Preview Cambridge O Level Commerce

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2 Specialisation and Division of Labour

Specialisation and Division of Labour Learning Objectives In this chapter you will cover: 1 the meaning and use of the terms specialisation and division of labour.

2 forms of specialisation such as by country, by region, by town, by firm, by factory and by individual.

3 the advantages and disadvantages of division of labour to a manufacturer and a worker.

Introduction

Trade and Specialisations Specialisation Specialisation has not always existed. In early times, most families satisfied their own individual needs themselves and were self-sufficient. Nowadays most people earn their livings by specialising or by concentrating on one particular kind of work. These specialists produce surpluses that they sell themselves or find someone else to sell for them. They earn money by selling these surpluses.

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Specialisation can take place at several levels.

1 At a regional level – specialisation by a number of countries This occurs when an area or region covering a number of countries is able to produce large quantities of particular products often from natural resources.

• Gulf states – e.g. Saudi Arabia, Abu Dhabi, Qatar, Iraq – are rich in oil.

• Southern Africa – e.g. South Africa, Botswana, Zimbabwe and Zambia – has large deposits of diamonds, gold, copper and coal.

2 At a national level – specialisation by country Many countries are well known for particular industries. They specialise in what they do best or most economically. This is called comparative advantage. The workforce develops specialist expertise and so achieves greater output. Any surpluses that may be created are exported to buy goods and services the country lacks.

For example:

Specialisation may be described as the tendency for people to concentrate on what they do best. In an industrial or commercial setting, it is the dividing up of productive activities with people doing the same job over and over again.

This money is then used to buy the goods and services the specialists themselves need. These goods and services are produced by other people who in turn sell to them.

So specialisation has led to trade.

As trade has expanded, specialisation has increased.

Levels of Specialisation

Figure 2.1 Specialisation and trade

Country

Specialism

Japan

Cars and electronics

Switzerland

Watches

Brazil

Coffee

New Zealand

Lamb and dairy products

Singapore and Hong Kong

Re-export of trade, and handling containers

Mauritius and Maldives

Tourist industries

All these countries can then use the foreign currency earned from the sale of these products or services to buy what they need and are not able to produce themselves.

As a result of specialisation at a national level, many countries are now dependent on other countries for the raw materials they require to manufacture finished goods. They, in turn, need to dispose of surpluses of goods to countries where they

are needed. This interdependence and growing specialisation has resulted in more trade. It also means that countries must maintain friendly relations with one another so that they can buy and sell to each other.

3 Specialisation within a country either at a regional level or a particular city or town Certain parts of a country concentrate on producing certain products or services. This may be because a particular region has certain natural resources such as mineral deposits, climate, soil or geographical position.

• The Bordeaux region of France is well known for its wine production.

• The area around Stoke on Trent, UK, is famous for its china and pottery industry.

• Madeira produces flowers and plants because of its climate and soil.

4 Specialisation by firms and factories Many companies or factories specialise in particular products.

Within an industry (e.g. food), one company may specialise in producing chocolates, another company may make processed food and ready-made meals.

Within one company, individual factories may make particular components, which are then assembled at another factory. For example, within a car manufacturer’s business, one factory may specialise in making body panels, another may produce bumpers and another may manufacture the windscreens. Batteries and tyres are bought from other companies specialising in making these components. All these parts and many other components are assembled to make the complete car in yet another factory.

5 Specialisation in the workplace (i.e. specialisation by process) The productive activity is broken down so that each individual performs a particular task or process.

This breaking up of the whole production job into a number of smaller tasks is known as division of labour. The product is made on an assembly line and the product moves rather than the workers. As the product moves slowly along the line each worker performs a particular task and the finished article at

3

2

2 Specialisation and Division of Labour

Specialisation and Division of Labour Learning Objectives In this chapter you will cover: 1 the meaning and use of the terms specialisation and division of labour.

2 forms of specialisation such as by country, by region, by town, by firm, by factory and by individual.

3 the advantages and disadvantages of division of labour to a manufacturer and a worker.

Introduction

Trade and Specialisations Specialisation Specialisation has not always existed. In early times, most families satisfied their own individual needs themselves and were self-sufficient. Nowadays most people earn their livings by specialising or by concentrating on one particular kind of work. These specialists produce surpluses that they sell themselves or find someone else to sell for them. They earn money by selling these surpluses.

2

Specialisation can take place at several levels.

