External Constraints on Production
Businesses face production constraints they can't control, because they're external. These might include:
- Market size: For example, there's no point in producing 1000 units if you know that last year there were only 300 sold in the whole of the market.
- Supply chain: A business must be aware of what its suppliers are capable of supplying them with. For example, there's no point in filling 2000 bottles with cola if your supplier can only provide you with 1000 bottle tops.
- Competition: No business operates in isolation - everyone's got competitors, and each business must keep an eye on what the competition is doing. Competitor actions may affect the number of units that need to be product, or what product needs to be produced.
- The law: Some aspects of production are controlled by law.
- Public relations: Businesses try to avoid doing things that'll give them a bad press. Environmental damage, or ethical problems such as the use of child labour or testing on animals can give a business a bad name.
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Ethics and Production
- A firm looking to reduce costs as much as possible would use the cheapest labour possible and make sure its workers worked the longest hours possible, with the least possible health and safety and employment rights. Moving production to some less economically developed countries (LEDCs) can achieve this.
- This kind of behaviour is often seen to be unethical, which can affect a company's image. For this reason, most companies try to behave ethically, e.g. by paying fair wages and investing in measures to improve health and safety, even though it might make production more expensive.
- Ethical considerations aren't limited to production in LEDCs. Switching to 24-hour production could be seen as forcing workers to accept non-family-friendly night shifts.
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