Category: Commerce Notes PPT

Management can be defined as the process of designing and nurturing an environment in an organization in which individuals, usually working in a group/groups, accomplish defined objectives efficiently. The functioning and success of an organization depend upon the existence of good management. The management architects the ways to achieve the goals and ultimate optimization of resources at a minimal cost. The following article aims to describe the importance of management, objectives of management in business studies, the answer of ‘explain the importance of management’, aims and objectives of management, and what is the importance of management, etc. in a vivid manner. 

What is Meant by Management? Explain the Importance of Management.

Management is the total of all the activities that ensure the smooth and efficient running of a business or non-profit organization. The importance of management is that it arranges all the four factors of production, i.e., men, materials, money, and machines, assembles and organizes them, and effectively integrates them to achieve group goals that are usually pre-determined.

Explain the Importance of Management

To explain the importance of management in the present business scenario, the following points have to be taken into account:

• It directs and unifies group efforts towards a common organizational goal.

• The managers foster a good organizational climate by establishing an effective grievance handling system, reward system, and problem-solving system, etc. 

• The ultimate function of the management is to maximize the organization’s profit by reducing the cost of production. This is nothing but productivity enhancement. 

• It faces competition strategically.

• It makes proper use of scientific and technological advancements to devise an appropriate growth strategy for the enterprise. 

• The management creates and maintains a good organizational structure and adapts to exciting new opportunities from time to time. 

•  It acts as a creative force and adds value to every element of organizational functioning.

Therefore, a dynamic, learning-centric organization is only created with the help of efficient management. All the above points summarized the answer to what is the importance of management. 

Management is a wide and endless concept. But, it has some levels which make it even easier to be understood. Below are the different levels of management :

Levels of Management

1. Top Management: It is related to setting basic goals or objectives and Expanding or contracting activities. Top management include Owners, Shareholders, Chief 

executives etc.

2. Upper Middle management: It contributes to activities like 

• Installing different departments

•  Designing operating policies and routines

• Assigning duties to their subordinates

Upper middle management includes Production executives, sales executives, etc.

3. Middle Management: Middle management works on 

• achieving coordination between different parts of the organization

• conducting training for employee development

• building an efficient company team spirit

Middle management includes Branch Managers, Superintendent, etc. 

4. Lower Management: The role of lower management is to supervise workers, impart instruction and develop/improve work methods operations.

Lower management includes Foramen, Supervisors or charge-hands, etc. 

5. Operating Force of Rank and file workmen: Its role is to work independently or under the guidance of a ‘supervisor’. 

The Operating Force consists of Rank and file workmen, Skilled and Semi-skilled workers, etc. 

Along with this, different areas of the management field require differently characterized management. So, management has various characteristics.

Characteristics of Management

1. Setting goals for organizations and firms

2. Management is a transformation process

3. Management is decision making

4. Management is a profession

Objectives of Management in Business Studies

There is a huge importance of management in business studies. Broadly, the objectives of management in business studies can be divided into three categories- organizational, social, and personal.

Organizational Objectives

Social Objectives

• To operate in an environmental-friendly manner

• To produce quality goods at reasonable rates

• To create employment and generate income

Personal Objectives

Overall, management aims to uplift the work quality and utilization of resources and assets in an efficient way to get the maximum output out of it.

Taking a micro view at the objectives of business management, they can be explained as below:

1. Surplus Creation: In the event of production, the management must aim towards surplus creation which then can be used to increase profitability. 

2. Optimum Utilisation of Resources: All the resources of an enterprise- men, machines, materials, and money- must be utilized in an economic way to earn profits that are sufficient to fulfil the interest of stakeholders- proprietor, employees, customers, associates, government and society. 

3. Market Creation: A stable market has to be created by the organization to sell the produced goods or services.

4. Ensuring the Sustainability of the Business: The business model must be devised in such a way that it can sustain itself on its own. It is then up to the management to plan its growth and long-term profitability. 

