P1 Unit 4 Business Environment
Organisations and Environment
“Discuss how an organisation’s competitive advantage can be enhanced with the introduction of new technology”
It is important to remember the difference between inventions and technology. Inventing something is the basis of the idea but the technology in it is ‘the application of knowledge to production’ (Wetherley, P 2008). This is because ‘Technology itself cannot do anything. It is how this technology is used that is important’ (Wetherley, P 2008) and how people involved in business adopt new technology and exploit its benefits. This means that the actual technology can be complex or simple, the defining factor is not ‘In the precise nature of the technology itself but in how it is used and the conditions …show more content…
that determine how it is used’ (Wetherley, P 2008). In more recent times the speed at which technology has affected and transformed the ways in which business’ operate. Technology is important as it promotes innovation and continually helps the economy grow.
Adam Smith (1776) showed how technology can be used to increase economic efficiency.
Due to the rapid developments of markets there was a significant improvement in productivity of businesses and as a result businesses began to analyse their production methods and altered these with the introduction of technology. The biggest change was the division of labour amongst the workforce, this is where production was broken down into a number of stages with workers only being responsible for a set task in their given production stage. Over time this also meant that those workers would specialise in their given task, becoming more skilled in their role and as a result increasing efficiency. (Wetherley, P …show more content…
2008).
An analysis of Smith’s theory is that;
Physical capital + technological advancement + specialisation of labor + free trade = economic efficiency
Free market + competition => encourages private entrepreneurs => innovation => development of new technology => increased productive efficiency =>economic efficiency
(Mahtab, T 2012)
Henry Ford became the innovator of the moving assembly line and consequently revolutionised the production function of manufacturing. This method of production is based on the division of labour and that the work moves to the workers. With the moving production line it also meant job specialisation of staff in the task they have been allocated on the assembly line which would also increase efficiency as already stated. By implementing technology and using the moving assembly line he was able to mass produce a car, resulting in lower costs and increased profits. This whole process is now referred to as Fordism in recognition of Henry Ford.
The Solow growth model follows the assumption that for growth not to slow, it was technological improvement that was important. Solow believed that in a products life cycle at the point where maturity is beginning to be realised, technology should be introduced to extend the life cycle of the product. (Mahtab, T 2012)
The main criticisms of this theory are that the technology which it relies on to stimulate the growth has no explanation as to where it will come from and who will pay for this.
(Mahtab, T 2012)
New Growth Theory- technology focusses on individuals or firms searching for increased profits by investing in human capital e.g. training staff and developing and adapting existing technologies. For this to work there needs to be openness to trade technology between others both domestically and internationally. Businesses need to continually evolve with innovation and efficiency and the way in which this theory focuses on this is by R&D.
When mentioning the impact of technology on business and competitive advantage it is impossible to do so without talking about the Value Chain. The value change consists of 5 stages ;
Inbound logistics include the receiving and warehousing of input materials.
Operations are the value-creating activities that transform the inputs into the final product.
Marketing & Sales are those activities associated with getting buyers to purchase the product e.g. advertising.
Service activities are those that maintain and enhance the product 's value including customer support, repair services,
etc.
Outbound logistics are the activities required to get the finished product to the customer, including warehousing, shipping etc.
(Sugden, D 2012)
The above 5 stages were classes by Porter as being the primary activities with the secondary activities being;
Procurement - is the acquisition of inputs, or resources, for the firm. (2012)
Human Resource management - consists of all activities involved in recruiting, hiring, training, developing, compensating and (if necessary) dismissing or laying off personnel. (2012)
Technological Development - pertains to the equipment, hardware, software, procedures and technical knowledge brought to bear in the firm 's transformation of inputs into outputs. (2012)
Infrastructure - serves the company 's needs and ties its various parts together, it consists of functions or departments such as accounting, legal, finance, planning, public affairs, government relations, quality assurance and general management. (2012)
Porter believed that this value chain can be used to help understand the role of technology in gaining a competitive advantage over your rivals. As you will see from the value chain, a business uses technology in all aspects of its operations and the true value of it is not necessarily in the technology itself but more in the way it is used and how it can benefit the organisation. The value chain shows how technology can be used to “combine purchased inputs and human resources to produce some output’ (Porter, M 1985). In regards to technology ‘information systems technology is particularly pervasive in the value chain, since every value activity creates and uses information’ (Porter, M 1985). The reason being for this is that information systems are commonly used in all areas of a business from scheduling appointments to stock control. The value chain also highlights the ‘linkages’ between the operations of a business and how technology in on part of the value chain can have either a positive or negative effect on other parts of the chain.
Example of the range of technologies typically represented in a firm’s value chain.
