Auto Warriors - the Capacity Management Reality Show

Some wicked humour from the the Onion provides an alternative entry point into teaching capacity rationalisation and retrenchment.  Lots of HRM in here too!

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Q&A - How are businesses affected by unemployment?

Businesses are affected in a variety of ways depending on whether unemployment is high or low, and rising or falling.

Managing Cash Flow - Beware the Economic Recovery

An excellent recent article in the ACCA magazine examines an interesting phenomenon - more businesses collapse at the beginning of a recovery than during the depths of a recession. Its all to do with working capital…

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Entrepreneur takes advantage of the postal strike

As the turkeys at the Royal Mail officially vote for Christmas, entrepreneurs are quick off the mark spotting opportunities to build a business from the Royal Mail’s dissatisfied customers.  Here is a terrific video which is packed full of full with key business studies terms - even though it only lasts just over a minute!

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Strategic business decision-making - Network Rail

Network Rail’s proposed £34bn development of a high-speed rail line from London to Scotland could prove to be a great example to use with students over the next few years.

Network Rail has just published Strategic Business Case for New Lines.  It attempts to justify the business case for both adding new rail lines and also releasing capacity on the existing rail network.  There is lots of useful information in the publication relating to:

- Stategic objectives
- Stakeholders and the impact of investment on them
- Investment appraisal
- Capacity management
- Forecasting revenue and demand
- Environmental considerations
- Sources of finance (who pays?)

Flexible working thrives in the recession

A very useful article in the Guardian takes a look at how flexible working arrangements have thrived during the UK recession as employers have tried to find ways of reducing production capacity and operating costs without always resorting to compulsory redundancies…

Standing room only - on Ryanair?

The undisputed kings of publicity are at it again.  The Telegraph is reporting a story in the Sun (an interesting decision in itself) that Ryanair is considering offering standing room options rather than seats on some of its flights.  Apparently it can increase the passenger capacity by up to 50% and reduce costs (unit costs per passenger?) by 20% by doing this.  A good example to use with students who might want to consider the +’s and -’s from various business perspectives…

Spare capacity prompts a fall in business investment

The recession is creating a growing amount of spare productive capacity across many different markets and industries. From container ships to hotels and from steel plants to airlines, the fall in demand has lowered capacity utilisation and put a big squeeze on profits. That pressure on profit margins comes not just from weaker revenues. Keep in mind that many businesses have a large fixed cost component such as the overhead costs of operating a network. Thus when output is contracting, the average fixed costs of production increase.

Declining demand and rising productive slack inevitably cause a fall in planned investment spending - economists term this a negative accelerator effect. BBC news reports that British Airways is cutting capital spending in response to the slump in demand and mounting losses. “The airline said it had cut spending by 20% to £580m ($952m) from £725m, and had lengthened its schedule of orders for 12 Airbus A380 aircraft.”

Further evidence for the reverse accelerator affect comes from Japan where Japanese firms cut their capital spending by a record level in the first quarter of 2009. In contrast Stagecoach is increasing investment in a fleet of greener buses. 

U2 on Tour - Investment appraisal and capacity utilisation rolled into one!

A fantastic example of investment appraisal and capacity utilisation in this article in the Guardian, which describes the risks and returns of the new U2 tour.

Stock control - de-stocking was over £5bn in Q1 of 2009

Fascinating evidence from the Office of National Statistics about what happened to firms inventories during the first three months of 2009.  Data form the ONS estimates that the value of stocks held fell by £5.4bn during the quarter - a significant reduction.  Students might consider why this happened.  There will be a variety of causes:

- Deiberate attempts to reduce finished goods stocks by converting them into cash (perhaps by offering lower prices or promotional discounts)
- Closure (temporary or permanent) of production capacity
- Delays in ordering new raw materials and components as a way of conserving cash