Management of Technology in Carnegie Corporation - Essay Example

Table of Contents: Introduction PESTEL Forces Industry Environment Technology Audit Possible Alternative Practices Conclusion Introduction: In this paper, the researcher will look at the company in detail in an effort to understand the forces that affect its modus operandi especially in the technological landscape. First, the research will look at some of the PESTEL factors which affect the company to create a design of the company. Then, industry forces analysis shall be conducted to look at hazards faced by the company, in order to ascertain the business issues faced by the firm. Then, a technology audit will be formulated in view of these said industry patterns. Subsequently, the researcher will introduce alternative theories of technological development as witness in the global business landscape. The first step the researcher will undertake will be to try and understand the PESTEL forces scenario that is faced by the organization at the current point in time. PESTEL Forces: Economic: One of the most pressing issues that Carnegie faces as an international firm is the issue with currency. Carnegie has been impacted by foreign currency fluctuations and interest rate changes. This has created a situation where international firms like Carnegie have to be very cautious financially. Tracking certain economic factors is also important during the development of your plan. A variable such as determining the optimal deployment date of a very expensive advertising campaign is critical. By tracking the economic status of the market you intend to do business, you are able more accurately predict consumer response. The following are some of the most commonly tracked economic indicators and what they measure: Gross Domestic Product (GDP) is the total market value of all goods and services produced within a country during a given period of time, usually one year. Consumer Price Index (CPI) is an index that measures changes in the price of a basket of typical consumer goods. The unemployment rate is the percentage of labor force that is unemployed (actively looking for work). It is a key indicator of the performance of the economy, generally lagging economic activity. The federal funds rate is the interest rate that banks charge each other when loaning bank reserves through the federal funds market. Social: Society shapes our beliefs, values, and norms. People absorb, almost unconsciously, a worldview that defines their relationships to themselves, to others, to organizations, to society, to nature, and to the universe. Carnegie offers a very Marxian approach to the matter: the necessity for people to collaborate together as a group and face and subsequently confront the problems of class inequalities which are determined around the composition of the relations of power which consistently underplay the importance of the sense of justice in the society has certainly not decreased. Political: The political and legal environment is composed of laws, government agencies, and special interest groups that strongly influence the risks associated with marketing decisions. The main issue Carnegie has had to content with revolves around labor malpractice allegations. Carnegie has been involved in many lawsuits that also threaten its reputation; however, it has not been indicted in any of these said lawsuits. Technological: Technology is so important to Carnegie that they incorporated it into their mission statement. In the mission statement, technology is inferred in the word "innovation". To foster this innovation the company pours enormous sums of money into research and development to keep Carnegie on the cutting edge; symptomatic of an entrenched belief within itself that "As human potential evolves, so must our products, we must be committed to the very best performance product. Products of pure imagination, products that move the needle of performance, and products that help us be the athletes we know we are." (Carnegie Corporation, 2009) Ecological: Having an ecological awareness has moved to forefront of issues for many companies. The bad press that can result from ecological ignorance can cause irreversible damage to your company or product. To avoid such backlashes, companies have made it their obligation to make choices and take actions that contribute to the welfare of the environment as well as their organization. Carnegie has accepted strict environmental standards to comply with the Kyoto Agreement amongst many other efforts to become more energy efficient. (Carnegie Corporation, 2009) Industry Environment In a careful scan of its industry, and the competition within, Carnegie must assess the level of intensity of 6 basic competitive forces. The collective strength of these forces will determine the ultimate profit potential in the industry. The six forces are: 1. Threat of new entrants, 2. Rivalry among existing firms, 3. Threat of substitute products, 4. Bargaining power of buyers, 5. Bargaining power of suppliers, and 6. Relative power of other stakeholders. The stronger each of these forces, the more companies are limited in their ability to raise prices and earn greater profits. A high force can be regarded as a threat, since it is likely to reduce profits. A low force, in contrast, can be viewed as an opportunity, since it may allow the company to earn greater profits. In the short run, these forces act as constraints on a company's activities. In the long run, however, it may be possible for a company, through its choice of strategy, to change the strength of one or more of the forces to the company's advantage. A person can analyze any industry by rating each competitive force as high, medium, or low in strength. The athletic shoe industry could be currently rated as follows: Rivalry is low but geared to increase in the future. Strong competition does not exist in the market at the current point in time but increasing technological advances shall advances will certainly augment the level of