Economics (522)

Assignment 2
(Pricing Factor of Production)
Name: Asifa Nazir
Roll Number: W-583956
Session: 2007
Submitted to: Mr. M. Siddique

Allama Iqbal Open University Islamabad

(Department of Business Administration)
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Acknowledgment

First of all, I am thankful of Almighty Allah whose grace alone brings success and
accomplishment.

I am very thankful to Miss Asma, head of the department (HRM), Packages Ltd and Mr.
Ahsan Feroz, head of CPD. She has been very cooperative throughout my assignment.

I am thankful to my tutor Mr. M. Siddique and Brig. (R) M. Zubair who always
encouraged me and gave me confidence to go and work with responsibility.

Asifa Nazir
Roll No. W-583956
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Introduction

As packages names indicates that it has packaging business. It is only

organization in Pakistan who has such large scale packaging business.
Packages established in 1957 as a joint venture between Ali groups of
Pakistan and Akerland & Rausing of Sweden to convert paper and
board into packing for consumer industry.

Over the year, the company continued to enhance its failure to meet
the growing demand of packing products, additional capital raised from
sponsor international finance corporation and from the public in 1965.

Packages commissioned its own paper mill in 1968 having production

capacity of 24,000 tones of paper and paper board on waste paper and
agriculture by products i.e. wheat straw and river grass. With growing
demand the capacity was increased periodically and 1996 reached
6500 tones per year.

Since 1982 packages limited has venture with tetra pack international.
Tetra Pak limited to manufacture paper of liquid food of packing and to
market Tetra packing equipment. Packages limited own 62% of this
company. In 1999-2000 packages has successfully completed the
expansion of the flexile packaging by installation of new rotofiavure
printing machine. Printing and cutting machine are in production since
December 1999.
Packages has no big competitors in market.

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Mission Statement

To be lead in market we serve by providing quality products and

superior services to our customers while learning from their feedback
to set even higher standard for products.

To be a company that continuously enhances its superior technologies

competeness to provide innovation solutions to customer needs.

To be a company that attracts and retains outstanding people by

creating culture and fastness openers and innovation promotes
individual growths and reward initiative and performance.

To be a company this combines its people and technology

management system and market opportunities to achieve portfolio
while providing fair returns to its investors.

To be that endorses to set the highest standard in corporate ethics in

serving the society.

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TOPIC
Pricing Factors of
Production
Production Unit:
Production unit is a unit where the four factors of production (i.e. Land,
Labor, Capital and Organization) are combined to produce a good or
service is known as a production unit. The factors of production are
organized by the entrepreneur. Production unit is called factory
whether big or small in size and scale.

Factors of Production:
Land:
Literally land would mean soil. But in economics land refers to all the
natural resources that are available and which may be used to yield an
income e.g. soil, mountain, forest etc. Wicksell has defined land as:
External natural forces at the service of man, is land Land is
therefore, conventionally classified as a separate factor of production.

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Characteristics of Land:
1. Supply is Fixed:
Land is limited although it has alternative uses. It
supply
remains the same even if the price for it in the
market rises or fall sharply. If, however, we are considering
the supply of land
for some particular use, the stick
limitation on supply is not applicable. The amount of land
used for-growing wheat can be increased by growing less
of some other crop.
2. Gift of Nature
Land is something that is already there. It can not be
produced nor can it be destroyed. It has been available for
thousands of
centuries and was lying useless until man
brought it into his use.
3. Different Characteristics
Not all the land is suitable for production. Only the
land having
specific characteristics is useful e.g. the
desert is of no use
because no production can be done
on it.
4. Mobility of Land is Impossible
Land cannot be moved from one place to another.
However, its
ownership can be transferred.

