Methods of production

● Job production: this involves one off job. Typically, they would involve just one or a
few customers and one or just a few manufacturers. For example, building a bridge
with special specifications and dimensions

● Batch Production: In this type a number of identical (or similar) items will be
produced in a set or batch. The items do not need to be for any specific customer but
are made at regular intervals in specific quantities. It involves work being passed from
one stage to another and each stage is highly planned. Example in bakeries: cake,
patties, bread.
● Flow Production: this involves product or services that are passed down a line of
production. The production process is a repeating one, with identical products going
through the same sequence of operations. For example: bottling operations, soap
manufacture, airport operations.

● Lean production: stems from Japanese manufacturing. In this type teams of

employees works together in small groups called quality circles. Quality circles seek
to determine ways of identifying waste in production, for example, processes and
activities that do not add value to the product. Lean production aims to cut out those
waste activities. The emphasis in lean manufacturing is getting workers to work
smarter.
 COTTAGE INDUSTRIES

What is a cottage industry?

A cottage industry is a small business carried out in the home.

Characteristics of cottage industries

i. Home-based: people can work from home rather in a factory

ii.Mainly manual or labour intensive; people work with their hands. E.g sewing
iii.
Operates on a small scale
iv.Makes use of local raw materials; materials will often be sources locally so that they
can be transported easily to family homes.
v. Employs family members; skills will usually be taught by older members of the
family to younger ones

Production Techniques
Production Techniques refer to the means or techniques used to create goods and services.

Types of Production Techniques

1. Labour Intensive Production
2. Capital Intensive Production

Explanations
A. Labour Intensive Production is when the production or creation of
goods and services rely heavily on labour (human resource) than the
other factors of production. E.g. farming, mining
 Advantages of Labour Intensive Production
a. Provides employment
b. Can be used for craft and cottage industries
c. Can provide personal feedback
d. Can provide a ‘persona touch’

Disadvantages of Labour Intensive Production

a. Relatively expensive – paying workers
b. Prone to ‘human error’
c. Can be affected by labour relations or industrial strike
d. There could be shortage of skilled personnel (brain drain)
e. Personal problems can affect performance or production

B. Capital Intensive Production is the production process that requires a

relatively high level of capita or automation. Eg. Refining, railway
transportation

Advantages of Capital Intensive Production

a. Reduces human error – more accurate
b. Greater speed – increase output
c. Allows the company to enjoy technical economies of scale
d. Mass or Bulk production

Disadvantages of Capital Intensive Production

a. Initial high implementation costs
b. Lack of flexibility in responding to change
c. Can replace man leading to unemployment
d. Prone to technical difficulties
e. High maintenance costs high

Cottage industry challenge

Come up with a unique idea/product that is supplied by cottage industries. You will have
to showcase your products to a panel of investors. The investor will decide in the end which
is the most creative product, as well as the product they will want to invest in. Hand made
and using local raw materials.

Examples or opportunities for Cottage Industries

 i. Cocoa- cocoa balls, cocoa fat
ii. Nutmeg – medicine, nutmed spray
iii. Spices – spice basket
iv. Pine – baskets, hats
v. Flowers – dry and fresh flower arrangements
vi. Bamboo – brooms, lampshades
vii. Coconut – brooms, candies
viii. Fruits – jams, jellies
ix. Textiles: tie dye
x. Wooden furniture products: chairs, woven baskets and wooden toys

FUNCTIONS OF COTTAGE INDUSTRIES OR SMALL BUSINESSES

I. Creates employment
II. Provides services that large firms are not willing to produce
III. Acts as niche markets
IV. Contribute towards the competitive spirit of the economy

NB: Niche markets are subsets of a market which produces a specific product. They
are similar to the concept of micro markets which concentrate on a small but
defined segment of the population)

ADVANTAGES OF COTTAGE INDUSTRIES OR SMALL BUSINESSES

I. Generate employment and income

II. Makes use of resources preventing spoilage or wastage
III. Introduces new products and ideas
IV. Uses one’s skills and talents hence satisfying a psychological need
V. Prevents the development of monopolies as well as increases competition
VI.

