Commerce

Meaning and Types of Production

Olawunmi Omosanya - Tue, 07th May, 2019 @ 19:05: PM

Meaning of Production

Let’s explain production using this analogy: There is something you probably would like. It could be a phone, car, console game, movie or something else. All of these things would have underwent a series of transformation processes before you could enjoy them. The goal of production is to indeed satisfy your demand for these transformed things.

According to Parkinson and Bates,

Production is the organized activity of transforming resources into finished products in the form of goods and services.

From the above definition, the objective of production is to satisfy the demand for such transformed resources. This transform resources could be a car, phone or something else.

When a service is rendered, such rendered service is considered to be "production" because it satisfies the needs or want of the recipient or consumer. Therefore, people who provide services like hair barbers, security men and public bus drivers are considered productive; and whatever service had been rendered may also be referred to as production.

An important point to note is that people pay for the end product of production (which could be goods or services).

The main purpose of production is to satisfy human needs and wants.

  • Needs may be referred to your required goods and services. (They are necessary and you just can't do without them). Examples are food and shelter. 
  • Wants are your desired goods and services (they are not necessarily required and you can do without them); for instance, a very expensive car or watch. 

The point is "anything made or created that is NOT wanted nor needed is not considered as production".

From what had been written above, we can also state that:

Production is any activity carried out to satisfy the needs and wants of humans; who would make payments or a form of exchange in return.

Note: An exchange is involved in production and will often be done in the form of monetary exchange. When a person renders a service for free or satisfies human needs/wants for free, such is not considered as production. Production is always an economic activity (that is, it involves money earning and money spending).

 

We have three types of production in commerce; they are:

 

Primary Production

The focus of primary production are raw materials. Any activity that involves the acquisition of material(s) from the surface of the earth with the intention of satisfying human needs or want is referred to as primary production. For instance, primary production is when a farmer prepares a land for crop production, plants on the farmland and eventually harvests the agricultural produce. Another example is a miner who goes down the earth in search of gold or diamond or iron or any other natural resources. Also, a fisherman doing his job of catching fish on the sea or ocean is said to be involved in primary production. In primary production, the produce or product are derived in their raw form. Most times, the materials or products derived from primary production can be further processed during secondary production.

 

Secondary production

Any activity that turns raw materials or intermediate material or materials from primary production into a finished product is referred to as secondary production. For instance, secondary production involves the conversion of iron ore (raw material) obtained from mining into a finished product like steel. Another instance is when cassava (a raw material from agricultural produce) is processed into garri (garri is a local food in Nigeria and is the finished product here). In short, secondary production involves the assembly and manufacturing processes.

Note: Most industries obtain their resources from primary production in order to manufacture a variety of products; for instance, the plastic industry may obtain its resources from oil, natural gas and coal (which are products derived from the fractional distillation of petroleum or crude oil).

 

Tertiary production

Any activity that put finished goods or services into the hands of the final consumer is termed tertiary production. They are the commercial services that support the distribution process of production. Examples of tertiary production are the distributive sales person or marketer, advertising company, banking, transportation, a teacher in a classroom and so on. You may need to read our previous article on marketing HERE.

Topics in Commerce

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