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What are the pros and cons of management using the experience curve to determine strategy?
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Meaning of global strategy?
Global strategy as defined in business terms is an organization's strategic guide to globalization. A sound global strategy should address these questions: what must be (versus what is) the extent of market presence in the world's major markets? How to build the necessary global presence? What must be (versus what is) the optimal locations around the world for the various value chain activities? How to run global presence into global competitive advantage? [1] Academic research on global strategy came of age during the 1980s, including work by Michael Porter and Christopher Bartlett & Sumantra Ghoshal. Among the forces perceived to bring about the globalization of competition were convergence in economic systems and technological change, especially in information technology, that facilitated and required the coordination of a multinational firm's strategy on a worldwide scale. [2] [3] A global strategy may be appropriate in industries where firms are faced with strong pressures for cost reduction but with weak pressures for local responsiveness. Therefore, it allows these firms to sell a standardized product worldwide. However, fixed costs (capital equipment) are substantial. Nevertheless, these firms are able to take advantage of scale economies and experience curve effects, because it is able to mass-produce a standard product which can be exported (providing that demand is greater than the costs involved). Global strategies require firms to tightly coordinate their product and pricing strategies across international markets and locations, and therefore firms that pursue a global strategy are typically highly centralized.[3] Global strategy as defined in business terms is an organization's strategic guide to globalization. A sound global strategy should address these questions: what must be (versus what is) the extent of market presence in the world's major markets? How to build the necessary global presence? What must be (versus what is) the optimal locations around the world for the various value chain activities? How to run global presence into global competitive advantage? [1] Academic research on global strategy came of age during the 1980s, including work by Michael Porter and Christopher Bartlett & Sumantra Ghoshal. Among the forces perceived to bring about the globalization of competition were convergence in economic systems and technological change, especially in information technology, that facilitated and required the coordination of a multinational firm's strategy on a worldwide scale. [2] [3] A global strategy may be appropriate in industries where firms are faced with strong pressures for cost reduction but with weak pressures for local responsiveness. Therefore, it allows these firms to sell a standardized product worldwide. However, fixed costs (capital equipment) are substantial. Nevertheless, these firms are able to take advantage of scale economies and experience curve effects, because it is able to mass-produce a standard product which can be exported (providing that demand is greater than the costs involved). Global strategies require firms to tightly coordinate their product and pricing strategies across international markets and locations, and therefore firms that pursue a global strategy are typically highly centralized.[3]
Why is penetration pricing more likely than skim pricing to raise a companys or a business units operating profit in the long run?
When pricing a new product, a company or business unit can follow a marketing strategy of skim pricing or penetration pricing. For new product pioneers, skim pricing offers the opportunity to skim the cream from the top of the demand curve while the product is novel and competitors are few. Penetration pricing offers the pioneer the opportunity to utilize the experience curve to gain market share and dominate the industry. Skim pricing is purely a short-term phenomenon and is used to gain high profits quickly in order to pay for expensive R&D and marketing costs before new entrants engage in price competition. It therefore cannot be used to raise long term operating profits unless the firm follows a differentiation strategy of continually entering markets early through exceptional R&D and exiting before the heavy-hitting late movers like IBM or Procter & Gamble force margins down.
What is the most appropriate organizational architecture for a firm that is competing in an industry where global strategy is appropriate?
I am searching the answer too, but I have got some information about it. Maybe it will help. The appropriateness of each strategy depends on the pressures for cost reduction and local responsiveness in the industry. There are four basic strategies to compete in the international environment: global standardization localization transnational International The global standardization strategy focuses on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies. The strategic goal is to pursue a low-cost strategy on a global scale. The global standardization strategy makes sense when: There are strong pressures for cost reductions Demands for local responsiveness are minimal The global matrix structure is an attempt to minimize the limitations of the worldwide area structure and the worldwide product divisional structure. The global matrix structure: Allows for differentiation along two dimensions - product division and geographic area Has dual decision--making - product division and geographic area have equal responsibility for operating decisions Can be bureaucratic and slow Can result in conflict between areas and product divisions Can result in finger-pointing between divisions when something goes wrong Firms pursuing a global standardization strategy focus on the realization of location and experience curve economies. Headquarters maintains control over most decisions The need for integrating mechanisms is high Strong organizational cultures are encouraged The worldwide product division is common
What is a project pain curve?
