LSC S2:Production in Business

Introduction
In this chapter, you will produce quality products for sale. To achieve this, you will explore human wants, factors of production, specialization, division of labour and diversification in production. You will appreciate the position of raw materials in production and have a discussion about
the machinery, equipment and tools used in production. Through working with your classmates and being guided by your teacher, you will be able to produce quality products for sale. For a good life, human beings need products and it is for that reason that you are going to study production in business.

Human Wants

You, your family and the community members use products every day.
These include basic items like salt, water, food, clothes, toothpaste,
cooking oil, soap, books and pens, among others. You play with your
friends using balls, video games, board games like ludo, chess and
the like.
All these items satisfy a number of given needs and wants. There are
those items that we must have to survive and these are regarded as
needs, and those ones that we can survive without are known as wants.
For humans to meet such needs and wants, there must be production Of
goods and services.

Differences between human wants and needs

activity 2.1 Categorizing wants and needs In your group,

1. Study items in Figure 2.1 carefully.
2. Categories them as needs and wants.
3. Basing on the explanations given for needs and wants, identify examples in each case and identify their characteristics in each case. Use Table 2.1 for your responses.
4. Do a write-up and present it to the class. Note: Remember that human beings have unlimited wants and needs.

2.1.2 Types of human wants
You have already understood that human wants are things that one wishes to have in order to have comfort and satisfaction. However, these human wants can be classified into different categories as
summarized below:
1. Primary wants (basic
wants)
2 Secondary wants
3 Material wants
4.Non-material wants
5 Private wants
6 Public wants

activity 2.2
Explaining the types of wants
In your group, research about the various types of wants and;

1. Describe each type.
2. Give examples of each.
3. Do a write-up, share with other groups important points
   and present to the class.

Characteristics of human wants Human wants are identified by unique features. You are going to read land discuss them in the next Activity.

:activity 2.3
Finding out the characteristics of human wants In your group,
1. With reference to the outline of characteristics given in able 2.2, discuss them and write one statement that clarifies them.
2 Add on more characteristics that you can find out using the available school resources.

3 Share with other groups what you have discussed.

Human wants have the following characteristics:

Factors of Production

Distinguishing between direct production and indirect production

Direct production (also called subsistence production)

This is when you produce products/goods and services for your own survival or for your family. For example, one can grow maize, beans, millet or vegetables for their family to eat, or keep goats or chickens for their family consumption. And in the case of services, if, for example, a mother takes
her child to school, that service is not paid for by the child. Therefore, it is a form of direct production.
Indirect/market production

This is when one produces goods and services not for one’s own consumption but for the market. It involves one specializing in producing goods and services where one is skilled. For example, some farmers specialize in the production of milk which they sell to buy products like soap, cooking oil and
clothes, among others, that they do not produce themselves.

In your group,
1.Discuss and explain the difference between direct production and indirect production. Note down your
discussions.
2 Use Table 2.3 to guide you as you work on the differences between the two terms.
3 Use the available school resources for research on the above.
4 Share your findings with other groups.

under primary production include farming, mining, fishing, forestry and lumbering, among others.
The secondary stage of production involves transforming raw materials into finished goods that can satisfy human wants. It comprises all the activities in the construction, processing and
manufacturing, industries, among others.

The tertiary stage of production involves the provision of services. Examples of economic activities under tertiary sector include transport, banking, insurance, tourism, advertising and communication, among others.

Explaining the stages of production

In your group,

1. Describe the illustration given in Figure 2.5 above.
2. Select one product of your choice, draw and explain its production chain.
3. Identify characteristics of the three stages of production.
4. Complete Table 2.4 below.
5. Do a write-up of your work and present it to the class.

Benefits of record keeping in production
Keeping business records is very important because of the following reasons:
It helps to identify the strength and weaknesses in your business.
It helps to maximise all the expenses you claim and reduce your
tax obligations.
It helps one to prepare financial reports at end of months,
quarterly or annually.
It helps you to plan for tax payments.
It helps to manage changes and improvements in your business.
It makes it easier to acquire a loan for your business.
It helps to avoid over/under tax payments.
It helps to identify the profits/losses made in a defined period.
It helps to identify creditors and debtors.
It helps you to keep track of your basis in property.
It helps you to monitor the progress of your business.

