Question

There are different definitions of capacity. What definition better describes a situation when a business is operating at a capacity level for a short time and is better than increasing resources permanently?

Answer 1

Capacity can be defined as the the capability of an organization to meet the demand with supply and provides the service without any delay and with quality products and services in a cost effective manner.

This refers to, meeting the demands with using more number of resources which adds more cost to produce the final product or to provide the service and thus which leads to decrease in the revenue of the organization and ultimately effects the growth of the company.

Business if running at full capacity for a very short time and being able to fulfill the demand, there is no need to add up the new resources as it will not be an efficient and effective decision. These rise in demand for the short Period is due to some variation in external environment which not be permanent and thus investment in increasing the resources will not be a correct decision.