1 At a regional level – specialisation by a number of countries This occurs when an area or region covering a number of countries is able to produce large quantities of particular products often from natural resources.

• Gulf states – e.g. Saudi Arabia, Abu Dhabi, Qatar, Iraq – are rich in oil.

• Southern Africa – e.g. South Africa, Botswana, Zimbabwe and Zambia – has large deposits of diamonds, gold, copper and coal.

2 At a national level – specialisation by country Many countries are well known for particular industries. They specialise in what they do best or most economically. This is called comparative advantage. The workforce develops specialist expertise and so achieves greater output. Any surpluses that may be created are exported to buy goods and services the country lacks.

For example:

Specialisation may be described as the tendency for people to concentrate on what they do best. In an industrial or commercial setting, it is the dividing up of productive activities with people doing the same job over and over again.

This money is then used to buy the goods and services the specialists themselves need. These goods and services are produced by other people who in turn sell to them.

So specialisation has led to trade.

As trade has expanded, specialisation has increased.

Levels of Specialisation

Figure 2.1 Specialisation and trade

Country

Specialism

Japan

Cars and electronics

Switzerland

Watches

Brazil

Coffee

New Zealand

Lamb and dairy products

Singapore and Hong Kong

Re-export of trade, and handling containers

Mauritius and Maldives

Tourist industries

All these countries can then use the foreign currency earned from the sale of these products or services to buy what they need and are not able to produce themselves.

As a result of specialisation at a national level, many countries are now dependent on other countries for the raw materials they require to manufacture finished goods. They, in turn, need to dispose of surpluses of goods to countries where they

are needed. This interdependence and growing specialisation has resulted in more trade. It also means that countries must maintain friendly relations with one another so that they can buy and sell to each other.

3 Specialisation within a country either at a regional level or a particular city or town Certain parts of a country concentrate on producing certain products or services. This may be because a particular region has certain natural resources such as mineral deposits, climate, soil or geographical position.

• The Bordeaux region of France is well known for its wine production.

• The area around Stoke on Trent, UK, is famous for its china and pottery industry.

• Madeira produces flowers and plants because of its climate and soil.

4 Specialisation by firms and factories Many companies or factories specialise in particular products.

Within an industry (e.g. food), one company may specialise in producing chocolates, another company may make processed food and ready-made meals.

Within one company, individual factories may make particular components, which are then assembled at another factory. For example, within a car manufacturer’s business, one factory may specialise in making body panels, another may produce bumpers and another may manufacture the windscreens. Batteries and tyres are bought from other companies specialising in making these components. All these parts and many other components are assembled to make the complete car in yet another factory.

5 Specialisation in the workplace (i.e. specialisation by process) The productive activity is broken down so that each individual performs a particular task or process.

This breaking up of the whole production job into a number of smaller tasks is known as division of labour. The product is made on an assembly line and the product moves rather than the workers. As the product moves slowly along the line each worker performs a particular task and the finished article at

3

2 Specialisation and Division of Labour

2 Specialisation and Division of Labour

the end of the assembly line is the combined effort of many workers.

• It enables the manufacturer to take advantage of division of labour.

Disadvantages of specialisation to a manufacturer using mass production methods

Division of labour is most suitable in factories where production is in very large quantities – called mass production – often where durable consumer goods such as cars, electronics, televisions and domestic appliances such as cookers are made. Specialisation in factories has been made possible by the simplification and standardisation of goods.

• It increases output of standardised products at lower costs.

• Boredom among the workforce may lead to mistakes, industrial unrest or lack of quality. To overcome this, workers are often switched from job to job.

• Simplification means making a product as simple and functional as possible.

• It saves time and enables large quantities of the same thing to be made.

• Standardisation is making products all alike or making parts so that they can be used in several different products.

• It may lead to increased efficiency as new and better techniques are introduced.

• It makes greater use of machinery, technology and robotics – these are automated systems.

• It reduces the need for labour and so reduces labour costs.

• It means that the workers are easier to train and so there is a reduction in training costs.

• Less time is wasted by workers moving from job to job.

Fig. 2.2 Part of the assembly line for a car 6 Specialisation by occupation Individual people may also specialise and become known for their particular skills. People making made-to-measure clothing in small premises in cities in Africa and parts of Asia make the whole product, but specialise in that type of work. Professional people such as teachers or doctors specialise in these occupations.

Specialisation enables individual workers to concentrate on jobs for which they are most suited.