Factors of production and their benefits
To produce a product, you must be having materials and skills which you combine to make a product. Have you ever made chapatis at home? If so, you must have used some materials. Discuss them with
your neighbor and mention them! For a carpenter to make a table, he/she must have the skills of making the table but also needs other materials such as timber, hammer, nails, varnish, time and the like.
In this example, the materials needed by the carpenter to make a table together with the skills of the carpenter are the ones we refer to as factors of production. Factors of production are economic resources needed to produce goods and services. The factors of production are land, labour, capital and entrepreneur, among others. The entrepreneur’s job is to combine the other three factors to produce goods and services.

Activity2.7
Presenting the factors of production and their benefits Study Figures 2.5-2.8 and their corresponding explanations. Use the information to fill in Table 2.5 on the benefits of each factor of production.

Task
The above are the factors of production. In your group, fill in Table 2.5 below and present it to class.

2.2.4 Simple production plan Before you produce goods and services, whether at home or otherwise,
you need to properly plan how they will be produced through preparing a production plan. Imagine you are going to make pancakes: plan how you are going to make them by identifying ingredients that you will use and also costing them. The result of that is a production plan.

A production plan, therefore, is the analysis of the estimated needs for producing a proposed good or service. It involves making sure that raw materials, workers and other necessary resources needed to create goods and services are available and used properly to produce goods and services.

Note: Different businesses have different requirements for producing their products and, therefore, will have different production plans. You should always do research before starting production of any type.

activity 2.8 Making a simple production plan In your group,

1. Think about a product that interests you.
2. Design a simple production plan for it: you must first
   carry out a survey based on the components below: The goods or services to be produced. Business premises and plant location. Target customers for the product. Equipment and machinery required.

o
o
Raw materials to be used.
Production process.
Technology to be used.
Quality control measures.
Labour requirements.
Total output.
(O Packaging materials required.

3. Present your simple production plan to the class.

A budget
Are you in a boarding school? If so, then you are given pocket money. Let us assume you are given twenty thousand shillings (20,000/=). I believe in this case you allocate the money to different items based on the period you have before more pocket money is given to you. The product of that is a budget.
Consider how you budget your school pocket money and share the experience with your classmates.
A budget, therefore, is an estimate of the planned revenues and expenditure of a business over a period of time; as much as the business expects to get and how it is likely to spend.

Activity 2.9
Making a simple budget
In your group,
1.Think about a business of your choice and the expenses you expect to meet when starting up that business.
2 Also think about the sources of revenue you need to spend to meet those costs.
3 Make an estimate for each item on the expenses in terms of money and also estimate the amount of money to receive from each source of revenue.
4 Make totals on either side and compare your answers.

5. Fill the information in Table 2.6 an present to the class type of business

Spreadsheets, books and calculators

:Activity 2.10 Making a simple budget In your group,

1. Use a spreadsheet to present all the money you use at the school canteen.
2. Present your work to the class.

Specialization, Division of Labor and Diversification in Production

Think about your school and identify the different jobs that people have there. Imagine what would happen if only one person had to do all the work that all people at your school do. Every day, you see people buying and selling a diversity of products and products of all types: What is your guess about who makes all those products? Which countries do they come from? Are all products on the market in your
home area produced in your home area?

.1 Difference between specialization and division of labour

Specialization and division of labour are most of the time confused with each other. However, they are very different. Specialization refers to the situation where a person or country or region concentrates on carrying out an activity which he/she/it does best and leaves out other activities to be done by other people or countries or region.

Sometimes work is split and done by different people at different stages of the production of a commodity’. In this case, therefore, production is divided into a series of tasks and each worker is responsible for a certain task, and when this happens, it is called division of labour. For example, in the manufacture of cars, workers do different tasks, given their specialized skills, i.e. producing tyres, engines, windscreens and seats, among others.