The other objectives of business management are producing more value for customers by ensuring a regular supply of goods and services, maintaining discipline and morale of the employees, mobilizing the right talent within the organization, improving overall performance, and minimizing all elements of risk. 

Styles of Management

Also, different ‘styles’ of management can also be understood as their types. Management styles are the ways by which a manager works to fulfil the task. Management style can depend on management, industry, country, culture, etc. 

Some of the management styles are: 

• Autocratic management styles follow a one-way approach i.e, ‘from bosses to employees. It has some subtypes named authoritative, persuasive, and paternalistic.

• Persuasive management style – In this, the manager convinces and motivates the team to work on the plan and makes them believe that the plan is worth working on. In this, there is no order given from the manager or workers. This style is good to build and maintaining trust between the company employees. This style requires good communication skills and convincing ability.

• Democratic management styles – In this, the manager motivates and encourages employees or workers to give input during decision-making and planning processes, but the final decision still remains in the hands of the manager. This communication goes both ways, and it increases team comprehensiveness.

• Laissez-faire management styles – In this, the staff is trusted to do their work without any supervision, and the decision-making and problem-solving related to their work are done by themselves. Hence, in this style of management, every employee or worker acts as their own manager and manages their work. 

Skills Required for Management

Management skills refer to those qualities and abilities that a person should acquire while working for an organization of managing a task.

Some of the common management skills include :

1. Planning: Planning is the ability to organize an event within a given limit of time and within a given limit of resources or money. Planning consists of understanding the task and setting achievable goals and that too within the deadline. 

2. Communication: Communication means the exchange of thoughts and ideas. Hence, it is a significant part of management because good communication is beneficial for strategy making and planning the tasks.

3. Decision-making: A good manager should have excellent and bold decision-making skills. It is because management is the core that decides the output or benefit after doing any task. Hence, one should have an intelligent and good decision-making mentality to be a good manager.

4. Problem-solving ability: While managing a task, things don’t work out as planned most of the time. During this course of time, problem-solving skills are a must for being a good manager.

5. Motivation and good leadership quality

Therefore, management skills are a set of abilities that include delegation, smart working, and punctuality. Management skills make a manager stand out professionally.  

Importance of Management in Society

The importance of management in society can be explained by the very fact that society forms the external environment of the enterprise. Therefore, it has certain responsibilities towards it. These are:

• Creating employment and generating income

• Not causing harm to the environment

• Ensuring the upliftment of society by indirectly fostering a learning environment.

• Facilitating infrastructure development 

• Meeting the demands of society by producing value-added products/services

The importance of business management in management studies is immense. It furnishes the students with the knowledge of management science and trains them to take critical responsibilities of running a business when they join an organization.

The expression ‘audit’ generally refers to the financial statement of a company’s expenses. It is an essential aspect that every corporate entity must take into consideration. An audit is the examination or checking of account books to make sure that all departments are following the procedures and responsibilities that are allotted to them. There are various types of audits conducted in banks, companies, or other organizations. Concerning other types of audit in India, a management audit is a new concept borrowed from the USA. The sole aim of this audit is to help the company in profit maximization by focusing on the improvement of efficiency.

Types of Audit in India

There are generally two types of audits in India.

• Statutory Audits

• Internal Audits

Statutory audits are prepared to inform the Indian government regarding the condition of the finances of the concerned company. Such audit reports are prepared by independent auditors (to ensure fairness and accuracy) in the manner that is prescribed by the government.

 

Types of Statutory Audits that are common in India are given as follows.

An internal audit is performed by the employees of the concerned company on behalf of internal management to analyze the efficiency of the company and its finances. Indian Companies Act governs the public and private companies and audits of banking companies and provides provision for an internal auditing system. 

Except for external audits and internal audits, the following types of audits are also prevalently used.