A doctor can develop skills without needing to worry about producing food or clothing. The other people who make the food and clothing will make use of the doctor’s skills when needed.

Advantages and disadvantages of specialisation Advantages of specialisation to a manufacturer using mass production methods • It enables the manufacturer to concentrate on one product.

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• Tasks are often simple so it is possible to employ people who do not have qualifications and so may be paid less.

• Industrial problems may arise as factories become larger and there is a greater separation of managers and workers. People doing a small task in a large factory may feel isolated and so morale will suffer.

• Workers become interdependent. Each part of the factory depends on the performance of other parts of the factory. No single worker makes the whole product. If one process is slowed down because a machine breaks down or workers are absent, a bottleneck may be created further along the assembly line and ultimately production stops.

Advantages of specialisation/division of labour to the individual worker

• Instability of employment – workers in one industry are often dependent on the workers of another industry. If there is a prolonged stoppage in the electricity power industry, many workers in industries dependent on electrical power may be out of work.

Advantages of specialisation to the consumer The production of standardised products means reduced costs and so lower prices. This may mean more goods are affordable, leading to a higher standard of living for many people.

Disadvantages of specialisation to the consumer Output becomes standardised. The choice of goods may be reduced unless consumers are willing to pay high prices for a custom-built product. Whether or not standardisation is really a disadvantage is a matter of opinion. After all consumers can pay extra for things such as houses built to their own particular requirements.

• By doing the same job repeatedly, the worker should become more skilled and may

Limits to specialisation

• It increases the skill of the workforce in one particular aspect of production.

work at a greater speed. This may be rewarded by higher pay.

The extent to which specialisation may take place may be dependent upon:

• It allows the manufacturer to take advantage of economies of scale.

• There may be a reduction in manual effort as more machinery is used.

• People’s ability to exchange what they make for what they need using money.

Economies of scale are known as the benefits of size.

Larger firms may be more efficient in terms of costs than small firms as they are able to operate on a large scale.

The unit costs of a large firm – the costs of making one article – are therefore lower. They may be more efficient in terms of purchasing economies as they can purchase raw materials in bulk and so obtain greater discounts than if they were buying in small quantities. They may be more efficient in terms of technological economies – they can afford to buy the latest machinery and introduce automated and computerised systems into their factories.

• Workers may become more mobile as they can be employed in a variety of workplaces where tasks are simple and easy to learn.

• The extent of the market. If a market is very large (e.g, the ready-to-wear clothing market), then mass production using division of labour can take place.

On the other hand, haute couture fashion serves a very limited market where there is limited demand for unique, very expensive items of clothing.

They may be able to take advantage of managerial economies – employ specialist managers to manage particular functions within the company. They may take advantage of commercial economies such as advertising on a national scale or being able to afford to own their own delivery vehicles.

• Reduction in skill, making it difficult to transfer to other jobs.

• Jobs take less time to learn and so people may be less reluctant to train for a new job.

Disadvantages of specialisation/division of labour to the individual worker • Boredom leading to loss of quality and lower output.

• Unemployment – some skills are no longer required.

• Good transport facilities for the distribution of goods.

Without good roads, it would be pointless for a company to mass produce hundreds of pairs of shoes if the company is unable to transport them to buyers.

Developments in air and sea transport have made it possible to distribute goods in an international market and so the demand for mass produced goods has increased.

• Less pride in the job and less job satisfaction as a worker is no longer responsible for making the product as a whole.

• Less variety of jobs. Workers no longer feel valued as they are doing only one part of the total job.

5

2 Specialisation and Division of Labour

2 Specialisation and Division of Labour

the end of the assembly line is the combined effort of many workers.

• It enables the manufacturer to take advantage of division of labour.

Disadvantages of specialisation to a manufacturer using mass production methods

Division of labour is most suitable in factories where production is in very large quantities – called mass production – often where durable consumer goods such as cars, electronics, televisions and domestic appliances such as cookers are made. Specialisation in factories has been made possible by the simplification and standardisation of goods.

• It increases output of standardised products at lower costs.

• Boredom among the workforce may lead to mistakes, industrial unrest or lack of quality. To overcome this, workers are often switched from job to job.

• Simplification means making a product as simple and functional as possible.

• It saves time and enables large quantities of the same thing to be made.

• Standardisation is making products all alike or making parts so that they can be used in several different products.

• It may lead to increased efficiency as new and better techniques are introduced.

• It makes greater use of machinery, technology and robotics – these are automated systems.

