The functioning of the economy is determined by the presence and use of various resources (physical labor, land, capital), which are otherwise called production factors. Together, they form the production potential of a company or an entire country.
Production concept
Anthropogenic impact on nature in order to obtain material and spiritual benefits is called production. It also includes the service sector. Production can be either individual, that is, carried out within a separate enterprise, or public. In this case, we are referring to all the existing relations between production units and the infrastructure that ensures the movement of goods and services from producer to consumer.
The main factors of production
First of all, labor refers to them, that is, any kind of transformative activity of a person who has as his goal the achievement of a practical result. For a long time, the physical aspect of labor determined the whole concept as a whole, but at the moment, with the development of information technologies and high-tech industries, the mental activity of a person, that is, the production of ideas, writing computer programs, and planning growth strategies, is becoming increasingly important.
It should be borne in mind that labor, as a rule, is understood not so much the mental and physical efforts expended, but the number of workers involved in production. Unemployed but able-bodied people also fall into this category.
The next factor of production is land. This term describes not so much a site owned by an individual, enterprise or state, but rather the resources contained on the planet. This factor includes mineral deposits, water and air, forest land. This takes into account not only primary resources (for example, oil), but also what is obtained during their processing (gasoline, kerosene).
A factor of production such as technology is becoming increasingly important. It means all the methods and techniques used in the process of productive activity. Technology is the most dynamically developing factor of production: several centuries ago, the economy was based on manufactories, and now mankind has entered the era of robotics.
Entrepreneurial qualities
The opening of one's own enterprise and active business management is not for everyone. The presence of the necessary knowledge and talents has recently been singled out by researchers as a separate factor in production. A product or service must be in demand in society in order to make a profit. Therefore, the entrepreneur needs not only to know the market and consumption structure, but also to have intuition.
The entrepreneurial qualities are bordered by the concept of entrepreneurship, that is, the ability to realize them. In order to get the maximum income, a person who decided to start his own business should organize the efficient use of capital goods and introduce innovative technologies, determine the goals and methods of their implementation, and also assemble a team.
Taking responsibility for decisions made is another aspect of entrepreneurship. This is especially true for any ambiguous and risky actions.
Time factor
In this category, two varieties are distinguished. The first is associated with the duration of the production cycle, which has a big impact on the cost of the product and profit from it. It is in order to reduce the manufacturing time of the sold product that new technologies are introduced.
The second kind of this factor of production follows from the concept of enterprise. Its essence is the need to capture demand fluctuations, the ability to determine the relevance of the proposed product or service.
Information
This factor of production primarily refers to information technology. In the modern world, their importance has become so great that we can talk about the existence of an information business. On the other hand, the information is all relevant information about what is happening on the exchange or market: changes in exchange rates, patterns of supply and demand. In addition, for successful business, you need to know about the status of competitors, their strategies. The effectiveness of decisions directly depends on the amount of information available.
Capital
Undoubtedly, one of the main resources and factors of production are available securities (money, stocks, bonds), equipment used, various buildings and premises (office, warehouse, point of sale), transport. Along with intangible objects, all of these and many other elements of the economy comprise the concept of capital. Intangible assets include intellectual property, such as copyrights and patents.
Capital is considered to be all objects that meet two criteria:
- the subject must be the product of intelligent human activity;
- the item should be used in subsequent stages of production.
Types of capital
In economic theory, capital as a factor of production, depending on its nature, is divided into two types:
- Real, or physical. This type of capital means all available means of production: technical base, buildings (for example, warehouse and office premises), transport.
- Monetary, or financial. It directly includes money, stocks, bonds and other types of securities. If we are talking about the country's economy, then this category can also include gold and foreign exchange reserves. It should be understood that in their material form, money does not participate in the production process, but they are the main condition for the acquisition of production assets.
There is another classification of types of capital, which is based on its use at various stages of production. From this point of view, the main and circulating types of capital are distinguished. The first includes buildings and equipment. Such capital is focused on long-term use, and its value is gradually covered by profit from manufactured products.
Working capital means the raw materials consumed in the production cycle. Costs, as a rule, are fully included in the cost of goods or services produced and are reimbursed immediately after their sale. Consumables, for example, spare parts in equipment, can also be referred to as revolving material - over time they wear out and require replacement.
Practical implementation of production factors
Now we turn from theory to practical explanations. As an example of factors of production at various stages of creating a product or service, we can consider the film industry. Filming is not possible without the intellectual work of the director, a team of scriptwriters, decorators, and technical workers such as lighting, editing, and costume designers. The latter at the same time spend physical effort.
Before the penetration of digital technologies into all spheres of life, the main carrier of the video material was synthetic film; Now the land, as a factor of production, is realized only during the construction of scenery and the creation of props. The film studio in this example acts as fixed capital, and the costs of filming and advertising are included in the working capital structure. The producer must have entrepreneurial abilities to determine which plot is in demand in society now, and to pursue it in spite of the sometimes stubborn resistance of the creative group.