• Bank Audit

• Insurance Audit

• Government Audit

• Management Audit

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What is a Bank Audit?

A bank audit is a regular activity that is performed to inspect the financial activities of institutions to make sure that they are following the rules and regulations as prescribed by the statutes. An accounting expert, who is also known as a bank auditor, is appointed for the audit of banking companies. Bank audits can be either internal audits or external audits. 

The emphasis on the audit of a banking company is based on compliance. The object of a bank audit is to find out if the financial activities of the institution are fair, legal, and complete. The main aim of the bank audit is to conduct an independent inspection of the bank’s performance, controls, and information systems. Various examinations are carried out on the systems, the findings are generated as well and auditors suggest some possible reformative actions that the bank should take. 

Types of Bank Audits

There are many types of bank audits. Some of them are as follows.

• Risk-based internal audit

• Concurrent audit

• Statutory audit and tax audit

• Credit audit

• Stock audit

• Snap audit

• Forensic audit

• RBI Inspection System audit

• Foreign exchange

  

The bank audit unveils the infringements of rules or regulations governing financial institutions and failures in compliance with the institution’s policies. Bank auditors look for the main set of issues so that they can come up with profiting suggestions. Their discoveries are documented and noted on file by the bank.

Risk-based internal audit is a type of bank audit that recognizes risks, such as:

• Finance risk

• Expenses risk

• Functioning risk

• Consistency risk

• Strategic risk

• Goodwill risk

• Credit risk

• IT and cyber risk 

Government Audit

There is the same provision for government auditing as there is for the audit of banking companies, organizations, and institutions. The central government and state government both are audited respectively. 

The Comptroller and Auditor General of India (CAG) is the authority to keep a keen eye on the following. The Comptroller and Auditor General of India make sure that financial transactions done by the central and state government are implemented accurately and with the proper authorization. The main emphasis is given to the expenses done by governments.

Insurance Audit

Sec 12 of the Insurance Act, 1938 provides that the financial statements of an insurer have to be audited annually by an auditor. The audit of insurance companies is to be done by an independent auditor, whose duty is to inspect the policies, liabilities, risk evaluation, and several other financial records of the company. It is one of the most important types of audits in India.

The audit of insurance companies is conducted to make sure that proper insurance rates and premiums are being given. Despite that, the insurance auditor must keep a check on quality control between insurance companies and customers. 

Solved Example

Q1. Name some essential points involved in an Insurance Audit?

Answer: The following are the essential points in the audit of insurance companies.

Hence, it is clear that there are various types of audits in India such as insurance audits, government audits, bank audits, etc. 

Did You Know?

Statutory audits are performed in India for each fiscal year which is from April 1 to March 31, not as per the calendar year.

Management audits have been introduced recently and it is a new concept in India. The idea of a management audit has originated in the USA.

IRS Tax Audit

IRS tax audit is an external audit that helps to find out if the tax returns filed by your business are correct or not. It is performed by a person who is not connected to your business in any way. It helps to determine if the tax payments made by you are accurate or not. IRS tax audits can be done in three different ways. It can be done digitally, on your company premises, or over the phone. 

Financial Audit

IT is the most common type of audit. Every business must conduct a financial audit as it helps to ensure that the information given in the financial statements is correct. Auditors verify the financial details of business related to revenue, assets, and expenses. Financial audits are useful for shareholders and investors who can make a decision on the final outcome of a financial audit report. 

Operational Audit

Operational audits are done to know the effectiveness of the operating systems of a business. This audit is done by an internal team but some businesses also opt for an external team of auditors. It helps to uncover ineffectiveness and wastage in a business. It also helps to determine the use of resources to meet business goals and identify how improvement can be made in the business operations.

Compliance Audit

A compliance audit is an audit conducted by educational institutions and industries where regulation is required. It helps to determine if the business is complying with internal and external regulations or not. It can be done for different departments. Compliance audit helps to reveal if the business is complying with the regulations such as proper working conditions or not. 

