Factors of production are resources that are the pillars of the economy; they are those that people use to produce goods and services. Every business model requires key resources. Your resources allow your company to create and offer a value proposition, reach markets, maintain relationships with customer segments and earn revenues. Different key resources are needed depending on the type of business model.
A microchip manufacturer requires capital-intensive production facilities, while a microchip designer focuses more on human resources. Key resources can be physical, financial, intellectual, or human. Key resources can be owned by the company, leased by the company, or purchased from key partners. These are the fixed resources of a company.
These are physical resources that cannot be moved. For any organization, these resources are of utmost importance and cannot be ignored. These include your physical workspace, connectivity, information systems, furniture, and more. This resource could be one of the most expensive.
Land, labor, and capital as factors of production were originally identified by early political economists such as Adam Smith, David Ricardo and Karl Marx. Factors of production are an important economic concept that describes the elements needed to produce a good or service for sale.
Entrepreneurship
is the secret ingredient that combines all other factors of production into a product or service for the consumer market. However, money is not a factor of production because it does not participate directly in the production of a good or service.It combines previous approaches to economic theory, such as the concept of work as a factor of production since socialism, into a single definition. In short, the human resource that maximizes the productivity of an organization by optimizing the effectiveness of its employees. Instead, it facilitates the processes used in production by allowing entrepreneurs and business owners to buy capital goods or land or pay salaries. One of the main reasons for this is due to the active and volatile resources of most companies today, specifically in service industries, where resources are unpredictable.
The definition of factors of production in economic systems is based on the assumption that ownership falls to households, who lend or lease them to businessmen and organizations. In socialist systems, the government (or community) often exercises greater control over factors of production. Depending on the specific circumstances, one or more factors of production may be more important than the others. Ericsson, the telecommunications manufacturer, offers an example of leveraging financial resources within a business model.
An example of this is the change in production processes in the information technology (IT) industry after jobs were outsourced to countries with lower salaries. However, during periods of economic expansion, they invest in new machinery and equipment to bring new products to market. The continued popularity of the product meant that Zuckerberg also had to scale technology and operations. Financial resources can be obtained from a variety of sources, the easiest of which is the personal accounts of the founder of the company.
