6 factors of Production & Production Process

Grade 10 Business

What is production?

Production happens when an individual, business or an organization makes a product, provides a service or generatres an idea or concept.

Name the 6 factors of Production

1. Natural resources

2. Raw Materials

3. Labor

4. Capital

5. Information

6. Management

Define Primary Industry and name the seven different types of resources that primary industries supply us

Primary Industries take something out of the earth or the sea which can be referred to as extractive industries

• Agriculture

• Fishing

• Hunting & Trapping

• Mining

• Water

• Fuel & Energy

• Logging & Forestry

Provide a brief description of the 2 main types of raw materials

1. Ingredients: raw materials that are combined or converted and become a part of the finished product

2. Supplies: raw materials that do not become a part of the finished product, but are used in the product creation process

What is Labor?

Labor includes all of the physical and mental(cognitive) work needed to product goods and services. Labor is expensive so most businesses seek ways to save on labor costs

What is Outsourcing?

Outsourcing is the act of hiring another company to perform tasks for any company, which is another cost saving business option

What is the main way businesses use to save on labor costs?

Businesses now automate and consolidate to save on labor costs. Automation means that many tasks are performed by more than one person using machines.

Define Consolidation

Consolidation occurs when many small manufacturing sites close down and are centralized into one large site.

What is Capital?

Capital is the money invested in the business and is often referred to as monetary capital. Capital can be transformed into other items to run the business such as a new truck. This type of capital is called liquid.

What are capital goods?

Some capital such as buildings or equipment are non-liquid. It is part of the business operations, and cannot be converted into liquid capital easily. These items are called capital goods.

Define Intellectual property

The ideas or the talent of a business’ workforce, is a non-tangible form of capital

Why is Information important?

Accurate and usable information reduces a business’ risk and can enhance its profitability

What do businesses need information about?

New Technology

• Customers

• Competition

• Political conditions

• Sources of Supply

What is management?

Management consists of the people who run the business and control or direct the factors of production. Management also allocates company resources and makes decisions that affect the day-to-day and long-term operations of the business

How does decision making work in large companies vs smaller businesses?

In larger companies, higher-level managers and/or the board of directors make decisions regarding profit distribution. In a smaller business, a single business manager or owner may make all of the business decisions

What are the 4 stages of the production process?

• Purchasing

• Grading

• Processing

• Quality Control

What is Purchasing?

When you have a business, someone is responsible for purchasing raw materials, that are needed to product the product or service.

What are some things to consider before making purchasing decisions?

• The quality of the raw material being purchased

• The price of the raw material being purchased - any additional costs associated with the purchase of the raw material

What is Grading and how does it work?

All products are graded in some way. Grades are an accepted universal standard, so anyone purchasing knows what to expect and how much it should cost.

• Coffee is graded according to: size, color, and appearance

What is Processing?

Processing is the conversion of one thing into another. Which is why it is called “conversion processing”. Many natural resources become raw materials through processing.

• Wheat = Flour

• Sugar Cane = Sugar

• Sea Water = Salt

What is Quality Control and how is it implemented?

Quality Control is used by many companies to ensure the safety of consumers and the products confirmation to accepted standards. Many products, such as food, over-the-counter medicine, and children’s toys must meet government standards.

Who sets the worldwide standards for many industries in terms of quality control?

The International Organization for Standardization (ISO)