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cost advantage, learning curve, economy of scale

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1. "Firms that seek a cost advantage should adopt a learning curve strategy; firms that seek to differentiate their products should not." Comment on both of these statements.

2. When economies of scale exist, firms with large volumes of production will have lower costs than firms with smaller volumes of production. The realization of these economies of scale, however, is far from automatic. What actions can firms take to ensure that they realize whatever economies of scale are created by their volume of production?

3. Wal-Mart, Timex, Casio, and Hyundai are all cited as examples of firms pursuing cost leadership strategies, but these firms make substantial investments in advertising, which seems more likely to be associated with a product differentiation strategy. Are these firms really pursuing a cost leadership strategy or are they pursuing a product differentiation strategy by emphasizing their lower costs?

4. Is the evolution of industry structure from an emerging industry to a mature industry to a declining industry inevitable? Why or why not?

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"Firms that seek a cost advantage should adopt a learning curve strategy; firms that seek to differentiate their products should not." Comment on both of these statements.

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1. "Firms that seek a cost advantage should adopt a learning curve strategy; firms that seek to differentiate their products should not." Comment on both of these statements.

For differentiation strategy to be successful, companies need to innovate and introduce new products on a continuous basis. Learning curve strategy inhibits innovation and thus, not suitable for firms that seek to differentiate. As learning curve strategy results in lowering cost of production with passage of time, firms looking for cost advantage can pursue this strategy.

If "learning curve strategy" is adapted instead of innovation, the products can become obsolete until learning effect reduces the cost of a unit to a profitable level, which may not work well with ...

Solution provided by:
Sandeep Bardia, MBA
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  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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