Running head: CAPACITY MANAGEMENT
Date of Submission
Capacity management refers to the practice of ensuring that organizations maximize on
the production output and potential activities under all conditions and times (Gao, Shi, Gorman
& Luo, 2018). The capacity of any organization or business helps in measuring how much an
organization can achieve, generate or sell within any given period (Gao et al., 2018). The
capacity of any organization can change depending on industry changes, seasonal demand and
unexpected macroeconomic events (Gao et al., 2018). Organizations must remain flexible
enough to meet the expectations and demands in a cost-effective manner. Implementing this
concept may also involve outsourcing business operations, working overtime, selling or leasing
commercial property and even purchasing additional equipment (Gao et al., 2018). Organizations
and businesses that poorly implement and execute capacity management may fail to meet targets
due to customer attrition, decreased sales due to unfulfilled orders and depressed market share
(Gao et al., 2018).
Starting a business represents a big achievement for most entrepreneurs but maintaining it
and managing it in an appropriate manner presents a larger challenge (Oghenejode, 2017). There
exists standard challenges faced by every business whether small or large. The components of
businesses sometimes often present challenges to the entrepreneurs. These business components
include brand building, human resource and others. However, there are some unique challenges
to small and medium sized enterprises. The three components that may pose a challenge to the
business include human resource, administration and marketing
In the recent past, the human resource function did not receive much appreciation from
most quarters in the business world (Yoshino & Hesary, 2016). During that time, the functions
of the HR department remained confined to staff function as opposed to the decision-making
function (Yoshino & Hesary, 2016). However, in recent times, the trend has slowly began to
change with businesses and organizations putting more responsibilities and power on the HR
department (Oghenejode, 2017; Yoshino & Hesary, 2016). The HR function is rapidly evolving
and these constant changes within the environment have led to many challenges. Managers must
offer a response by seizing advantage of the gradual yet reflective alterations in the nature of the
field, contemporary practices and comprehensive HR mission, policies and vision (Yoshino &
Moreover, one of the biggest challenges faced by our company is attracting and retaining
talent. The creation of HR capabilities that widen and sustain organizational performance has
proven to be a monumental challenge for many organizations (Yoshino & Hesary, 2016). To
succeed as an organization and business and achieve sustainable performance, an organization
must have the ability to attract and retain talent. Retention of employees has become crucial
factor in the success of many businesses (Yoshino & Hesary, 2016). Retention of employees
depends on the creation of a good employer brand both externally and internally by ensuring that
individuals have good jobs and working environment that makes the feel proud of offering
services within the organization (Yoshino & Hesary, 2016). To ensure that the organization
retains employees, the management must also learn to empower the employees. Employee
empowerment represents the creative distribution of power and shared responsibility
(Oghenejode, 2017). It is energetic, vital, long lasting, democratic and inclusive. Employee
empowerment enables individuals to utilize their capabilities and talents, invest in their
education, foster accomplishment and create effective relationships. Empowerment serves,
coaches, leads, liberates and creates effectiveness within the system (Yoshino & Hesary, 2016).
Therefore, managers must strive to empower their employees.
Administration within organizations is not an easy task. Managers are in charge of
administration, they ensure business operations keep running smoothly, and they ensure that
everything carried out is done to the satisfaction of the consumers (Oghenejode, 2017). Lack of
an administrative agency my plunge a business into some tough administrative management
challenges (Oghenejode, 2017). The managers in charge of administration supervise support
operations within organizations. Through their activities, they ensure there is effective flow of
information and resources are utilized efficiently within the organization (Oghenejode, 2017). To
avoid these administrative challenges, the managers must stay up to date with internal
operations. An effective organizational management requires organization, detailed orientation
and possession of excellent analytical skills to run daily operations smoothly (Oghenejode,
2017). Lack of proper support and coordination has led to many challenges within organizations.
Flow of communication is also vital in implementing the vision and policies of any organization
(Oghenejode, 2017). The management needs to draft policies aimed at providing direction
regarding flow of information and communication within the organization. In addition, the
management should also clearly define the various tasks and duties within the organization to
avoid any form of conflict from arising (Oghenejode, 2017).
Businesses currently face a wide range of challenges that include ones associated with
marketing. Marketing has one of the biggest responsibilities of guiding the organization through
growth in the midst of uncertainties (Yoshino & Hesary, 2016). One of the biggest challenge
facing the marketing component of any business is demonstrating the value of marketing.
Marketing is a crucial business function that drives growth and offers a business a commercial
advantage (Yoshino & Hesary, 2016). For the marketing component to proof its value, it has to
demonstrate or proof and communicate the return on investment of the marketing activities
(Yoshino & Hesary, 2016). Marketing activities educate the public on the services offered by the
organization, which in turn, attracts potential customers (Yoshino & Hesary, 2016). Another
challenge that can face the marketing department is delivering an account based marketing
strategy. Account based marketing is a relatively new trend that involves the creation of
personalized buying experience for a given group of identified accounts (Yoshino & Hesary,
2016). Delivering this personalized experience has proven to be a challenge for many marketing
departments within organizations. To solve this challenge, organizations must adopt the use of
account based marketing software (Yoshino & Hesary, 2016). Most organizations implementing
this strategy are using manual techniques leading to loss of customers due to unfulfilled
promises. The adoption of this software will enable organizations compile marketing and sales
information and in addition, collaboration among the teams to personalize content (Yoshino &
Hesary, 2016). An example of this software is HubSpot’s software.
Value of Accurate Forecasting
Avci (2019) notes that many decisions within organizations are based on accurate
forecasting for future demands. For this reason, businesses, manufacturing companies and
organizations consider forecasting as a vital element for guiding several activities (Avci, 2019).
