Business UNIT 2

• Production


  The making of a product, providing a service, or generating an idea or concept
• Six Factors of Production

  • Natural resources
  • Raw materials
  • Labour
  • Capital
  • Information
  • Management
• Natural resources


  Primary industries that supply six types: agriculture, fishing and trapping, mining, water, fuel and energy, logging and forestry
• Extractive industries


  Takes something out of the Earth or the sea
• Raw materials


  Any goods used in the manufacturing of other goods, including ingredients (raw materials that become part of the finished product) and supplies (raw materials that do not become part of the finished product)
• Labour


  Includes all of the physical and mental (cognitive) work needed, can be expensive so companies automate and consolidate, and can outsource tasks to other companies
• Capital


  Money invested in the business, including liquid capital (can be transformed into cash) and non-liquid capital (cannot be converted into liquid capital easily, e.g. buildings or equipment), as well as non-tangible capital like intellectual property and talent
• Information


  Business require information about new technology, customers, competition, and political conditions to produce goods and services competitively, accurate and usable information can reduce risk and enhance profitability
• Management


  Consists of the people who run the business and control or direct the factors of production, allocating company resources and making decisions, with different levels of management for different company sizes
• The production process


  1. Purchasing

  2. Grading

  3. Processing

  4. Quality control
• Purchasing


  Someone is responsible for purchasing the raw materials needed to produce the product or service, considering quality, price, and any additional costs
• Processing


  All non-service businesses convert one item into another through processing, refining raw materials into semi-finished products
• Quality control


  Ensuring all produced products conform to prescribed levels of excellence, often using ISO certified standards
• Grading


  Checking products for size and quality against fixed standards, related to quality control, products that don't meet standards can be sold as "seconds" or at "scratch and dent" sales
• Improving productivity


  Increasing productivity through training, capital investment, investment in technology, and new inventory systems, while maintaining or improving quality
• Types of training


  • Initial training
  • Ongoing training
  • Retraining
  • Specialized training
• Capital investments


  Investments in new computers, machinery, buildings, and facilities to increase productivity
• Investments in technology


  Using up-to-date technology like robotics and automation to maintain and improve competitive edge
• New inventory systems


  Just-in-time (JIT) inventory systems that coordinate suppliers, monitor warehouse storage, and track factory production to deliver goods on time, saving time, money, space, and reducing waste
• Management functions


  Planning, organizing, leading, controlling
• Planning


  Process of setting short-and-long-term goals and deciding how to achieve them
• Organizing


  Arranging people and tasks to carry out the business's plans and objectives, with upper, middle, and lower-level management
• Leading


  Involves motivation, communication, encouraging participation, and creating a good work environment and schedule
• Controlling


  Involves employee discipline, performance appraisals, budgeting, and different managers overseeing areas like purchasing, production, marketing and distribution, R&D, and finance
• Leadership styles


  • Autocratic
  • Laissez-faire
  • Democratic
• Autocratic leadership


  Makes all decisions, no employee participation, often used when quick decisions are necessary
• Laissez-faire leadership


  Leaves employees alone to do their work, can be beneficial for independent employees but difficult for new workers or those needing more direction
• Democratic leadership


  Encourages employees to contribute ideas and creativity, recognizes achievements, increases team spirit and morale, effective for keeping employees content and increasing productivity
• Assets


  Things of value that you own
• Liabilities


  Debt or money owed to others
• Personal equity


  Net worth after all liabilities are deducted from assets
• Balance sheet


  Financial statement that shows the financial position of a business on a particular date, with assets equaling liabilities plus owners' equity
• Income statement


  Financial statement that shows a business's profit or loss over a period of time, with revenue (money received) minus expenses (money spent) equaling net income
• Common accounts activity


  • Revenue: commissions, fares, fees, interest, rent, subscriptions

  Expenses: advertising, donations, maintenance, office supplies, rent, salaries, telephone, wages