Fig. 5-1 (Porter, M 1985)
Not only does technology affect the way a business operates internally but also has an effect on how goods are received by customers. Traditionally the process of getting completed goods to customers would go through various intermediaries. However, with the use of technology organisations are capitalising from selling direct to customers. The company can increase profits by cutting costs and consumers are able to purchase the product at a lower cost. Business’ who are able to do this then gain a competitive advantage over rivals who continue to go through those intermediaries.
(Saadman, 2011)
Ultimately all businesses will want to gain a competitive advantage. ‘Technology affects competitive advantage if it has a significant role in determining relative cost position or differentiation.’(Porter, M 1985). By using technology they are able to do so whether it comes from innovation, a completely new product/service or using technology to change what they already do in order to make them more efficient. For a business to have competitive advantage they must offer or do something better than what their rivals can offer. ‘Since technology is embodied in every value activity and is involved in achieving linkages amongst activities, it can have a powerful effect on both cost and differentiation.’ (Porter, M 1985). While the benefits of technology are immense it must also be remembered that in some circumstances ‘technology is not the source of competitive advantage but rather an outcome of other advantages.’ (Porter, M 1985). Economies of scale are also an example of how competitive advantage can be achieved. It means the business sell on a larger scale, by doing this they will have lower costs per unit of output and can increase profits and gain a larger market share.
Technology has also had a significant effect on advertising techniques. This has enabled firms to save money, in some cases, and attract a larger audience. Traditional methods of advertising such as Television, Radio, Newspapers, and Magazines have now become less effective at grabbing our attention as we have now grown accustomed to these methods. New forms of advertising are now more commonly used by firms through E-mail, social networking, online pop-ups and viral marketing. With the use of services such as YouTube, Viral marketing is now being used by not only big organisations with large budgets but also as a low cost option with a simple video uploaded and then passed on to others over the web.
Technology is crucial in globalisation as it relies on information being fast and accessible. This helps businesses maintain contact internally and externally from long. Video conferencing ensures regular contact with different areas of the company and cuts costs. Logistics for the company are also improved and a firm’s website is accessible to the public from anywhere but most companies will also have an intranet, which is an internal area of the site only available to employees, making communication easier. Technology also helps track sales and inventory from anywhere in the world and diminishing stock can be replenished automatically.
From the research and information gathered my conclusion is that technology can be an immense tool in rapid growth and competitive advantage however, at the same time I believe it can also be of huge detriment at an equally fast pace. The reason for this is that it is also a ‘great equaliser, eroding the competitive advantage of even well-entrenched firms and propelling others to the forefront.’ (Porter, M 1985). I also feel that if a company implements new technology but does this poorly, there is risk of a competitor using this but, more efficiently and therefore obtaining the competitive advantage from them that previously would have been unattainable without the initial technological breakthrough. I would recommend all companies to invest in R&D in technology but carry out thorough due diligence before announcing any changes in their operational processes.
Bibliography
IFM. (2012). Porter 's Value Chain. Available: http://www.ifm.eng.cam.ac.uk/dstools/paradigm/valuch.html. Last accessed 11th March 2012
Mahtab, T (2012). 'Seminar 3 - Technology ', Seminar notes distributed in the topic 9561 Organisation and its Environment. Leeds Metropolitan University, Leeds On 16/02/2012.
Porter, M (1985).Competitive Advantage. New York: The Free Press. p164
Porter, M (1985).Competitive Advantage. New York: The Free Press. p164
Porter, M (1985).Competitive Advantage. New York: The Free Press. p166
Porter, M (1985).Competitive Advantage. New York: The Free Press. p167
Porter, M (1985).Competitive Advantage. New York: The Free Press. p169
Porter, M (1985).Competitive Advantage. New York: The Free Press. p169
Porter, M (1985).Competitive Advantage. New York: The Free Press. p170 saadman. (2011). Direct Selling – The Ultimate Social Business Model. Available: http://blogs.ubc.ca/saadman/2011/11/08/direct-selling-the-ultimate-social-business-model/. Last accessed 13th March 2012.
Sudgen, D (2012). 'Lecture 3 - Technology ', lecture notes distributed in the topic 9561 Organisation and its Environment. Leeds Metropolitan University, Leeds On 14/02/2012.
Wetherley, P & Otter, D (2008). The Business Environment. New York: Oxford University Press Inc.. p65.
