Understanding Cost Advantage: Economies of Scale, Experience Curve, and Market Share, Dispense di Management Theory

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Cost Advantage

Outline

ECONOMIES OF EXPERIENCE CURVE AND THE BENEFITS OF MARKET SHARE SOURCES OF COST ADVANTAGE USING THE VALUE CHAIN TO ANALYZE COSTS

The Drivers of Cost Advantage

Economies of Scale: The Long-Run Cost Curve for a Plant

Scale Economies: Consequences and Limits

• (^) Industry Concentration
• Concentration is rarely the outcome of scale economies on the production side.
• (^) More significant scale economies arise from: - Marketing indivisibilities; - (^) Product development
• Why do SMEs still survives? - (^) Flexibility; - (^) Motivation and Coordination Advantages

Economies

of Learning

• (^) The experience curve is based on

learning-by-doing on the part of

individuals and organizations;

• (^) The more complex a process or

product, the greater the potential for

learning.

• (^) Learning curves are exceptionally

steep in semiconductor fabrication;

• (^) The dominant position of Samsung

in LCD is primarily a result of

volume-based learning resulting in

exceptionally high yields

Sequence of

Analysis

• (^) Identify Key Activities;
• (^) Allocate Total Costs;
• Identify Cost Drivers;
• (^) Identify Linkages;
  • Size of the purchase orders;
  • (^) Quality of parts and materials;
  • (^) Standardization of parts and platforms.
• (^) Identify Opportunities for Cost Reduction;

The Case of a Car Manufactu rer