Technology Management in Electronic Goods Company - Essay Example

 Technology Management in Electronic Goods Company 1. Introduction In this essay, we will consider the strategic planning and technology development for a hypothetical company, Electra that produces electronic goods. The company is assumed to be established in USA where it has to survive in an environment offering tough competition. We will consider the performance and demands of the products in the market in the light of the theoretical framework developed by Christensen. We will discuss the contribution of Christensen’s concepts in developing the strategy for avoiding the disruption in the market from the point of view of incumbent [Bow95]. We will also consider the prospects of Electra from the point of view of new emergent in the market as well as disruptors. Low-end disruption and high-end disruption scenarios will be discussed herein. Criterion or the basis for production and purchase is included. New market disruption will be highlighted in the later parts of the report. At the end, the strategies to maintain a sustained technological development in the market to avoid incurring of disruption will be described [Bow95]. 2. Theoretical Concepts: Christensen’s Contribution 2.1) Basic Concepts The theoretical framework of disruption in the market of existing technologies and products was laid by Clayton M. Christensen. He proposed the ideas of “Disruptive Innovation” which refers the products or values in the market that provide new dimensions or uses to customers [Bow95]. It focuses on providing something new in the market which is markedly different than the current products. The performance of the new products may or may not be superior to the existing technology but these items are supporting the desires of the people who are purchasing them. The term of “disruption” is often used in the realm of business which defines the phenomenon of tremendous improvement in the current technology that the existing technology couldn’t predict or anticipate (Archibugi, 1997). The innovation in the market can be introduced either by targeting a new set of consumers or lowering the prices of the existing products by lowering their performance from the current standards but keeping them above the expectations of consumers [Adn02]. Disruptive technology is markedly different from sustainable innovation. The latter refers to the sane series of products in the market with superior performance [Cha00]. The applications could be increased with superior output. However, the dimensions of the products are kept the same. In disruptive technology, the marketers try an entirely new type of product that has no prior link to the existing technology. The new technology targets a set of consumers. The consumers may lie at lo-end or high-end of quality expectations. Their demand sets the basis for disruption of the existing products. If the new products meet the requirements of the consumers at lower performance and cost, then disruption is certainly set in [Cha12]. 2.2) Intersecting Performance Projector of Sustainable Technology and Disruptive Technology The hypothesis proposed by Christensen declares the firms and companies to be climbers in performance measures. They need to upgrade their standards with time to keep up with the market requirements. The continuous rise in performance marks the existence of the company in the market. If improvement in the performance is not achieved, then it would reduce the business considerably. Christensen’s concept of the company states that the firm holds its existing “value networks” that doesn’t emphasize much on innovations in the market [Chr98]. The hypothesis of Christensen focused on strategies to avoid the technological disruption in the market. Disruptive innovation can seriously hurt the reputation of the companies that are meeting the expectations of their customers. The companies always forget about the markets which are most sensitive to the technological disruption. Such markets provide narrow margins to incumbents in terms of profits. The disruptive technology is infused into the market by focusing into the demands of the customers. Christensen emphasized that the well established companies should analyze the chances of technological disruption in advance. They need to include the sustainable advancement and customer satisfaction in their strategic planning to avoid any damage caused by disruption. Figure 1: Technology Disruption Curve The figure shown above shows the incurring of disruptive technology into the existing market. Performance measures according to the different sets of clients are shown. The performance need to be improved with time to keep up with the standards of the market. Low quality users require lesser performance while high performance is required for most demanding customers. Sustainable changes keep the trend going for each type of customers until disruptive technology nullifies the sustainability by causing downfall of the market of the incumbent. Disruption occurs when low performance products are sold for cheaper prices as compared to the existing products of renowned companies. A particular set of customers is targeted to serve this purpose. As the innovation curve cuts the performance curve, the disruption sets in at that specific time in the market. The innovator company is sad to have foothold in the market then (Walsh, 2002). For successful disruption, the innovators have to go along the path from downwards trend of performance till they reach the higher quality limit. Firstly, innovators target low-profitable customers who cannot provide much premium for the products. When technological innovators have firm foothold in the market, they tend to increase their performance from low standards to high standards. They aim for customers who are willing to pay more premium for the products. In this way, more profit is achieved. The sharp rise in disruptive technology curve shows the phenomenon of rapid improvement in the standard of the products to capture the attention of high class consumers. 2.3) Limitations of Report This report discusses only a few aspects of technological disruption from the point of view of innovators, who are responsible for the disruption in the market, and incumbents, who want to avoid the undesired disruption in the market. The report is not detailed for deep-rooted analysis. It only provides comprehensive picture of the strategic planning and technological development to foresee the disruption chances. 