The 4 Factors of Production: Understanding Economics:

All businesses, no matter what type, rely on four factors that allow them to operate smoothly. These four factors are natural resources, capital, human resources, and entrepreneurship. Each one of these factors is extremely important to every business operation. A company must balance these resources and consider their cost in order for them to stay profitable.

Natural resources include all items that occur naturally. A few examples of this are land, water, and other things that are not man-made. Even the most basic level, all companies must buy land in order to have a place to do business. Though some companies might not rely directly on natural resources to produce their product, but the products that they buy from other companies are likely to at some point have been derived from natural resources.

Capital another factor in play a huge role in the formation and expansion of the company. Capital includes things like tools, machines, and other things that a business uses in order to produce their goods or services. At some level, all companies rely on their capital in order to successfully run. Without these things, the company would not be able to produce anything. These things can be very expensive, so this can be a hard part for the owner to finance.

Yet another factor of production is human resources. Human resources deals with everybody that works within the company. All companies need labor in order to function. Everyone from the manual workers, to the owner of the company falls under the classification of human resources. Without this factor, there would be no company at all because nobody would be working there.

The final factor production is entrepreneurship. Entrepreneurs are the people that start their own business, taking all the necessary risks in order to, hopefully, make a profit. Without these people and their ideas, no companies would ever start. Starting a business extremely risky, because there is no way to tell if it will be profitable until after you've tried. However, if you manage the company well and people want your goods or services, there's a good chance he will be successful in the end. In order to take this risk, entrepreneur must collect the necessary resources needed to start the company. If he or she does not have natural resources, capital, and human resources, then there is no way to get the company off the ground. Without these factors, company will never amount to anything more than an idea.