MGTA01 – INTRO TO BUSINESS – WEEK

The Factors of
Production

Please read Chapter 2

 FACTORS OF PRODUCTION

There are basic building blocks used to

produce anything

In business, the building blocks are:

“factors of production”
 FACTORS OF PRODUCTION

natural
resources
raw materials found in ground, grown
from earth, or harvested from nature.
Examples: coal, wheat, water, wood
 FACTORS OF PRODUCTION

labour
Businesses
need people.

labour = workers, human beings

 FACTORS OF PRODUCTION

capital
money, or machines and
technologies that money can buy.

examples: tractors, hammers, printers, phones

A BUSINESS COMBINES THE FACTORS

.
FACTOR INTENSITY

An organisation that relies on lots of labour is

“labour intensive”

Employer Employees

Walmart 2.1 million

McDonald's 1.9 million
China National Petroleum 1.6 million
Indian Railways 1.4 million
FACTOR INTENSITY

An organization that relies on natural resources is called

“Resource intensive”

farming, fishing, forestry, mining

rely on natural resources.

They are “resource intensive”

FACTOR INTENSITY

A businesses that relies on lots of money, equipment and technology is

“Capital intensive”

banking, auto manufacturing

THE FOURTH FACTOR:
ENTREPRENEURS
Businesses are formed by people…

… who are uniquely motivated to take time, incur costs and take risks, to make something happen

“entrepreneurs”

.
ENTREPENEURS

.
WHY CARE ABOUT FACTORS?

If you understand the parts,

you better understand the whole

Quantity, quality, and cost of factors

determine
quantity, quality and cost of products
 FACTOR SUBSTITUTION

Substituting one factor

for another factor

So products can be made

more quickly, cheaply, easily and sometimes better
 FACTOR SUBSTITUTION

This 1 machine can do the work of 40 men

THE INDUSTRIAL REVOLUTION

This can produce more than 20 of these

THE INFORMATION REVOLUTION

This software can deliver more documents than countless

letter carriers can
FACTORS: CONCLUSION

A business is made from basic elements:

Natural Resources
Labour
Capital

These are organised and assembled by:

Entrepreneurs

Who uses INFORMATION to develop and implement

business strategies
Understanding what each does,
allows you to better manage the whole
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