Lion Air Private Limited (LAPL)
Lion
Air Private Limited (LAPL) operates from Indian capital city New Delhi. The
company flies 5 domestic destinations.
It is a budget airline and also offers heavy discounts for frequent travellers.
The capacity utilisation of each flight is around 90 % and the company has
recorded 95 % on time departure and arrival. This is one of the biggest reasons
for successful flights. LAPL also offers
heavy discounts for those passengers who pre-book onboard meals and snacks.
LAPL
shares are held by Rohan and Rakesh who
have more than 15 years of working experience in European airlines. Due to
growing demand in the domestic market, the company has decided to lease 3 more
air planes and fly to 5 more destinations which are commercially and culturally
rich. This internal growth plan also
brings various economies of scale which will help LAPL to reduce operating cost
and increase profit.
a)
List two features of a private limited company [2]
b)
With reference to LAPL, distinguish
between internal growth and external growth [4]
c)
Identify and explain two reasons ( other
than economies of scale) why a business like LAPL wants to grow. [4]
d)
Identify and explain
two internal economies of scale that LAPL may experience due to this proposed
internal growth plan. [4]
Suggested Answers
List
two features of a private limited
company [2]
Limited
Liability: The shareholders' liability is limited
to the amount they invested in the company. Personal assets are protected from
the company's debts or financial obligations.
Shares
Not Publicly Traded: Shares of a private limited company are
not available for public trading on stock exchanges. They are privately owned,
often by a small group of individuals, such as family members or business
partners.
With
reference to LAPL, distinguish between internal growth and external growth [4]
Internal
Growth refers to the expansion of a business using its own
resources and capabilities, often by increasing its product range, opening new
locations, or improving efficiency. In the case of Lion Air Private Limited
(LAPL), internal growth is evident in the company's decision to lease 3 more
airplanes and fly to 5 additional domestic destinations. This growth is driven
by the company's own efforts to expand its operations and meet increasing
demand.
External
Growth, on the other hand, occurs when a business expands
by merging with or acquiring other companies. This can help a business gain
access to new markets, technologies, or customer bases. LAPL has not
specifically pursued external growth in this scenario, as there is no mention
of acquisitions or mergers. However, if LAPL were to acquire another airline or
partner with other companies to grow its market share, that would be an example
of external growth.
Identify and explain two reasons ( other than economies of scale) why a business like LAPL wants to grow. [4]
Increased
market share:
LAPL
may want to expand to increase its market share and strengthen its competitive
position in the airline industry. By growing and flying to more destinations,
the company can attract more passengers, build a larger customer base, and
establish a stronger brand presence. This helps LAPL stay competitive against
other airlines and reduces the risk of losing customers to rivals.
Diversification
of revenue streams:
Growth
allows LAPL to diversify its revenue sources, making the company less dependent
on a limited number of routes or services. For example, by expanding to new
destinations and potentially offering new services like international flights,
LAPL can tap into different customer segments and geographical markets. This
diversification reduces the risk associated with relying solely on existing
operations, offering more stability and potential for long-term profitability.
Identify and explain two internal economies of scale that LAPL may experience due to this proposed internal growth plan. [4]
Technical
Economies of Scale:
As
LAPL leases more airplanes and increases its fleet, the company can make better
use of advanced technology and larger equipment. For example, larger airplanes
with higher capacity can reduce the cost per passenger, making operations more
efficient. Additionally, improved scheduling and the use of technology in
managing flights and bookings can enhance productivity, lowering the overall
cost of operations.
Managerial Economies of Scale:
With
internal growth, LAPL can afford to hire specialized managers for different
areas such as marketing, operations, and customer service. As the company
grows, delegating tasks to experts in these fields can lead to better
decision-making and more efficient operations. This reduces inefficiencies and
allows the business to run smoothly at a larger scale, leading to cost savings.
More case studies:
Case study 1
Case study 2
Case study 3
Case study 4
Case study 5
Post a Comment