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Technological Environment
Strategic importance of technology ,[object Object],[object Object],[object Object]
Technology mechanisms Technology Mechanism How It Creates an Advantage Example A new process Produce faster, at lower cost or better quality Internet banking Solve a complex problem Do something competitors find hard to master Google search engine A new product The first product to market The iPod Protect a valuable idea Have something others can only sell if they pay for a licence Pfizer’s Viagra Rewrite the rules A completely new approach which makes other products and markets redundant Digital cameras
Technology and Porters Five Forces (1) Technology can have a significant effect on the five forces
Technology and Porters Five Forces (2) Force Examples of Potential Impact of Technology Barriers to entry May reduce economies of scale – encouraging new entrants (e.g. digital publishing) In some case barriers may rise – as products become more complex and processes difficult to copy Substitutes New products may displace old – e.g. DVD for videotape Technology in other markets may “steal” customer spending from other markets – e.g. more spending on games consoles v less spending on days out Power of customers (buyers) & suppliers Technology may free businesses from a single source of supply – e.g. Open Source software  v Microsoft Competitive rivalry Rivalry is diminished is technology is successfully patented and licensed
Opportunity or Threat? ,[object Object],[object Object]
Innovation and technology ,[object Object],[object Object],[object Object]
Supply-side factors affecting innovation diffusion Adapted from Johnson & Scholes – Corporate Strategy Supply Factor Potential Effect on Technology Degree of improvement Does the technological change provide enough incentive for customers to change? Compatibility Is the new technology compatible with existing products? Are older products likely to become obsolete? Complexity Does the product or the way it is marketed (e.g. pricing) make it too complicated for the majority of customers to understand? Experimentation Can customers test the new technology before committing to buying it?  What feedback is available from early-adopters? Customer service How easy is it for potential customers to get answers to their questions before committing to the new technology?
Demand factors affecting innovation diffusion Adapted from Johnson & Scholes – Corporate Strategy Demand Factor Potential Effect on Technology Market awareness How aware is the market of the new technology? What promotional activity is required in order for customers and distributors to support the technology? Observability What is the potential for a “band-wagon effect”? How easy is it for customers and distributors to see the technology in action and observe the benefits that is brings? Customers Which customers are likely to adopt the technology first? What approach is most appropriate for a successful launch of the innovation? How are existing customers going to be supported in transferring to the new technology?
What is a “tipping point”? The point in time at which some new technology becomes mainstream
Tipping points ,[object Object],[object Object],[object Object]
Tipping point for digital radio? http://www.guardian.co.uk/media/2008/dec/19/digital-radio-switchover   http://www.guardian.co.uk/media/2009/jan/26/digital-radio-sales-soar-in-december
Developing or acquiring technology Three main options In-house Development Alliances Acquisition
In-house development ,[object Object],[object Object],[object Object],[object Object]
Alliances ,[object Object],[object Object],[object Object],[object Object],[object Object]
Acquisition ,[object Object],[object Object],[object Object]
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Strategy and Technological Change

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  • 3. Technology mechanisms Technology Mechanism How It Creates an Advantage Example A new process Produce faster, at lower cost or better quality Internet banking Solve a complex problem Do something competitors find hard to master Google search engine A new product The first product to market The iPod Protect a valuable idea Have something others can only sell if they pay for a licence Pfizer’s Viagra Rewrite the rules A completely new approach which makes other products and markets redundant Digital cameras
  • 4. Technology and Porters Five Forces (1) Technology can have a significant effect on the five forces
  • 5. Technology and Porters Five Forces (2) Force Examples of Potential Impact of Technology Barriers to entry May reduce economies of scale – encouraging new entrants (e.g. digital publishing) In some case barriers may rise – as products become more complex and processes difficult to copy Substitutes New products may displace old – e.g. DVD for videotape Technology in other markets may “steal” customer spending from other markets – e.g. more spending on games consoles v less spending on days out Power of customers (buyers) & suppliers Technology may free businesses from a single source of supply – e.g. Open Source software v Microsoft Competitive rivalry Rivalry is diminished is technology is successfully patented and licensed
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  • 8. Supply-side factors affecting innovation diffusion Adapted from Johnson & Scholes – Corporate Strategy Supply Factor Potential Effect on Technology Degree of improvement Does the technological change provide enough incentive for customers to change? Compatibility Is the new technology compatible with existing products? Are older products likely to become obsolete? Complexity Does the product or the way it is marketed (e.g. pricing) make it too complicated for the majority of customers to understand? Experimentation Can customers test the new technology before committing to buying it? What feedback is available from early-adopters? Customer service How easy is it for potential customers to get answers to their questions before committing to the new technology?
  • 9. Demand factors affecting innovation diffusion Adapted from Johnson & Scholes – Corporate Strategy Demand Factor Potential Effect on Technology Market awareness How aware is the market of the new technology? What promotional activity is required in order for customers and distributors to support the technology? Observability What is the potential for a “band-wagon effect”? How easy is it for customers and distributors to see the technology in action and observe the benefits that is brings? Customers Which customers are likely to adopt the technology first? What approach is most appropriate for a successful launch of the innovation? How are existing customers going to be supported in transferring to the new technology?
  • 10. What is a “tipping point”? The point in time at which some new technology becomes mainstream
  • 11.
  • 12. Tipping point for digital radio? http://www.guardian.co.uk/media/2008/dec/19/digital-radio-switchover http://www.guardian.co.uk/media/2009/jan/26/digital-radio-sales-soar-in-december
  • 13. Developing or acquiring technology Three main options In-house Development Alliances Acquisition
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  • 17. Keep up-to-date with business stories, resources, quizzes and worksheets for your business course. Click the logo!