What is Production?
Production is originated from the word ‘produce’. In business studies, production means the act of producing a product, an output or a service which has values to fulfill the consumers’ wants and needs. It is also meant by the process of manufacturing goods using labour, machines, tools, chemical and biological processing, or formulation, by converting raw materials or components. Later, firms will add value to the final product, and the value added is the difference between the cost of inputs and the final selling price of the product or service. And this is how a business gets their profit from.
For example: A production process of biscuits
First, the company would have to order the required ingredients from other companies. Then, in their factory, hired bakers will use those ingredients to bake biscuits. Later, the baked biscuits will be put into packages and sold to the consumers. This is a very brief explanation of a production process. In real-life, the process is so much complicated, because the process of buying ingredients, baking and packaging involve many other procedures, as shown as the diagram below.
For example: A production process of biscuits
First, the company would have to order the required ingredients from other companies. Then, in their factory, hired bakers will use those ingredients to bake biscuits. Later, the baked biscuits will be put into packages and sold to the consumers. This is a very brief explanation of a production process. In real-life, the process is so much complicated, because the process of buying ingredients, baking and packaging involve many other procedures, as shown as the diagram below.
Factors of Production
There are four main factors of production:
The factors of production refer to the input required for a business to start their process of production.
“Anything that contributes towards the output is a factor of production.”
–Professor Brenham
All the factors of production have to 'work together as a team' so that the production activity can go on as planned.
Land
Land is one of the natural resources in the Earth. In business studies, land can be referred to the space, place or location to carry out the production.
Land
Land is one of the natural resources in the Earth. In business studies, land can be referred to the space, place or location to carry out the production.
Labour
Labour means workers, the human input in a production. Each individual has different levels of jobs and qualifications. Labour is a very important factor of production and vast majority of businesses need labours to handle a production especially when they intend to extend their business.
Labour means workers, the human input in a production. Each individual has different levels of jobs and qualifications. Labour is a very important factor of production and vast majority of businesses need labours to handle a production especially when they intend to extend their business.
Capital
Capital includes machines, computers, tools, factories and so on. It is the man made resources that help in producing the product.
Capital includes machines, computers, tools, factories and so on. It is the man made resources that help in producing the product.
Enterprise
An enterprise refers to a business, project, undertaking, company or firm. In this factor of production, the entrepreneurs give the initial ideas and plans. Later, they bring all the previous resources together to begin their production.
An enterprise refers to a business, project, undertaking, company or firm. In this factor of production, the entrepreneurs give the initial ideas and plans. Later, they bring all the previous resources together to begin their production.
Productivity
Productivity is one of the important parts in production. It is about the efficiency of a firm to complete a product. Productivity involves the input and output of a production. It is the output measured against the inputs used to create it. The output is of course, the final product, or a service. And the inputs are usually labours. Productivity is measured using this formula:
The productivity of a business can be increased if the employees work more efficiently. This can be done as the amount of output produced per employee rises too and thereby the cost of producing the product will fall.
It is very important to keep increasing or maintaining the good productivity of a business. Business is not just about earning profit, it is also about the ability to remain trading and at the same time being able to generate profits. If a firm can maintain good productivity, the level of success it can achieve is different with those firms that care only the profits and neglect their productivities. Therefore, sometimes, productivity of a business determines how long it could ‘survive’.
It is very important to keep increasing or maintaining the good productivity of a business. Business is not just about earning profit, it is also about the ability to remain trading and at the same time being able to generate profits. If a firm can maintain good productivity, the level of success it can achieve is different with those firms that care only the profits and neglect their productivities. Therefore, sometimes, productivity of a business determines how long it could ‘survive’.