Factors of Production
What is production?
Production refers to the process of making goods or services out of resources/raw materials
What is Productivity?
Productivity is a measure of how much output can be produced from a given level of input – e.g. how many cakes can a baker make in one hour.
What is a Cottage Industry?
A cottage industry is one that takes place in a person’s home.
What is of Business Growth?
Business Growth is a stage where the business reaches the point for expansion and seeks additional options to generate more profit.
Explain "Labour" as a Factor of Production
Labour refers to the human resources used to convert and combine the other factors of production into
the necessary goods and services. It includes the effort of the individual, as well as their mental and physical work.
Labour can be classified in many different ways, such as skilled, semi-skilled/unskilled, managerial/professional.
What is the Formula for Productivity?
Productivity =
Quantity of output
Quantity of inputs
Give and explain two benefits of operating Small Business
a) Create employment
Small businesses provide employment for a large number of persons in both urban and rural areas. For example: farming, fishing, education, building and construction, IT and web design, retail (parlours and mini marts) selling of food and drinks.
Small enterprise provides and environment for entrepreneurs to learn new skills which can lead to the creation of much larger businesses.
b) Provides services that large firms are not willing to produce Small businesses provide services for larger firms as well as provide services that larger firms do not want to provide themselves. Examples include cleaning services, catering services, hiring services, legal and accounting services.
A large firm may seek to contract out many non-core functions to smaller companies, such as the taking of corporate photographs, repairing machinery or the creation of contracts.
c) Niche markets
A niche market is a small segment of a larger market. Demand may be relatively small and specialized in a niche market, therefore a large firm may find that demand and potential sales are too low for it to target the market.
Give 2 types of Linkages
Forward and Backward
Give 3 ways in which a company can improve employees' work ethic
• Providing incentives for good work – eg. Employee of the month awards, bonuses, commission
• Providing a good working environment – comfortable, safe
• Providing opportunities for promotion – this will encourage workers to put their ‘best foot forward’
• High staff setting a good example – if upper staff such as managers and supervisors are not working diligently, employees may be influenced by their work ethic
• Setting clear goals and milestones – employees are likely to work more efficiently and positively if they are clear about what tasks they need to complete
Using a real life example, explain how productivity can be improved by investing into capital
Capital relates to the resources used by a business (machinery, equipment, tools) to produce goods.
Using capital well enables labour productivity to increase.
e.g better machinery, more machinery would likely lead to increased output/productivity
Give three features of a Cottage Industry business
a) home-based – persons work from home instead of a factory/office/firm
b) mainly manual – typically people will work with their hands, for example, sewing, weaving, baking,cooking.
c) small scale – the scale of production will be small in comparison to factory level production. As a result, the machinery used is likely to be smaller and in less quantity.
d) use of local raw material; - the raw materials used are likely to be soured locally so that they can be transported easily to homes to use in production
e) use of family members as labour – the family will often work together to produce goods and skills will likely be taught by older members of the family to younger ones.
Give three examples of Internal Growth
Opening other outlets
Employing more workers
Increasing Capital
Establishing- ecommerce
Francising
State and explain the 4 Factors of Production
• Land
• Labour
• Capital
• Enterprise/Entrepreneurial skill
What is labour productivity?
Labour Productivity is calculated as total output divided by total hours worked - this is the most common measure of productivity
What are the 4 Types of Production?
Extractive
Construction
Manufacturing
Service
Distinguish between a joint Venture and a Merger
A joint venture (JV) is a business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task and business opportunity.
A merger occurs when two businesses combine to form a single company. Any existing shareholders of both businesses retain a shared interest in the new business.
Explain each type of the 3 main types of Capital
Fixed capital includes the assets and capital investments, such as property, plant, and equipment that are needed to start up and run the business. These assets are considered fixed in that they are not used up during the actual production of a good or service.
e.g Machines, Chairs, Buildings, Tables
Working Capital refers to the stocks of materials, goods and cash needed for the day-to-day running of the business e.g. raw materials, money.
Venture Capital refers to the money provided by investors to ‘start up’ businesses and small companies to help them grow
What is Venture Capital and how can it be used to boost productivity? Give an example
Venture Capital (VC) is a form of private financing provided by investors (venture capital firms) to startups and small, early-stage companies that are believed to have high growth potential. In exchange for this funding, the investors receive equity, or an ownership stake, in the company.
It boosts productivity by giving the startup the cash to:
Buy better or faster technology and machinery.
Hire more skilled employees.
Expand operations quickly.
Explain "Surplus and Export" as a Level of Production
This level of production is also known as cash-crop economy. Countries that produce at this level are
usually the ones that have many resources and advanced technology. Such countries are not only able to satisfy domestic demands, but are also able to produce a surplus which can be exported to other countries and earn foreign exchange. Due to this, these countries are able to experience a better quality of life.
Give 5 benefits of a merger
• Increases market share: When companies merge, the new company gains a larger market share and gets ahead in the competition.
• Reduces the cost of operations: Companies can achieve economies of scale, such as bulk buying of raw materials, which can result in cost reductions. The investments on assets are now spread out over a larger output, which leads to technical economies.
• Avoids replication: Some companies producing similar products may merge to avoid duplication and eliminate competition. It also results in reduced prices for the customers.
• Expands business into new geographic areas: A company seeking to expand its business in a certain geographical area may merge with another similar company operating in the same area to get the business started.
• Prevents closure of an unprofitable business: Mergers can save a company from going bankrupt and also save many jobs.