Transition Risk
Risk usually arises when technological obsolescence suddenly overtakes the company. This
risk can be traced partly to the complacencies developed by the firms in certain industries
under a protected economy when a favorable import duty structure is levied by the
Government so that the indigenous industry is able to thrive. However, these approaches
have led to a state where these protected companies, become secure due to their
continuing profitability and do not recognize the obsolescence of their technology as they
are insulated from the onslaught of new technology.
Many industrial estates in India that thrived during the middle of the 20th century came to
grief towards the end of the century when globalization and liberalization gained pace hand
in hand. This was because the state-of-the-art technology that was espoused by advanced
nations helped place their products with better quality at lower prices. This phenomenon has
also happened in the IT field when new products were introduced very frequently based on
new technology. The life of a technology which had been normally a decade or more,
today suddenly finds itself reduced to a period of less than five years. This unexpected
change of events in the history of IT has posed a transition risk for many industries. Technology
has made many factors of productions namely men, machinery, and capital suddenly redundant. As the time frame required for a turnaround or transition from one technology to another differs, companies face transition risk, according to their preparedness and their position in the life cycle. In addition, consumer behaviour has become an enigma clue to the wide variation and aspiration of different customers. This wide variety in the requirements of customers is also one of the factors leading to the extinction of technology that is no longer relevant to the customer, such as the case of black and white televisions.
Risk usually arises when technological obsolescence suddenly overtakes the company. This
risk can be traced partly to the complacencies developed by the firms in certain industries
under a protected economy when a favorable import duty structure is levied by the
Government so that the indigenous industry is able to thrive. However, these approaches
have led to a state where these protected companies, become secure due to their
continuing profitability and do not recognize the obsolescence of their technology as they
are insulated from the onslaught of new technology.
Many industrial estates in India that thrived during the middle of the 20th century came to
grief towards the end of the century when globalization and liberalization gained pace hand
in hand. This was because the state-of-the-art technology that was espoused by advanced
nations helped place their products with better quality at lower prices. This phenomenon has
also happened in the IT field when new products were introduced very frequently based on
new technology. The life of a technology which had been normally a decade or more,
today suddenly finds itself reduced to a period of less than five years. This unexpected
change of events in the history of IT has posed a transition risk for many industries. Technology
has made many factors of productions namely men, machinery, and capital suddenly redundant. As the time frame required for a turnaround or transition from one technology to another differs, companies face transition risk, according to their preparedness and their position in the life cycle. In addition, consumer behaviour has become an enigma clue to the wide variation and aspiration of different customers. This wide variety in the requirements of customers is also one of the factors leading to the extinction of technology that is no longer relevant to the customer, such as the case of black and white televisions.
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