Question

Comp-XM Prep Refer to your Capsim Foundation simulation knowledge and the Comp-XM practice materialsin order to answer the question(s) below.

(A-G) What are the reasons for expanding or selling capacity? How did your team’s Marketing decisions impact your capacity decisions?

Answer 1

Solution:

The reasons for expanding or selling the capacity are strategic decisions that are taken at the corporate level strategy. There can be multiple reasons that can lead to a business either selling or buying additional capacity. Hence, it is the circumstance in which the company is determining the decision to either buy or sell the capacity. Thus, this decision is dependent on the state of the market and demand the status quo.

Companies can decide to buy additional capacity if the demand is projected to be increased and the current capacity has constraints over how it can manage the extra capacity that is projected. Hence, in such cases, the businesses prefer to buy more capacity to meet the demands of rising demand as projected. The businesses will sell the capacity if they are not expecting any future demand and additional unused capacity is increasing the expenses to the company and hence the efficiency of the capacity is decreased. In such cases, the businesses can sell the capacity to control the redundant expenses to the business. Hence, these are the reasons why businesses may sell or buy additional capacities.

The marketing decisions can have significant impact on the capacity requirement because the marketing of a particular brand, if effective, can bring in a lot of capacity requirements and thus there will have to be alterations to the capacity requirements. The marketing decisions like increasing in the marketing budget to for certain marketing activities can also result in reduction of capacity to accommodate the expenses. HEnce, the marketing decisions can have drastic impact on the capacity requirements of a business.

Hence, this is how the capacity requirements ar affected within a business.