Division of labour

activity 2.11
Visiting nearby companies that do specialization In your group,
1. Visit the nearby community.
2 Identify companies or factories in the community or school neighborhood that specialize in production of particular products and services, and the reason why they specialized in production of that commodity.
3 Fill them in Table 2.7:

Types of specialization
Specialization is in different types and these are:
Specialization by craft
Specialization by process
Regional specialization
International specialization

Activity 2.12
Dramatizing the types of specialization in class In your group,
1. Read and analyze the provided types of specialization.
2 Think of any product and describe the various specialist roles involved in making it.
3 Write your findings on a flipchart.
4 Take on one type of specialization and create a role-play about it. Present both your role-play and flipchart in class.

Specialization by craft: This was the earliest form of specialization where certain families specialized in different activities basing on their location, like fishing, hunting, weaving, farming etc.

Specialization by process: This is where different people specialize in different stages in the production process. For example, in the production of a necklace, some people may make threads, others,
beads and others join to make necklaces.

Regional specialization: This is where a certain region specializes in carrying out an activity which it can do best. For example, people in Kabale specialize in growing Irish potatoes while people in Jinja
specialize in growing sugarcane.

International specialization: This is where a country specializes in the production of a commodity which it can do best and exchanges it with other countries which cannot produce the commodity. For example, developing countries like Uganda specialize in agricultural
products and developed countries in industrial products.

Specialization has a number of benefits. For example, in the process of producing goods and services high-quality products are produced .However, it has a challenge of boredom by workers due to doing one single activity over and over again. There are also other challenges ,as you will find out later.

:activity 2.13
Analyzing the advantages and disadvantages of
specialization
In your group,
1 Read and discuss the following advantages and disadvantages of specialization.
Do a write-up of their explanations.
2 Find out more advantages and disadvantages using
possible sources of information.
3 Share your findings with other groups.

Advantages of specialization include, among others:
Training is easy because work is broken down into simple processes.
Tme is saved because workers do not move from one operation
to another.
Workers become more efficient as they repeatedly do the same work.
Workers choose the work that they can do to the best of their ability.
It leads to mass production of goods and services.
Specialised workers tend to get higher pay.
Workers’ specific skills are improved.
More motivation from job satisfaction.

Disadvantages of specialization include, among others:
It is difficult for a worker who loses employment to find another job.
Workers become bored because of repeatedly doing the same work.
Workers lose their skills as they repeatedly use machines.
Slow workers may slow down the process of production.
Sickness and absenteeism may also slow down the process of
specialization.

It is expensive to train workers.
o Specialized workers are very expensive in terms of payment.

:Activity 2.14 Discussing the advantages and disadvantages of division of labour In your group, discuss:

1. The advantages of division of labour.
2. The disadvantages of division of labour.
3. Share your findings with the class

Diversification in production

You have witnessed companies or your parents who are involved in farming, producing a variety of commodities or performing different activities. Mention two such companies that you can remember that
are found in your community. Refer to Figures 2.14—2.16 above. People are involved in or perform several activities instead of concentrating on one. This is called diversification in production. A business that

engages in the production or marketing of several products has an advantage over a business that markets only a single product. Some of the reasons for diversification may include the following:
Diversification allows businesses to significantly increase their revenue since they are able to market a number of products using the same resources. Diversifying a business rather than specializing in a single product lowers a business’ risks. Diversification allows a business to remain profitable during hard times
in society, for example reduction in demand and epidemic attacks such as coronavirus, among others.
Diversification allows a business to maximize its current resources which may be underutilized if it specialized.

:tivity 2.15
Pointing out the advantages and disadvantages of diversification in production In your group, read the passage below carefully and do the tasks that follow: Diversification at Mr Ocheng’s farm
Mr Ocheng is a resident of Kaabong. He is a fruit farmer in the whole of his sub-county. He grows lemons, pineapples, mangoes, jackfruit and passion fruit. Last year, Mr Ocheng faced a big challenge with his passion fruit and pineapples because of prolonged sunshine in Kaabong. His production in these two products reduced by a half. Consequently, his income, too, reduced by the same rate in this period. However, his production and income from lemon and jackfruit remained the same since they are resistant to prolonged drought.
Tasks
1 Discuss the advantages of Mr Ocheng diversifying his
business of growing fruits.
2 Discuss the challenges that you think Mr Ocheng faces
by diversifying his business of growing fruits.
3 Do a write-up and present it to the class.