Information System Audit

An information system audit is done to know if your business is using the best security practices so that an external entity such as a hacker may not get access to your business data. It includes checking if the best practices are being used by your business to make sure the proper functioning of the IT systems in the business. It also helps in determining the data processes and accuracy of data from these systems.

Perpetual Inventory System Accounting

The meaning of perpetual inventory is that it deals with the record of the physical quantities of the stocks and its valuation. There are two principles to determine the inventory of a firm, which are the periodic inventory system and the perpetual inventory record system.

 

Perpetual Inventory System Meaning

The perpetual inventory system records the stocks continuously. Under the perpetual inventory system, the inventory gets recorded after each issue or receipt or purchase of the raw materials, work in progress, final goods, etc. The perpetual inventory system cost of goods sold are updated on a day to day basis.

For ensuring the accuracy of the perpetual inventory transactions, the physical counts of the inventory are carried out many times in a year. This ensures that the inventory is cross-checked and the validity and the accuracy of the perpetual inventory accounting is checked as well. According to the perpetual inventory system, the value of the closing stock is determined by the cost of goods that are issued and the cost of goods that are sold. The equation given below refers to the closing inventory valuation.

Opening Stock (known value) + Purchases during the year (known) – COGS (known) = Closing Stock (balancing figure)

Advantages of a Perpetual Inventory System

The advantages of the perpetual inventory record system are given as follows:

1. It helps in avoiding the time-consuming practices of the regular stock taking. According to the perpetual inventory management system, the stocks are counted only a few times in the year.

2. The management keeps a daily record of the valuation and quantity of the closing stock which helps in the distribution and the production management.

3. There is also a system of internal check which dissuades misappropriation or thefts. The records of different departments like stores, purchases, and manufacturing are checked against each other.

4. There is no requirement to halt the process of production for taking physical stock count often. 

Periodic Inventory System

According to the periodic inventory system, the verification of the inventory is carried out by the physical count of the inventory on a given date. Hence, for determining the closing stock the physical count of the inventory including the weight, numbers, etc. are taken. Firms usually tend to carry this out around the end of the accounting year.

The valuation of the inventory or the closing stock is done with the help of either of the inventory pricing methods like Average Cost, FIFO, LIFO, etc. In this method, the cost of the goods sold are calculated using the following equation:

Opening Stock (known value) + Purchases during the year (known) – Closing Stock (counted) = COGS (balancing figure)

Disadvantages of the Periodic Inventory System

The disadvantages of the periodic inventory system are mentioned below:

1. Firms tend to do a physical count more than one time in a year and generally make quarterly or monthly installments that need frequent inventory counting.

2. For carrying out a physical count, the normal manufacturing and several other activities are suspended which eventually leads to losses for the firm or business.

3. COGS is regarded as a balancing figure which means that it cannot be accounted for the losses due to any kind of damages or abnormal losses.

4. The periodic inventory system also does not provide any kind of inventory control systems or methods.

A Precis is a summary of a story. The gist of the passage is written in as few words as possible. The reader should understand the idea expressed in the first reading by only reading the Precis. So it should have all the essential points. It is an exercise of comprehension. It must always be shorter than the original passage. Many people read carelessly and fail to understand the meaning of the passage for Precis Writing. So, it helps them to pay attention to the reading as no one writes a Precis without reading it carefully. 

 

Summarizing teaches one to read with concentration. It improves the overall Writing skills too. It allows one to express their thoughts clearly, concisely, and effectively. You learn to choose your words carefully and in a logical manner. 

 

In this article, students will be learning about what is Precis Writing, the Importance of Precis Writing, Writing Precis, Steps for Precis Writing, Features of a Good Precis, Dos and Don’ts for Precis Writing, Characteristics of Precis Elements of Precis along with respective examples.

Students can go through the official website of to get a thorough understanding of various topics related to the English language.  

