Technological

Environment
• In the last few decades technology has made great strides, It has
affected every aspect of our lives from how we shop, to how we
travel to how we communicate.
• Technology has also greatly affected businesses around the
world.
• Businesses can’t control external factors but must respond to
them. These political, economic, social, technological,
environmental and competitive factors are represented by the
acronym PESTEC.
• Technological environment refers to the state of science and
technology in the country and related aspects such as rate of
technological progress, institutional arrangements for
development and application of new technology, etc.
• According to the well known economist J.K. Galbraith,
technology means,
“systematic application of scientific or other organised
knowledge to practical tasks”.
• Technology comprises of both machines (hard technology) and
scientific thinking (soft technology) used to solve problems and
promote progress.
• It consists of not only knowledge and methods required to carry
on and improve production and distribution of goods and
services but also entrepreneurial expertise and professional
know how.
• Technology includes inventions and innovations.
 Features
• The main features of technological environment are as follows :
• Technological environment is a component of macro or indirect
action environment.
• Technological environment changes very fast.
• Technological environment affects the manner in which the
resources of the economy are converted into output.
• Technological environment is self reinforcing. An invention in one
place leads to a sequence of inventions in other places.
 Features
• Changes & Developments.
• Widespread Effects.
• Self Reinforcing.
 Technological change- Significant Opportunities
and Threats
• Technology developments affect business operations in a number
of positive ways:
• Increasing access to, and storage and manipulation of, data.
• Increasing speed and volume of communication.
• Reduced language and cultural barriers.
• Reduced costs of production.
 Technological change- Significant Opportunities
and Threats
• Reduced administration costs, waste and increased efficiencies.
• Increased outsourcing of key functions cutting operating costs.
• Higher quality products at competitive prices through improved
innovation and development.
• Better working conditions, flexible working practices and greater
opportunity for personal development.
• Increasing access to global markets and greater mobility in
business transactions.
 Technological change- Significant Opportunities and Threats

• However, there are some potential negatives associated with

technology development
• The real costs of remaining ahead of competitors.
• Fewer barriers to entry to markets, allowing smaller companies to
compete using relatively low cost web marketing tools.
• Empowering customers to seek lower prices and better deals.
 Technological change- Significant Opportunities
and Threats
• The increasing support costs such as licensing of software,
maintenance of equipment and the training of staff.
• Reduced job security.
• The pace of constant change undermining existing organisational
structures and threatening social relationships.
• The increased risk of interconnected systems failing and resulting
chaos. Not all systems are secure and it is increasingly difficult to
protect systems from hacking.
 Impact of Technology
• Impact of Technology – Studied under three heads;
1. Technology & Society
2. Technology & Economy
3. Technology & Plant level changes.
 Impact of Technology
• 1. Technology & Society
 Relationship between business & Society
 Consumers Expectations
 Complexity of system
 Social Changes
 Impact of Technology
• 2. Technology & Economy
 Qualitative and Quantitative increase in productivity
 Need to encourage Research & Development
 More Intellectual and upgraded jobs
 Need for highly professionalised and knowledgeable personnel
 Need for Bioprofessional and Multiprofessional Managers
 Govt. Regulations & Public Opposition
 Impact of Technology
• 2. Technology & Economy
Insatiable demand for capital
 Impact of changes on products and organisations
 Redefinition of Business Boundaries
 Impact of Technology
• 3. Technology & Plant
 Impact on Organisational StructureTotal
 Resistance to Change
 Import of Technology
 Total Quality Management
 Business Process Reengineering
 Flexible Manufacturing Systems
 Hurdles in Technological Development
1. Pollution
Technological development leads to more industrial production, and
pollution is an unavoidable consequence of that.
Industrial establishments generate smoke, smell, noise, effluents and
dust.
The biosphere cannot observe all this pollution and the buildup of
harmful chemicals in the Ecosystem poses a threat to life and the
planet itself.
Part of the answer to this hurdle in the technological development is to
invent and use new and less polluting forms of Technology and energy
 Hurdles in Technological Development
2. Industrial Resources

• Technological development depends upon the availability of industrial resources like

minerals, energy, water supplies skilled labour and human knowledge.
• But there is a limit to the answers this serious question.
• It has potential to discover new materials availability of these resources which check
the growth of Technology.
• But Technology itself substitutes for the existing ones and new uses for the existing
materials.
• It has the potential to develop human knowledge and discover newer forms of energy.
Therefore the hurdle can also be eliminated by technology itself.
 Hurdles in Technological Development
3. Social Institutions
Many societies that adopt modern technology and encounter
problems in arriving at a consensus between the traditional social
Institutions and the new trends of technological development.
Social values and Institutions may impedge the technological
development. But as Technology means change, with the passage
of time, the social values and Institutions will also adapt to the
changes brought in by the growth of technology.
 Transfer of Technology TOT
• Technology transfer is the movement or flow of technical
knowledge, data, designs, prototypes, materials, inventions,
software, and/or trade secrets from one organisation to another
organisation or from one purpose to another purpose.
• The technology transfer process is guided by the policies and values
of each respective organisation.
• It is well known the modern know how and technology is today the
monopoly of MultiNational Corporations (MNCs). The less
developed countries who lack it are totally dependent on the MNCs
for borrowing the sophisticated and costly technology.
 Methods of Transfer of Technology

 According to the Nature of the Technology Transfer.