3. Electra (Pioneer Industry for Electronic Products) 3.1) Introduction Electra was established in 1985 by Michael Slater (Chief Executive) in New York, USA. It is one of the leading companies for producing electronic products like TV, LCDs, Computer hardware, FPGAs, Electronic Chips for various functions, Microcontrollers, ACs, Washing machines, Electric heaters, and Microwave ovens etc. The wide range of products makes this industry quite successful in the market. It started its business with only a few types of items for sale. As the time passed, management hired more technical persons to increase their range of products. 3.2) Strategic Planning Electra believes in continuous improvement in the quality of products based on the desires of the customers. They have set of consumers for which they plan accordingly. Some consumers are very low demanding. They require only a few electronic items like circuit chips and microcontrollers. They are not producing high revenues for the company [Chr96]. On the other hand, high quality customers buy costly items like TV, Fridge, and AC. They are high revenue generators for the company. Electra focuses on the supply chain of the products to be more than the demand of each type of product for all types of customers [And90]. 3.3) Incumbents The existing market owners in electronic products are definitely Electra. The company is making progress by leaps and bounds in the market by enhancing its range of products and attracting a huge mob to buy its products. They are leading the trends of the market with their deep analysis of market trends. They have value networks that are competing other niches in the market. The worth of the products is rising slowly but surely. The market value of the products is higher than any other company in New York. The reputation of Electra is playing a great role in attracting more people into buying its products by ensuring reliability and consistency in standards [Mor93]. 3.4) New Entrants The new companies are trying to bring revolutions in the market by introducing different types of products which are not launched by Electra. Some companies are trying to infuse disruption by producing products which are better alternates to that offered by Electra at cheaper prices. However, the products are at small level like Electronic circuit chips. It will take some time for these companies to overwhelm the performance of the incumbents. Innovators are focusing on new trends on the part of the customers brought about by technological advancements. They are trying to manufacture latest technological products to lure people towards their company. 3.5) Market and Segments The market is composed of various segments in the field of electronics. We can consider them separately according to their price ranges as well as worth. High prices items are sold at largest level since their demand is high. This segment constitutes TVs, ACs, Washing Machines, and LCDs. Middle priced items are considered for the next segment in the market. Their demand is also in the lower range as compared to high priced items. This segment includes items like electric heaters, microwave ovens, and juicer blenders. Third segment of the market is targeted for students mainly. This segment includes products for experimentation in laboratories and for building small-scale applications at homes and universities. This segment has least demand in the market. 4. Analysis of Electra in the Light of Christensen 4.1) Market Segment and Criterion Market segments, as discussed above, have their own criteria for pursuing the customers to buy them. Criterion is defined as the reason or motivation for the customers to buy a certain set of products from a company. Electra provides motivation to its customers by ensuring reliability and quality of products. The market segments have their own range of prices. High price items are very sensitive to marketing trends. If financial fluctuations occur, then high priced items suffer a great deal due to imbalance in supply and demand of the products. Low priced items are not vulnerable to the marketing fluctuations since their supply and demand are more or less stable. New entrants like Orson (fictitious) are producing the new set of products in lower ranges of prices to compete with Electra. They are bringing innovation into the market by introducing modern set of electronic equipments that could replace the products of Electra at cheaper prices. They claim more reliability and durability of products for a long time. 4.2) New Market Disruption Their performance measures might be lower than the products of Electra, but they are trying to meet the expectations of the lower tier clients. Their progress is steady on time scale and they will inevitably get foothold in coming years if Electra doesn’t react proactively to this situation. They will have to strategize to avoid the undesired scenarios. Their planning and development should be strong enough to accommodate all the innovations surges in the market. Figure 2: Setting in of Disruption As obvious from the figure, innovators have something extra to offer for customers that are quite enticing for them. Innovators raise their performance above desired standards of consumers to bring revolution in them market niches. 5. Strategies for Sustainable Technologies and Disruption in Market 5.1) Planning as CEO of Incumbent The figure shown below shows the behavior of incumbent industry on time frame. The sustaining strategy is continuously improving to keep up to the demands of the customers. The products have to be made with superior performance to stay in the race in the market. However, the rate of rise of sustainable improvement is not high that shows the difference between supply and demand of products is not high [Wes12]. As CEO of Electra, I would advise my Research and Planning Division to foresee the trends in the market related to our products. We need to have very close relation to customers to judge their requirements and adapt according to the technological advancements (Kaounides, 1999). R&D will ensure that innovations cannot run out the performance measures of products even for the lowest tier consumers that would allow innovators to enter into the market and have strong grip on shares [Ric98]. Low-end disruption refers to as the downfall incurred to incumbent industry when lower cost products of innovators cross the expectations of the consumers without achieving the same performance than