Assessing Risk and Opportunities of a Manufacturing Plant Expansion
Major strategic decisions for many companies are often fraught with uncertainty. If we build a new manufacturing plant, will demand for the products it produces be adequate to justify its construction? What might competitors do that would affect the outcome? Will our customers stay with us or will they find alternative suppliers? Will there be adequate supplies to feed the new factory? In these situations, we find ourselves coping with uncertainty, not risk, a distinction that the economist Frank Knight made in 1921.1 James Surowiecki characterized Knight’s distinction as follows:
Risk . . . is something you can calculate—the probability of someone losing at roulette. ...
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