Answer (D) is correct . Whether to expand capacity is a major strategic decision because of the capital required, the difficulty of forming accurate expectations, and the long time frame of the lead times and the commitment. The key forecasting problems are long-term demand and behavior of competitors. The key strategic issue is avoidance of industry overcapacity. Undercapacity in a profitable industry tends to be a short-term issue. Profits ordinarily lure additional investors. Overcapacity tends to be a long-term problem because firms are more likely to compete intensely rather than reverse their expansion.
Answer (A) is incorrect because Forecasting long-term demand, input costs, and technology developments is a step preliminary to predicting total industry capacity and firms’ market shares.
Answer (B) is incorrect because Analyzing the behavior of competitors is a step preliminary to predicting total industry capacity and firms’ market shares.
Answer (C) is incorrect because Identifying options is a step preliminary to predicting total industry capacity and firms’ market shares.
|