DISADVANTAGES OF COTTAGE INDUSTRIES OR SMALL BUSINESSES

I. Business may lack expertise affecting quality of the product or operations of the
business
II. Some of these may be seasonal
III. Owners find it difficult to source finance
 IV. Limited resources affects ability to meet demand or service customers
V. Lack of economies of scale

Ways in which Government can assist or promote cottage industries or small businesses

i. Exhibitions
ii. Competitions
iii. Incentives, loans and grants
iv. Provide skills training
v. Assist in marketing products
vi. Build factory space or factory shells
vii. Give advice or consultancy

BUSINESS GROWTH

Definition of Growth

Growth refers to the increase in terms of size and scale of production

TYPES OF GROWTH

i. Internal growth – refers to an increase in the level of production or amount of sales. It

takes place within the busines. Money to finance comes from either reinvesting the
company’s profits back into the business or the owners putting more capital.

Examples of internal growth

a. Employing more workers

b. Working existing plant
c. Increasing capital
d. Better use of assets
e. Increasing work hours
f. Opening other outlets
g. Establishing e-commerce
h. Franchising and outsourcing (when a business contracts out some of its work to an
outside supplier, who will make goods or provide a service on behalf of the business.
It makes it possible for a business to grow quickly at low cost, partly because
managing is done by people external to the business.
 ii. External Growth refers to an increase in the size of the business

Examples of external growth

a. Merger – two or more companies voluntarily joining together to form a single

organization

Types of merger
i. Lateral or horizontal merger – two or more companies at the same stage of production
ii. Vertical merger – two or more companies at different stages of production
joining together

b. Takeover or Acquisition – happens when there is no agreement to join but a

company buys majority shares in another
NB: Holding company – a company created to buy and possess the shares of other
companies, which it then controls.
c. Joint Venture – a business arrangement in which two or more companies
undertake an enterprise jointly or together but retain their distinct identities

Example: Ford and Toyota working together to make Hybrid trucks or Barbados Port
Inc. and Royal Caribbean Cruises (cruise ships and port authority)
EFFECTS OF GROWTH OF THE BUSINESS

1. Organizational Structure:

- Affects chain of command: More bosses

- Affects span of control: more employees
- Affects business chart or structure: type may change depending on changes made

2. Capital:
- Increases capital for advertisement and investment
- New machinery or technology can be introduced
- More finances can be acquired, quite easily as well. Can be from investors, selling
of shares, profits ploughed back.

3. Labour:
- Employment of more workers
- Laying off of some workers due to machinery replacement
- From part time to full time
 - More formal employment structure such as paying income taxes or other
contributions to government
- Experts, skilled or specialists can be employed
- Wages may increase
-

4. Use of Technology:
- Automation and mechanization can be utilized
- More advance tachnology

5. Potential for export:

- Can operate at the surplus level
- Increase exports due to possible competitive advantage

NB: Competitive advantage or Absolute cost advantage – a condition or

circumstance that puts a company in a favourable position to produce a good
or service at equal value but a lower price

NB: Comparative advantage – is when a country produces or specializes in a good

or service more efficiently at a lower cost than other countries.
 LINKAGE

Definition of Linkage
Linkage refers to when an industry facilitates a relationship with another

A linkage industry is an industry which is associated or connected to other industries

in such a way that the existence of one is dependent on the other, or it enhances the
other's production process

Types of Linkages

i. Forward Linkage – the output (final or finished product) of one company

becomes the input (raw material) of another company. One industry
supplies another industry or firm further up the supply chain, i.e, when the
 products of an industry become the raw materials of another industry.
ii.
Eg. The Flour produced by Caribbean Agro Ltd. is used by ‘Sweet
Tradition’ to make its pastries

iii. Backward Linkage – the needs of one company leads to the

establishment of another company to produce for the needs of this
industry or when an industry or firm is supplied by another firm further
back down the supply chair.

Eg. Sweet Tradition needs paper bags to sell their pastries, hence, John
established a business and sells the paper bags to the ‘Hotter than the rest
Bakery’ or firm that extract oils has a backward linkage with the
producer of oil rigs.

Examples of Linkages
i. Local Linkage – Agriculture and tourism industry. (Agricultural products such
as nutmeg and spices sold to tourist in baskets)

ii. Regional linkage – CARICOM, OPEC etc.

Benefits or advantages of linkage

1. Improves standard of living

2. Provides outlets for raw materials
3. More unemployed persons are able to find work
4. Provides ties or develops relationships with other countries
5. Promotes earnings from foreign currency