The 4 Factors of Production
All businesses need resources. Resources is just a posh way of saying 'things to run the business'.
In Business Studies, we say that all businesses need four things to produce their products. Let's take a look....
In Business Studies, we say that all businesses need four things to produce their products. Let's take a look....
Most businesses need money. In business we call money 'Capital'. Money, or capital, is needed to buy things like factories or machinery, or cars or tractors or anything else that will help you to produce (or make) goods.
Businesses also need somebody who has a business idea. Without an idea, how will you have a business? Entrepreneurs are people who have a business idea and want to set up a business.
Entrepreneurs are prepared to risk their own money to set the business up, in the hope of making millions. But it's a risk. If the business fails, they could lose everything.
Having a business idea and being prepared to take a risk is known as 'Enterprise'.
Entrepreneurs are prepared to risk their own money to set the business up, in the hope of making millions. But it's a risk. If the business fails, they could lose everything.
Having a business idea and being prepared to take a risk is known as 'Enterprise'.
Everything must come from something. That's what I reckon. Our food comes from grain and wheat etc. Anything plastic started out as oil. Chairs come from trees made from wood.
Natural products, such as wood, oil, wheat, eggs, water and fish, all come from the land or the sea. Things like this are known as Raw Materials.
Natural products, such as wood, oil, wheat, eggs, water and fish, all come from the land or the sea. Things like this are known as Raw Materials.
If your business is going to be successful, you will probably need some workers, or employees. These are people who work for you and in return you pay them wages.
In business, we say that workers provide Labour for your business.
In business, we say that workers provide Labour for your business.
So, that's it. The four things that most businesses need. We call these the 4 Factors of Production.
Luckily for you, I've got a great way of remembering these things. Just think of the word 'CELL'. This stands for:
- Capital (meaning money or things bought with money to help you produce things)
- Enterprise - Entrepreneurs have a business idea and are prepared to risk their money.
- Land - this is a quick way of saying 'Raw Materials'. Things that come out of the land or sea.
- Labour - these are the workers in the business.