The pain curve tell that proper planning is painful but pays off in less pain later in the project. whereas absence of planning in the start exposing to pain which gradually increases & may reach unbearable levels.
What is Earned value management?
Project Management involves management of three variables in a project - cost, time and performance (sometimes cited as quality or scope). Conventional managerial models such as Gantt Charts and CPM/PERT Networks consider modelling project in terms of time alone. Earned value management is an attempt to integrate cost and time variables into professional project management. The essence is to represent value (in terms of cost of project) against time of execution as a graph called planned value curve during planning of a project. Thereafter during actual execution, the actual value of work completed is plotted on the requisite intervals of time to get what is called an Earned Value curve. A comparison of earned value and planned value curves along with a similar plot of actual cost versus time, throws considerable light on project delays and cost over-runs. Of course, there are many images and formulae that need to provided to elucidate the concept, but much information of that sort is available on the net. You may prefer to read the wikipedia pages, with this background. Earned Value Management (EVM) is a project control process based on a structured approach to planning, cost collection and performance measurements. It facilitates the integration of project scope, time and cost objectives and the establishment of a baseline plan for performance measurement (schedule, progress and budget). EVM focuses on useful work done and not just on money/time spent. It effectively measures the efficiency of the work in progress and provides an indication of likely out turns by facilitating trend analysis techniques. A by-product of the technique is that to measure progress, tighter controls are usually required and this usually means projects are better managed. Beware EVM requires considerable administrative organisation and effort in order to implement (new/modified processes and computer systems) and the collect the data. EVM takes a holistic view of the project, so over-performance in one area may well hide under-performance in another. In summary the benefits of EVM are that it gives repeatable answers (how well a project is doing, how will it will do, how well it could do and identify areas of under achievement), provides reliable information to aid decision making, provides data for future estimates of similar work and helps the development of standard curves to assist with target setting for future projects. The equations for EVM have not been mentioned, and if readers want to find out more, then they should investigate concepts such as Budgeted Cost of Work Schedule (BCWS), Actual Cost of Work Performed (ACWP), Schedule Performance Index (SPI) and Cost performance Index (CPI) to name but a few.
What are the pros and cons of management's using the experience curve to determine strategy?
Management's use of an experience curve could help them avoid costly risks. However, repeated actions must be performed in this management style which could push production efforts back.
Difference between learning curve and experience curve?
difference between leaning curve and experience curve
What is a Bézier curve?
A Bézier curve is a parametric curve defiend by a set of control points, two of which are the ends of the curve, and the others determine its shape.
What is the calibration curve for rotameter?
calibration curve helps you determine the value of a unknown substance
What is needed to determine equilibrium price of a good or a service?
a supply curve and a demand curveA supply curve and a demand curve.
What is needed to determine the equilibrium price of a good or services?
a supply curve and a demand curveA supply curve and a demand curve.
What are the three characteristics of a supply curve?
The three characteristics of a supply curve are the slope, shift, and the curve's position. Together they help determine supply and demand trends.
What is a bezier?
A bezier is another term for a Bézier curve, a parametric curve defiend by a set of control points, two of which are the ends of the curve, and the others determine its shape.
What is meant by realize experience curve?
An experience curve is a graph that shows the relationship between cumulative production quantity and the production cost. It takes into account both variable and fixed costs.
How do you determine what happens to productivity when a product's input change?
Supply curve
What implications does the product life cycle theory have for international product development strategy?
for each curve net export results when the curve is above the holizontal line if the curve is below the holizontal line net import results for a particular country.
What is learning curve according to cost of production?
The learning curve is reverse 'J' shaped. Its shape indicates that the cost of production rises with rise in quantity produced but to an extent. After that point it stops increasing. It happens because the management or the production department learns to control the cost of production from past mistakes or experience or by reffering previous data. so, the learning to control the cost has named this curve as learning curve. when the cost stops rising and it stabilises then the curve becomes a straight line acordingly.....and it forms the shape of reverse 'J'.
