2) Advantages and limitations:-

a) Leading- It ensures that the organization has adequate capacity to meet all demand, even during
periods of high growth. It can be used to preempt competitors who might be planning to expand their
own capacity. Of course, a lead capacity strategy can be very risky, particularly if demand is
unpredictable or technology is evolving rapidly.

Lagging- Reduced risk of overbuilding, greater productivity due to higher utilization levels, and the ability
to put off large investments as long as possible. Limitations include result in the loss of possible
customers either by stock-out or low service levels.

Average- Advantages include the utilization of operational resources throughout the year, efficient level
of production can be maintained and decreases the marginal cost. Limitations are if there is any change
in the demand of the customer there is a risk of obsolescence. Also the cost of staffing also increases if
they are under-utilized, during low demand time.

Advantages of leading : first mover advantage for firm, leads to increase in productivity.

Limitation of Leading : takes time away from performing tasks.

Advantages of lagging: It waits for demand to get pick up, then they make a move.

Disadvantages of lagging: if the demand increase, it is difficult to cope up with demand as stock is not
kept.

Advantages of Average capacity : it is less risky, most companies follow this.

Disadvantages of Average capacity: It is riskier in both leading and lagging if demand increases or
decreases respectively.