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The Key to Success

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4. What are the pros and cons of management using theexperience curve to determine strategy?

The experience curve is an idea developed by the Boston Consulting Group (BCG) in the mid-1960s. Working with a leading manufacturer of semiconductors, the consultants noticed that the company's unit cost of manufacturing fell by about 25% for each doubling of the volume that it produced. This relationship they called the experience curve: the more experience a firm has in producing a particular product, the lower are its costs. However, if the decline in cost is fast if growth is fast and slow if growth is slow.
The strategic implications of the experience curve came closer to shattering earth. For if costs fell (fairly predictably) with
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In some cases, this can save companies money because they do not have to pay travel expenses. When employees use technology for telecommuting, they can work in the comfort of their home instead of traveling to a workplace.

Benefit: Saving Time

Technology can decrease the time it takes to accomplish a task, which can ultimately save money and increase productivity. Communication speed also increases. Instead of sending a message by postal mail, using email or fax can deliver it instantaneously. Technology can also speed up various manufacturing processes, as machines and computers can do work that was once performed by humans more quickly and efficiently.

Drawback: Dependency

On the downside, the use of technology doesn't always result in greater efficiency. Companies that depend heavily on computer systems to conduct business can come to a virtual standstill if the system breaks down. There is typically a learning curve that accompanies the introduction of a new process, which can lead to a loss in productivity and disgruntled employees. For employees who telecommute and experience computer problems, it may be more difficult to receive timely technical support.

Drawback: Need to Upgrade

Some technologies contain features that need to be upgraded regularly, which can result in an additional expense for the company. For example, companies may need to change computer software frequently just to
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