competition in the industry. Threat of potential entrants is low due to the fact that the industry is reaching maturity. Threat of substitutes is low because other shoes don't provide support for sports activities. The bargaining power of suppliers is medium, but rising because suppliers in developing countries are increasing in size and ability. The bargaining power of buyers is low because advertising is much less if not at all more important as compared to the distribution channels. The threat of other stakeholders is medium to high due to increased government regulations and human rights concerns. Based on current trends in each of these competitive forces, the industry appears to be increasing in its level of competitive intensity - meaning profit margins will likely fall for the industry as a whole. Source: http://student.dcu.ie/slejhad2/pics/porter.jpg Technology Audit: The questions that can be asked at a technology audit are directly dependant on the level, purpose and scope of the audit that is being conducted i.e. whether it is an audit of acquisition, audit of development, audit for systems development etc. For this purpose of this paper: we shall assume that this audit is an audit for acquisition because Carnegie usually acquired new R&D from external vendors instead of building it in-house. Now, the audit questions might include the following: 1. What are the actual objective organizational requirements and the ways and means which are requisite to satisfy them 2. What is the need of this new level technology 3. Is it possible to conduct operations without acquiring this new technology 4. What are the precise requirements that have to be satisfied by the new technological input which is being acquired for the business process 5. Who are the different vendors of this technology and which is best suited for the business at hand 6. How will the new technology be physically acquired, installed and subsequently incorporated into the system Source: http://www.scottish.parliament.uk/corporate/procurement/policyManual/flowChart-1.jpg Possible Alternative Practices: An alternative theory to technology audits is the resource category theory. Now, at any point in time and under any circumstances, a resource can be beneficial, harmful or neutral. (Anand et al, 2002) Now, any resource is considered to be beneficial when it becomes a point of advantage for a firm over its competitors, thus enabling revenue creation (Calhoun, 2002). In order to maintain this advantage, the resource must have a high intrinsic value, must not be common and should have no close substitutes at all. Normally, there are only a few resources in a firm that act as a source of competitive advantage. In corroboration to this, a resource is considered harmful if it moves the firm away fro its advantages and diminishes the ability of revenue generation in the firm. Interior inflexibilities of a firm are an example of disadvantageous resources and these disadvantageous resources are created in a very small amount of time. Third, a resource is considered neutral when it is neither advantageous nor disadvantageous to the firm; however, they are of immense importance in the running of the firm. (Chao, 2001) Now, resources can be allocated into to two sets: Firm specific resources Common pool of resources Resources can only be considered firm specific if only the central firm is able to use them whereas common pool of resources are those resources which are available for use to any number of firm. Many consider them to be the inputs in the process of production. (Eden et al, 2001) These two basic concepts which have been described above form the basis of the development of six theoretically different classes of problems in the process of internationalization. Now, the first concept defined by the researcher i.e. relationship to advantage gives rise to three sets of problems: Decrease in comparative advantage of resources when they are relocated into a new country The new generation of disadvantages in the instance of transfer of resources into a new country. Paucity of neutral resources in the instance of firms lacking in neutral resources which are essential for operations in the new country. The second concept of asset specificity leads to the breakdown of each of the problems that have been mentioned above into two separate categories i.e. whether the problems are related to a single firm or a general pool of firms who perform in the same in industry. Loss of an advantage: Any benefit that resources provide to an organization is relative to the organization's competitors and industry of existence. Now, the environment in a new country will naturally be different from the firm's country of origin largely due to differences in the natural features i.e. topography or weather conditions, or in the features of its people or organizations working in the country i.e. type of government, industry, common religion, national language, general level of wealth and most importantly culture. When the competition and the consumer base is different across different countries, then a resource which brought comparative advantage to a firm in one country might in turn not be so beneficial, in fact become harmful to that firm's operations in another country. This loss can be specific to firm or a set of firms in the same industry. Creation of a disadvantage: Previously, the researcher has determined that relocation to a new country might render any resource of a firm unable to provide the same comparative advantage to the firm as it was before, however, there are also instances whereby based on the same set of reasons as the ones demarcated in the precious discussion, a resource might not just stop providing benefit but in fact become harmful for a firm when it is moved to a new location. This loss again can be specific to firm or a set of firms in the same industry. Paucity of neutral resources: Till now, the researcher has only shed light upon those cases where the researcher can experience changes in the effects