existing products (Mountz, 2012). It targets the lower tier consumers for getting permission to enter into the market. After that, the trends are all set for raising the standards of the products [Lyn96]. Figure 3: Low-end and High-end Disruption High-end disruption occurs when a company targets an entirely new dimension of the market in the completion of the existing technologies. They are focused on the non-consumers of the products. Innovators introduce revolutionary set of products in the market that disrupts the reputation of the incumbents very seriously. . Figure 4: Risks involved in the company The figure shown above mentions the types of risks that could be involved in technological disruption in market. R&D has to combat all such risks to mitigate the chances of disruption in the supply chains. They will have to identify the key nodes in the market that are most vulnerable to disruption. Their actions should be backed up with proper reasoning and planning. The plans should ensure recovery from short-term disruption to get hold of the market again. They should hold collaboration with other strong market segments and industries to avoid disruption in the future. Figure 5: Avoiding Disruption The figure shown above, discusses the triad of supply chain to avoid the disruption. Identification of disruption is very important in fighting with it. In many cases, identification of risks at the earliest can avoid the disruption to set in. I would advise online monitoring of supply chain parameters in the market especially for sensitive segments. I would order supply chain redesign whenever required. 5.2) Planning as CEO of Low-end Entrant If I were CEO of Oran, a new entrant in the market, I would have focused on the demands of the lower tier customers. I would’ve a close eye on over-served customers where supply exceeds far more than the demands for existing companies. I would’ve concentrated on manufacturing those products that are unnecessarily sold at high prices in the market. I will reduce the performance somewhat to bring down the prices range to meet the standards of the customers. It is very difficult to predict the performance measures of the existing technologies. So I just have to stay closer to consumers to observe their trends for purchasing products. The criteria of purchasing products carry a lot of meaning in this regard. 5.3) Planning as CEO of High-end Entrant If I had been CEO of high-end entrant in the market, I would’ve targeted the customers who offer high premiums on products by introducing revolutionary products in the market. Competition with Electra is not that easy. I will have to be on my toes all the times to overcome the shares of incumbent. They offer very small room in the market to overcome their performance. However, I would search for the provisions of extra dimensions in the world of electronics that are highly desired by people. In this way, a firm foothold can be achieved in the market that would be highly beneficial for my company (Foster, 1986). I would ask my R&D division to find the solutions to most complex and most desired solutions by customers in the market. In this way, innovative ideas could be generated to get hold of the customers (Cooper, 1976). 6. Findings and Conclusions The Christensen theory has been applied to Electra by considering the various products and market segments which are vulnerable to disruption. In this report, we considered the aspects that Electra has to look out for avoiding any undesired scenarios in the market. Their sustained technological progress should be widely spread to cover overall market segments as argued by (Christensen, 2003). The R&D division has a very crucial role in this story. They are the eyes of the management. Their analysis and research carries a lot of meaning for top management so that they can take decisions wisely at the right time to avoid disruption setting in (Christensen, 1996). Innovators are always trying to sneak into the market from absolutely any pin-hole. They are always in the search for finding market segment that is most vulnerable to be overcome. They develop string friendship with customers to judge their performance requirements. Low-end entrants focus their radar on the lowest-tier consumers who cannot provide much profit initially but act as gateway to enter into the market and move upward in the stairs for achieving high profits later on if the time permits. Their valuable insight is quite important in this regard to lower the process of items for existing products. They have to offer something extra to attract the consumers from incumbents (Christensen, 1997). High-end disruptors have been discussed in the report that is quite threatening for incumbents. They have innovative ideas to bring revolution in the market. Their ideas are related to achieving something extra ordinary that has never been achieved before. Their efforts are entirely in new dimension to existing technologies. They don’t go for improving the designs of products. They are directed towards making rapid progress in entirely new way. Their eyes seek something that has never been explored in the market. Their target is non-consumers of the products. They are responsible for overwhelming the current market share holders (Christensen, 1998). The report discussed the preventive planning and strategies from the point of view of incumbents to avoid the disruption from setting into the market. R&D division of incumbent has to act proactively to support the customers at all times. The supply chain has to be modified to achieve the desired technological demands and desires of customers. Risk assessment is very important in this regard. Deep-rooted analysis could clarify the matters in detail so that management can act in the favor of the company (Rogers, 2010). Finally, some fictitious examples were generated to represent the low-end entrants and high-end entrants in the market that could topple the reputation of Electra. Their planning is discussed from the point of view of their CEO that judges the overall scenario. Many conclusions have been drawn from this report. Firstly, marketing is not that easy even if you are a leader of all jacks (Tang, 2006). Secondly, research and development is very important to foresee the undesired situations in the market. Thirdly, risk assessment can avoid disruption from setting in by adapting the supply chain according to the requirements of the consumers. 7. 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