Production

FACTORS IN THE PRODUCTION OF GOODS AND SERVICES

• Land or Natural Resources - refers to all gifts of nature

• Labour - refers to all physical and mental contributions of an employee

• Capital - refers to all the man-made items that go into producing other things

• Enterprise - refers to bringing all factors together to produce goods to make profit while taking risks

Production- is the process of using raw materials (inputs) and transforming them in some way to produce goods and services (outputs)

Productivity - is a measure of how much output can be produced from a given level of input

How to Calculate Productivity

Quantity of Output / Quantity of Input

IMPORTANCE OF PRODUCTIVITY

• Improving labour supply

  Productivity is vital for enhancing the efficiency of labour utilization. By increasing productivity, fewer hours may be required to achieve desired output levels, potentially incentivizing more people to enter or remain in the workforce, thereby improving the overall labour supply

• Human Resource Development

  Productivity is a key metric for assessing the effectiveness of human resource development efforts. Improving productivity through skill development, training, and education, enhances individual performance and also contributes to the overall growth and competitiveness of the workforce.

• Use of capital to increase productivity

  Productivity optimizes the utilization of capital investments. By increasing output per unit of capital input, productivity improvements maximize the returns on investment in machinery, technology, and infrastructure, enhancing the overall efficiency and competitiveness of businesses.

• Importance of positive work ethic

  Productivity reinforces the value of a positive work ethic by demonstrating that efficient and effective work leads to tangible results. A focus on productivity encourages employees to take pride in their work, strive for continuous improvement, and maintain high-performance standards, fostering a culture of excellence.

• Land use and declining productivity in the region

  Productivity is crucial for sustainable land use management. Declining productivity in a region can result in inefficient utilization of land resources, leading to economic losses, environmental degradation, and decreased agricultural output. Improving productivity helps mitigate these challenges and promotes sustainable land use practices.

Role of Capital in Production

Capital plays a crucial role in production by providing the necessary resources, such as

• Machinery

• Equipment

• Infrastructure

To facilitate the transformation of inputs into outputs. It enhances efficiency, increases output per worker, and drives economic growth by enabling businesses to produce goods and services more effectively and competitively.

TYPES OF CAPITAL

• Fixed Capital - refers to durable capital equipment the can be used repeatedly in the production process

• Working Capital - refers to the capital needed to pay for the day-to-day operations of the business

• Venture Capita- refers to the money that is provided by investors to start-up the business

METHODS OF PRODUCTION

Job Production - when individual products are made one time to meet specific customer preferences

Batch Production - when a group of identical products are produced simultaneously

Flow Production - when there is a continuous 'flow' of goods along an assembly line

Lean Production - when teams of employees work together in small groups to identify ways of improving production and eliminating waste

CATEGORIES OF PRODUCTION

• Primary

• Secondary

• Tertiary

TYPES OF PRODUCTION ACTIVITES

• Extractive - (agricultural, mining, quarrying and fishing)

  An extractive industry is any form of industry that removes resources supplied naturally

• Construction - (building)

Construction refers to the erection of all types of buildings and other infrastructure

• Manufacturing- (assembling, refining)

Manufacturing is concerned with making finished products from raw materials and semi-manufactured goods

• Service (transport, communication, tourism)

  A service industry provides a direct service to people

LEVELS OF PRODUCTION

• Subsistence

Only just sufficient to meet the basic needs of the local population.

• Domestic Consumption

Providing sufficient goods to meet the needs of people within a given territory or country

• Surplus

Efficient industry yields surpluses, fostering small factories, plantations, exports, foreign exchange, employment, and trade.

• Export

Organized production enables Caribbean exports, including goods, tourism, natural resources, and modern services globally.

ADVANTAGES OF ECONOMIES OF SCALE

Technical economies of scale.

▪ This is where more effective techniques are used to produce goods, such as the use of automated machinery for mass-production purposes.

Commercial economies of scale

• Refers to advantages in the buying and selling of goods.

Financial economies of scale

• Large firms can raise finance more cheaply than smaller firms

Marketing economies of scale

• Costs are lower when you produce on a large scale.

Information technology economies of scale

• Large firms can use information technology at a far lower unit cost of sale than a small firm.

Management economies of scale

• A larger firm can employ a greater number of specialist managers

Risk- spreading economies of scale

• Whereas a small firm will produce or sell a narrow range of products, a large firm is

likely to produce and sell a far wider range.

DISECONOMIS OF SCALE'

Diseconomies of scale results in increasing output or sales, but only at the expense of higher unit costs.

Reasons for diseconomies:

❑ a firm has become too large to manage effectively

❑ the scale of Production is greater than the demand for goods.

Types of Growth in Business

INTERNAL

By investing in new products or selling more of the company’s existing products.

Types of Internal Growth

• Opening other Outlets

• Employing more Workers

• Increasing Capital

• Establishing E-Commerce

• Franchising and Outsourcing

EXTERNAL

Involves the takeover of another business, a merger with another business, or the creation of a joint venture

Types of External Growth

• Joint Ventures

  • A good way to enter an overseas market is to form a joint venture with a local partner.

• Mergers

  • A merger occurs when two businesses combine to form a single company.

• Takeovers

  • An acquisition occurs when one business gains control of part of another business.

Linkage Industries

A linkage industry is one that is connected to another industry because it provides supplies for it or is a market for its finished product.

An industry will have backward links to other industries, as well as forward links.

BACKWARDS LINKAGE

Backward links are when an industry is supplied by an industry or firm further backdown the supply chain. (The demand of one industry leads to the development of another industry.)

Eg: A firm that extracts oil (primary sector) has a backward linkage with the producer of oil rigs (secondary sector).

FORWARDS LINKAGE

When one industry or firm supplies another industry further up the supply chain

The Effects of Growth on a Business

• Organizational Structure

• Use of Technology

• Labour

• Capital

• Potential for Export