Keywords raw materials By the end of this sub-topic, you will be able to:
a) know raw materials for
producing a given product.
b)understand the factors
considered when selecting
raw materials for a product.
c)use raw materials in production.

To make pancakes, you need sweet bananas, cassava flour, cooking oil, etc. These are raw materials. Therefore, a business or company requires raw materials to be transformed to produce products. Different products require different raw materials to be produced. These can be
natural or artificial.

2.4.1 Understanding raw materials
Production cannot take place without raw materials. They, therefore, aid the process of production. Raw materials, therefore, are natural or artificial resources used by a firm or company to produce its finished
goods and products. Raw materials can be divided into two, that is, direct

and indirect materials. Direct materials are used within the final product Examples include, wood used to make furniture, or fabric used to make clothing. Indirect materials are used throughout the production process but they are not directly included in the final product. Examples include, the soils used to maintain machinery, or the light bulbs in a factory

tivity 2.16
Identifying examples of raw materials
In your group,

1. Brainstorm five natural and five artificial raw materials.
2. Categorise them in Table 2.8 below.
3. Share your work with other groups.

2.4.2 Factors to consider when selecting raw materials for a product
Before an entrepreneur chooses raw materials to use in the production process, there are several factors that he or she considers:
Cost of the material: The material cost is only a fraction of the total
production cost. When choosing materials to use in production, one has to compare their costs and select the ones which cost less but does not compromise the quality.
Material properties: Know what you need for the best results in your final product. Every material has its own unique attributes, not all of which may be suitable for your product. Steel and stainless steel, for example, are categorised according to a variety of standards connected to strength, corrosion, formability, hardness and machinability properties.
Form of material: This implies that the material can be liquid, solid, Powdered, gaseous and also of defined shape depending on the product one wants to produce. Each of these forms varies in cost, but

considering the subsequent production steps, the most expensive may be the best overall value.
Harmful materials: Minding about the environment is an criterion in selecting raw materials. The government, through NEMA, requires that all business people carrying out production observe environmental standards and failure to do so leads to punishment. Therefore, only environmentally
friendly materials should be used in producing products. Rules and Many raw materials are subject to governing rules and regulations, To extract them, one needs to get authorisation from the government, for example trees, fish, minerals and wildlife, among others, cannot be exploited without permission from the government.

Understanding the factors considered when activity 2.17
selecting raw materials
In your group, select a product of your choice:
1.List the raw materials required to produce that selected product.
2 What factors did you consider when selecting raw materials identified in question one)?
3 Describe how you can use the selected raw materials above to produce the selected product.
4 Do a write-up and present it to the class.

2.4.3 Using raw materials in production
Making an environmentally friendly product using activity 2.18
locally available materials
In your group, basing on the product you selected and presented about in the previous Activity (2.15):
1. Collect all the necessary materials to produce that product.
Focus on using locally available materials to produce your product.
2 When selecting materials, choose those ones which will help to protect the environment (products from recycled material may be better).
3 Bring your product to class and explain how it is environment-friendly.

Keyword so equipment machinery tools By the end of this sub-topic, you will be able to:
a)understand the factors considered when selectin machinery, equipment an tools of production. select appropriate machinery, equipment and tools of production. use appropriate machinery,
equipment and tools of production.

You may have observed road construction in your community. A combination of different machines like bulldozers, trucks, oil tanks, graders etc are used. The collection is known as machinery.
Equipment is different from machinery. A set of objects commonly used to achieve a particular objective is known as equipment. For example, to write a letter to your best friend, you need a pen and paper, colours, an envelope etc. In this case, the pen, colours, envelope and the paper are equipment you need to write a letter.

