Capacity utilisation

Read the information below and then answer the questions that follow.

Dodo

Dodo is a small, growing, low-cost airline offering flights between the UK and Europe. The airline is seeing high demand for its flights due to its competitive pricing. It is able to keep its prices low due to its low-cost business model. The business model includes:

• making effective use of its non-current assets by using quick turnaround times which allow its planes to fly more hours a day than traditional airlines

• flying to cheaper airports rather than larger, more expensive airports such as London Heathrow

• using its own website for customers to book directly, avoiding the need to pay commission to other businesses

• making food, baggage and choice of seat optional extras rather than including them in the basic product offering.

Dodo currently has around 5000 permanent staff and sees its staff as key to the quality of service that it offers. Airline staffing needs are complex with a variety of different roles required. Some roles such as pilots and aircraft engineers require significant training that can take many months to complete. In addition, many staff spend most of their working day away from the company offices. Dodo sets and regularly reviews HR objectives in relation to:

• number of employees

• employee engagement.

Measures of quality that Dodo focuses on are:

• punctuality, measured using percentage of flights on time

• customer complaints, measured by number of complaints per 1000 customers.

Analyse why Dodo sets HR objectives in relation to the number of employees and employee engagement.

Analyse how Dodo would benefit from being the best in its market for its chosen quality measures.

Using non-current assets as fully as possible is the best way to gain low-cost advantage.

To what extent is this true for all low-cost businesses?

Effective capacity management involves ensuring a business has the right level of capacity in the right place to match demand.

To what extent is effective capacity management always harder for large, multinational businesses than small businesses?

The data in the table refers to a company’s production of a product.

Between 2020 and 2021 there was a decrease in the unit costs of the product.

Statement 1: ‘Between 2020 and 2021, economies of scale might have led to lower unit costs.’

Statement 2: ‘Between 2020 and 2021, higher capacity utilisation might have led to lower unit costs.’

Read statements 1 and 2 and select the correct option from the following:

Analyse how Speed-e-Puds Ltd benefits from operating with a high level of capacity utilisation.

Which of the following will cause spare capacity in a business to rise?

Statement 1: ‘An increase in its level of capacity utilisation can help a business because it allows it more time for maintenance and repair of equipment.’

Statement 2: ‘An increase in its level of capacity utilisation can help a business because it allows it to meet unexpected increases in demand.’

Read statements 1 and 2 and select the correct option from the following options.