(Cost management and strategy) You are the product manager at a silicone chip manufacturer. One of your products is a commodity chip that the elec¬ tronics industry widely uses in cell phones, printers, digital cameras, and so forth. As product manager, you have full profit responsibility for the com¬ modity chip.

The commodity chip is a “cash cow” for your company and enjoys an enviable market share in the industry. Because your company’s chip is ap¬ proximately the same as chips available from competitors, market competi¬ tion for this product is primarily based on price.

Because of your success in managing the commodity chip, you were re¬ cently promoted to product manager of ZX chip, the most innovative chip your company has ever developed. It is innovative because of its data pro¬ cessing speed, miniature size, and incredible functionality. The ZX chip has just completed final testing and will be ready to be presented to the market in two weeks.

You were successful in managing the commodity chip because you kept unit production cost low by achieving high volume and efficient production. Identify and discuss the key variables you will try to manage to make the ZX chip as successful as the commodity chip. Discuss how your efforts to manage costs will be similar to and different from your efforts to manage costs of the commodity chip.

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