Answer (D) is correct.
Whether to expand capacity is a major strategic decision because of the
capital required, the difficulty of forming accurate expectations, and the long time frame of the lead times and the commitment. The key forecasting problems are long-term demand and behavior of competitors. The key strategic issue is avoidance of industry overcapacity. Undercapacity in a profitable industry tends to be a short term issue. Profits ordinarily lure additional investors. Overcapacity tends to be a long-term problem because firms are more likely to compete intensely rather than reverse their expansion.