Technology

Definition: 

The pursuit of technological breakthroughs to improve product features; or to improve operational processes (transforming inputs), leading to greater efficiency, productivity, lower operational costs and higher profitability.

Firms should always pursue a competitive advantage by utilising technologies created by other businesses, or pursue internal innovations through Research and Development (R&D). Technology is an influence when other firms make innovations, but also a strategy...

Technology is expensive and requires capital investment. Technology also changes quickly; businesses need to ensure that capital invested in the technology has generated enough revenue and profits to make it worthwhile.

Leading-Edge Technology:

• Most advanced level of technology (frontier innovation)

• Innovations developed internally (R&D—expensive, time-consuming)

• First mover advantage; if hard to imitate, the competitive advantage over rival firms is secured 

• Risk: innovation fails, increasing defects, loss of productivity, hard to repair

Established Technology:

• Widely used; proven to work; the standard for an industry

• Easier to repair, functionally sound, fewer glitches

• Cheaper and more accessible (barcoding, CAD, CAM)

When to apply this strategy:

• When rival firms invest heavily in technological innovations. 

• When internal technologies are dated, inefficient and costly (repairs). 

• When a firm seeks to obtain long-term competitive advantage through advanced productive capacity...