Presentation Transcript
The Economic Context for Strategy: The Economic Context for Strategy
PRODUCT LIFE-CYCLE: PRODUCT LIFE-CYCLE
Sales Volume Over Time: Sales Volume Over Time Time Sales Embryonic Growth Mature Decline Profits
Continued Growth: Continued Growth Time Sales Embryonic Growth Mature Decline Rejuvination
The Product Life Cycle: The Product Life Cycle
Variations on Business Life Cycle: Variations on Business Life Cycle $ $ $ $
Market Segments in Business Life Cycle: Market Segments in Business Life Cycle $ Composite PLC Time M10 M10 M20 M20 M30 M30 M40
Products in Business Life Cycle --Warner-Lambert Company: Products in Business Life Cycle --Warner-Lambert Company Dispos-
able razor
Easprin E.P.T. Plus
Bubblicious
Angiocath II Listerine
Surgical
Gloves Norlestrine
Bromo-Seltzer 1 2 3 4 5 6 7 8 9
EXPERIENCE CURVE: EXPERIENCE CURVE
Experience Curve: Experience Curve Based on observations of cost of manufacturing aircraft. For every doubling in volume produced, X% of cost was reduced. Ct = C0 (Pt /P0)-a Where Ct is cost at time t Pt is production volume at time t. a is an industry constant
Experience Curve: Experience Curve Cost Accumulated Volume
Experience Curve: Experience Curve Cost Accumulated Volume 1 10 100 1000 $1.00 $0.50 $10.00 $30.00 Log-Log
Experience Curve Examples: Experience Curve Examples
Experience Curve: Experience Curve Cost Accumulated Volume
(millions of units) 1 10 100 1000 $1.00 $0.50 $10.00 $30.00 Integrated Circuits 1964-74 70% Slope
Experience Curve: Experience Curve Cost Accumulated Volume
(millions of units) 1 10 100 1000 $400 $200 $800 $1000 3-ton Split System Air Conditioners 1957-74 80% Slope
INTEL #2716--A 16K EPROM: INTEL #2716--A 16K EPROM Price 1-79 1-80 1-79 1-80 Cost 1-81 3-81 Cumulative Experience Price
Index Cost
Index (on
different
scales)
Cost Experience for Steam Turbine Generators: Cost Experience for Steam Turbine Generators COST/
Megawatt Steam Turbine
Generators Log Industry
Cumulative Megawatts
of Generators Delivered 70% slope 200 MW
units 400 MW
units 600 MW
units 87% slope
Price Experience Curves for Japanese Motorcycles (1959 to 1974): Price Experience Curves for Japanese Motorcycles (1959 to 1974) Average
Price
( 000
1965) Cumulative Volume (million units) 1 10 100 80 60 40 20 Slope 76% 126-250 cc 51-125 cc <50 cc Slope 81% Slope 88%
Slide21: Photovoltaic modules, 1976-1992 (William and Terzian 1993).
Experience Curve Components: Experience Curve Components
Experience Curve Components: Experience Curve Components Learning
Specialization of Labor
Product & Process Improvements
Methods & Systems Rationalizations
Economies of Scale
Know-How
GROWTH/SHARE MATRIX: GROWTH/SHARE MATRIX Product Life Cycle Meets the Experience Curve
BCG Growth/Share Matrix: BCG Growth/Share Matrix Relative Market Share Relative Market Growth Low High Problem Child High Rising Star Low Cash Cow Dog
BCG Growth/Share Matrix: BCG Growth/Share Matrix Relative Market Share Relative Market Growth High High Low Low Problem Child (Top Executive Version)
BCG Growth/Share Matrix Development Path: BCG Growth/Share Matrix Development Path Relative Market Share Relative Market Growth High High Low Low Rising Star Problem Child Cash Cow Dog
BCG Growth/Share Matrix Cash Flow: BCG Growth/Share Matrix Cash Flow Relative Market Share Relative Market Growth High High Low Low Rising Star Problem Child Cash Cow Dog $ $ $ $ $ $ $
BCG Matrix: BCG Matrix Mark II
BCG Matrix II: BCG Matrix II Number of Approaches to Achieve Advantage Size of the Advantage Many Small Fragmented Few Stalemate Large Specialization Volume
BCG Matrix II: BCG Matrix II Number of Approaches to Achieve Advantage Size of the Advantage Many Small Fragmented Few Stalemate Large Specialization Volume
Industry Value Chain: Industry Value Chain Manufacturing Product and service flow R & D Engineering Production
&
Manufacturing Marketing Sales &
Distribution Service Disposal Administrative & other
Indirect Value Added
The Experience Curve & The Value Chain: The Experience Curve & The Value Chain R & D Production
&
Manufacturing Subassembly Marketing Sales &
Distribution Retailing 95% 75% 70% 90% 85% 95%
Slide36: THE END THE END