BBI2O – Functions of a Business
PRODUCTION
Factors of Production: Any good or service must first be made from raw labour
and resources.
Factors of Production
1.
2.
3.
4.
5.
6.
Natural resources
Raw materials
Labour
Capital
Information
Management
1. Natural Resources
Also known as the primary industries, they are made up of six types of natural
resources:
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fuel/energy
logging/forestry
fishing/trapping
Agriculture
Mining
Water
They are often converted into the raw materials that make most other products.
E.g. Mining->Iron Ore->Steel->Car parts (or electronics or ...)
2. Raw materials
Are the goods used in the manufacture of other goods. Only fishing and
some agriculture natural resources make it directly to the consumer, the
rest are largely refined into a raw material.
E.g. corn is a natural resource that is refined into the raw-material
cornmeal which is then used in the manufacture of various food
products.
3. Labour
Is the physical or mental work used to produce a
good or service.
Since the advent of unions the cost of labour is
very expensive (usually THE most expensive) part
of production.
In cost-cutting measures, labour is usually the
first thing targeted. There are usually a few
different ways in which labour costs are cut.
1) Outsourcing (buying the parts from
another company) or
2) Offshoring (moving part of the
production of some, or all of the company to
a country where labour is cheaper),
3) Consolidation (centralizing aspects of
production)
Examples:
GM using various tire manufacturers for tires for their vehicles, rather than
make them themselves (as opposed to Henry Ford who insisted in making all
components of his machines - Robertson screw)
With NAFTA offshoring production to Mexico was commonplace as there were
no tariffs for goods/services to and from there.
Consolidation of baking to a central plant in Brantford, ON make Tim Horton's
baked products far more profitable.
4. Capital
Is the money invested into a business.
Liquid: cash, investment, receivables [assets to the company because it
expects to see return soon]
Non-liquid: buildings, machinery, ideas (IP), talent etc...
5. Information
Is a product like most others that can be sold.
For example, consultants and researchers are key in making good business
decisions.
It is also a tool to be used, for example, lawyers, accountants and other skilled
professionals can make money for a company though the use of information.
6. Management
Are people who make decisions on factors of production. Most often, they
decide things like where to buy, and at what cost, who to hire, who to partner
with to gain a competitive edge.
Management oversees all elements of production to ensure the company is
profitable.
Production Process
With a partner outline the production process to create a bag of potato chips. Be
sure to include the following stages:
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Purchasing
Processing
Quality Control
Grading
Production Worksheets F & G