• It reduces the need for labour and so reduces labour costs.

• It means that the workers are easier to train and so there is a reduction in training costs.

• Less time is wasted by workers moving from job to job.

Fig. 2.2 Part of the assembly line for a car 6 Specialisation by occupation Individual people may also specialise and become known for their particular skills. People making made-to-measure clothing in small premises in cities in Africa and parts of Asia make the whole product, but specialise in that type of work. Professional people such as teachers or doctors specialise in these occupations.

Specialisation enables individual workers to concentrate on jobs for which they are most suited.

A doctor can develop skills without needing to worry about producing food or clothing. The other people who make the food and clothing will make use of the doctor’s skills when needed.

Advantages and disadvantages of specialisation Advantages of specialisation to a manufacturer using mass production methods • It enables the manufacturer to concentrate on one product.

4

• Tasks are often simple so it is possible to employ people who do not have qualifications and so may be paid less.

• Industrial problems may arise as factories become larger and there is a greater separation of managers and workers. People doing a small task in a large factory may feel isolated and so morale will suffer.

• Workers become interdependent. Each part of the factory depends on the performance of other parts of the factory. No single worker makes the whole product. If one process is slowed down because a machine breaks down or workers are absent, a bottleneck may be created further along the assembly line and ultimately production stops.

Advantages of specialisation/division of labour to the individual worker

• Instability of employment – workers in one industry are often dependent on the workers of another industry. If there is a prolonged stoppage in the electricity power industry, many workers in industries dependent on electrical power may be out of work.

Advantages of specialisation to the consumer The production of standardised products means reduced costs and so lower prices. This may mean more goods are affordable, leading to a higher standard of living for many people.

Disadvantages of specialisation to the consumer Output becomes standardised. The choice of goods may be reduced unless consumers are willing to pay high prices for a custom-built product. Whether or not standardisation is really a disadvantage is a matter of opinion. After all consumers can pay extra for things such as houses built to their own particular requirements.

• By doing the same job repeatedly, the worker should become more skilled and may

Limits to specialisation

• It increases the skill of the workforce in one particular aspect of production.

work at a greater speed. This may be rewarded by higher pay.

The extent to which specialisation may take place may be dependent upon:

• It allows the manufacturer to take advantage of economies of scale.

• There may be a reduction in manual effort as more machinery is used.

• People’s ability to exchange what they make for what they need using money.

Economies of scale are known as the benefits of size.

Larger firms may be more efficient in terms of costs than small firms as they are able to operate on a large scale.

The unit costs of a large firm – the costs of making one article – are therefore lower. They may be more efficient in terms of purchasing economies as they can purchase raw materials in bulk and so obtain greater discounts than if they were buying in small quantities. They may be more efficient in terms of technological economies – they can afford to buy the latest machinery and introduce automated and computerised systems into their factories.

• Workers may become more mobile as they can be employed in a variety of workplaces where tasks are simple and easy to learn.

• The extent of the market. If a market is very large (e.g, the ready-to-wear clothing market), then mass production using division of labour can take place.

On the other hand, haute couture fashion serves a very limited market where there is limited demand for unique, very expensive items of clothing.

They may be able to take advantage of managerial economies – employ specialist managers to manage particular functions within the company. They may take advantage of commercial economies such as advertising on a national scale or being able to afford to own their own delivery vehicles.

• Reduction in skill, making it difficult to transfer to other jobs.

• Jobs take less time to learn and so people may be less reluctant to train for a new job.

Disadvantages of specialisation/division of labour to the individual worker • Boredom leading to loss of quality and lower output.

• Unemployment – some skills are no longer required.

• Good transport facilities for the distribution of goods.

Without good roads, it would be pointless for a company to mass produce hundreds of pairs of shoes if the company is unable to transport them to buyers.

Developments in air and sea transport have made it possible to distribute goods in an international market and so the demand for mass produced goods has increased.

• Less pride in the job and less job satisfaction as a worker is no longer responsible for making the product as a whole.

• Less variety of jobs. Workers no longer feel valued as they are doing only one part of the total job.

5

2 Specialisation and Division of Labour

Summary points

2 Specialisation and Division of Labour

2 Separate operations make up a single production process. What is this called? a automation b commercial activity c manufacturing d mass production

• Specialisation is the tendency of people to concentrate on what they do best.

• Specialisation takes place in a number of ways – by region, by country, by town or city, by industry, by factory, by individual person.

