six factors of production

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six factors of production

information

To produce goods and services in a competitive global market, businesses require more information about new technology customers competition political conditions sources of supply Accurate and usable information reduces a business’ risk and can enhance its profitability.

Labour

Labour includes all of the physical and mental (cognitive) work needed to produce goods and services. Labour is expensive so most businesses seek ways to save on labour costs. Businesses now automate and consolidate to save on labour costs. Automation means that many tasks are performed by more than one person using machines. Consolidation occurs when many small manufacturing sites close down and are centralized into one large site. Outsourcing, the hiring of another company to perform tasks for any company, is another cost saving business option.

Management

capital

Capital is the money invested in the business and is often referred to as monetary capital. Capital can be transformed into other items to run the business such as a new truck. This type of capital is called liquid. Some capital such as buildings or equipment are non-liquid. It is part of the business operations, and cannot be converted into liquid capital easily. These items are called capital goods. Intellectual property, the ideas or the talent of a business’ workforce, is a non-tangible form of capital.

Raw materials

Raw materials are any goods used in the manufacturing of other goods.

Natural resources

logging and forestry

fuel and energy

water

mining

fishing and trapping

Agriculture