Sematech is a producer of computer chips. To gain an advantage over other computer chip makers, Sematech focuses on reducing its costs below all of its competitors and has aligned its value chain accordingly. Recently, several of Sematech's competitors have begun to reduce the company's competitive advantage. In response to this threat, Sematech has decided to add production capacity in an effort to lower costs.
-If Sematech's expansion plans did not produce the desired cost savings but the company decided to continue production expansion in an effort to capture cost reductions, this would be an example of

Question

Quizplus · Accepted Answer

This is an example of the escalation of commitment, where the company continues to invest in a failing project or plan in the hopes of turning it around. Despite not seeing success in the initial expansion, Sematech is still committed to continuing production expansion to try and capture cost reductions.

Sematech Is a Producer of Computer Chips