 

Writing Precis

The Precis Writing format has some essential points that you should take care of while writing it. The main important point for Writing a Precis is that you should read the passage carefully. Reading helps you to understand the gist of the passage and write it down more concisely. The main message and theme of the passage should be conveyed through your Precis. 

 

Also, it is essential to note down that the general idea of the passage for Precis Writing should not be forgotten. The key points should be written in the Precis. The language of the Precis should be focused on. Precis Writing has no fixed pattern. However, we need to follow a particular procedure for the Precis to be more effective. The right diction will help you write a good Precis. 

 

Dos and Don’ts for Precis Writing

Dos:

• Do start with the main idea of the Precis so that the readers can quickly grasp the base of the Precis.

• Pick out all the insignificant information in the passage and remove them from your Precis.

• Create a proper environment in order to incorporate all the important points

• It is important to mention the objective of Writing the Precis.

• Write the Precis in the original flow of the writer to ensure that the message of Precis Writing should be clear.

• Add the relevant keywords and keep a check on the word count.

• Be sure to mention any historical fact in the past tense. 

Don’ts:

• Do not use abbreviations or short forms. Only use full forms while Writing Precis

• Be sure not to insert any facts taken from the internet. Incorporate the only facts given in the passage.

• Do not ask questions while Writing Precis. If it is imperative, you can cover it in the form of a sentence.

• Be sure not to revolve around the same content, The Writing flow should not be jerky. It implies that you are not confident with your content.

• Don’t keep the Precis too long because it is a summary. It should be short, crisp, and to the point.

Steps for Precis Writing

• Start reading the paragraph carefully before Writing the Precis. It is essential to understand the central theme of the passage. After identifying the idea, incorporate it in the required manner.

• The word count is another important factor for a good Precis. Check whether the total number of words is given or not. If not, then count the number of words. Generally, it should be one-third of the total words given in your passage.

• You should be clear about the theme or idea of the passage for Precis Writing. If you do not understand the theme, read the passage a couple of times, before starting to write your Precis. Make sure you are clear about the idea.

• While reading, note down the points or highlight them. Try to find the points that are irrelevant to your Precis.

• The heading of your Precis is critical. It should give a brief idea of the passage given. So, choose your title, wisely.

• The Precis should be arranged in a manner so that the reader understands the gist quickly. Logically organize your sentences and write them in reported speech.

• For an official Precis, you are required to provide titles and designations instead of names. If there is no information provided, then write a personal name. Make sure to follow the same throughout your Precis.

•  Before submitting, read it carefully for mistakes. As it is already in a short manner, there should be a minimal error.

• At the end mention in a bracket the number of words of your Precis.

Elements of Precis

The following are the key elements of a Precis:

Clarity: A Precis is actually a summary of the story, hence a reader should clearly understand what the story is about. Your Precis should be easy for readers to understand.

Correctness: Always take care of punctuation, grammar, and sentence structure mistakes while Writing a Precis. Be sure to double-check all of the dates, addresses, facts, and figures that were used in the original passage.

Objectivity: Be objective while Writing a Precise. You should only talk about facts in your Precis. Do not try to give your opinions and views.

Conciseness: Always be concise while Writing a summary of a story. A writer should avoid repeating things and using unnecessary words.

Coherence: Your piece of Precis should make sense. You can say what you want to say, but it should be presented clearly. Readers should not get lost or confused while reading your Precis. Use effective words that help readers understand better.

 

Features of a Good Precis

• A good Precis must have clarity, brevity, and Precision.

• It should not be just Writing the sentences directly from the passage for Precis Writing. It should be written in your own words.

• It is a miniature version of the given passage.

• The Precis should be well-knit and well connected.

• It would be best if you used linking words like so, therefore, and, because, further, etc.

• It must have a good title.

• Must have coherence and follow the order of the original extract.

