This essay will try to separate between the acquisition and experience curves and suggest how each of these distinguishable curves may give rise to competitory advantages. It is imperative to detect why many persons may come to the decision that these two curves are one and the same. JamesA P. A Gilbert ( Experience and Learning Curves, 2010 ) provides the basic impression of experience and acquisition curves, saying that: “ Experience and larning curve theoretical accounts are developed from the basic premiss that persons and administrations get cognition by making work.
By deriving experience through repeat, administrations and persons develop comparatively lasting alterations in behavior or acquisition. As extra minutess occur in a service, or more merchandises are produced by a maker, the per-unit cost frequently decreases at a diminishing rate. This phenomenon follows an exponential curve. ” The frequent interchangeable usage of the footings larning curve and experience curve can be easy disproved upon scrutiny of their several definitions, which differ.
John L. Colley ( 1991, p. 1 ) postulates that “ the acquisition curve expresses diagrammatically the discernible exponential addition in the cumulative volume of production as costs are reduced due to a decrease in labor input hours as workers learn their occupations ( i. e. cumulative larning experience ) ” .
Contrastingly, the experience curve applies to treat orientated every bit good as labour intensive production methods, as harmonizing to Hall and Howell ( 1985, p. 97-212 ) “ the experience curve is an analytical tool designed to quantify the rate at which experience of accrued end product, to day of the month, affects entire life-time costs ” . Gilbert ( Experience and Learning Curves, 2010 ) best summarises the differences between larning and experience curves: “ the experience curve is broader than the larning curve with regard to the costs covered, the scope of end product during which the decreases in costs take topographic point, and the causes of decrease ” .
The cost leading facet of Porter ‘s ( 1980 ) two dimensional strategic pick taking to competitory advantage theoretical account is substantiated by the acquisition curve. Sami Daniel ( Strategic Assets, 2003, p. 7 ) elaborates specifically on the cost leading facet of Porter ‘s ( 1980 ) theoretical account, saying that “ Cost leading: bring forthing the same merchandise at lower cost making barriers to entry through economic systems of graduated table and experience ” .
When a house has the cost advantage associable to the decrease in its costs of production as a consequence of a decrease in the figure of hours of labor it employs ( due to workers increasing their acquaintance of production methods ) , it moves along the acquisition curve and experiences increased cumulative frequence of end product.
As a consequence, such a house has the competitory advantages of economic systems of graduated table and barriers to entry into the industry. John L. Colley ( 1991, p. ) exemplifies this farther with Grumman Aerospace Corporation during 1970, saying that: “ Grumman Aerospace Corporation was successful at gaining the acquisition curve consequence. Grumman began with a monolithic cost-cutting run in 1970 when terrible overproduction jobs developed with their newest aircraft, the F-14 Tomcat. Grumman had everyone in the fabrication administration inquiry costs and developed a particular ‘productivity ‘ group with people who had nil to make but dispute costs.
As a consequence, Grumman was able to accomplish a decrease in the cost per plane and figure of fabrication hours per plane, doing the F-14 Tomcat the basic combatant aircraft in the US Air force during the 1970 ‘s, therefore giving rise to barriers to entry and economic systems of graduated table ( due to be advantage ) ” . The Boston Consulting Group ( BCG ) observed a distinguishable and consistent relationship between the costs of production and the cumulative volume of end product during the 1960 ‘s, production costs declined as the cumulative volume of end product increased.
Sami Daniel ( Strategic Assets, 2003, p. 5-6 ) elaborates upon this illustration in relation to competitory advantages: “ The Boston Consulting Group saw two procedures at work that led to a cost based competitory advantage, procedure invention: insistent undertaking command and uninterrupted minor betterments in production methods by direction, and merchandise polish: standardization of constituents, redesign of merchandise to integrate less expensive stuffs, or better focal point on consumer demands.
Economies of graduated table were besides experienced: capital costs do non increase at the same rate as capacity, therefore unit costs fall. These effects led to barriers to entry and the aggressive acquisition of market portion. ” In decision, the experience and acquisition curves are divisible based upon their several definitions. Firms who are on such curves can get competitory advantages such as cost advantages, economic systems of graduated table and barriers to entry.