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Labor:
In the words of Marshall, Any exertion of mind or body undergone
partly or wholly with a view to some good other than the pleasure
derived directly from the work, is called labor. Basically labor is any
form of mental or physical work, done for the sake of rewards, directed
towards the production of goods and services.
Characteristics of Labor:
1. Labor and Laborer are inseparable from each
other:
In order for labor to be done, there must be a laborer
to do it.
Likewise, there is a laborer when labor is to be
done.
2. Unidentical Laborers:
There are different categories of labor e.g. teaching is
a
profession as it is a form of labor and so is factory
working. However, they are different in the sense that
they different
kinds of mental or physical work.
3. Labor can be wasted:
A laborer, sitting idle, doing nothing is wasting time
and is
wasting his own resources. This is wastage of
labor.
4. Labor has a weak bargaining position:
Laborers are controlled by superiors. They do not have
nay word of authority except to just follow orders, unless
trade unions are
formed to bargain with superiors.
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5. Rapid change in supply of labor is impossible:

Supply of labor depends on the population. It cannot
increase nor can it be reduced at once. It takes some time
for a change in the supply of labor to occur.

6. Inverse correlation of supply of labor and wage

rate:
Increase in the supply of labor results in a reduction of
wages
and vice versa. The fewer the number of labor
the better will be
the wages. Although this cannot be
regarded a general rule.
7. Mobility of Labor is Limited:
Change of profession, place or grade of labor is limited
due to
certain factors, such as culture, transport etc.
Efficiency of Labor:
This is the working capacity of the laborer i.e. his efficiency, being
give the same time limit and given the same type of work.
Factors Determining Efficiency of Labor:
1. Climatic Conditions:
Cold weather is a vital factor for the increase of
efficiency in labor e.g., Western countries such as America,
England. etc have progressed in modern technology while
countries with moderate climate are still being in the field of
technology which include the countries of Asia and Africa.
2. Personal Characteristics:

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Sometimes there are certain build in personal

characteristics of individuals which affect their efficiency.
For example, a man having a higher IQ will be more efficient
than the one with lower IQ. Similarly incase of manual work
a well-built worker will be more efficient than a weaker one.

3. Education and Training:

General and technical exposure is essential in
increasing in the efficiency of labor. A laborer with sound
technical training will be more effective than the one which
lacks these qualities. The modern industry requires high
skilled laborer.
4. Wages and Fringe Benefits:
Reasonable allowances, bonuses, leave, etc. increase
the efficiency of labor. A laborer with sound technical
training will be more effective than the one which lack these
qualities. The modern industry requires highly skilled
laborers.
5. Working Environment:
A well kept place leads to healthy and efficient labor.
On the other hand, a dark, cold and cheerless workshop will
not encourage industrious and careful effort. The efficiency
of labor is very much influenced by the conditions under
which labor is carried out.
6. Nature of cooperating factors of production:
A good combination of the other three factors of
production would increase the efficiency of labor. The
quality of the other factors (land and capital) with which
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labor has to work is an important determinant of labors

efficiency.

Capital:
Definition of capital can be divided into two parts, i.e. capital in the real
sense and capital in the money sense. In the real sense capital consists
of those gfoods which are used to produce more goods, i.e. machinery,
buildings, etc. whereas in the money sense, capital is that part of
income which is saved and borrowed for investment, e.g. loans from
banks etc.
Kinds of Capital:
1. Fixed and Circulating Capital
Fixed capital consists of the equipment used to
increase production, e.g. machinery. It is fixed capital that
does not change its form in the course of production.
Circulating capital is, for example, raw material. It is a form
of capital that can lead to a return when fully manufactured.
Materials are changed into finished goods which are then
exchanged for money and this on turn is used to buy more
circulating capital.
2. Sunk and Floating Capital
Sunk capital is, for example, where firms or industries can
only produce one type of good or product, e.g. a soap firm,
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a shampoo industry etc. Floating capital is that capital

which goes through different kinds of processes. These are
of many types, e.g. fuel, raw material etc.

Entrepreneurship:
This is the main factor of production. Without it work cannot be
initiated. An entrepreneur is the one who combines the four
factors of production to produce goods and services.

