An Analysis of Cost Improvement in Chemical Process Technologies

by Edward W. Merrow

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Cost improvement — sometimes called the learning curve or progress curve — plays a crucial role in the competitiveness of the U.S. chemical industry. More rapid cost improvement for a product results in expanding market share and larger profits. Using information from ten in-depth case studies and a database consisting of year-by-year market histories of 44 chemical products, including organic chemicals, inorganic chemicals, synthetic fibers, and primary metals, this report explores the relationships among the rate of learning and characteristics of the technologies, the nature of markets, and management approaches. The author concludes that (1) rates of improvement are dominated by technological factors, including the complexity of the basic production process and the type of chemical product, i.e., its phase (solid, liquid, or gas) and whether it is a primary or secondary chemical; and (2) there is no relationship between improvement slopes and market factors such as industry concentration or the rate of market expansion, except for the obvious finding that improvement is more rapid in rapidly expanding markets.

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