 According to the Nature of Instrument Used.
 Methods of Transfer of Technology

 According to the Nature of the Technology Transfer.

1. Simple Direct Sales of Technology
2. Process Packaged Sale of Technology
3. Project Package Sale of Technology

(The three fold categorisation of Technology Transfer is presented by

COOPER & HOFFMAN)
 Methods of Transfer of Technology

According to the Nature of Instrument Used.

 Methods of Transfer of Technology

 According to the Nature of Instrument Used.

• The second method of classifying technology transfer is by the
nature of the instrument used i.e. whether technology is sold in
form of equipment, designing of plant supervision, management
licences, direct investment etc.
• Technology transfer between countries can take place in a number
of ways
 Methods of Transfer of Technology

 1. By the flow of books journals and other published information

 2. By the movement of people between countries including
immigration, return of emigrants, study visits and other travel
 3. By foreign investment and associated transfer of knowledge
and equipment
 4. By the import of machinery and equipment
 5. By technical cooperation programs,, material and bilateral
official and private
 6. By licensing patent and know how agreements
 Methods of Transfer of Technology

• Most developing countries employ all those methods simultaneously. The

first method is more important for transfer of fundamental scientific
knowledge.
• All the other methods are directly relevant for the transfer of Industrial
Technology.
• Through technical cooperation programs with other countries, governments
of developing countries have sought to introduce latest technology in the
industrial sector.
• For this purpose they sent their missions abroad or invite technical
missions from abroad through the establishment of a network of Technical
training and Research Institutions, they have tried to improve the quality of
Technical Services
 Multinational Corporations - MNCs
• The chief instrument of transfer from developed to the developing
countries are the multinational corporations.
• MNCs are huge industrial organisations which extend its Industrial
and marketing operations in a number of countries through a
network of the branches or subsidiaries.
• They bring with them technical knowledge and equipment and also
participate in the industrial development programs of the
developing countries by licensing patent and know how
agreements.
• MNCs organise their operations in different countries through any
of the following alternatives:
 Multinational Corporations - MNCs

• BRANCHES  This is the simplest way of extending the operations.  Under this
alternative the multinational companies set up branches in the developing
countries. These branches bring with them the technology of the parent
company and are linked up with it.

• SUBSIDIARIES  They also operate by setting up subsidiary companies in the

affiliated Nations. A subsidiary in a particular country is established under the
laws of the country.

• JOINT VENTURE COMPANY  Sometimes the multinational companies enter

into a joint venture with an indigenous firm or agency.  Under this arrangement
the MNCs make available machinery, capital goods and technological
expertise to the indigenous firm.
 Multinational Corporations - MNCs

• FRANCHISE HOLDERS – This is a special kind of arrangement

under which an affiliated firm produces or markets the product of a
MNC after obtaining a license from that MNC.

• TURNKEY PROJECTS - Under this organisational form MNCs undertakes to

complete the project from the scratch to the operational stage. When the
project is ready it is handed over to the host country.
 Multinational Corporations - MNCs
• Through these varioius methods of operation the MNCs carry
technology to the developing countries. If MNCs set up a branch or
a subsidiary company, it is claimed that there is a direct injection of
foreign experience and expertise in the developing country.
• This branch or subsidiary can provide a channel for the
transmission of the latest improvements from the developed to the
Underdeveloped countries.
• However the success on this front depends crucially on how far the
recipient countries are able to regulate the activities of the MNCs,
keeping the local interest in view
 Features of Technology Transfer
• Technology is transferred by the advanced capitalist countries to the
developing countries.

 Principal Instrument of Technology Transfer – MNCs

 Foreign Exchange Policies of the Developing Countries
 Criticism of the Operations of MNCs

• The activities of MNCs are looked upon with suspicions and distrust
in many developing countries.
• The main reasons being their economic resources, greater
bargaining power and capacity to influence the production patterns
and even the political process in the host countries.
 Criticism of the Operations of MNCs
 Transfer of Inappropriate Technology
 Destruction of Indigenous Capital Goods Industry
 Production of Unnecessary or Over Sophisticated Products
 MNCs and Employment
 MNCs and Industrial Concentration
 Capital Flows and Balance of Payments
 Restrictive Practices of MNCs
 Biased Behavior of International Institutional Structure
 Technological Dependance and Threat to National Sovereignty.
 Remedies
Domination of MNCs is fraught with serious dangers. But an outright
ban on the activities of MNCs does not seem to be feasible. The
only effective way out of this crisis is to launch a mass movement
embracing a Four Point Action Plan.
1.