Business activity

Specialisation: the best use if limited resources

One feature of modern business is specialization. In all societies the factors of production are in
limited supply. It is therefore important to use the resources in the most efficient ways possible.
Very few products are now made just by the efforts and skills of one worker. Nearly all workers
specialise in one skill and most businesses specialise on one product.

Specialisation- This is the production of a limited range of goods by an individual, region or

nation. In other way we can say that specialization occurs when people and businesses
concentrate on what they are best at. Specialisation is now very common because:

 Specilised machinery and technology are now widely available

 Increasing competition means that business have to keep costs low
 Most people recognise that higher living standards can result from being specialized.

Division of labour is when production process is split up into different tasks and each worker
performs one of these tasks. It is a form of specialisition.

Advantages of division of labour

 Improve workers skills: By continually performing a single task, employees become

more skilled and output increases.
 No time is lost: Time is saved because workers are not switching from one task to
another.
 Workers are trained in one task and specialise in this –this increases efficiency of worker.
 Specilised machines: The division of labour allows the use of specilised machinery.
Which helps to increase production.

Disadvantages of division of labour

 Monotony: Workers only perform one task so they may get bored and output may fall. In
such a case level of efficiency might fall.
 Interdependence: Division of labour increases interdependence and if one group of
employees goes in strike/absent then production might be stopped.
 Unemployment: As machines are developed to carry out small tasks, labour might be
replaced by machines and unemployment created.
The purpose of business activity

The purpose of all businesses is to combine the factors of production to make products which
will satisfy people’s wants. These products can be goods physical products, such as mobile
phone or they can be services such as insurance, tourism or banking.

Businesses: A business is an organization combines factors of production to provide (goods and

services) which satisfy people’s wants.

Added Value: Added value is the difference between the selling proice of a product and the cost
of bought in materials and components.

For example, selling price of a product is £1000 and cost price of that product £600. So added
value is £400.

Importance of added value:

Added value is important because sales revenue is greater than the cost of materials bought by
the business then

 business can pay other costs such as labour costs, management expenses and costs such
as advertising and power
 may be able make a profit if these other costs total less than added value.

How can a business increase added value:

 Increase selling price: Increase selling price but keep the cost of materials the same.
This might be possible if the business tries to create a higher quality image for its product
or service
 Reduce the cost of materials: Reduce the cost of materials but keep the price same. If
the price charged to customers stays the same than higher added value will be made.

MD. GOLAM ZIA UR NUR, SENIOR TEACHER, BUSINESS, SUNBEAMS AND PLAYPEN. 017121566556