Page 4 - Portfolio Analysis

b) SPECIALISATION: As scale of production increases so it becomes possible to split work into more and more specialist jobs. 'Doing half as much but twice as often equals the same amount of effort but twice the experience with the task.’ If the scale of production doubles simultaneously with total experience, then costs decline by between 10-15% because of learning and a further 10-15% because of specialisation. c) SCALE: The capital costs required to finance additional capital diminish as that capacity grows. FIGURE 2 THE EXPERIENCE CURVE Total Cost Curve Total Unit Cost Prevailing Price Competitor A Profit Competitor B 70% Slope (Same as a Decline of 30% in Costs as Experience doubles) Cumulative Doubling of Volume