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%


Slide 21: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 MatrixDevelopment Path :BCG Growth/Share MatrixDevelopment Path Relative Market Share Relative Market Growth High High Low Low Rising Star Problem Child Cash Cow Dog


BCG Growth/Share MatrixCash Flow :BCG Growth/Share MatrixCash 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 :Professor Robert R. Wiggins 34 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 :Professor Robert R. Wiggins 35 The Experience Curve & The Value Chain R & D Production & Manufacturing Subassembly Marketing Sales & Distribution Retailing 95% 75% 70% 90% 85% 95%


Slide 36:THE END THE END


Slide 37:QUESTIONS?