Production. Productivity. Product

(1) A person or an enterprise that is economically productive creates

economic value. Such a person or enterprise is constructive, that is, effi-

cient. Productivity is a measure indicating how constructive or efficient

a person, an operation, or an enterprise is. The most common way to

measure productivity is a ratio of output to input. A measure of produc-

tivity in a factory might be the amount of output for a single worker over

a specified period of time, that is, output per labor hour. For an entire

automobile factory, the number of cars produced in a day might be the

measure of productivity.

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(2) The production of goods is a more volatile business than the de-

livery of services. Production moves up and down depending on the state

of the economy. When times get tough, consumers and businesses both

defer their purchases of such products as cars, houses, machinery. Con-

sumption of services, on the other hand, occurs more independently of

the business cycle. Despite recessions, people still go to the doctor, pay

their insurance premiums, make telephone calls, burn electricity and go

to the movies.

(3) The economy can be divided into two overall sectors: goods-pro-

ducing businesses (manufacturing, agriculture, constructing, etc.) and

service businesses (wholesale and retail trade, finance and insurance,

transportation etc.) Since the end of World War II, the relative balance

between these sectors has shifted. But the relationship between services

and the production of goods is not a battle for dominance. The two sectors

are complementary parts of a whole, both dependent on each other.

(4) The product a company offers to its market is not simply a can

of cat food, a hotel room, or a charitable cause. Defining a product as

a bundle of benefits stresses the satisfaction a product provides its con-

sumers. Thus, it is a customer-oriented definition. It stresses what the

buyer gets, not what the seller is selling. For example, a family visit at a

Disney World Resort Hotel is more than a place to stay. It’s sun and fun,

relaxation and entertainment, and being a good parent.

(5) Every product has both primary characteristics and auxiliary di-

mensions. Primary characteristics are basic features and aspects of the

core product. The core product provides the essential benefits com-

mon to most competitive offerings. Consumers expect a basic level of

its performance. A half-inch drill is expected to operate to provide half-

inch holes. Auxiliary dimensions include special features, styling, color,

package, warranty, repair service contract, reputation, brand name, in-

structions for use, and so on. Any of these features may be important

to a particular buyer. However, effective marketing strategies emphasize

certain benefits over others.

(6) Defining the product in terms of benefits allows a broad range of

offerings. Practically everything ranging from tangible items to services

and ideas can be identified as products. Whether the company’s offer-

ing is largely tangible (a car), intangible (financial counseling), or even

more intangible (the idea of racial harmony), it is a product. Thus, a

product includes all the tangible and intangible benefits a buyer might

gain once he or she has purchased it.

(7) The transformation of inputs into outputs requires that some in-

puts perform operations that affect other inputs. Effective production

requires that waste and pollution be minimized, that the goods or ser-

vices be of high quality, and that a minimum of inputs be consumed

(used up) in the process.

(8) Typically the production process is thought of as an input-trans-

formation-output system. Inputs in the production system include the

people who work for the company and collaborators such as consult-

ing and engineering firms that provide useful services. Various materi-

als, technology, and equipment used during the transformation stage are

also important inputs.

(9) Productivity for the economy can be measured with average out-

put per labor hour. Changes in productivity, seen by comparing the cur-

rent year with past years, influence the cost of production of goods and

services for the economy as a whole.

(10) Economists argue that a strong production sector is fundamental

to a strong country. Production is the use of people, capital, and other re-

sources (inputs) to convert raw materials into finished goods and services

(outputs). Production management concerns the activities directly involved

in producing the organization’s goods or services. Both tangible goods and

intangible services require the conversion of inputs into outputs.

Look through the text once again and say if the following statements are

true or false. Correct the false ones.

1. Productivity is a measure of efficiency.

2. Products have only primary characteristics.

3. The delivery of services is more volatile business than the produc-

tion of goods.

4. Consumption of services depends greatly on the business cycle.

5. Primary characteristics include special features, styling, colour,

package, etc.

6. Only tangible items can be defined as products.

7. The production process is thought of as an input-transformation-

output system.

8. Various materials, technology, and equipment are important outputs.

9. Changes in productivity do not influence the cost of production of

goods and services.

Text 3

Read the following text. Analyze and compare the information given in two columns.

Complete the table. You can use additional information from the text in Appendix G & S.