Firms use inputs (workers, machinery, natural resources) to produce outputs (goods and services). For example: General Motors uses steel, rubber and other materials to create automobiles. A pizza restaurant turns dough, sauce and cheese into pizzas.
In everyday language, we usually refer to technology as the development of new products. The economic definition of technology is different. A firm's technology is the processes it uses to turn inputs into goods and services. A pizza restaurant's technology is much more than just its computer or phone system. The restaurant''s production technology includes the capacity of the ovens, how fast the workers prepare the pizzas, the ability of the managers, and the overall layout of the restaurant.
Technological change refers to a change in the ability of a firm to produce a given level of output with a given quantity of inputs. Technological change is usually positive because it increases the level of outputs while using the same number of inputs. Technological change might result from a better layout, faster equipment, or higher skill level of workers. [Negative technological change can also occur - reducing output.]
Wal-Mart is considered one of the front runners in using technological change to increase outputs. Here is an excellent example of how Wal-Mart used data and inventory tracking to increase output. Sophisticated databases track sales. In 2004, Wal-Mart determined that sales of strawberry pop tarts increased 700% following a hurricane in the Gulf Coast. Using this information, Wal-Mart increased strawberry pop tart output and redirected pop tart stock to stores in areas where hurricanes were predicted. The result was a huge increase in sales and profit. (Hayes, Wal-Mart)
Discussion Questions
Think of a firm that relates to your major program of study, where you currently work, or a firm that interests you. This firm can be in the private sector, a government entity, a military unit, or a public sector firm.
Provide some background information on the firm and provide an example of how this firm has instituted technological change. Describe this change. Determine the nature of the technological change, and explain how the change either increased outputs (positive technological change) or decreased outputs (negative technological change). How is the firm operating more efficiently or how has the firm increased production? What economic model might apply? In your opinion, what sort of technological change might take place in the future?
When you reply to your peers, determine any commonalities between your example of technological change and your peer''s example. Provide feedback on the effectiveness of this change (in your opinion), based on the information given.
You may have to do some research for this assignment. Consider doing an interview with a person who works for the firm. You may also use the Internet. If you use the Internet, avoid biased sites such as press releases or public relations sections of the firm's website. Be sure to cite your source using APA format.
References
Hayes, Constance. (2004) ""What Wal-Mart Knows about Customer's Habits."" New York Times.