of resources from a transfer from the country of origin to the country of relocation will take place. However, due to the difference in countries, some resources cannot be relocated to the new country for use in the production process. (Khanna et al, 2005) New resources which were not used in the previous production processes might have to be employed in the new location of production. Now, the paucity of these said resources will have a dampening effect on the operations of the international country with regards to the competing firms already present in the area since assortment of these resources will create expenses which will not be incurred by the competitors. Now, the researcher can see a major set of problems that can occur due to a paucity of these neutral resources. The first set is met when a firm is in need of a greater allocation of resources over the ones that it already has in its portfolio, in a bid to expand the scale of operations in dissimilar trading circumstances and within the streamlines of dissimilar organizations. (Cuervo et al, 2007) Another alternative theory relies more on the behavioral aspect of management as opposed to resource allocation. This looks at the type of activities that are conducted by a business. The type of the activities that take place and the requirements of these activities on the part of the participants of these activities are demarcated separately based on their respective grades in three separate areas of judgment: Ambiguity; or what can also be identifies as the level of risk and uncertainty that any firm has to face with regards to decision based on random variables in the present date. The level of investment specificity; the level of use of alternative investment opportunities that can be entertained as an assistance mechanism to the main investment that is being made which would lead to a large amount of opportunity cost losses. The level and subsequent strength of asymmetric information a priori to the actual unfolding of the event that is going to take place or the capability of the evaluation mechanism that has been put in place to demarcate the real level of quality of the real delivered appointment. (Marginson, 1999) Now, these factors, in the presence of human behavioral concepts that have already been described above i.e. bounded rationality and opportunism, these features are considered to be most probably correlated to the easily differentiable problems of organizational control that must be brought to the attention of the scholars and general masses alike. Now managerial control structures are the basic mechanism that has been the major choice of problem solving mechanism for most type of organizations around the world. These prescriptions are available in a completely overpowering range of alternatives. However inside this overpowering range, only a certain type of standard methods of control can be identified and easily distinguished: Managerial control from an arm's length: This has the inherent trait of control over the outcome that is to take place in the future. These said controls have the inherent ability to control the final result of the proposed activity and these controls are either standard derivatives of the market or conditions of the contract that was signed between any two parties with regards to this activity that was determined even before the activity had taken place. Mechanical control: The control over the administrative aspects of any organization which are determined by the concept of behavioral commoditization or organizational performance levels that the organization sets out to achieve at the start of the activity. Investigative control that is determined by the congregating understandings those collect and then expand during this entire ordeal of the activity. Limit control: considered by many to be very narrow-minded at the very crux of this issue that this issue that puts emphasis on those actions that can be easily avoided. (Otley, 2001) Conclusion: Carnegie Corporation is certainly a significant force to reckon with in the technological sector in Australia at the current point in time: the PESTEL forces analysis and the Porter's forces analysis clearly intimate that. Their decision to build research and development outside is also a tactically astute decision which leaves it in a considerably good stead to face any problems the business environment or the competition can through up in the future. Bibliography 1. Carnegie Corporation (2009), 'Company Overview", Available at www.carnegiecorp.com.au [Retrieved on September 5, 2009] 2. Marginson, D.E.W. (1999). Beyond the budgetary control system: towards a two-tiered process of management control. Management Accounting Research, 10: 203-230. 3. Otley, D. (2001). Extending the boundaries of management accounting research: developing systems for performance management. British Accounting Review, 33: 243-261. 4. Spekle, Robert (2002) " Towards a transaction cost theory of management control" Rotterdam School of Management Anand, J., and Delios, A. (2002). "Absolute and relative resources as determinants of international acquisitions." Strategic Management Journal, 23: 119-134. 5. Calhoun, M. A. (2002). "Unpacking liability of foreignness: Identifying culturally driven external and internal sources of liability for the foreign subsidiary." Journal of International Management 8: 301-321. 6. Chao, P. (2001). "The moderating effects of country of assembly, country of parts, and country of design on hybrid product evaluations." Journal of Advertising, 30: 67-81. 7. Eden, L., Miller, S. (2001). "Opening the black box: Multinationals and the cost of doing business abroad." Academy of Management Proceedings, 2001: C1-6. 8. Khanna, T., Palepu, K.G., and Sinha, J. (2005). "Strategies that fit emerging markets." Harvard Business Review, 83(6): 63-76. 9. Cuervo-Cazurra, A., Maloney, M., and Manrakhan, S, (2007) "Causes of the difficulties in internationalization." Journal of International Business Studies, 38 (5): 709-725. Read More