Strategic Management - Chapter 04

Topics: Manufacturing, Management, Economics of production Pages: 2 (471 words) Published: January 23, 2014

Functional – Level Strategies:
1. Efficiency
2. Quality
3. Innovation
4. Customer Responsiveness

Economies of Scale
are unit cost reductions associated with a large scale of output. Fixed Costs
are costs that must be incurred to produce a product whatever the level of output; examples are the cots of purchasing machinery, setting up machinery for individual production runs, building facilities, advertising, and R&D. Diseconomies of Scale

are the unit costs that increases associated with a large scale of output. Learning Effects
are cost savings that come from learning by doing.
tend to be more significant when a technologically complex task is repeated because there is more to learn. Experience Curve
refers to the systematic lowering of the cost structure, and consequent unit cost reductions, that have been observed to occur over the life of a product. Three reasons why managers should not become complacent about efficiency-based cost advantages derived from experience effects: 1. Because neither learning effects nor economies of scale go on forever, the experience curve is likely o bottom out at some point; indeed, it must do so by definition. 2. Changes that are always taking place in the external environment disrupt a company’s business model, so cost advantages gained from experience effects can be made obsolete by the development of new technologies. 3. A further reason for avoiding complacency is that producing a high volume of output does not necessarily give a company a lower cost structure. Flexible Production Technology

it is sometimes called – covers a range of technologies designed to reduce setup times for complex equipment, increase the use of individual machines through better scheduling, and improve quality control at all stages of the manufacturing process. also called as lean production.

Mass Customization
has been coined to describe the ability of companies to use flexible...
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