The functioning of the economy is determined by the presence and use of various resources (physical labor, land, capital), which are otherwise called factors of production. Together, they form the production potential of a company or an entire country.
The concept of production
Anthropogenic impact on nature in order to obtain material and spiritual benefits is called production. It also includes the service sector. Production can be both individual, that is, carried out within the framework of a separate enterprise, and public. In this case, we mean all the established links between production units and the infrastructure that ensures the movement of goods and services from the producer to the consumer.
Main factors of production
First of all, they include labor, that is, any kind of transformative human activity that aims to achieve 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 technology and knowledge-intensive industries, human mental activity, that is, the production of ideas, writingcomputer programs planning growth strategies.
It should be borne in mind that labor, as a rule, is understood not so much as the amount of mental and physical effort expended, but as the number of workers included 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 the land owned by an individual, enterprise or state, but 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).
Technology is becoming increasingly important. It refers to all the methods and techniques used in the process of productive activity. Technology is the most dynamically developing factor of production: a few centuries ago, the economy was based on manufactories, and now humanity has entered the era of robotics.
Entrepreneurial qualities
Opening your own business and active business is not for everyone. The presence of the necessary knowledge and talents has recently been singled out by researchers as a separate factor of production. A product or service must be in demand in society in order to be profitable. Therefore, an entrepreneur needs not only to know the market and the structureconsumption, but also to have intuition.
Entrepreneurship borders on entrepreneurial qualities, that is, the ability to implement them. In order to receive the maximum income, a person who decides to open his own business must organize the efficient use of production assets and the introduction of innovative technologies, determine the goals and methods for their implementation, and also assemble a team.
Taking responsibility for your decisions is another aspect of being entrepreneurial. This is especially true for any controversial and risky actions.
Time Factor
There are two varieties in this category. The first is related to the duration of the production cycle, which has a great impact on the cost of the product and the profit from it. It is with the aim of reducing the manufacturing time of the sold product that new technologies are being introduced.
The second kind of this factor of production follows from the concept of entrepreneurship. Its essence is the need to capture fluctuations in demand, 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 the 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, the structure of supply and demand. In addition, to run a successful business, you need to knowabout the state of affairs of competitors, their strategies. The effectiveness of decisions made directly depends on the amount of information available.
Capital
Undoubtedly, one of the main resources and factors of production are the available securities (money, stocks, bonds), the equipment used, various buildings and premises (office, warehouse, point of sale), transport. Along with intangible objects, all of the above and many other elements of the economy make up the concept of capital. Intangibles include intellectual property such as copyrights and patents.
Capital is considered to be all objects that meet two criteria:
- the item must be the product of intelligent human activity;
- item to 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 refers to all available means of production: technical base, buildings (for example, warehouse and office space), transport.
- Money, or financial. It directly includes money, stocks, bonds and other types of securities. If we are talking about the country's economy, then gold and foreign exchange reserves can also be attributed to this category. At the same time, it is necessary to understand that in its material form, money does not participate in the production process, but is the main conditionacquisition 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, fixed and circulating types of capital are distinguished. The first includes buildings and equipment. Such capital is focused on long-term use, and its cost is gradually covered by profit from the produced products.
Working capital refers to raw materials consumed in the production cycle. Costs, as a rule, are fully included in the cost of the goods or services produced and are reimbursed immediately after they are sold. Recycled material can also include consumables, such as spare parts in equipment - over time they wear out and need to be replaced.
Practical implementation of factors of production
Now let's move on from theory to practical explanations. As an example of factors of production at various stages of creating a product or service, consider the film industry. Shooting a film is impossible without the intellectual work of the director, a team of scriptwriters, set designers and technical workers such as lighting, editors and costume designers. The latter also expend physical effort.
Before the penetration of digital technologies into all spheres of life, the main carrier of video material was synthetic film; now land, as a factor of production, is realized only during constructiondecorations and creating 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. A producer must have the entrepreneurial ability to determine which story is currently in demand in society, and carry it out, despite the sometimes stubborn resistance of the creative team.
