Capacity Strategy at Alden Products, Inc
| Capacity Strategy of Alden Products, Inc. | Submitted by Varsha Advani (11349) | | | |
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Capacity strategy should embody a mental model of how a firm works in a given industry and geographic region. There are a series of assumptions and predictions about the log-term behaviour of markets, technologies, costs and competitor’s behaviour. Such a model would include the following factors: * Predicted growth and variability of demand for the firm’s products and services * Costs of building and operating different sized-facilities * Likely rate and direction of technological evolution * Expected behaviour of competitors * Anticipated availability, capabilities and costs of external suppliers
The European organization of Alden Products, Inc. is contemplating a doubling of unit sales over the next ten years. Their largest plant, located in Holland, was set up 25 years earlier to supply all demands of the EEC countries on the continent. It has since expanded six times. The question in mind pertaining to the case is that: * Should it expand again? * Should it build a new plant in Southern Europe? * Or should it expand its use of contract fillers?
As of 1988, 75% of Alden-Europe’s sales took place on the continent and 25% came from UK. Out of 75% of the continent, * 25% came from France, * 12.5% came from Italy, * 37.5% came from Spain and Germany
Alden-Europe’s overall growth was expected to average over 40% per year but this varied across various countries. Thus, there was a high degree of uncertainty about the growth rate in several countries. The capacity strategy adopted by API was Policy C: Add Capacity Only after Demand Exceeds It. This policy implies that the company’s capacity plan will contain a negative cushion so that the likelihood of running short is greater than the likelihood of having excess capacity.
As per my analysis of the scenario, I feel that API should expand at Uniplant
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Capacity strategy should embody a mental model of how a firm works in a given industry and geographic region. There are a series of assumptions and predictions about the log-term behaviour of markets, technologies, costs and competitor’s behaviour. Such a model would include the following factors: * Predicted growth and variability of demand for the firm’s products and services * Costs of building and operating different sized-facilities * Likely rate and direction of technological evolution * Expected behaviour of competitors * Anticipated availability, capabilities and costs of external suppliers
The European organization of Alden Products, Inc. is contemplating a doubling of unit sales over the next ten years. Their largest plant, located in Holland, was set up 25 years earlier to supply all demands of the EEC countries on the continent. It has since expanded six times. The question in mind pertaining to the case is that: * Should it expand again? * Should it build a new plant in Southern Europe? * Or should it expand its use of contract fillers?
As of 1988, 75% of Alden-Europe’s sales took place on the continent and 25% came from UK. Out of 75% of the continent, * 25% came from France, * 12.5% came from Italy, * 37.5% came from Spain and Germany
Alden-Europe’s overall growth was expected to average over 40% per year but this varied across various countries. Thus, there was a high degree of uncertainty about the growth rate in several countries. The capacity strategy adopted by API was Policy C: Add Capacity Only after Demand Exceeds It. This policy implies that the company’s capacity plan will contain a negative cushion so that the likelihood of running short is greater than the likelihood of having excess capacity.
As per my analysis of the scenario, I feel that API should expand at Uniplant