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PRODUCTION

1. Production can be defined as the creation of wealth which in turn,

adds to society's welfare .It is a vital link in the process of satisfying

wants; As man's wants are almost unlimited relative to the resources

available, it is important in production, then, that the limited resources

be used efficiently in order to create the maximum possible welfare.

2. At a general level, all economies, irrespective of their organisation,

face the same basis decisions of what, how and for whom to produce, subject

to their production possibilities. In a mixed economy, such as the United

Kingdom, some production decisions are left to private enterprise and the

market mechanism whilst others are taken by the government: the production

by shoes for example, is the result of the decisions of private firms,

where as the quantity of hospital services or military tanks produced is

the result of political decisions.

3. The firm and its The total level of output in an economy is of

objective course, the sum of the outputs of all the individual firms.

It is important at the outset, therefore, to explain what is meant by a

firm

and to consider some of the main factors which motivates firms to produce

goods and services.

4. Definition: A, firm is a decision-making production unit which

transforms resources into goods and services which are ultimately bought by

customers, the government and other firms.

5. Traditional economic theory has assumed that the typical firm has a

single objective-to maximise its profit. No distinction is drawn between

the objective of a comer-store proprietor and that of the largest firm. The

modern theories of the firm, however, do acknowledge that firms may -have

other objectives, such as sales-revenue maximisation or the maximisation of

managerial utility.

6. Types of busi ness units. Consider now the legal status of the

differant,

types of firms in a western economy, such so the United Kingdom.

7. One-man business. In terms of numbers, the one-man business (or sole

proprietorship) is the most common type of firm. Typically it

is a small-scale operation employing the moat a handful of people. The

proprietor himself is normally in charge of the operation of the business,

with the effect that he is likely to be highly motivated as he benefits

directly from any increase in profits. As the one-man business is small it

can provide a personal service to its customers and can respond flexibly to

the requirements of the market. Decisions can be taken quickly as the owner

does not have to consult with any directors.

8. Disadvantages associated with a one-man business are that the owner

cannot specialise in particular functions but must Jack-of-all trades, and

the finance available for the expansion of the business is limited to that

which the owner himself can raise. An even bigger disadvantage is perhaps

that there is no legal distinction between the owner and his business: The

owner has, therefore, unlimited liability for any debts incurred by the

business, so that in the eventually bankruptcy all his assets (for example

his house and car) are liable to seizure.

9 One-man business as are common in retailing, fanning, building and

personal services, such as hairdressing.

10 PARTNERSHIP. The logical progression from a one-man business is to a

partnership. An ordinary partnership contains from two to twenty partners.

The main advantages over a one-man business are that more finance is likely

to be available the influx of partners, and that each partner may

specialise to some extent (for example, the marketing , production or

personnel functions). The major disadvantage, once again, is that of

unlimited liability. As each partner is able to commit the other partners

to agreements entered into, all of the others may suffer from the errors of

one unreliable or foolhardy partner.

I I Partnerships are oftcn found in the professions-for example, among

doctors, dentist, solicitors and architects, Ultimately, the upper limit on

the number of partners is likely to restrict the amount of finance

available to the partnership and so place a limit on its growth. This,

together with disadvantage of unlimited liability, means that many growing

business eventually form joint-stock companies.

12. JOINT-STOCK COMPANY, the Joint-stock company with limited liability

developed in the second halt of the nineteenth century. It helped to

promote the development of large companies by providing a relatively safe

vehicle for investment in industry and commerce by a wide cross-section of

the community. The liability of the shareholders is limited to the amount

they have subscribed to the firm capital and each shareholder knows the

extent of his potential loss it the company goes bankrupt. So make

information available to potential shareholders, all joint-stock companies

are required to file annually with the Registrar of Companies details of

their profits, turnover, assets and other relevant financial information,

such as the remuneration of the directors.

13. A joint-stock company can be either a private limited company or a

public limited company. The shares of a private cannot be offered for sale

to the public and thus are not traded on the Stock Exchange .The shares

cannot be transferred without the consent of the other shareholders.

Private companies require a minimum of two and a maximum of fifty

shareholders (or members), though the upper limit may be exceeded in the

case of employees or former employees of the company.

14. The shares of a PUBLIC company can be offered for sale to the public.

A public company requires as minimum of two shareholders, but there is no

upper limit. Shares are freely transferable and the company is required to

hold an annual general meeting where shareholders are able to question the

directors, to change the company's articles of association, to elect or

dismiss the board of directors, to sanction the payment of dividends, to

approve the choice auditors

and to fix their remuneration. In practice, attendance at annual general

meetings is low, and normally the approval of the director's

recommendations is a formality.

15. Although only about 3% of companies are public companies, most large

companies are public companies. Indeed, they account for about two-thirds

of the capital employed by all companies.

16. CO-OPERATIVES. In the'United Kingdom consumer co-operatives have been

successful since the first co-operative was formed at Rochdale in 1844. The

movement, which comprises a familiar section of the retail trade, is based

on consumer ownership and control, al-though there is a professional

management. In 1985 it was reported that there were 8,5 members of retail

cooperative societies in the United Kingdom.

17. Producer co-operatives, on, the other hand, have not generally been

successful and are not particularly significant in the United Kingdom. The

recession of the early 1980s, however, led to an upsurge in the number of

producer co-operatives. In many cases they sprang from on attempt by

workers to continue production and to maintain jobs after a parent company

had decided to close or to sell a plant. This type of co-operative is

sometimes referred to as "phoenix co-operative". The Co-operative

Development of producer cooperatives reported the existence of 911 producer

co-operatives with around 20000 members in 1984. In some other countries of

the EEC, such as France and Spain, producer co-operatives are of more

significance than in the United Kingdom.

