Commerce

Meaning and Types of Production

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

Topics in Commerce

Division of Labour and the Conditions necessary for it Forms, Advantages and Disadvantages of Division of Labour Balance of Trade and Balance of Payments Meaning and Types of Production Deferred payment and its benefits Commodity market explained Marketing Explained Meaning, Scope, Functions and Characteristics of commerce



Academic Questions in Commerce

QUESTION: What does a bearer cheque mean?

A bearer cheque is a cheque that is made payable to whoever presents it. The cheque can be presented by anyone regardless the name written on it

.For instance, if Mr. Jibola presents a bearer cheque to the bank, such cheque may have a different name written on it; e.g James John. Regardless, the cheque will still be made payable to Mr. Jibola

 

Commerce

QUESTION: What is an order cheque?

An order cheque is a cheque made payable either to the person whose name is written on it OR on the order of the one who wrote the cheque. This implies that:

  1. Money will only be paid to the person whose name appeared on the cheque
  2. Money will be paid another person after the cheque had been endorsed by the owner. The owner of the cheque can therefore order the bank to pay a person even through their name isn’t present on it.

Commerce

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.



Amazing facts in Commerce

Amazon is an e-commerce website launched in 1995. It did not make any profit for its first seven years.
Amazon's first profit was in 2003. Its founder "Jeff Bezos" is the richest man in the world as at 2018/2019


NOTABLE POINTS IN Commerce

Commerce can be defined as the exchange of goods and services, usually for money and on a large scale that will require the transportation of such goods and services.

Commerce is very important to the life of any Nation for the following reasons:

  1. Commerce facilitates the exchange of goods and services which everyone can enjoy, regardless their location or whether the goods is produced within or outside their country.
  2. Commerce creates an awareness of the existence of goods and services through advertising.
  3. Commerce offers employment to a very large number of people in a Nation.
  4. Commerce promotes rapid transfer of both oral and written messages through communication.
  5. Commerce determines the standard of living in a Nation. This is because the extent of commercial activities is crucial to wealth of  a nation.
  6. Commerce makes for the protection against risk in day to day business operations.
  7. Through commerce, there is a steady supply of goods in a Nation. This is because commerce ensures that goods produced are stored until needed.

A public company is not owned by an individual. Usually, it is owned by groups or a very large number of people.

The shares of a public company are traded freely on the stock exchange.

Below are some features of a public company

  1. A public company must receive it’s training certificate to commence business.
  2. The minimum membership is two while the maximum membership is limitless.
  3. A public company has a legal status. It can sue and be sued.
  4. A public company files and publishes its annual reports, including its accounts.
  5. The liability of its members is limited.
  6. The shares are easily transferrable through the stock market.
  7. A public company can issue debentures to be secured as its assets.

Please read on the types of business structure here

The four elements of the marketing mix are usually referred to as the 4 “P”. These are:

  1. Product: Anything thing that satisfies a consumer’s need is referred to as a product. Product may come in the form of manufactured goods, raw materials or services.
  2. Price: Price is defined as the exchange value of goods and services supplied. In simple terms, it serves as a mechanism of exchange.
  3. Promotion: It involves all the processes that concerns with how business organizations should inform their customers about its product. If done properly, the demand of product will be increased. Promotions can take the form of advertising, search engine optimization, social media marketing, trade fairs exhibition and so on.
  4. Place: The place as a marketing mix concerns variables such as location and transport facility where the distribution of goods and services take place.

Think of marketing mix as the set of marketing tools that an industry or company uses to drive or accomplish its marketing objectives in the target market

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