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Strategy (Strategy can be defined as the actions that managers must take…

Strategy (Strategy can be defined as the actions that managers
must take to attain the goals of the firm, Global expansion, profitability, and profit
growth, How is value created? (cont.), Importance of strategic positioning, Global expansion, profitability, and profit
growth (cont.)
• Experience effects
– The experience curve refers to the systematic reductions in
production costs that occur over the life of a product

By moving down the experience curve, firms reduce the cost of creating value
To get down the experience curve quickly, firms can use a single plant to serve global markets

, • Experience effects (cont.)
– Two factors influence the relationship between cumulative output
and production costs

Learning effects are cost savings that come from learning by doing.
When labor productivity increases:
– Individuals learn the most efficient ways to perform particular tasks
– Managers learn how to manage the new operation more efficiently
Economies of scale refer to the reductions in unit cost achieved by
producing a large volume of a product. Sources include:
– Spreading fixed costs over a large volume
– Utilising production facilities more intensively
– Increasing bargaining power with suppliers

)