PESTEL Analysis: The Strategic Significance of the Technological Environment

Technological differences and change operate at three levels:
1. Apparatus, technique and organization: How technology is used in the business, e.g. the use of ICT within the firm .
2. Invention and innovation: These affect the products being offered, e.g. the impact of higher power handsets on the development from mobile phone handsets to Personal Digital Assistants.
3. Metatechnology: A technology that can have a variety of applications, e.g. lasers are a technology that have found uses in industry (welding), surgery (corrective eye surgery, key hole surgery), recorded music and software (CD, CD-ROM and DVD), and visual displays and light shows.

The Strategic Significance of the Technological Environment

The strategic significance of the technological environment includes:
 Technological base, and therefore customer and staff familiarity with it, varies across countries. Operations will have to take this into account.
 Technological change challenges existing industry structure and competitive advantages and so strategies to harness or evade it are necessary.
 Technological change can render existing products obsolete. Therefore continuous R&D and learning is necessary to remain competitive.
 Technological change creates uncertainty which may influence the approach to strategy formulation that is adopted.

Impact of Technology in PESTEL Analysis based on Pulp and Paper

Reports of the death of paper were rampant in the 1990s. However the paperless office never materialized nor yet have e-books. Even so the vast paper-and-pulp multinationals have been hard hit by the electronic age, especially in America. Mills are closing to buoy prices. Newsprint has been worst hit as circulation and classified advertising at newspapers fall and the Wall Street Journal and other papers grow skinnier. ‘The only grade of paper immune to technological substitution is tissue’ such as bathroom or facial tissue says investments analysts D.A. Davidson.

Restructuring in the paper industry is proceeding at a furious pace and have included:
 Mergers between producers to eliminate slack capacity
 Closure of capacity
 Selling off of lumber farms and associated businesses (e.g. plywood, cartons, home furniture)
 Development of businesses in non-affected areas such as corrugated cardboard used in packaging and export industries.

As they thrash around for new direction, the pulp-and-paper giants of America and Europe must also deal with the forces of globalization. Brazil, with fast-growing eucalyptus trees, is the cheapest place to make paper and China has recently gone from being a net importer to being a net exporter of newsprint. At the same time, emerging economies also represent new markets that are not as hooked on email as the developed world. However BlackBerrys and Dells will not keep a low profile in Brazil for ever.

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