Technological Change - BUSS4 2015 SUMMARY

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  • Technological Change
    • DRIVING FACTORS
      • Need for significant boost in efficiency, safety and resource substainability
        • Manu. firms across the world rely on efficiency of operations to remain competitive
          • Tech change can be source of competitiveness (R&D + innovation) but also a threat
            • Especially for complacent market leaders who don't keep up with the tech advancements
            • May not be a competitive advantage if competitors exploit the same tech
            • Rapid tech change can challenge all competitors
            • technology creating advantage e.g.
              • new process = produce faster, at lower cost/better quality e.g. online video streaming
              • solve a complex problem = do something competitors find hard to master e.g. google search enginge
              • new product = first product to market e.g iPad & iPhone
              • protect a valuable idea = have something only others can sell if they pay for a licence e.g. Pfizer's Viagra
              • rewrite the rules = completely new approach which makes other products/markets redundant e.g. smartphones
        • Efficiency if important as manu. is capital intensive & has relatively low ROCE
        • Factors increasing need for energy & resource efficiency:
          • Rising demand for raw materials (incl. energy)
          • Uncertainties over energy supply (incl. political instability)
          • Increasingly stringent env legislation
          • Customer requirement for sustainability
        • e.g. Rolls-Royce - world class engine innovation but also rationalization to maintain efficiency
      • Rising labor costs pushing greater automation
        • e.g China
      • Digital factory modelling is reducing product design errors and speeding up "time to market"
        • e.g. JLR - showroom technology
        • e.g. 3D printing (reduces cost of prototyping & enabling print-on-demand for high-cost components)
          • e.g BAE - high investment in R&D and effective use of 3D print to reduce component costs
          • 3D PRINTING: process for making a physical object from a 3D model, typically by laying down man successive thin layers of materials
          • BENEFITS: Allows bus. to make things at low costs, so costs will decrease. Products finished to higher quality. Less chance of human error.
          • THREATS: Jobs aren't satisfying. Patents will expire protecting product/ideas from being copied.
      • Machinery & tools need to have greater flexibility
      • Increased processing power & sophisticated software
    • KEY TERMS:
      • PRODUCTIVITY: effectiveness of productive effort as measured in terms of rate of output per unit of input
      • AUTOMATION: Use/introduction of automatic equipment in a manufacturing or other process or facility:
      • MASS CUSTOMIZATION: products are adapted to meet a customers individual needs, so no two items are the same.
        • e.g. JAGUAR - 'create the jaguar that's the perfect fit with your lifestyle, driving style and personal tastes" - creates unique SP & attract customers
        • creates advantage - ideal for niche segments
      • COMPUTER AIDED MANUFACTURING
      • ROBOTICS
    • YELLOW = key terms    PALE RED = company eg.
    • OVER TIME:
      • Inevitable change over the years to meet increased demands (quality, quantity etc)
        • Automation over human labor - reduces human error. Human used in quality assurance.
        • e.g. FORD - first automotive company to use mass production in UK & first moving assembly line
      • tech shortening product life cycles of established products
      • investment in R&D
        • UK falling behind other countries in terms of R&D investment and automation
          • Can UK manu, expect to compete without heavy investment in tech?
            • 1997 - investment in manu. worth £21.6 billion (22% total investment by bus)
            • 2012 - manu. worth £13.8 billion (11% total bus investment)
        • financing tech change?
          • Gov incentives for UK manu. to invest more in tech.
            • e.g. HIGH VALUE-ADDED MANUFACTURING CATAPULT CENTRE
              • e.g. of Gov policy encouraging tech innovation
              • Catapult project
              • over £140 million of government investment planned over a six-year period, and investment matched by private industry.
              • develop manufacturing echnologies, which can span from raw materials to finished assembly processes
              • bridges gap between early innovation (UK trad, strong) + industrial-scale manufacturing, which UK needs to grow to support a healthy and balanced economy.
        • e.g. GSK/ AstraZeneca - highest UK investors in R&D = global pharmaceutical sucess
          • only 2 UK firms to feature in worlds top 100 R&D investors
        • R&D investment in UK concentrated on few key sectors - is this enough?
          • Pharmaceutical & biotech = 35%
          • Aerospace & defence = 7%
          • Software & computer services = 6%
          • Automobile & parts = 6%
          • Banks = 6%
          • Other = 40%
    • LINKS:
      • Porters five forces: (potential impact of tech)
        • Barriers to entry (IMPACTS OF TECH)
          • may reduce econmoies of scale - encouraging new entrants (e.g. digital publishing)
          • some cases - barriers may rise as products become more complex & processes more difficult to copy
        • Substitutes (IMPACTS OF TECH)
          • new products may displace old - e.g online streaming for DVD which in turn replaced videotape.
          • tech in other markets may 'steal' customer spending from other markets - e.g. more spending on smartphone apps may reduce spending on PC software
        • Power of customers & suppliers (IMPACTS OF TECH)
          • tech may free bus from a single source of supply - e.g. cloud-based applications v microsoft
            • e.g. using google docs (free) rather than spending out on microsoft?
        • Competitive rivalry (IMPACTS OF TECH)
          • rivalry diminished if tech successfully patented & licensed
        • EVALUATION: has tech made markets more competitive
    • OPPORTUNITY FOR BETTER BUS MODEL
      • Product being sold
        • e.g. materials/production process used
        • e.g. method of delivery (physical or online)
          • e.g. games - rather than physical copies people can now get codes online instantly.
        • e,g, extent of customisation
      • how product being sold
        • e,g, what distribution channel is used (direct v intermediaries)
        • e,g, the pricing model (subscription v free)
      • how a bus organises its activities to generate income (revenue) and incur costs

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