18. PUBLIC CORPORATION. The public corporation is the form of enterprise

that has developed in the United Kingdom for those areas where the

government has decided to place production in the hands of the state.

Whilst there are early examples of the formation of public corporation,

such as the Port of London Authority (1909) and the British Broadcasting

Corporation (1927),Boat were formed in the period of the post-war Labour

government of 1945-51. The

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government appoints the chairman and the board of directors which is

responsible to a minister of the Crown for full filing the statutory

requirements for the public corporation aid down by Parliament. The

minister is supposed not to concern himself with the day-to-day running the

company.

19. Recent government policy has been to return state-owned enterprises to

the private sector. Privatisation is the word used when the ownership of a

state-owned asset is transferred to private individuals or companies.

20. Examples of privatisation include the sale of British Aerospace (51%

sold in 1981 and 49% 1985) and of British Telecom (51% sold in 1984).

Effective Communication

Effective communication is absolutely crucial to good management. You can't

get the best out of people unless you can communicate effectively with

them, and they with you.

It seems easy enough. All you have to do is to tell your subordinate what

you want him to do, and he gate on with it. A few words of encouragement or

criticism nay be needed, but that's all there is to it. If only it were so

simple. The manager has to consider three forms of communication , any of

which can cause him problems if he is not careful. They are:

• oral

• written

• non-verbal communication.

Oral communication

Speaking directly to someone in person, by telephone or via a television

link is the most common form of human communication. Oral communication is

instantaneous, allows great flexibility, and permits sentiment to be

combined with an intellectual message without difficulty. Effective oral

communication depends on a number of factors which can't always be taken

for granted. These are:

• language

• the style used

• the supporting signals

Language

If a manager was asked to take charge of a group of Chinese workers he

would probably expect to have a language problem since everyone knows that

apparently identical words can have very different meanings to people

living in different countries. If, on the other hand, the group comprised

his own countrymen he would assume a shared vocabulary. And terms of

ordinary words he would be right. The problem is that management includes

many complicated issues which require the use of specialised words. If both

parties don't share the same sense of what these words mean, the scope for

misunderstanding is considerable. As a result the manager's intentions are

often not fulfilled. This in turn causes him frustration and the employee

confusion, and perhaps a sense of Injustice.

It is only technical or abstruse language which causes the problems; It can

just easily happen with what would otherwise seem commonplace words. Any

new manager has to take particular care to explain his meaning since his

predecessor might well have used words in different nay. Some examples

serve to illustrate the point. The interpretations are not meant to be

typical-only what can happen.

|What the |What he means |What the |

|manager says | |employee may |

| | |think he means |

|If you have the|I want you to |You have the |

|time |do it right |choice |

| |away | |

|Finish it this |Even if you |You have until |

|evening |have stay late |5.30 |

|I'm |You've got to |This is |

|disappointed |improve or |friendly hint |

|with your work |you're fired | |

|We shall |You're in the |You've got the |

|certainly bear |running |job |

|in | | |

|mind | | |

|We shall have |You're fired |Take you time |

|to let you go | |to look around |

The list of opportunities for misunderstandly becomes immeasurably longer

when meetings are involved. Managers addressing a group of staff mixed by

seniority, age and sex have no tiptoe through a potential minefield of

confusion. If the issues are ones of personnel management, for example,

organisation, pay scales, working practices or whatever, they should take

great care the words they use.

Imagine such a meeting. The manager says: "I think we could be more

efficient if we combined order checking with computer logging so I've

decided to transfer Stan and Susan to Michael's section. I've asked Mike to

join the executive committee and he'll take responsibility for liaison with

the factory...

By saying, "we could more efficient", does he really mean that it's a

shambles at the moment? If so the staff presently involved may well find it

less than gratifying. The manager's decision to transfer Stan and Susan

sounds like a directive which doesn't involve any sort of consultation.

This may or may not be true, but the opportunity for misunderstanding is

there. Mike's joining the executive sounds like good news. The likely hood

is that the staff are either unsure about what its powers are or who is on

it anyway. What does liaison with the factory entail? Was someone already

doing the gob who has been given the elbow? And soon and so forth.

Things often get worse when question are asked the questioner may use

"insider" language which underlines his relationship with the manager. For

example, "Isn't the same trouble we had with Frank Barnes? No one else has

a clue who he was and the Manager has either to ask the questioner to

explain what be means or pass on quickly leaving an air of mystery in his

wake. Quest oners often use meetings to make implicit political points

about the organisation

and their own position within it. Some use the opportunity to score points

off the manager, if he allows it.

Whether the meeting is face to face or in a group .the manager has to bear

three principles in mind:

• he should always be prepared to explain what he means if he has any

reason to suspect that he's being misunderstood ;

• He should always be in control of the communications process when dealing

with subordinates and determine the vocabulary to be used ;

• he should strive to make his own use of language as clear and

unequivocal as possible. Telephone calls. .These too can hold pitfalls

because;

• you don't know what the other person is doing (or who he is with);

• you can't see his facial expression;

• it's very easy to mishear what he has said. There are few things worse

than giving instructions on a conference phone. Not only is the voice

disembodied, but the person receiving the call will suspect that is being

overhead. This discourages open response and mumbled ascent is often the

only reaction the caller receives. Obviously, a good deal of man management

is conducted on the telephone. Here are some simple rules which is sound

for a manager to follow :

• Be friendly-the recipient doesn't know if you're pleased or angry with

him at his ease straight way;

• Be dear-explain the purpose of your call including your Instructions (if

there are any) before asking for comment. This gives the recipient, time to

assimilate the whole message end not waste time by disgracing.

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