• It must contain only the information given in the passage of Precis Writing.

 

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Characteristics of Precis

The following are some of the primary Characteristics of Precis.

• A Precis is usually short and to the point, as compared to the original passage 

• It is an ideal demonstration of content in the original passage.

• Precis filters out supporting ideas, supplementary details, and illustrations of the original passage.

• It is written from the point of view of the original authors of the content

• Indirect speech is usually used in Precis Writing

• Third-person pronouns are mostly preferred in Precis Writing.

What a Precis is Not?

• It should not be just a summary or abstract of the passage given.

• It must not have disconnected facts and statements.

• You cannot write your own opinion in your Precis.

• It should not contain any questions.

Solved Examples

Given below is a common question on Precis Writing.

1. What are Precis Writing examples?

Ans: It is Writing the gist of a passage. It is supposed to convey the summary of the passage without changing the idea or theme with the use of minimal words.

 

Did You Know? 

There is no specific length for Precis Writing. It is usually mentioned in the question for Precis Writing examples. If the word count is not given, you can write any number of words you wish. Never forget the main idea for Precis Writing examples is to summarize the passage given. So, it is better to use one-fourth of the length of the given passage.

Introduction

Earning more profit and acquiring more market share is the basic motto of any organization. The profit can be earned by selling our products in the market. Obtaining market share can be done by showing more qualitative products at less prices than the other companies. Pricing seems to be small but plays a crucial role in the growth of the organization. So, let’s see how the prices are made and what are the Pricing Strategies available? 

 

Definition

Pricing Strategy is a tool used to fix the price of a particular product or service by considering various factors like the consumption of resources, Market conditions, the ability of customers, demand and supply, need of the product like regular item or occasional, etc.

 

Types of Pricing Strategies

We have had different Pricing Strategies available in practice form for a long time. Organizations can opt for a suitable strategy that meets their requirements and expectations. Let us see all the product Pricing Strategies one by one to get a clear idea. 

 

Premium Pricing:

In the premium Pricing Strategy, the prices of goods and services are a bit higher than the general prices. These are especially concentrated on premium segment people. Some people may have a perception that if the price of the product is high, then only the quality maintains up to the mark. If anyone announces a discounted sale or half price, they even suspect the reliability and quality of that product. Especially for those people, the premium Pricing Strategy was used at the same time they needed to maintain the quality, which means that price.

 

Penetration Pricing:

Penetration Pricing Strategy is one of the three major Pricing Strategies. Generally, it is used by the new traders to gain a foothold in the market. The sellers wanted to attract more customers by decreasing the price of the product. So that the customers can show interest in purchasing them and they can know the users and the quality of that particular product. Once the customers get used to that product, the price may increase.

 

Economy Pricing:

Economy pricing is one of the best Pricing Strategies, which considers the generalized category of customers. These are majorly affordable and reasonable prices as much as they can provide. The economy class can be easily understood if we consider the scenario of flight tickets. The least amount required for the entire journey will be fixed as the price for the economy category.

 

Price Skimming:

It is an occasional Pricing Strategy where the well-known product has reduced its sales drastically. Even though its market share is very good for some time, with any kind of factor, they may be reduced, yeah abnormally. Then to regain the market share and to get back its customers, the price will be reduced.

 

Psychological Pricing:

Among the three major Pricing Strategies, psychological pricing is also there. This Pricing Strategy can be seen everywhere. For example, Bata introduces a new kind of shoes, and the price is rupees 1,999 /-. The psychology of the human brain is ready to accept 1999 rupees, and it is not ready to take 2,000 figure 2. That’s the reason several companies use this psychological Pricing Strategy. Usually, electronic appliances were tagged with this Pricing Strategy. Bata, Samsung, Amazon, etc., can be considered as examples of Pricing Strategies.

