Back to category: Business Limited version - please login or register to view the entire paper. Experience in Company The experience curve has important strategic implications. If a firm is able to gain market share over its competitors, it can develop a cost advantage. Penetration pricing strategies and a significant investment in advertising, sales personnel, production capacity, etc. can be justified to increase market share and gain a competitive advantage. When evaluating strategies based on the experience curve, a firm must consider the reaction of competitors who also understand the concept. Some potential pitfalls include: • The fallacy of composition holds: if all other firms equally pursue the strategy, then none will increase market share and will suffer losses from over-capacity and low prices. The more competitors that pursue the strategy, the higher the cost of gaining a given market share and the lower the return on investment. • Competing firms may be able to discover the leading firm's proprietary methods and replicate the cost reductions without having made the large i... Posted by: Anthony Pacella Limited version - please login or register to view the entire paper. |
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