Wetherley, P & Otter, D (2008). The Business Environment. New York: Oxford University Press Inc.. p65
Wetherley, P & Otter, D (2008). The Business Environment. New York: Oxford University Press Inc.. p65
Wetherley, P & Otter, D (2008). The Business Environment. New York: Oxford University Press Inc.. p72
“Discuss how an organisation’s competitive advantage can be enhanced with the introduction of new technology”
It is important to remember the difference between inventions and technology. Inventing something is the basis of the idea but the technology in it is ‘the application of knowledge to production’ (Wetherley, P 2008). This is because ‘Technology itself cannot do anything. It is how this technology is used that is important’ (Wetherley, P 2008) and how people involved in business adopt new technology and exploit its benefits. This means that the actual technology can be complex or simple, the defining factor is not ‘In the precise nature of the technology itself but in how it is used and the conditions …show more content…
that determine how it is used’ (Wetherley, P 2008). In more recent times the speed at which technology has affected and transformed the ways in which business’ operate. Technology is important as it promotes innovation and continually helps the economy grow.
Adam Smith (1776) showed how technology can be used to increase economic efficiency.
Due to the rapid developments of markets there was a significant improvement in productivity of businesses and as a result businesses began to analyse their production methods and altered these with the introduction of technology. The biggest change was the division of labour amongst the workforce, this is where production was broken down into a number of stages with workers only being responsible for a set task in their given production stage. Over time this also meant that those workers would specialise in their given task, becoming more skilled in their role and as a result increasing efficiency. (Wetherley, P …show more content…
2008).
An analysis of Smith’s theory is that;
Physical capital + technological advancement + specialisation of labor + free trade = economic efficiency
Free market + competition => encourages private entrepreneurs => innovation => development of new technology => increased productive efficiency =>economic efficiency
(Mahtab, T 2012)
Henry Ford became the innovator of the moving assembly line and consequently revolutionised the production function of manufacturing. This method of production is based on the division of labour and that the work moves to the workers. With the moving production line it also meant job specialisation of staff in the task they have been allocated on the assembly line which would also increase efficiency as already stated. By implementing technology and using the moving assembly line he was able to mass produce a car, resulting in lower costs and increased profits. This whole process is now referred to as Fordism in recognition of Henry Ford.
The Solow growth model follows the assumption that for growth not to slow, it was technological improvement that was important. Solow believed that in a products life cycle at the point where maturity is beginning to be realised, technology should be introduced to extend the life cycle of the product. (Mahtab, T 2012)
The main criticisms of this theory are that the technology which it relies on to stimulate the growth has no explanation as to where it will come from and who will pay for this.
(Mahtab, T 2012)
New Growth Theory- technology focusses on individuals or firms searching for increased profits by investing in human capital e.g. training staff and developing and adapting existing technologies. For this to work there needs to be openness to trade technology between others both domestically and internationally. Businesses need to continually evolve with innovation and efficiency and the way in which this theory focuses on this is by R&D.
When mentioning the impact of technology on business and competitive advantage it is impossible to do so without talking about the Value Chain. The value change consists of 5 stages ;
Inbound logistics include the receiving and warehousing of input materials.
Operations are the value-creating activities that transform the inputs into the final product.
Marketing & Sales are those activities associated with getting buyers to purchase the product e.g. advertising.
Service activities are those that maintain and enhance the product 's value including customer support, repair services,
etc.
Outbound logistics are the activities required to get the finished product to the customer, including warehousing, shipping etc.
(Sugden, D 2012)
The above 5 stages were classes by Porter as being the primary activities with the secondary activities being;
Procurement - is the acquisition of inputs, or resources, for the firm. (2012)
Human Resource management - consists of all activities involved in recruiting, hiring, training, developing, compensating and (if necessary) dismissing or laying off personnel. (2012)
Technological Development - pertains to the equipment, hardware, software, procedures and technical knowledge brought to bear in the firm 's transformation of inputs into outputs. (2012)
Infrastructure - serves the company 's needs and ties its various parts together, it consists of functions or departments such as accounting, legal, finance, planning, public affairs, government relations, quality assurance and general management. (2012)
Porter believed that this value chain can be used to help understand the role of technology in gaining a competitive advantage over your rivals. As you will see from the value chain, a business uses technology in all aspects of its operations and the true value of it is not necessarily in the technology itself but more in the way it is used and how it can benefit the organisation. The value chain shows how technology can be used to “combine purchased inputs and human resources to produce some output’ (Porter, M 1985). In regards to technology ‘information systems technology is particularly pervasive in the value chain, since every value activity creates and uses information’ (Porter, M 1985). The reason being for this is that information systems are commonly used in all areas of a business from scheduling appointments to stock control. The value chain also highlights the ‘linkages’ between the operations of a business and how technology in on part of the value chain can have either a positive or negative effect on other parts of the chain.
Example of the range of technologies typically represented in a firm’s value chain.
