What Are the Factors of Productions in a Business?

What Are the Factors of Productions in a Business?

So you want to start a business, or maybe grow an existing business, well there are things that you need to consider! These are what we call Factors of production. In other words these are things you need to factor in to begin producing your products.

Traditionally there are four factors these are:

1. Natural resources

2.Human resources otherwise known as labor



Keep in mind it is also essential to have knowledge of the field, this could be gathered through experience, education, or research. Whatever the methodology is, knowledge is essential.

If these factors are considered accurately, then the business is bound to grow efficiently using the same resources. The only difference is that these resources will be allocated to the right department. For example money might be spent on marketing where at that stage it needs to be spent on R&D for product testing and development. Once these factors are analyzed it becomes easier to determine what goes where and when.

Let’s take a look at what these factors really are!

Natural resources

As your intuition would have you believe, are the resources that are found in nature that you use to make your products. For example if your company produces paper then the natural resources would be wood. If you own a bakery your natural resources will be things like eggs or flour.


This is where things man get a little confusing, it is not just money. We often think of capital as the amount we invest in the business, but it could be other things as well. For example an equipment or a machinery that you use for your business is also considered capital. Think about the ovens you bake your cake in, that’s capital.


Entrepreneurship is a concept that many people use, but what does it really mean? Very simply, entrepreneurship is the process of combining all four factors together to produce the desired goods or services that will be profitable.

So this is all great, but are these the only things that influence a business? Absolutely not! Another major impact is the environment, which can either be internal or external.

So you may be thinking “environment” that’s a very big term, true, but luckily experts have divided it into seven handy dandy categories. These are:

1. Economic

2. Political

3. Global

4. Demographic

5. Social

6. Competitive

7. Technological

These of course are the external influences and not internal. Since they are external, they cannot be internally controlled.

So what do you do then?

You adapt!

Do you remember the oil spill in the Gulf of Mexico in 2010.That explosion and oil spill killed 11 people and spilled over 3 million barrels of oil. It affected all kinds of organizations from environment to tourism. These business owners could only do one thing, adapt!

How do business and economics work together?

To put it in simplistic terms, the success of your business is somewhat dependent on the economic system of the country where your business is located. So, your business in the US may be ran differently than it would be if you were to run in a different country.

So it is your job as a manager or an owner to understand and adapt to the requirements of the country so that your business may thrive.

Contrary to popular belief, the US does not have a capitalist economy. What it does have is what we call mixed economy. It leans more towards pure capitalism, but it is not. So, what does this mean for you as a business owner? It means that you are free to create your desired business so long as it is legal and lawful, and it means that the government has intervened on your behalf by creating laws that will ensure that giant companies compete fairly with weaker competition. So what you need to know is that you have a chance to grow!

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