Types of production

HELLO, FRIENDS. Objective 7 of Section 5 requires that you be able to classify the types and levels of production. Types of production will be covered this week, and levels of production will be covered next week.

Definitions are important in principles of business. Therefore, before a discussion of this topic, we will first define the term ‘production’. Production refers to the combining of the factors of production to create goods and services to satisfy people’s wants. The types (stages) of production should not be confused with the levels of production.

The levels of production classify the amounts of goods and services produced under three different headings: subsistence, domestic and surplus/export levels. These levels of production will be considered next week.

When we produce, the activities carried out fall under different headings known as the stages, types or branches of production. Production can be placed under three or four such stages, types or branches.

THE THREE STAGES OR TYPES OF PRODUCTION (A) PRIMARY PRODUCTION

The industries involved in primary production are known as extractive industries. This is the raw material stage of production. Raw materials are extracted from the environment. Examples of primary production include: mining, fishing, lumbering, quarrying, agriculture, etc. In the Caribbean region, agriculture is an important primary activity. Most Caribbean countries produce sugar cane, bananas, and a variety of fruits.

(B) SECONDARY PRODUCTION

Secondary production is also referred to as the manufacturing and construction stage of production. Secondary production cannot take place without primary production. This stage of production involves putting the raw materials extracted at stage one together to make finished or semi-finished goods. It also includes all kinds of construction work. Examples of manufacturing include: sugar cane to rum, bauxite to aluminium, lumber to furniture, coffee beans to coffee, etc. Construction involves: construction of houses and other buildings, and the construction of roads, bridges, etc.

(C) TERTIARY PRODUCTION

The third stage of production is also called the service stage of production. It involves the provision of indirect (impersonal) and direct (personal) services. The indirect services are all those used to distribute the goods produced in the secondary stage of production. These services include those of the wholesaler, retailer, importer, exporter, insurance, transportation, etc. The direct services include the services of doctors, nurses, teachers, hairdressers, plumbers, electricians, etc. In the Caribbean, tourism is an important area of tertiary production. The personal touch provided to our visitors earns us the much-needed foreign exchange.

THE FOUR STAGES OF PRODUCTION

When considering the four stages of production, the primary stage is the same as when considering three stages. However, the secondary stage will involve only manufacturing and not manufacturing and construction. Construction will fall under the tertiary stage, and all services, direct and indirect, will fall under the fourth stage, known as the quaternary stage. The four stages of production are explained below.

■ Primary: Extractive industries, e.g., fishing, lumbering, mining, etc.

■ Secondary: Manufacturing industries, e.g., food processing, furniture making, garment making, etc.

■ Tertiary: Construction industries, e.g., road building, house building, bridge construction, etc.

■ Quaternary: Service industries, e.g., telecommunications, dentist, banking, etc.

With the information discussed on the three stages of production you can construct a similar diagram to the one above. Your steps will begin with primary and end with tertiary.

Most production in the Caribbean region falls under the primary stage of production. Some production will be secondary and a small amount tertiary. In countries that are more developed than those in our region, the majority of productive activity is under the manufacturing, construction and service stages. The implications of this is that primary production does not earn much income for a country, whereas manufacturing, construction and service industries earn much more income than primary-producing industries. Therefore, countries in the Caribbean region need to concentrate on developing activities that fall under the stages beyond the primary stage of production.

Your task this week is to:

(a) Define ‘production’. (2 marks)

(b) Explain what is meant by ‘stages of production’. (2 marks)

(c) Classify the following areas of production under the appropriate stage (use three stages of production):

(i) bauxite

(ii) lumbering

(iii) coffee processing

(iv) nursing

(v) selling

(vi) building a school

(vii) constructing a road

(viii) harvesting cotton

(ix) making pots

(x) dentistry (10 marks)

(d) Discuss the interdependence of the primary, secondary and tertiary stages of production. (6 marks) Total marks: 20

Next week, I will give you the answers to part (c) of the question and an outline for part (d). In addition, we will cover levels of production.

Take care. See you next week.