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:

Question

Quizplus · Accepted Answer

With excess capacity and a downturn in the general economy, the manufacturer is likely to face increased competition and decreased demand. Offering rebates and incentives is a common strategy to stimulate demand and move excess inventory in such situations. It is less likely that the manufacturer will raise prices, as this may further decrease demand and make the company less competitive in the market. While new entrants and international manufacturers are always a potential threat, the excess capacity may give the manufacturer an advantage in terms of production efficiency and cost control.

A Manufacturer of Washing Machines Has Expanded Its Plant and Has