The technological environment is the part of the company’s external environment related to technological developments and changes. The word ‘technology’ is usually associated with techniques and equipment. Their changes create both threats and opportunities for the company.
The environmental impact of technology on the company
Technological developments affect all aspects of business, not just products and services. In production, technology can increase total output through:
- Increased productivity. With the same input, the firm can produce more output per unit.
- Cost reduction e.g. computers and transportation technology
The increase in output ultimately contributes to overall economic growth. That shifts the production possibilities curve outward.
Not only does the amount of output increase, technology also allows companies to produce new products. For example, the presence of internet technology allows book publishers to launch e-books.
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However, technology also makes products obsolete faster. For example, the emergence of smartphones with high camera resolutions reduces interest in conventional camera products.
And, the effect of technological change on the organization as a whole can affect:
- Product sales techniques. For example, more shops are turning to online than shops. These changes of course have a significant impact on business strategy.
- Product manufacturing method. For example process automation
- Market research. Marketers can more easily analyze the market with a database system. Technological elements allow marketers to access more accurate data that enables them to better plan marketing.
- Company management and operations. Employees may not need to come to the office to work. Instead, they can do it at home, as long as they are connected to the internet.
- Option to communicate with stakeholders , such as through the website, social media, and email.
- New skill needs. Companies increasingly need data analysts and programmers for data interpretation and digital information processing.
- Changing consumer needs and wants.
Why the technology environment is important
The technological environment affects various aspects of business. It could be an opportunity or a threat. And, companies cannot control the technology factor, but must respond to it. Therefore, companies must be able to adapt to new technological developments.
Early adopters of new technologies often achieve higher market share and earn higher returns. Therefore, companies need to scan for trends and changes. The goal is to take advantage of opportunities while minimizing threats. In this way, the company can gain a competitive advantage.