Page 205 - Cambridge IGCSE Business Studies

15 Production of goods

and services

Introduction
Objectives
All businesses in the private sector provide goods and services to customers with
In this chapter you will
the primary objective of earning profit. These goods and services are the output of
learn about:
a production process. In this chapter you will learn about the diff erent production
■ the production process methods used by businesses and the factors that influence their choice. You

■ production methods and will also learn how businesses measure and improve the effectiveness of their
production processes and the impact that technology has on these processes. The
how these are influenced by
chapter looks at the importance of inventories (stock) to the production process
technology
and business costs.
■ the difference between goods

and services
■ how to explain, measure and
What is production?
increase productivity

■ why businesses need to hold The traditional view of production was the making of inputs such as land, labour
and control inventories. and capital into physical goods such as motor cars, clothing and computers.
Since the decline of the secondary sector and growth of the tertiary sector in
many countries the term now includes production of goods and services from all
businesses in the primary, secondary and tertiary sectors.
KEY TERM 203

Production: the process of Managing resources to produce goods and services
converting inputs such as land,
labour and capital into saleable The production process
goods, for example shoes and Operations management involves managing business resources – known as
cell phones. inputs – throughout the production process so as to produce fi nished goods,
services and components – known as output – that can be sold to other businesses
or customers. For example, a baker (labour) will take ingredients such as fl our and
water to his kitchen (land) and using mixers and ovens (capital) will make bread
Primary, secondary and (the output), which he sells in his shop to customers.
tertiary sectors: see
Chapter 2, page 20.

Figure 15.1 The production process