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

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

Option a: Technological advantages. This choice focuses on tech-based improvements rather than scale-driven cost reductions. While technology can lower costs, the prompt emphasizes increasing volume to cut costs, which points more directly to scale effects than to technological leaps alone.

Option b: Size differences and economies of scale. When output rises, fixed costs are spread over more units and variable costs per unit can decrease due to bulk purchasing, process efficiencies, and utilization of fixed assets. This aligns precisely with the classic sources of cost advantage associated with increasing production volume.

Option c: Size differences and first mover advantage. First mover advantage refers to being first to market and capturing early market share, not to cost reductions from higher volume. While size can matter, the combination here incorrectly pairs volume-driven costs with a reputational/temporal advantage that isn’t the primary cost mechanism described.

Option d: Late mover advantage. This concept describes benefits realized by entrants who follow incumbents, often in terms of learning from others or catching up, rather than achieving cost reductions through higher volume. It does not capture the economies of scale benefit sought by expanding production.

Option e: Differentiation hybrid strategy. A differentiation-oriented approach focuses on creating unique product attributes to charge a premium, not primarily on lowering costs through higher volume. While some hybrids exist, the prompt’s focus on cost reduction via increased volume points away from differentiation as the main mechanism.

Summary view: The core idea behind increasing production volume to reduce costs is the attainment of economies of scale, as well as the ability to spread fixed costs over more units and negotiate better terms with suppliers. Among the options, the pairing that directly reflects this mechanism is the combination of size differences and economies of scale. The other choices misattribute the cost advantage to technology, timing, or strategic positioning rather than fundamental scale economics.

254_MGT4800_Strategic Planning_Fall 2025

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

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