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In the process, this activity requires production factors which become the foundation of a business. This is because production factors can make company activities run smoothly.
In this article, several things related to production factors will be discussed, starting from the definition to the types that business actors need to understand. Below is the information.
What are Factors of Production
In general, a production factor is an item or process that can be used as a means to create sales and use value for a product/service. If viewed from this understanding, then all goods that can increase the useful value of the product are called production factors.
One analogy that can be used to understand the above is the use value of a book. A new book can be said to have useful value and selling value if it has glue and paper as raw materials. Apart from that, in the book production process, labor and capital are also required to make them.
Paper, glue, labor and capital are called factors of production. These four factors of production make books into products that have use value.
Purpose Factors of Production
Production factors must be provided by business actors before building their business. This is because the existence of production factors can make it easier for companies to achieve several goals.
The following are the objectives in question:
1. Streamline the Production Process
The aim of the first production factor is to expedite the production process of goods and/or services. This means that if all factors have been met, the company can focus on other management and operational issues.
2. Improve product quality and profits
The next goal is to improve product quality and profits. Production factors can help a business to grow and develop stably and make it easier for business actors to control every production process.
The best product quality can increase customer trust and the business brand so that this can increase company profits optimally and maximally.
3. Produce Output
The purpose of the next factor of production is to produce output . This means that production factors have an important role in the financial condition of a company, both when costs increase or decrease over a certain period of time.
In this case, the company’s permanent production factors can help stabilize the business.
4. Fulfill Consumer Needs
Production factors also aim to provide the best service for consumers. The production activities carried out by the company will help to meet consumer needs well, where the company will also get a number of benefits from this.
Types Factors of Production
In business development, good production factors are needed that are running well. There are five factors that have a fundamental influence, namely human resources, natural resources factors, capital factors, entrepreneurial factors, and technological resources.
Below is an explanation of each type:
Production Factors (Pexels)
1. Natural Resource Factors
Natural resource factors are a type of production factor which is included in the raw materials to be made into products. These raw materials will later be processed into goods/services that will be marketed to consumers.
Natural resources which include production factors include air, land, water, animals, plants, minerals and other mining materials.
An example is products made from leather. So the natural resource is animals because the skin of this animal will be used as raw material for the product.
2. Human Resources (HR)
The next production factor is human resources which are important to have so that raw materials can be processed into products or goods. Therefore, human resources must also be present within the company, especially those that have good competition in the field of product processing. This also includes being able to operate production equipment.
Even though in recent years a lot of work has been completed by robotic machines, human resources are still needed to operate the robot machines themselves.
For example, employees who work as HRD who manage incoming and outgoing employees. Or the marketing department which focuses on strategy and market analysis.
3. Capital Factor
The third production factor is capital. To be able to run production, the company also needs capital. Not only in the form of money, capital can also be in the form of investment in equipment and sophisticated machines to support the production process.
Capital plays a big role in being able to produce goods and/or services of the best quality. Apart from that, sufficient capital can also help entrepreneurs run and develop their business so they can get high profits.
Apart from that, capital also influences the creation of quality products that consumers like. The greater the capital you have, the higher quality the product produced will be because the human resources, natural resources and production equipment used are also of the best quality.
4. Entrepreneurship Factors
Entrepreneurial factors or management factors also need to be included in production factors. This is because this factor also plays a role in determining the success of production, including products, techniques, strategies, planning, control and so on.
Even though the three previous production factors are available, without a strategy, plan, control and supervision when the product is made, the resulting product will not be satisfactory. Of course, this will only produce products that do not have advantages and are not in demand on the market.
Therefore, management (entrepreneurship) factors are needed so that the production process runs more smoothly. This also includes marketing, bookkeeping, production distribution, and market observation.
5. Information Resources
In today’s global era, information resources have become an important factor to include in production factors. The reason is, a lot of the information needed can be obtained quickly because of the internet.
Therefore, companies must manage this factor well. At the very least, companies do not miss out on information about what products people need at this time.