Fig. 5-1 (Porter, M 1985)
Not only does technology affect the way a business operates internally but also has an effect on how goods are received by customers. Traditionally the process of getting completed goods to customers would go through various intermediaries. However, with the use of technology organisations are capitalising from selling direct to customers. The company can increase profits by cutting costs and consumers are able to purchase the product at a lower cost. Business’ who are able to do this then gain a competitive advantage over rivals who continue to go through those intermediaries.
(Saadman, 2011)
Ultimately all businesses will want to gain a competitive advantage. ‘Technology affects competitive advantage if it has a significant role in determining relative cost position or differentiation.’(Porter, M 1985). By using technology they are able to do so whether it comes from innovation, a completely new product/service or using technology to change what they already do in order to make them more efficient. For a business to have competitive advantage they must offer or do something better than what their rivals can offer. ‘Since technology is embodied in every value activity and is involved in achieving linkages amongst activities, it can have a powerful effect on both cost and differentiation.’ (Porter, M 1985). While the benefits of technology are immense it must also be remembered that in some circumstances ‘technology is not the source of competitive advantage but rather an outcome of other advantages.’ (Porter, M 1985). Economies of scale are also an example of how competitive advantage can be achieved. It means the business sell on a larger scale, by doing this they will have lower costs per unit of output and can increase profits and gain a larger market share.
Technology has also had a significant effect on advertising techniques. This has enabled firms to save money, in some cases, and attract a larger audience. Traditional methods of advertising such as Television, Radio, Newspapers, and Magazines have now become less effective at grabbing our attention as we have now grown accustomed to these methods. New forms of advertising are now more commonly used by firms through E-mail, social networking, online pop-ups and viral marketing. With the use of services such as YouTube, Viral marketing is now being used by not only big organisations with large budgets but also as a low cost option with a simple video uploaded and then passed on to others over the web.
Technology is crucial in globalisation as it relies on information being fast and accessible. This helps businesses maintain contact internally and externally from long. Video conferencing ensures regular contact with different areas of the company and cuts costs. Logistics for the company are also improved and a firm’s website is accessible to the public from anywhere but most companies will also have an intranet, which is an internal area of the site only available to employees, making communication easier. Technology also helps track sales and inventory from anywhere in the world and diminishing stock can be replenished automatically.
From the research and information gathered my conclusion is that technology can be an immense tool in rapid growth and competitive advantage however, at the same time I believe it can also be of huge detriment at an equally fast pace. The reason for this is that it is also a ‘great equaliser, eroding the competitive advantage of even well-entrenched firms and propelling others to the forefront.’ (Porter, M 1985). I also feel that if a company implements new technology but does this poorly, there is risk of a competitor using this but, more efficiently and therefore obtaining the competitive advantage from them that previously would have been unattainable without the initial technological breakthrough. I would recommend all companies to invest in R&D in technology but carry out thorough due diligence before announcing any changes in their operational processes.
Bibliography
IFM. (2012). Porter 's Value Chain. Available: http://www.ifm.eng.cam.ac.uk/dstools/paradigm/valuch.html. Last accessed 11th March 2012
Mahtab, T (2012). 'Seminar 3 - Technology ', Seminar notes distributed in the topic 9561 Organisation and its Environment. Leeds Metropolitan University, Leeds On 16/02/2012.
Porter, M (1985).Competitive Advantage. New York: The Free Press. p164
Porter, M (1985).Competitive Advantage. New York: The Free Press. p164
Porter, M (1985).Competitive Advantage. New York: The Free Press. p166
Porter, M (1985).Competitive Advantage. New York: The Free Press. p167
Porter, M (1985).Competitive Advantage. New York: The Free Press. p169
Porter, M (1985).Competitive Advantage. New York: The Free Press. p169
Porter, M (1985).Competitive Advantage. New York: The Free Press. p170 saadman. (2011). Direct Selling – The Ultimate Social Business Model. Available: http://blogs.ubc.ca/saadman/2011/11/08/direct-selling-the-ultimate-social-business-model/. Last accessed 13th March 2012.
Sudgen, D (2012). 'Lecture 3 - Technology ', lecture notes distributed in the topic 9561 Organisation and its Environment. Leeds Metropolitan University, Leeds On 14/02/2012.
Wetherley, P & Otter, D (2008). The Business Environment. New York: Oxford University Press Inc.. p65.
Wetherley, P & Otter, D (2008). The Business Environment. New York: Oxford University Press Inc.. p65
Wetherley, P & Otter, D (2008). The Business Environment. New York: Oxford University Press Inc.. p65
Wetherley, P & Otter, D (2008). The Business Environment. New York: Oxford University Press Inc.. p72