Production. Productivity. Product.

(1)A person or an enterprise that is economically productive creates economic value. Such a person or enterprise is constructive, that is, efficient. Productivity is a measure indicating how constructive or efficient a person, an operation, or an enterprise is. The most common way to measure productivity is as a ratio of output to input. A measure of productivity in a factory might be the amount of output for a single worker over a specified period of time, that is, output per labor hour. For an entire automobile factory, the number of cars produced in a day might be the measure of productivity.

(2)The production of goods is a more volatile business than the delivery of services. Production moves up and down depending on the state of the economy. When times get tough, consumers and businesses both defer their purchases of such products as cars, houses, machinery. Consumption of services, on the other hand, occurs more independently of the business cycle. Despite recessions, people still go the doctor, pay their insurance premiums, make telephone calls, burn electricity and go to the movies.

(3)The economy can be divided into two overall sectors: goods-producing businesses (manufacturing, agriculture, constructing, etc.) and service businesses (wholesale and retail trade, finance and insurance, transportation etc.) Since the end of World War II, the relative balance between these sectors has shifted. But the relationship between services and the production of goods is not a battle for dominance. The two sectors are complementary parts of a whole, both dependent on each other.

(4)The product a company offers to its market is not simply a can of cat food, a hotel room, or a charitable cause. Defining a product as a bundle of benefits stresses the satisfaction a product provides its consumers.Thus, it is a customer-oriented definition. It stresses what the buyer gets, not what the seller is selling. For example, a family visit at a Disney World Resort Hotel is more than a place to stay. It's sun and fun, relaxation and entertainment, and being a good parent.

(5)Every product has both primary characteristics and auxiliary dimensions. Primarycharacteristicsare basic features and aspects of the core product. The core productprovides the essential benefits common to most competitive offerings. Consumers expect a basic level of its performance. A half-inch drill is expected to operate to provide half-inch holes. Auxiliary dimensionsinclude special features, styling, color, package, warranty, repair service contract, reputation, brand name, instructions for use, and so on. Any of these features may be important to a particular buyer. However, effective marketing strategies emphasize certain benefits over others.

(6)Defining the product in terms of benefits allows a broad range of offerings. Practically everything ranging from tangi­ble items to services and ideas can be identified as products. Whether the company's offering is largely tangible (a car), intangible (financial counseling), or even more intangible (the idea of racial harmony), it is a product. Thus, a product includes all the tangible and intangible ben­efits a buyer might gain once he or she has purchased it.

(7)The transformation of inputs into outputs requires that some inputs perform operations that affect other inputs. Effective production requires that waste and pollution be minimized, that the goods or services be of high quality, and that a minimum of inputs be consumed (used up) in the process.

(8)Typically the production process is thought of as an input-transformation-output system. Inputs in the production system include the people who work for the company and collaborators such as consulting and engineering firms that provide useful services. Various materials, technology, and equipment used during the transformation stage are also important inputs.

(9)Productivity for the economy can be measured with average output per labor hour. Changes in productivity, seen by comparing the current year with past years, influence the cost of production of goods and services for the economy as a whole.

(10)Economists argue that a strong production sector is fundamental to a strong country. Production is the use of people, capital, and other resources (inputs) to convert raw materials into finished goods and services (outputs). Production management concerns the activities directly involved in producing the organization's goods or services. Both tangible goods and intangible services require the conversion of inputs into outputs.

Look through the text once again and say if the following statements are true or false. Correct the false ones.

1. Productivity is a measure of efficiency.

2. Products have only primary characteristics.

3. The delivery of services is more volatile business than the production of goods.

4. Consumption of services depends greatly on the business cycle.

5. Primary characteristics include special features, styling, colour, package, etc.

6. Only tangible items can be defined as products.

7. The production process is thought of as an input-transformation-output system.

8. Various materials, technology, and equipment are important outputs.

9. Changes in productivity do not influence the cost of production of goods and services.

Text 3

Read the following text. Analyze and compare the information given in two columns. Complete the table. You can use additional information from the text in Appendix G & S.

Basic Differences between Goods and Services

Products can be grouped in a variety of ways. One approach is to distinguish between goods and services, which differ in fundamental respects.

Although the distinction between goods and services is important, the line between the two types of products is often blurry. There is a continuum with pure goods, like toothpaste, on one end and pure services, like medical attention, on the other. In between lies a vast middle ground where goods and services are bundled to create a total package that satisfies the consumer. The mail-order-catalogue service is a typical example.

Text 4

Read the text. What title can you suggest? Explain what has influenced your decision.

The major issue in product design is selecting the characteristics and attributes a product will have. Engineers must consider several factors when designing new prod­ucts and services. It is difficult to range them according to their importance but among the first are producibility and cost. Producibility means the extent to which a product or service can be easily produced using existing facilities and processes. Costrefers to the value of all inputs used to produce the product or service, including raw materials, labor, plant and equipment overheads, and similar factors. Products that are less pro­ducible tend to cost more.

