• Creativity and innovation have given the business a competitive

2. Analyse how two qualities of leadership demonstrated by Frederico have contributed to CQ’s success.

edge by developing a product that is unique and meets customer

demands for a shoe that is lightweight and comfortable to wear in
the hot climate which will increase sales enabling it to challenge
leading brands in the market.
• Good communication skills have encouraged the unions and
workers to accept change which will result in job losses .this
would improve loyalty as it could motivate workers will enable
them to cut costs hence reducing costs of production and its
operation problems as it could as well lead to increase in
producton of the workers.
3.a) Calculate CQ’s capacity utilization.
b) calculate CQ’s rate of inventory turnover
• A) Capacity utilisation = current output level x100

maximum output level

= 120000 x100

160000

= 75%

• B) Costs of sales = revenue – gross profit

= 1.2 -0.8 = 0.4

Inventory turnover = average inventory x365

cost of sales

= 0.13 x365

0.4
C) Evaluate whether introducing lean production will sufficient to
achieve CQ’s operational objectives.
• Using total quality management whereby there are likely to be zero defects will reduce
to enable Federico to reduce defective output by 50%. This will increase quantity so
making CQ’s shoes more competitive to an increase in the sales of CQ . To add on that
quality circles may give employees a sense of responsibility so as increasing their
motivation levels which would increase efficiency resulting to lower costs of
production .
• However , using JIT for CQ as the business may run out of inventory so as leading
lower levels of consumer satisfaction which will reduce customer loyalty resulting to
lower demand for shoes which lead to lower sales hence reducing revenue earned .To
add to that increased training for employees will increase costs for CQ so as increasing
the cash outflow of CQ.