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 were to continue seeking methods to maintain the company's cost-leadership position that would be costly to duplicate, which of the following is most likely to be a basis of cost leadership that may be costly to duplicate?

Question

Quizplus · Accepted Answer

Securing differential access to low-cost productive inputs, such as raw materials or labor, can be a basis of cost leadership that may be costly to duplicate. This is because it can be difficult for competitors to replicate the same level of access to these inputs or negotiate equally favorable prices, thus giving Sematech a sustainable cost advantage. Establishing economies of scale and exploiting learning-curve economies may also contribute to cost leadership, but they may be more easily duplicated by competitors. Purchasing new technological hardware is important for innovation and staying competitive, but it is not necessarily a basis for cost leadership.

Sematech Is a Producer of Computer Chips