Social and Technological Environment

Meaning of technological environment

The technological environment is one of the external factors that influence a business.

The technological environment can have a huge impact on a business and includes all external technological innovations and developments like disruptive technologies, Big Data and AI, new production processes, etc. A technological change or advancement can:

• Have a sudden and substantial impact on the firm's environment,

• Advance the way an industry operates,

• Destroy industries altogether,

• Impact the demand for certain products and services,

• Shift the demand from one product or service to another.

Technological change can be very rapid in certain industries like the science or technology industries and, on the other hand, it can be very slow in other industries like leather goods or furniture manufacturing.

Examples of technological environment

Some of the technological factors which can be part of the PESTLE analysis include:

• Disruptive technologies

• Artificial Intelligence

• IoT

• New production processes

• Machine learning

Impact of technological changes on strategy

The technological environment has a great influence on strategy.

One important thing to note is that technology might not be a source of competitive advantage if the technological innovation is external to the business. However, technology can provide a huge opportunity for strategic change.

As a result, the technological environment is directly related to Porter's Five Forces. Technological advancements can, for example, create substitute products or services making old ones obsolete (think Netflix, Prime Video, HBO Max, etc. replacing DVDs). Rivalry among existing firms may decrease if the technology becomes available to everyone, however, rivalry could also increase if firms are innovating new technologies rapidly. Technological improvements can also impact barriers to entry. It can either increase the barrier to entry if the technology is hard to access or imitate by inexperienced firms, or it can make an industry easier to enter by reducing economies of scale. The bargaining power of buyers is likely to increase, as technology brings them access to more information.

Nowadays, with the technological environment changing rapidly in several industries, the firm should ideally have a technological strategy. This is because in certain industries technological changes can be seen as a threat rather than an opportunity.

Meaning of social environment

The social environment is another external factor that influences a business.

What is the Social Environment?

The social environment is an important factor for companies to consider, especially for marketing analytics and strategy decisions.

Changes in society and lifestyle are key determinants of many markets. Changes in society can dictate key market trends and are an essential part of segmentation. Often times customer segments are created based on social or demographic factors. The social environment is also essential for marketers, as it helps them understand and target certain customers. The social environment can also give managers an insight into current workforce and workplace trends, which can help them with effective management strategy and decision making.

Examples of the social environment

Some of the social factors which can be part of the PESTLE analysis include:

• Demographic factors like age distribution or education levels

• Lifestyle and lifestyle changes

• Cultural norms and expectations

• Health consciousness

Impact of technological and social change in the business environment

The social and technological environments both have unique ways of impacting strategy. The social environment has a large impact on marketing activities like new product development, pricing and other marketing mix factors.

Lifestyle changes can also have a huge impact on strategy. For example, due to digitalization consumers have more access to information and use digital media daily. These changes present significant opportunities for businesses to reach customers through new digital channels and cater their advertisements exactly to the specific segment they wish to target with their promotions.

Social media marketing also creates great opportunities for firms as they can target very specific segments with their advertisements, which is often not possible with traditional media.