 

Product Line Pricing:

It is one of the differential Pricing Strategies. Here the prices may vary based on the size of the product. Even though the product is the same if we purchase a single product, the price may be 10 rupees. If we purchase 5 pieces, the price may be rupees 45. Similarly, 100gm oil is 20/- 500ml is 80/-. 

 

Pricing Variations:

Another differential Pricing Strategy is variations in the pricing structure. It is usually observed in travel agencies. For example, if we book an air ticket 2 months before, the price will be less. If we book the ticket as we thought it would be before, the price may increase slightly. If we want to buy Tatkal tickets, the price may increase more.

These are the various types of product Pricing Strategies. It is to be noted that apart from these types, we have different kinds of classifications based on the requirement, scenario, product, etc. So, the company needs to choose according to its product, Market share, competitors, etc.

 

Conclusion

The topic Pricing Strategy is one of the important topics of the syllabus and students can get a good understanding of the topic with the information provided above. Also, students should know the pattern to complete the answers in the right format to score extra marks in their exams. Practice will help students to get good confidence before appearing in the examination. They can go through the practice papers and important questions prepared by ’s expert teachers who have deep knowledge about the subject and they have years of experience in providing the best study material to help students to prepare for the examination.

Production is one of the most widely used terms and it is constantly found in the conversations of business magnets. Be it small-scale industries or large-scale industries, the type and the size of the firm or organization don’t matter since everyone works their best for achieving success. The success can be quantified in terms of quantity and quality of the production for the companies. Here we will have brief documentation of the term production and what it means in commerce. 

Definition of Production

The term product can be defined in terms of commerce and economics. Production essentially refers to the procedure of using numerous inputs for obtaining the required output. This output is known as production. The production should be quantitative as well as qualitative. This is the basic definition of production however it is a vast subject that covers different aspects and concepts. 

The Different Types of Production

There are various types of products that can be categorised into numerous categories.

• Unit or Job Production: This is the single unit of production to a single customer. The term unit suggests the same theory. Bakeries, Restaurants, Tailoring shops amongst others come under this category. Its features are dependent on customer service and support. It also depends on human resources such as communication, skill etc. than the machinery.

• Batch Production: This is another important classification that concentrates on the production of the group of products within the same period. Most appliances and durables fall in this category. The manufacturer knows the volume of products that is required before the start of production. This type of production depends on the season and involves high risk if it has to stop in the middle.

• Mass or Flow Production: This type of production applies to large-scale industries since they produce goods and items in bulk quantity and once the production is completed they start all over again. This type of production needs large capital. The car manufacturers are an example of this type of production. 

• Process or Continuous Production: This has similarities with mass production however it is a completely different type of production. In this type, the process plays a key role since the process of manufacturing goes on continuously. Brewing is one example of continuous production.

Different Components of Production

So far, we have covered ‘what is meant by production?’ and, ‘what are the types of production in economics?’. Besides these, we have another classification of production based on a process. They are as follows. 

• Primary Production: It is the first phase of the production process. The collection and extraction of raw materials take place in this stage. It plays a vital role in hardware and large-scale industries. In this phase, the collection of funds and investment are essential.

• Secondary Production: It is the mid-phase of production. It involves both machinery and manual work in parallel. It focuses on the utilization of raw materials effectively to get more productivity. Here we need working capital.

• Tertiary Production: It is the last and significant phase as all the packaging, and distribution of goods happens here. It is the phase where we can earn returns for our qualitative products. It involves certain risks too.

Production is the maximum utilization of the available resources and it undergoes various processes for producing the goods and services. The function of production is necessary and fundamental to every business since the returns depend majorly on productivity. The production definition in economics can be found within the process itself. A good grasp of the production concept helps the entrepreneur in shaping their business accordingly.

Conclusion

These notes are created by subject-specific experts and academics with excellent knowledge of the topic. These notes are highly accurate, provide lucid explanations and illustrations wherever necessary, and thus provide an excellent learning material resource for the students to prepare for their exams.