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Technological Environment: Definition and Its Effects on Business

Updated on April 14, 2022 · By Ahmad Nasrudin

Technological environment definition and its effects on business
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The technological environment is part of the company’s external environment related to developments and changes in technology. Further, the word ‘technology’ is usually associated with technique and equipment. Their change raises threats and opportunities for the company.

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The impact of the technological environment on companies

Technological developments affect all aspects of business, not only in products and services. In production, technology can increase total output through:

  • Increased productivity. With the same input, the company can produce more output per unit.
  • Cost reduction for example computers and transportation technology

The increase in output ultimately contributes to overall economic growth. That shifts the production possibilities curve outward.

Not only has total output increased, but technology has also allowed companies to produce new products. For example, the presence of internet technology allows book publishers to launch e-books.

However, technology also makes products obsolete faster. For example, the emergence of smartphones with high-resolution cameras reduces interest in conventional camera products.

And, the effect of technological change on the organization as a whole can affect:

  • Product sales technique. For example, more retailers are turning online than physical stores. These changes certainly have a significant impact on their business strategy.
  • Ways of making products. For example, is process automation
  • Market research. Marketers can more easily analyze the market with a database system. The technology element enables marketers to access data more accurately, allowing them to plan marketing strategies better.
  • Management and operation of the company. Now, employees do not have to attend the office to work. Instead, they can do work at home, as long as they are connected to the internet.
  • The choice of communicating with stakeholders, such as through websites, social media, and email.
  • Needs for new expertise. Companies increasingly need data analysts and programmers for the interpretation of data and digital information processes.
  • Change the needs and desires of consumers.

Why is the technology environment important?

It affects various aspects of the business. That could be an opportunity or a threat. And, companies cannot control technological factors but must respond to them. Therefore, companies must be able to adapt to new technological developments.

Early adopters of new technology often achieve higher market share and get higher returns. Therefore, companies need to scan for trends and changes. The aim is to take advantage of opportunities while minimizing threats. That way, the company can be competitive.

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