Functions:
1. Planning of Business: The first task of an entrepreneur is
the plan the business keeping in mind the availability of
funds and existence of the market.
2. Suitable Combination of the four factors of
Production: Naturally the most desirable combination of
the factors of production is the least cost of combination of
the four factors of the production. If the entrepreneurs
detect the one factor costs more than the other, it would be
advisable for him to replace the former with the latter.
3. Responsibility for sales of Production: This is done by
advertising and copyrights, etc.
4. Faces Uncertainties of Future: Various risks have to be
faced and taken, in order to improve business.
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5. Efficient Administration: Highly qualified executives

should be employed. People with a background in business
and economics are essential for the business. They should
be paid highly so that they woek with honesty and
efficiency.
6. Distribution of Rewards to the four factors: This is
done when the entrepreneurs pays the rewards in the form
of rent, interest, wages and profit to the various factors of
production including him.
7. Responsible For Profit and Loses: The profits of the
company are equally faced by the entrepreneurs. They are
the only ones responsible for the profit and loss of the
business as they are the ones who take decisions.

Different Forms of Business Organizations:

There are many types of entrepreneurship. In the following
we have
listed five most important types of it:
a. Sole Proprietorship
b. Partnership
c. Joint Stock Company
d. Cooperatives
e. State Enterprise.

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Three types of Production Prices:

Most Marxists missed the fact that Marx identified (though not
often
and not very clearly) three main types of
production prices:
1. The private or enterprise production price. This price equals
the cost-price and profit applying to the new output of a specific
enterprise when this output is sold by the enterprise.
2. The sect oral production price. This price equals the average
cost-price and average profit applying to the output of a specific
sector or branch of production (at producers market prices).
3. The economic production price. This price equals the average
cost-price and average profit of an output at the point of sale to
the final consumer, including labor-value contributed by all the
different enterprises participating in its production (factory,
storage, transport, packaging etc).

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Data Collection & Analysis

CPD (Consumer Product Division)
Packages Ltd., CPD deals with the three brands of consumer product,
related to paper products, personal hygines products and tissue
products. When we talk about the production factors included in the
workflow of Packages Ltd. We will divided them as follows:

1. Land:
As land, refers those natural products which give benefits in
production of products. The products of Packages Ltd. highly
require wood material for their paper and tissue products, and
cotton for female hygiene product i.e. Feminix. These resources
are bought by different producers of those specific products.

2. Labor:

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Labor, in any organization, refers to those individuals

that contribute their services either mentally or physically.
Packages Ltd. has a trained and skilled staff in all areas of
production, distribution, marketing etc. Also, they give
training to their labors and laborers in order to enhance their
skill level.
3. Capital:
Here, we will discuss the Fixed capital, that consists of the
equipment used to increase production, e.g. machinery.
Packages Ltd. have up-to-dated machineries to produce
their products in order to compete both national and
international markets, imported majorly from Itlay.
Circulating capital is, for example, raw material, is bought
from different producers in order to produce their products.

4. Entrepreneurship:
Management of Packages Ltd. is highly organized and skilled
and is very efficient in planning about their business,
managing the combination of the four factors of production i.e.
Land, Labor, Capital and Organization. Responsibility of
Production is carried with huge advertisement too. Also, the
risk analysis for future uncertainties is always measured by
specific methods.

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SWOT Analysis of Packages Ltd.

Strengths:

Packages Ltd. has strong management.

The labor of Packages Ltd. very efficient and skilled.
Own research, development and control department.
They are having their own generation plant.
According to need purchase the new technology.
Transportation system for easy handling of products.
Strong Advertisement of products.
Proper protection and storage of products.
Packages fulfill the demand of customer.

Weakness:
They cannot take small orders.
Sufficient facilities are not being given to labors
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 Late decision making.

Opportunities:
Market of packaging industry is growing day by day.
Strong advertisements attract the customers.
Distribution Channels are strong.

Threats:
High costs of products.
Tough competition will be faced in near future.

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