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AS Level F292 Answer

Hi guys, i've been trying to work on my 16 mark answers, could someone please tell me what this type of answer would get ? And what I could do to improve this answer? Thanks:

JKL – Operations management question
‘Discuss the implication for JKL for increasing numbers above the current maximum capacity of 100 children per centre (16 marks)’.

By increasing the number of children per centre JKL would be able to bring in more inflows into the business as more customers would join due to more spaces being available in the childcare centres.
One of the main problems that I can see with this is cost; currently JKL is not in a profitable situation and has a lot of costs despite being at 100% capacity in all three of its centres. By increasing the number of spaces; the business would bring in more revenue, which would decrease the amount of time for the business to reach the breakeven point – which at the moment is predicted to be in two years. However; we can see that in the case study (line 56) that the staff-child ratio is more than the legal requirement – there if the number of children in case, the number employees would have to also increase in a similar ratio as this would maintain the objection of a high quality service that JKL proves. If the number of employees stays the same then the ratio will decrease, causing each employee to look after more children; which would decrease their output as they would have to look after more children; increasing their responsibility and as these employees have been given so much freedom already, motivation levels could possibly drop as an outcome; causing the high quality service to drop – which would make JKL lose its main selling point and reason for its high prices.
In order to resolve this issue more employees will need to be recruited, which would include several costs to the business such as advertising, recruitment, training and wages. As the business only has a small profit margin after the main costs if the new places were filled at 100% capacity; only then it would be viable to do so, else then JKL is only increasing costs and decreasing their money which could be used in funding the new centre (opportunity cost).
Another factor to remember is the amount of incentives that JKL provides to its employees, this means that the business is incurring further costs which would decrease the profit margins (if new employees are recruited). Unless JKL is able to cover these costs it would not be viable to only increase the number of spaces per centre these are long term ongoing costs 0 so as Jordan mentioned extra funding would be required unless the number of incentives is decreased – which would enable the firm to use this money on other things such as covering costs and paying for the expansion and improving the cash flow.
We can see that there is also an opportunity cost here, rather than increasing spaces, Harriet can use this money on expanding the business, however in the short run this option would cost less and could possibly be done without having to use an external or costly source of income, however it will take longer to expand the business but it is a more efficient way as the expansion is more organised and planned.