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.
-By increasing production volume in an effort to reduce costs, Sematech is pursuing which sources of cost advantage?

Question

Quizplus · Accepted Answer

By increasing production volume to lower costs, Sematech is taking advantage of economies of scale, which are enabled by differences in size between Sematech and its competitors. Increasing production capacity will allow them to spread fixed costs over a larger number of units, which will drive down per-unit costs.

Sematech Is a Producer of Computer Chips