diaz - ex: music sharing online  new technologies out of areas that firm is unfamiliar with - disruptive technologies challenge value of organizational capabilities and resources worthless - organization  capabilities  strategy - shift from VCRs to DVDs, from horse buggies to cars - eventually forced to switch to new technology as our technology standards rise  unpredictable evolution - beta vs. VHS  before, you could rent in Beta or VHS, and then big companies committed themselves behind VHS  VHS won out - when big players in an industry say this is the standard they will be releasing their products in, consumers say they won’t use the other standard  obsolete  demand constant learning and scanning - a lot of investment required - still benefits you in other ways  information overload Information technology  The various devices for creating, storing, exchanging, and using information  Consumers use it daily  ATM, shopping  Companies use it to gather information on customers, run operations Info Technology and Organizational processes  Better service through coordination - Delivery and information: can meet customer needs better when you know more about them - Sobeys point cards get your information, keeps you happier  Leaner, more efficient organizations - Networks enable information linkages between employees - Instant access to information for decision-making and increased responsiveness - Mailing systems were so inefficient compared to email - Can work from remote locations at any time  Increased collaboration inside and out  Greater independence of company and workplace  Improved management processes - CAD: computer A design: you used to have to sit and think about how to build a product, build a prototech and discover it doesn’t work and then fix it  time and money. If you are collaborating with your suppliers, you can go into their data systems and use their data in your design system to see how different components from your suppliers can fit/mesh into your own design  saves time and money because you’re identifying problems sooner. Suppliers get to sell better too. - ERP: enterprise resource plan: allows you to control the physical resources within an organization. Keeps track of your money and sources; allows you to make a shopping list. - Ex: Toyota used an ERP system to make money. They had too many varieties of nuts and bolts, so they shrunk the variety to a smaller range, and saved money. This also led to less mistakes because there are less to choose from. Efficient because you can get more of a smaller range.  Improved flexibility for customization - Machines used to just repeat the same action to create things  reduced variety - With changes in technology, we can now create more flexible machinery  ex: ordering things online, customizing your own backpack with the colors you want, etc. Keith Diaz - All customers have different expectations, and it’s hard to customize that many products. Every individual order means a lot of labour just taking the customized order. Technology enabled us to gather that data in a simple and efficient way.  Providing new business opportunities - Reaching clients in a new or improved way Future of Internet Retailing  Retailer’s mission: 4 things aiming for the customers 1. Right product 2. Available in the right place 3. Competitive price 4. Have to have it when customer wants it  3 prior waves of significant change 1. Department stores: Sears, Hudson Bay: there used to be individual specialized stores, where shoe stores only sold shows and dress stores only sold dresses, etc. This meant lots of choices in ONE category. But the invention of department stores allowed people who want a lot of things to go to one place and get everything. There wasn’t a wide variety of each thing, but there were a lot of types of things. Specialists still sold expensive specific things, but department stores sold smaller variety of cheaper things. 2. Mail Order (catalogue shopping): department stores realized that they could reach tout to people who could not physically make it to the stores by making it possible for someone to order things  they made mail order catalogues accepted and this led to better reputation of department stores. But then specialists made these catalogues too since customers were now comfortable with the idea of buying through mail. 3. Discount department store (Walmart, Zellers): while original department stores set up in locations with high traffic (expensive real estate), discount stores set up in places a bit away from the centre  allowed lower prices on products.  Prior failures happened because 1. Specialists entered after generalists set up the model: - Amazon because the internet version of the department store, and they made us comfortable with the idea of internet shopping. Hence, specialist stores also made internet shopping available when we were already comfortable with the idea. - Cybermalls and consumer comfort increase are the future: virtual spaces with specialist stores where you can go in and try things on and be comfortable with internet shopping. 2. Started in simple products and then moved up: newcomers entered in the market segment that had lower demand, so the upper end didn’t really care. But these lower organizations moved up with the invention of shopping malls (department stores became anchors of the malls and kind of became useless since malls have all these specialists stores being in the same place).  Upmarket momentum - Clicks setting up mortar to deal with time factor - technology enables us to provide customer service and detail - As you can offer more personal service and more information, better sell to your customers, you are able to move to more complex products that give you greater margin - To address the time aspect, companies that only sell online have begun opening physical facilities (stores) so that we can go buy something if we need it quickly  going backwards - Now you can even sell online instead of just buying online - Now, if you go into a store and they don’t have the thing you want, you can order it and they ship it to you for free, and if you don’t like it, all you have to do is bring it back to the store Keith Diaz - people go to the mall not intending to buy something, but they find something they want to buy - At the very least, malls make money off the food court because we hang out at the mall and we get hungry  so even if we don’t buy anything, we will probably buy food - If you work at the mall, you are more likely to buy stuff Technology standards  Standards wars - Battles between incompatible technologies can determine survival of companies involved - Not limited to information technology  Example: Apple used to be incompatible with PC programs, but now they are compatible  RCA vs. CBS - RCA manufactures TVs and owned MBC in 1940s  black and white TV - The next innovation was color TV - While RCA tried to come up with a mechanical color system, CBS thought of an electrical color system that could receive the black and white signals for certain broadcasts - RCA had bad color coordination, so they tried as many black and white TVs as they could in order to buy time  anyone with a black and white TV would use it for a while before buying a color TV so that the money is worth it - Lucky for RCA, WW2 meant the government told CBS to stop manufacturing color TVs due to war supply issues. Hence, RCA asked the government to approve their method of color TV because it’s just as good quality as CBS, and RCA also accepts black and white (good for broadcasting programs because it is compatible, unlike CBS) so RCA standard won Important concepts  Installed base: # of users - The greater the number of users you have, the greater the influence you have  Lock in: size of investment - the larger the investment a buyer has to make in a particular technological standard, the harder it is to switch to another one - ex: you buy a PS3 and a whole bunch of games for that system. When another system comes along, you’re less likely to buy it because you already spent your money on the PS3  switching costs - when you ask me to switch something, you’re not only asking me to forget the investment I already made, but also to invest in something else  two costs - switching costs are not only dollar costs, but it can also be chances in habits and skills - ex: every time Microsoft changes its organization, I have to get used to it again  complementary goods: needed for value - creates vicious or virtuous cycle - we need complementary goods not by themselves, but to add value to other products - Vicious cycle: apps add value to an iPhone, if little apps, less customers, less value, less apps - Virtuous cycle: once there are apps, more people buy phone, more apps, more customers  Network effects: value depends on users - Occur with products that become increasingly valuable with more users - Subscribers increasing at an increasing rate  Ex: facebook Key assets
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