Perhaps the most talked about issue in the area of product design today is quality. Product quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. An important indicator of quality is a warranty for the product. Warranty is the producer’s statement of what it will do to compensate the buyer if the product is defective or does not work properly. Many sellers offer a guarantee instead of or in addition to a warranty. A guarantee is a promise that the product is as represented and will perform properly. Typically, if the product fails to perform, the organization making the guarantee replaces the product or refunds its cost. These promises imply that the manufacturer is confident in the product’s quality.

It is necessary to distinguish between grade and quality. Grade represents the addition or deletion of features or characteristics to satisfy additional needs, usually at a higher cost. Quality refers to satisfying customer requirements. Japanese manu­facturers have shown that high-quality goods and services are actually less costly to produce in the long run. This is because less scrap and rework are involved, and fewer purchases are returned by customers.

Styling (colour, shape, size and so on) is also very important for products ranging from tissue paper to office furniture. Styling should facilitate a product’s function. Nowadays product designers are increasingly emphasizing the human side of their products’ design – human factors engineering, or ergonomics. The last but not the least characteristic is materials that go into making a product. It is of great importance as it can affect a product’s sales appeal.

The product development process involves analysis of the marketplace, the buyer, the company’s capabilities, and the other economic potential of new product idea. For every one hundred generated ideas, only one or two salable products may emerge from the lengthy and expensive process of product development. As a rule, this process is both expensive and time-consuming.

The first step -- generating and screening of ideas -- is to come up with ideas that will satisfy unmet needs. From the mass of ideas, the company culls a few that appear to be worthy of further development. A product idea that survives the screening stage is subject to a business analysis. At this point the question is: Can the company make enough money on the product to justify the investment? To answer the question, companies forecast the probable sales of the product.

The next step is to create and test a few samples, or prototypes, of the product, including the packaging. During the product-testing stage, a small group of consumers actually uses the product, often in comparison tests with existing brands. If the results are good, the next step is test marketing. The company introduces the product in selected areas of the country and monitor consumer reactions.

The final stage of development is commercialization, the large-scale production and distribution of those products that have survived the testing process. This phase requires the coordination of many activities – manufacturing, packaging, distribution, pricing, and promotion.

Look through the text once again and answer the following questions:

1. What is the major issue in product design?

2. What are the main “ingredients” of product design?

3. Why is quality the most talked about issue in the area of product design?

4. What role does styling play in product design?

5. What are the steps of product development?

Text 5

Read the text. Be ready to explain what a product life cycle is, how many stages product passes through, the objectives of each stage.

Product Life Cycle

After launching a new product, the company is naturally eager to see it enjoy a long and profitable life. It is difficult to forecast how long the public will go on liking a product. Public tastes change very quickly. Even if a product is successful at first, this may not last for very long, as rival products may begin flooding the market or another manufacturer may produce a more advanced product. Few products last forever. Most go through a product life cycle, passing through four distinct stages in sales and earnings: introduction, growth, maturity, and decline.

The amount of time that elapses during any one of the stages depends on consumer needs and preferences, economic conditions, the nature of the product itself, and the manufacturer’s marketing strategy. A basic product that serves a real need is likely to show steady growth for quite a few years before leveling off. In contrast, some high-technology items and many fashions generally have relatively short life cycle.

The first stage in the product life cycle is the introductory stage, during which the producer tries to stimulate demand. Typically, this stage involves an expensive advertising and promotional campaign, plus research and development costs. Products in the introductory phase generally require large investments to cover the costs of developing the product, building distribution systems, and educating the public about the product’s benefits. The producer is not likely to make a great profit during this phase.

Next comes growth stage, marked by a rapid jump in sales – and, usually, in the number of competitors – as the introductory effort starts paying off. As the product enters the growth phase, competition increases and the war for market share begins, creating pressure to maintain large promotional budgets and reduce prices. This competitive warfare is expensive, and often the small, weak firms do not survive. The remaining participants divide the market, and competition diminishes.

During the maturity stage, sales begun to level off or show a slight decline in unit terms. This slowdown may result in overcapacity in the industry, prompting producers to cut prices. Nevertheless, mature products are a primary source of profits for most companies, since the maturity phase is typically the longest phase in the product life cycle.

Although maturity can be extended for many years, eventually most products enter the decline phase, when sales and profits begin to slip and eventually fade away. Declines occur for several reasons: changing demographics, shifts in popular taste, and advances in technology. When a product reaches this phase, the company must decide whether to remain in the game or discontinue the product and focus on newer items.

Text 6

Read the text. In each paragraph, find the topic phrase or sentence and those related and unrelated to it.

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