However, if the decline in cost is fast if growth is fast and slow if growth s slow. The strategic implications of the experience curve came closer to shattering earth. For if costs fell (fairly predictably) with experience, and if experience was closely related to market share (as it seemed it must be), then the competitor with the biggest market share was going to have a big cost advantage over its rivals. This was the logical underpinning of the idea of the growth share matrix.
The experience curve justified allocating financial resources to those businesses (out of a firm’s portfolio of businesses) that were (or were going to be) market leaders in their particular sectors. This, of course, implied starvation for those businesses that were not and never would be market leaders. Labor efficiency – Workers become physically more dexterous. They become mentally more confident and spend less time hesitating, learning, experimenting, or making mistakes. Over time they learn short-cuts and improvements.
This applies to all employees and managers, not just those directly involved in production. Standardization, specialization, and methods improvements – As processes, parts, and products become more standardized, efficiency tends to increase. When employees specialize n a limited set of tasks, they gain more experience with these tasks and operate at a faster rate. Technology-Driven Learning – Automated production technology and information technology can introduce efficiencies as they are implemented and people learn how to use them efficiently and effectively.
Better use of equipment – as total production has increased, manufacturing equipment will have been more fully exploited, lowering fully accounted unit costs. In addition, purchase of more productive equipment can be justifiTABLE. Changes in the resource mix – As a company acquires experience, it can alter TTS mix of inputs and thereby become more efficient. Product redesign – As the manufacturers and consumers have more experience with the product, they can usually find improvements. This filters through to the manufacturing process. A good example of this is Cadillac’s testing of various “bells and whistles” specialty accessories.
The ones that did not break became mass- produced in other General Motors products; the ones that didn’t stand the test of user “beatings” were discontinued, saving the car company money. As General Motors produced more cars, they learned how to best produce rodents that work for the least money. Network-building and use-cost reductions – As a product enters more widespread use, the consumer uses it more efficiently because they’re familiar with it. One fax machine in the world can do nothing but if everyone has one, they build an increasingly efficient network of communications.
Another example is email accounts; the more there are, the more efficient the network is, the lower everyone’s cost per utility of using it. Shared experience effects – Experience curve effects are reinforced when two or more products share a common activity or resource. Any efficiency learned from one product can be applied to the other products. 5. How might a firm’s management decide whether it should continue to invest in current known technology or in new, but untested technology? What factors might encourage or discourage such a shift?
Benefit: Saving Money Technology limits the need for people to be in the same physical location, for example when companies hold a teleconference with several employees located in different branches or when they allow employees to telecommute from home. In some cases, this can save companies money because they do tot have to pay travel expenses. When employees use technology for telecommuting they can work in the comfort of their home instead of traveling to a workplace. Benefit: Saving Time Technology can decrease the time it takes to accomplish a task, which can ultimately save money and increase productivity.
Communication speed also increases. Instead of sending a message by postal mail, using email or fax can deliver it instantaneously. Technology can also speed up various manufacturing processes, as machines and computers can do work that was once performed by humans more quickly and efficiently. Drawback: Dependency On the downside, the use of technology doesn’t always result in greater efficiency. Companies that depend heavily on computer systems to conduct business can come to a virtual standstill if the system breaks down.
There is typically a learning curve that accompanies the introduction of a new process, which can lead to a loss in productivity and disgruntled employees. For employees who telecommute and experience computer problems, it may be more difficult to receive timely technical support. Drawback: Need to Upgrade Some technologies contain features that need to be upgraded regularly, which can result in an additional expense for the company. For example, companies may need to change computer software frequently just to keep up with industry trends. Entire computer systems may also need upgrading every year or two.
Companies that employ telecommuters may face the additional expense involved with sending a computer technician to a worker’s home to install new equipment or programs. Effects on Customers Technology can have both a positive and negative effect on your customers. While some customers may enjoy the convenience of paying bills online, others may see this as a possible invasion Of their privacy. Some may consider being routed through a phone tree standard operating procedure in modern business, but others may be frustrated when they cannot reach a live person to help them with a problem.
The Advantages of New Technology in Your Business Reduced Waste will lead to lower costs. Today, the amount of waste produced by technology can be the difference between strict environmental regulations and closure (but of course, also profitability). Increased Productivity where properly assessed, increased production, through efficiency and better planning, can also result from the introduction of new technology. Less Workforce may be needed if jobs that previously required personnel can now be automated, further reducing costs.
This is an added advantage if you have few employees already, otherwise you may face redundancies. Higher Profits due to the increased efficiency which prod cues less costs. It may also be that new technology allows jobs to be completed quicker so that cash flow is more fluid. A Higher Income can be yours if your business is making more profit. You may even decide to give your employees a bonus that could increase their motivation. Advanced Communications such as the use of e-mail, computer networks and mobile phones allow information to be sent/received instantly.
This is especially useful for long distances where documents and information needs to be passed on quickly. Remote work-force employers (employing traveling sales, home workers etc) have instant access to staff from mobile phones, web cams from PC’s and on, the-road lap tops. More Competitive as you can afford to lower the price of your product/service if your profit levels increase, without lowering your standards. The Disadvantages of New Technology in Your Business The Management f new technology can be extremely difficult.
If the decision of purchasing new technology is down to you, do you buy now or wait for the next technological advance? Also, you have to decide if the technology is really needed as some things can be expensive. Integrating the technology into your workforce is another task in its self. New Skills may be needed to operate the new technology and so you will have to re- train your employees. Maintenance of the technology will be required to keep it efficient. More importantly, if it is a piece of machinery on a production line: what if it beaks down – will it put a top to all production?
