The Pros And Cons Of The Learning Curve

In addition, the Boston Consulting Group, a global advisor in business strategy, claims credit for a similar theory developed in the 1960s that they called the Experience curve. “BCG had observed that, on average, every doubling of volume in an industry resulted in a 20 percent or greater reduction in production costs. Therefore, by pricing below all competitor’s cost, a market could be rapidly captured… This strategy for achieving a competitive advantage was enormously successful (in Japan) for a time and led to a rapid capture of market share in, for example, consumer electronics, machine tools, robots, textiles, shoes, fax machines, and by 1984, about 90 percent of the world market for semiconductor memory chips. (Merrifield, 2000) Learning curves are now being applied to all types of repetitive tasks; where there is a large level of manual labor, no production break, consistent design in the product, and an expectation to increase productivity. Though all three of these models are very similar, the best model is the one that predicts the closest learning curve to the actual output.
Learning curve models are often utilized

As a production manager, it is important to understand the practical limits of this type of cost reduction and the implications of applying such a strategy. As the organization reaches the practical limit of this strategy, it may not have the flexibility or capability to continue to innovate and make improvements in production efficiency. The decision to apply a learning curve strategy to any production effort relies on comparing the potential gains in production cost reduction with the eventual loss in the ability to improve and innovate. Remember that learning curves differ from company to company, from product to product and from industry to industry and can be very