Strutc Examples
Major influence on the steepness of SRATC curve at output level below point Q* is determined by the fixed component of total cost. Then bigger/smaller fixed cost is then SRATC curve will be more/less steeper (“F/S” shapes). High fixed costs causes that business is much more vulnerable to any kind of external shock on the market.
Variable labour cost also has influence on the steepness of the SRATC curve especially when a business benefits from IRL. IRL reduces variable cost as output increases and this makes the SRATC curve steeper where IRL has strong influence means at low levels of output.
Vulnerability is not the same. We can observe interesting “opposite” effect it means that considering the impact of a fall in the level of output from Q> Q* moving point Q closer to Q* area what it means in a consequence decreasing Average Total Cost, so positive effect on business.
Accor Hotels
Accor is a French multinational hotel corporation established in 1972. After 45 years Accor is present in more then 90 countries, with more then 4,200 hotels and 500,000 rooms. [Table 1]
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Major business outcome of Accor is number of rooms sold. In 2010 average occupancy rate was approx 65%. Accor has high fixed cost so the curve is steep at the beginning. Average cost is lower then higher umber of available rooms is sold. Optimal Q* point is at the full number of currently available rooms.
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Accor Hotels is vulnerability type 1 business
Fixed cost is coming from owned hotel and from high labour cost. HR department of Accor has strategy People First.
Taken form [2] “a Strategic Priority for Accor is to offer its employees humanity, warmth & a unique place to gain greater professional experience and fulfillment”
It means that that skilled labour cost is quasi-fixed cost.
In years 2008, 2009 there is visible declining revenue growth comparing to result from year 2007. This was effect of slow down of global economy. [Table2]
Strategy to
Variable labour cost also has influence on the steepness of the SRATC curve especially when a business benefits from IRL. IRL reduces variable cost as output increases and this makes the SRATC curve steeper where IRL has strong influence means at low levels of output.
Vulnerability is not the same. We can observe interesting “opposite” effect it means that considering the impact of a fall in the level of output from Q> Q* moving point Q closer to Q* area what it means in a consequence decreasing Average Total Cost, so positive effect on business.
Accor Hotels
Accor is a French multinational hotel corporation established in 1972. After 45 years Accor is present in more then 90 countries, with more then 4,200 hotels and 500,000 rooms. [Table 1]
[pic]
[pic]
Major business outcome of Accor is number of rooms sold. In 2010 average occupancy rate was approx 65%. Accor has high fixed cost so the curve is steep at the beginning. Average cost is lower then higher umber of available rooms is sold. Optimal Q* point is at the full number of currently available rooms.
[pic]
Accor Hotels is vulnerability type 1 business
Fixed cost is coming from owned hotel and from high labour cost. HR department of Accor has strategy People First.
Taken form [2] “a Strategic Priority for Accor is to offer its employees humanity, warmth & a unique place to gain greater professional experience and fulfillment”
It means that that skilled labour cost is quasi-fixed cost.
In years 2008, 2009 there is visible declining revenue growth comparing to result from year 2007. This was effect of slow down of global economy. [Table2]
Strategy to