For over 50 years, SG Industries has manufactured and sold aircraft jet engines to customers around the world. The marketing manager of the company's spare parts division has learned that a new competitor from a different industry has begun to manufacture a machine part that is similar to one produced and sold by SG. There is, however, one major difference: the wear and durability of the competitor's product has proven to be four times better than that of the SG's product. The good news is that the compound used to make the competitor's part will be simple to mix and inexpensive to provide, and SG's existing machinery can be easily adapted for use in the new manufacturing process. The bad news is that the spare parts division recently purchased a significant quantity of a specialized material that was used only in the manufacturing of the soon-to-be-obsolete SG parts. An upcoming managers' meeting will decide what path to follow with respect to cost analyses, sunk costs, technological changes and staying ahead of the company's newest competitor in the field.
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