On the other hand, to produce a product, you need tools. They are
the implements held in hands to carry out a particular function. For example, to join two pieces of wood, you need a hammer to hit the nail to join them. Therefore, a hammer is a tool.
2.5.1 Factors considered when selecting machinery, equipment and tools for production
To make good choices of machinery, equipment and tools to be used in production, you must keep in mind several considerations. This can be about your skills, the location of your production site, existing regulations, accessibility to the equipment, and the amount of product
you expect to produce, among others.

Explaining factors considered when selecting
tivity 2.19
machinery, equipment and tools for production
In your group,

1. Read and discuss the following factors to consider when selecting machinery, equipment, and tools of production.
   a) Choice between new or used machinery.
   b) Production output
   c) Price
   d) Manpower engagement
   e) Space required
   f) Power required and consumption
   g) Warranty period
   h) Installation and training
2. Use available school resources to add on more.
3. Make a write-up and present it to class.
   Factors to consider when selecting machinery, equipment and tools for production include, among others:
4. Choice between new or used machinery: In most cases, when someone is starting a business or an investment, he/she will always consider buying used/second-hand equipment rather than brand-new.

The reason behind is that they are always a little cheap. However,
precautions have to be taken.
Production output: All businesses need to consider the production output Of the equipment to be purchased. This determines how much will be produced in comparison to what is required by the entrepreneur. The equipment should come with a maximum production output and minimum utility requirements.
Price: Price should never be compromised over any other thing about the equipment. When you find different prices for the same machine, find out the reason behind it. One should be able to check all the features and functions of the machine to be purchased for better decision-making.
Manpower engagement: Look at the manpower that is required to operate the machine required. There are manual, semi-automatic and automated machines; the number of manpower required is not the
same and every operator is a cost to the business. Space One must bear in mind the space available and the size of the machine to be installed and operated. More space needs to created for the machine operator and servicing: these should be taken into consideration before making the final order.
Power and consumption: Consider the consumption rate of the machine to calculate the cost of energy involved till the final production. Consider whether the machine requires a domestic or
commercial phase for it to operate. Warranty period: Consider the warranty period before placing the final order. Check in detail the parts that with the warranty. Check the fees structure after the warranty period has passed sinæ you will need to pay for the service issues in the future.
Installation and training: Find out if the supplier will install the equipment free of charge or at a cost. Check if the supplier will offer on-site training to employees that will be handling the machines.

2.5.2 Selection of appropriate machinery, equipment and tools for production Selecting appropriate machines, equipment and :activity 2.20 tools for production
In your group, given the following activities in Table 2.9. below:

1. Select the machines, equipment and tools needed to
   effectively carry out production accordingly.
2. Fill them in the table and share it with other groups.

2.5.3 Use of appropriate machinery,
equipment and tools for production Activity 2.21 Explaining use of appropriate resources for
production
You have been invited to a wedding party as a food nutritionist
and as a result, you have offered to provide two twenty-litre
jerrycans of passion fruit juice. Show how you will use the
appropriate machine to make the juice.
Sample Activity of Integration
Context
Musoke is a resident of Kasiiga village in western Uganda. He can barely meet his basic needs. He, however, inherited three acres of land from his father who passed on last year. He is planning to engage in diversified agriculture. He intends to rear poultry and use the poultry wastes to fertilize his farmland. He is planning to grow Irish potatoes, maize and beans.

Musoke has used his land title to secure a loan from a local bank. He has been advised to supplement local tools with machinery for high output and returns from his agricultural activities.

Tasks
Design a flow chart showing the primary wants that Musoke
should ensure to have a healthy life. In a write-up, explain to Musoke how he will benefit from the
approach he has used to make use of his land as a factor of production.
Chapter Summary
In this chapter, you have learnt about:
human wants and needs.
the types of human wants.
the characteristics of human wants.
production.
the types and stages of production and describing the benefits of
effective record-keeping.
the factors of production and their benefits.
a simple production plan for a given product, including a budget.
spreadsheets, books and calculators.

o
the difference between specialization and division of labour.
the types of specialization.
the advantages and disadvantages of specialization, division of
labour and diversification.
raw materials for producing a given product.
factors considered when selecting raw materials for a product.
raw materials in production.
the factors considered when selecting machinery, equipment and
tools for production.
appropriate machinery, equipment and tools for production.