Explain the concept of Experience Curve and highlight its relevance in strategic management.

(b) Experience curve akin to a learning curve which explains the efficiency increase gained by workers through repetitive productive work. Experience curve is based on the commonly observed phenomenon that unit costs decline as a firm accumulates experience in terms of a cumulative volume of production. It is based on the concept, “we learn as we grow”. The implication is that larger firms in an industry tend to have lower unit costs compared to those for smaller companies, thereby gaining a competitive cost advantage. Experience curve results from a variety of factors such as learning effects, economies of scale, product redesign and technological improvements in production. Experience curve has following features: As business organisation grow, they gain experience. Experience may provide an advantage over the competition. Experience is a key barrier to entry. Large and successful organisation possess stronger "experience effect". A typical experience curve may be depicted as follows: Figure: Experience curve As a business grows, it understands the complexities and benefits from its experiences. The concept of experience curve is relevant for a number of areas in strategic management. For instance, the experience curve is considered a barrier for new firms contemplating entry into an industry. It is also used to build market share and discourage competition.