Purpose of the Assignment:
To understand the relevance of capacity in a game and to understand the economics of costs, and in particular to identify the 5 Steps in obtaining cost leadership [CL] in a game. CL can be viewed from the perspective of managing production plants in terms of minimising costs but avoiding the capacity constraint.
The Assignment Question:
Outline and discuss the likely market conditions that would persuade a company as a player in a game to use capacity as a credible threat.
Approach: You may use your own company, or a company that you are familiar with or a hypothetical case.
Hint: Read Chapter 2 in Besanko and Chapter 5 in McNutt. Look at the 5 steps template at page 61 in McNutt ‘Decoding Strategy’