• Trade and specialisation are linked. Without the ability to trade what is produced, specialisation cannot take place.

3 Specialisation by process would describe the work of a a b c d

• Specialisation in the workplace is specialisation by process.

• Division of labour means breaking down production so that each individual performs a separate task.

• Specialisation allows manufacturers to take advantage of economies of scale.

Practice questions

4 Why has the use of specialisation led to an increase in production? a b c d

a b c d

1 Explain the benefits of specialisation to Martha, a doctor specialising in eye surgery.

(Adapted from Cambridge Ordinary Level Commerce 7100/22, Question 1, October/ November 2012)

3 George and Margaret have opened a shop selling and repairing computers. George and Margaret specialise in different areas of the business. Which two of the statements listed below are advantages of specialisation for them: a b c d

Division of labour can be introduced.

George and Margaret will become more skilled in all areas of the business.

Profits of the business will increase.

The output of the business will increase.

More machinery can be used.

Skilled workers need to be employed.

Workers become independent of each other.

Workers need long periods of training.

5 A company is mass producing for the first time. What will it need?

Short Answer Questions

2 Explain the link between specialisation and comparative advantage.

doctor in a hospital. farmer growing crops. mechanic repairing a car in a garage. welder working on an assembly line.

a larger market for its goods less fixed capital many different goods to produce in small quantities more workers for each unit of production

Essays and Long Answer Questions 1 Explain how specialisation depends on trade and aids to trade.

2 Cam Tools manufactures spades and other garden tools.

Assess the arguments for and against the use of division of labour in the manufacture of spades and other garden tools. Should Cam Tools use division of labour? Give reasons for your answer. (Cambridge Ordinary Level Commerce 7100/21, Question 1, October/ November 2014)

4 Name two industries where specialisation may take place.

5 Explain why companies who mass produce are able to make use of machinery and technology.

Multiple Choice Questions 1 Which of the following is specialisation in a factory? a b c d

10

dividing work into a number of tasks doing the same job over and over again producing large quantities of different goods using machines instead of people to produce goods

11

2 Specialisation and Division of Labour

Summary points

2 Specialisation and Division of Labour

2 Separate operations make up a single production process. What is this called? a automation b commercial activity c manufacturing d mass production

• Specialisation is the tendency of people to concentrate on what they do best.

• Specialisation takes place in a number of ways – by region, by country, by town or city, by industry, by factory, by individual person.

• Trade and specialisation are linked. Without the ability to trade what is produced, specialisation cannot take place.

3 Specialisation by process would describe the work of a a b c d

• Specialisation in the workplace is specialisation by process.

• Division of labour means breaking down production so that each individual performs a separate task.

• Specialisation allows manufacturers to take advantage of economies of scale.

Practice questions

4 Why has the use of specialisation led to an increase in production? a b c d

a b c d

1 Explain the benefits of specialisation to Martha, a doctor specialising in eye surgery.

(Adapted from Cambridge Ordinary Level Commerce 7100/22, Question 1, October/ November 2012)

3 George and Margaret have opened a shop selling and repairing computers. George and Margaret specialise in different areas of the business. Which two of the statements listed below are advantages of specialisation for them: a b c d

Division of labour can be introduced.

George and Margaret will become more skilled in all areas of the business.

Profits of the business will increase.

The output of the business will increase.

More machinery can be used.

Skilled workers need to be employed.

Workers become independent of each other.

Workers need long periods of training.

5 A company is mass producing for the first time. What will it need?

Short Answer Questions

2 Explain the link between specialisation and comparative advantage.

doctor in a hospital. farmer growing crops. mechanic repairing a car in a garage. welder working on an assembly line.

a larger market for its goods less fixed capital many different goods to produce in small quantities more workers for each unit of production

Essays and Long Answer Questions 1 Explain how specialisation depends on trade and aids to trade.

2 Cam Tools manufactures spades and other garden tools.

Assess the arguments for and against the use of division of labour in the manufacture of spades and other garden tools. Should Cam Tools use division of labour? Give reasons for your answer. (Cambridge Ordinary Level Commerce 7100/21, Question 1, October/ November 2014)

4 Name two industries where specialisation may take place.

5 Explain why companies who mass produce are able to make use of machinery and technology.

Multiple Choice Questions 1 Which of the following is specialisation in a factory? a b c d

10

dividing work into a number of tasks doing the same job over and over again producing large quantities of different goods using machines instead of people to produce goods

11