Factors of Production: A Brief Overview
Factors of production are the five essential elements needed in the production process to fully be able to produce a product to market. They consist of Land, Capital, Labor, Information & Entrepreneurship.
Many people in business don't understand the importance of the 5 Factors of Production that helps to transition a product from the manufacturing line to selling it on the market. With these 5 characteristics of land, capital, labour, information and entrenpreneurship, we can successfully make a product successful in the market.
Factors of Production
Land: Natural Resources used to produce goods and services.
Ex. Wood for a furniture maker; aluminum for a bicycle manufacturer
Capital: The money used to start a business and keep it running. Capital includes the value of machinery and equipment required to produce goods and services.
Labour: Labour is the human element and includes all mental and physical work that people put into producing goods and services. In the last century, technology allowed business to change the ways that labour was used, for example, the assembly line.
Example: Ford Motor Company invented the assembly line, which helps produce more cars at a faster rate. Ford then sells the cars at a lower cost, which puts them into greater demand.
Information: Using computers and other technologies, businesses track information about their operations, customers, and competitors. Managing information is especially important for the companies’ plants and offices around the world.
Read more in Small Business.
Entrepreneurship: The activity of people who bring together all the factors of production to start a business. Entrepreneurship includes having the skills and determination to start and operate a business and to accept the calculated risks involved. The entrepreneurs must be aware of the changing needs, wants, and demands of the consumer in order to identify possible opportunities.
Example: GroceryGateway.com had an idea creating a online grocery shopping and delivery service after hearing about overworked consumers and the aging population.