Keeping a record of your spending and sales within an organization is critical in effective
management of the business but the management is more likely to maximize on profits by
accurately projecting revenues, sales and expenses (Avci, 2019). Moreover, accurate forecasting
helps in the reduction of unwanted expenditure, staffing, schedule production and helps
organizations manage cash flow and avoid missing potential opportunities (Avci, 2019). On
better financial planning, accurate forecasting of sales, not only by volume but also by service or
product type ensures organizations have enough credit or cash to pay bills on time (Avci, 2019).
Through accurate forecasting, businesses avoid penalties and potential loss of vital vendors. In
addition, it reduces interest payments and reliance on credit. Accurate forecasting also helps in
enhancing production management (Avci, 2019).
Accurate forecasting of inventory schedules production of goods near expected delivery
needs or sales thereby reducing inventory carrying costs (Avci, 2019). Accurate demand and
sales forecasting enables the company to spread out production to ensure clients and customers
have the products when needed (Avci, 2019). Accurate forecasting helps improve quality
through better planning of production needs, including shipping requirements, labor and
materials (Avci, 2019). Forecasting also plays a role in decision-making. Forecasting provides
reliable and relevant information and data about the present and past events and likely future
events. Therefore, managers then utilize this information and data to make vital decisions (Avci,
2019). Accurate forecasting keeps managers alert and active when dealing with challenges
related to changes in the environment and future events (Avci, 2019).
BioMarin Pharmaceutical, Inc. is a biotechnology company that specializes in research,
development and commercialization of therapies (“BioMarin”, n.d.). The company was founded
in 1997 and has its headquarters are in San Rafael, California (“BioMarin”, n.d.).
Demographics of BioMarin’s Customers
The organization is an extremely successful commercial biopharmaceutical entity
specializing in providing important therapeutic treatments for many patients across the world
with rare diseases (“BioMarin”, n.d.). The company possesses a recognized record of
accomplishment for the development of innovative therapies that include seven approved drugs
for rare inherited diseases (“BioMarin”, n.d.). The company targets patients across the world
who suffer from these rare conditions with the aim and vision of developing new treatments and
availing them in order to have a huge impact on the lives of these small patient populations
(“BioMarin”, n.d.). The target clients are spread across four continents namely Europe, United
States, Middle East and Latin America (“BioMarin”, n.d.).
Demographics in business are far more vital than many organizations realize. This aspect
of business can be easily overlooked when building a company. However, when trying to reach a
larger customer base, demographics play a vital role in understanding the target audience and
this information can be key to unlocking success. Demographics comprises of any specific
information on potential consumers and it includes age, annual income, education, occupation,
geographical location, ethnic background among others. For BioMarin, the company targets
small patient populations across the world, mostly children that suffer from rare diseases
(“BioMarin”, n.d.). The entire target populations may be as low as 1000 across the globe. The
target conditions are mainly inherited diseases that proof hard to diagnose, are debilitating,
progress fast, are usually not given priority and have few or no treatment options (“BioMarin”,
n.d.). These target demographics enable the company to work efficiently in achieving its goals
and targets. Time is of critical essence for these rare conditions. Therefore, the company strives
hard to develop and avail therapies for these diseases. This determination has led to improved
speed and efficiency in research, development, production and commercialization of new
therapies ranking the company ahead in therapies’ development and commercialization
(“BioMarin”, n.d.). This efficiency has seen the company take the top position as one of the
fastest drug developers in the pharma world and among the best innovative organization across
the globe (“BioMarin”, n.d.).
Determination of the Practical Limit to the Economies of Scale
Economies of scale represent the advantages realized by organizations when production
becomes efficient (Bartelme, Costinot, Donaldson & Clare, 2018). Bartelme et al. (2018) note
that companies can realize economies of scale by lowering costs and increasing production. The
costs can be variable or fixed and the realization happens when the costs are spread over a large
number of goods (Bartelme et al., 2018). The size of the business plays a vital role with larger
businesses having most of the cost savings. BioMarin has successfully created a business model
that has enabled it reap huge profits in billions of dollars, making bigger pharma companies take
notice (“BioMarin”, n.d.). Therefore, despite its limited target population, the company should
strive to increase production of its popular therapies, invest more in research to develop new
ones in a bid to lower the cost of its therapies (“BioMarin”, n.d.). It is important to note that the
price of BioMarin’s products is high making their access by some of the potential customers
hard. The business metrics that can be used to determine the company’s growth include monthly
recurring revenue, net profit margin, sales revenue, gross margin and net promoter score.
Capacity management is a vital element in ensuring that organizations maximize on the
production output and potential activities under all conditions and times. The capacity of any
organization can vary depending on a number of factors that include seasonal demand, industry
changes and macroeconomic events. Failing to implement and execute capacity management
may lead to failure to achieve set targets.
Avci, Ö. (2019). A study to examine the importance of forecast accuracy to supply chain
performance: A case study at a company from the FMCG industry.
Bartelme, D., Costinot, A., Donaldson, D., & Clare, A. (2018). Economies of Scale and
Industrial Policy: A View from Trade.
BioMarin is a World Leader in Developing and Commercializing Innovative Biopharmaceuticals
for Rare Diseases Driven by Genetic Causes. (n.d.). Retrieved from
Gao, L., Shi, J., Gorman, M., & Luo, T. (2018). Business Analytics for Intermodal Capacity
Management. Manufacturing & Service Operations Management.
Oghenejode, O. (2017). The Most Challenging Aspects of the Modern Business Environment.
Yoshino, N., & Hesary, F. (2016). Major Challenges Facing Small and Medium-Sized
Enterprises in Asia and Solutions for Mitigating Them. SSRN Electronic Journal.