A measure of the
efficiency of a person, machine, factory, system, etc., in
converting inputs into useful outputs. Productivity
is a critical determinant of cost efficiency. Productivity is the combination of intelligent planning and focused
efforts.
4. Higher productivity results in a lower cost per unit
of output resulting in higher levels
of profit for a company. Thus, it refers to efficient utilization of resources.
A factory worker can produce 10 items in an hour and
he subsequently produces 20 units in the same hour after some training. His
productivity has doubled and the business will benefit from a fall in unit cost
as more units are being produces at the same costs of production.
1. If inputs remain the same and the production of
output increases, then there is a rise in the level of productivity.
2. If the output rises in a greater proportion than the
increase in the input, there is still a proportionate rise in the level of
productivity.
3. However, if
the output rises at a lower rate than the input, then there will be a fall in
the productivity, even though there is an increase in production on the whole.
4. Higher productivity results in a lower cost per unit
of output resulting in higher levels
of profit for a company. Thus, it refers to efficient utilization of resources.
5. High
productivity increases the economic well-being. It increases the income and the
standard of living of the people. It brings in money for the company.
Importance of Productivity
1.
Productivity
increases output.
2.
High
productivity results in lower cost per unit of output resulting in higher
levels of profit for a business.
For example,
Higher
profits for the firm will mean more funds available for its expansion, new
business ventures and community support. It may also wish to pass on the
benefits of lower costs to consumers in the form of lower prices
The Importance of Productivity in Business
The
importance of productivity in business can be summarized as follows.
- Enhanced production lowers the cost per unit of a product which in turn, results in lower prices for better quality, which enhances a business.
- If the rates are competitive, the business is in a better position to attract more customers and make more sales. This is the primary motive of any business organization.
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