Question

A manufacturer of washing machines has expanded its plant and has created excess capacity, just as the general economy has taken a downturn. The company is likely to a. suffer from intense rivalry from international manufacturers. b. offer rebates and incentives for customers who purchase washing machines. c. be vulnerable to new entrants to an attractive market. d. raise prices on washing machines to offset lost sales.

Answer 1

Answer:

. b. offer rebates and incentives for customers who purchase washing machines.

Explanation:

Increasing the productive structure of a firm must be carefully planned. There needs to be demand and take into account the expectations of the economy. When a company increases its structure over an inadequate period, the strategy can be fatal, as firms typically go to great lengths to make investments. In the case described, the company now has an idle capacity, ie does not use all its productive infrastructure. This is compounded by the moment of narrated economic crisis. In this situation, the company is most likely to promote price incentives through discounts to stimulate demand for washing machines. Thus, the employer gets a breath to maintain its activities until the economy recovers and she can use all the installed capacity.