Expansionist strategy Assignment Help

Capacity Strategies - Expansionist strategy

Expansionist strategy:

Several factors favour the expansionist strategy. This can result in economies of scale and a faster rate of learning, hence helping a firm drop off its costs and compete on price. Firm's market share might be enhanced by this strategy. By making a large capacity expansions or announcing that one is imminent, the firm uses capacity to preempt expansion by other firms. These other firms should sacrifice some of their market share or risk burdening to the industry with overcapacity. Though, to be successful, the preempting firm must have the credibility to convince the competition that it shall carry out its plans before the competition can act.

The wait-and-see strategy is to expand in smaller increments, such like through renovating existing facilities instead of building new ones. The wait-and-see strategy follows demand, it minimizes the risk of over explosion depend on overly obsolete technology, optimistic demand forecasts, or inaccurate assumptions regarding the competition. However, this strategy has its own risks, such like being preempted by a competitor or being unable to respond of demand is unexpectedly high. The wait & see strategy has been criticized like the short term strategy typical of some of the management styles. Managers on the swift track to commercial progress tend to take minimum risks. The big promotions are earned by ignoring the big mistakes and maximizing short term profits and return on investment. The wait and see strategy fits this short term outlook but may erode market share over the long run.

Managers can opt any one of these two strategies or can opt one from various strategies between these limits. With strategies in the more moderate middle, firms can expand more frequently than with the expansionist strategy but do not always lag behind demand as with the wait and see strategy. An intermediate scheme could be to follow the leader, expanding while others do. If others are right, so you are, and nobody gain a competitive advantage. If they commit a mistake and over expand so have you, then everyone shares in the suffering of overcapacity.

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