Question 1

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.
-Sematech is pursuing which strategy?

Accepted Answer

Sematech is pursuing a cost-leadership business strategy by focusing on reducing costs below all of its competitors and adding production capacity in response to competitors' actions.

Question 2

As a firm increases in size,it often increases in complexity; however,the ability of managers to control and operate the firm efficiently are virtually unlimited and therefore costs do not substantially increase.

Accepted Answer

As a firm increases in size, it often increases in complexity, which can lead to increased costs and decreased efficiency in management and operations. The ability of managers to control and operate the firm efficiently has limits, and costs can become a significant factor in larger companies.

Question 3

A firm that chooses a cost-leadership business strategy focuses on gaining advantages by reducing its costs to a level equal to all of its competitors.

Accepted Answer

A firm that chooses a cost-leadership business strategy focuses on reducing its costs below that of its competitors, not just equal to them, to gain a competitive advantage.

Question 4

The link between volume of production and the cost of building manufacturing operations is particularly important in industries characterized by product manufacturing,such as chemical and oil refining.

Accepted Answer

The answer of The link between volume of production and...

Question 5

There are physical limitations to the size of some manufacturing processes and when this size is exceeded,diseconomies of scale are experienced.

Accepted Answer

When the size of a manufacturing process exceeds a certain limit, it may become difficult to efficiently manage and control the production process. This can lead to additional costs and inefficiencies, resulting in diseconomies of scale. For example, in the production of electronic components, features become too small for current technology to handle beyond a certain size, and production becomes less efficient.

Question 6

As the volume of production in a firm increases,the average cost per unit decreases until some optimal volume of production is reached,after which the average costs per unit of production begin to rise because of diseconomies of scale.

Accepted Answer

This statement is true and describes the concept of economies of scale. As production increases, fixed costs are spread over a larger output and efficiency improves, leading to lower average costs. However, beyond a certain level of output, it may become difficult to manage operations or coordinate resources, leading to diseconomies of scale and rising costs per unit.

Question 7

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 decided to focus on building its technological hardware,it would focus on elements such as

Accepted Answer

Building technological hardware would involve the use of robots, which is one of the options given. Organizational culture, quality of organizational controls, and quality of relations among labor and management are not directly relevant to building technological hardware.

Question 8

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 efforts to increase its production capacity resulted in increased complexity and an inability of managers to control and operate the firm efficiently,this would be an example of

Accepted Answer

This situation describes a case of diseconomies of scale, where increasing the size of the firm results in increased complexity and reduced efficiency of operations. This can lead to higher costs and a decrease in Sematech's competitive advantage.

Question 9

The link between cumulative volumes of production and cost has been formalized in the concept of the learning curve.

Accepted Answer

The learning curve demonstrates how cumulative production increases can result in cost reductions due to increased efficiency in production processes.

Question 10

In general,cost advantages are not possible when competing firms produce similar products.

Accepted Answer

Cost advantages can still be possible even when competing firms produce similar products, through factors such as economies of scale, efficient production processes, and access to cheaper raw materials or labor.

Question 11

When a firm has high levels of production,it is often able to purchase and use specialized manufacturing tools that cannot be kept in operation in small firms.

Accepted Answer

Large firms have the advantage of economies of scale, including the ability to purchase and use specialized manufacturing tools that are not feasible for small firms due to cost or volume constraints.

Question 12

Choices which firms make about the kinds of products and services they will sell that impact their relative cost position are known as

Accepted Answer

The choices that firms make about the kinds of products and services they will sell that impact their relative cost position are known as policy choices. These policy choices include decisions about product design, production processes, sourcing strategies, and marketing approaches, which all have cost implications.

Question 13

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 choose to narrow its product line in an effort to reduce costs,this would be an example of

Accepted Answer

Narrowing the product line is a policy choice made by the company to reduce costs.

Question 14

Large transportation costs can offset cost reductions attributable to the exploitation of economies of scale in manufacturing.

Accepted Answer

This statement is true. While economies of scale in manufacturing can lead to cost reductions, these savings can be offset by large transportation costs, especially for heavy and bulky goods that require long-distance shipping.

Question 15

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?

Accepted Answer

Sematech is pursuing a cost advantage through volume-related economies of scale. By adding production capacity, Sematech aims to achieve greater efficiency in its production processes, which should result in lower costs per unit of output. This is an example of a size difference advantage.

Question 16

Firms that are successful in pursuing a cost-leadership strategy focus solely on keeping costs low and abandoning other business or corporate strategies.

Accepted Answer

Successful cost-leadership strategies involve not just focusing on reducing costs but also maintaining quality, ensuring customer satisfaction, and continuously improving processes. These firms often balance cost reduction with other strategic objectives to remain competitive.

Question 17

Economies of scale are said to exist when the increase in firm size (measured in terms of volume of production)are associated with lower costs (measured in terms of average costs per unit of production).

Accepted Answer

Economies of scale refer to the phenomenon of lower average costs per unit of production as firms increase their level of output. This is due to a variety of factors such as increased specialization, better use of technology, and spreading fixed costs over a larger volume of production. Therefore, the statement is true.

Question 18

Economies of scale focus on the relationship between the cumulative volume of production and average unit costs,while the learning curve focuses on the relationship between the volume of production at a given time and average unit costs.

Accepted Answer

The statement is reversed. Economies of scale focus on the relationship between the volume of production at a given time and average unit costs, while the learning curve focuses on the relationship between the cumulative volume of production and average unit costs.

Question 19

High volumes of production are also associated with high levels of generality in employee tasks and as workers become increasingly generalized in accomplishing a variety of tasks; they can become more effective at these tasks,thereby reducing the firm's costs.

Accepted Answer

High volumes of production are typically associated with high levels of specialization in employee tasks, where workers become highly skilled at a narrow range of tasks, leading to efficiencies and cost reductions.

Question 20

Increased worker specialization associated with higher levels of production can lead to worker de-motivation and diseconomies of scale.

Accepted Answer

While increased worker specialization may lead to higher levels of production, it can also lead to worker de-motivation and a lack of engagement. This can result in a decrease in productivity and ultimately lead to diseconomies of scale.

Quiz 4: Cost Leadership