Costs, Constraints and Capacity

Abstract

One of the most important points that has arisen from the discussion so far is that, because of the costs of obtaining information and the uncertainty of the benefits of obtaining particular kinds of information, managers are forced to cut down their area of investigation. First, the firm has to restrict itself to growth areas in the economy, then to demand areas where competitive pressure is least or least important and finally to products which occupy exploitable gaps in the market or (which sometimes amounts to the same thing) to products which create new markets. But once the basic characteristics of the products which will go forward to the final stage of analysis have been decided in the course of the demand analysis, the firm is faced with two major problems. These are as follows: