![]() The reward of the labour production factor is wages. Productivity measures how much output is produced every hour. Productivity is also an important gauge for the success of labour. The value of the worker depends on their level of education, skills, and motivation. Labour is the second production factor and encompasses all the work done by people. The income of this production factor, or the reward, is called land interest. A grassy meadow in the Alps is a natural resource, but the adjacent farm is a capital good. Crude oil is an example of a natural raw material, while petrol is a capital good as it has been refined. When people change the condition or composition of land, it becomes a capital good. Renewable resources, such as wood, are also part of the land production factor. This can also be non-renewable resources, such as oil and gold. It includes untreated properties and everything that comes from the earth. Land as a production factor refers to all natural resources that are available to produce supplies. The sum of all goods and services is called the Gross Domestic Product (GDP). These inputs are essential for producing output.Īt a larger scale, you could say that production factors produce all goods and services within a nation’s economy. These are land, labour, capital, and entrepreneurship. ![]() These production factors are scarce and are considered essential for all businesses. We mentioned that resources are production factors. Production factors and Resource Allocation The strategy determines which resources are required, but the availability of resources can also limit a strategy.Įfficiently allocating resources to the right places is complex and often hampered by a number of factors, including scarcity, financial criteria, organisational politics, ambiguous objectives, risk aversion, and a lack of knowledge and information. The relationship between resources and strategy is a two-way street. The value of these programmes is in meeting organisational objectives. Resource Allocation is a management activity that’s closely related to strategic planning and strategic (resource) management and resource scheduling. Strategic resource allocation is important because the project scope can change during its execution phase. Do you want unlimited and ad-free access? Find out moreĮffective resource allocations allows for team members of a project to keep momentum and respect project timelines.
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