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Production is a process by which raw materials are transformed into finished goods to satisfy the requirements of consumers or other organizations. Production is not complete until goods are with consumers. That's why form, place and time utility are important in production. Production can be divided into three different stages.

1. Primary Production: It is the first stage of production and it includes all the extractive industries. For example quarrying, mining, fishing, forestry and farming. Extractive industries supply raw materials to secondary industries.
2. Secondary Production: This is the second stage of production and here raw materials are converted into thousands of finished goods and products. As the products are given useful forms the value of these products increase.
3. Tertiary Production: This is the third stage of production and it helps to transfer goods from the factory to the consumer. Services provided in this sector are

   (i) Commercial services

   (ii) Direct services

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Commercial activity facilitates the trading of goods between people and organizations within a country or on an international basis. Commercial services are also known as aids to trade.

1. Transport: It includes all modes of transport and it helps goods to be on the right place and at the right time.
2. Finance: The banks and other financial organizations provide finance for various business activities such as extracting raw materials, transforming raw materials into finished goods and marketing activities. It includes both short term and long term loans.
3. Insurance: Insurance companies provide protection in return of premium charged for goods which may be stolen, damaged, destroyed during production or while goods are in transit to the consumer.
4. Warehousing: Warehousing is necessary for goods, which are seasonal or produced in a particular time of the year due to the uneven demand of the product.
5. Communications: Manufacturers communicate with their customers and suppliers and this is done by

   (i) Advertising: It helps to create demand for the goods, increases turnover and reduces cost of goods sold due to bulk production. Consumers are constantly informed about the new products through advertising.

   (ii) The post office: Various business documents are sent from one place to another through the post office.

   (iii) Telecommunications: These services help business firms to be in touch of latest development of market and its requirement.

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Division of labour is a system wherein the productive process is analysed and broken down to small elements consisting of different operations which can be done by different workers. Such a system is clearly visible in case of industries involved in manufacture of durable consumer goods for example cars, radios, electrical appliances etc.

Advantages of division of labour from the point of view of industries:

1. Working repeatedly on the same job enables the employee to develop special skills on the job which results in increased production.
2. Each worker can be employed to his full capacity, as there is no time loss in moving from one process to the other.
3. Expensive use of power and machinery is feasible. Repetition of identical movements by machines result in speed and accuracy in performing tasks.
4. Combined efforts of number of specialists result in better products.
5. Technical progress is accelerated through development of machines.
6. Simplification of process increases scope for invention.

Advantages of division of labor from the point of view of workers:

1. Repetition of the same operation, enables the worker to acquire special skills in it.
2. A worker has choice from a large selection of different occupations.
3. Differences in natural aptitude e.g. Age, sex, physique, etc. can be utilized to the best advantage by fitting tasks to the individual capability of workers, thus full use is made of skill and dexterity, strength, judgement and organising ability.
4. Period of apprenticeship and length of training is reduced.
5. Job opportunities can be improved with creation of new occupations arising out of various kinds of specialized machinery used.
6. There is reduction in physical toil as machine takes over the tasks of manual labour.

Disadvantages of division of labour to an industry:

1. Maintaining all processes and stage of production in perfect unison is difficult and any interruption caused may slow down production or may lead to temporary stoppage of work.
2. There is a risk of schedules getting upset as the firms and industries are interdependent.
3. As plant equipment and labour are highly geared to a particular line of production, there is no flexibility for changes.

Disadvantages of division of labour to a worker:

1. Repetition of work day in day out leads to monotony, carelessness and lack of interest in work.
2. As the worker is tied down to one task, to a large extent there is danger of being exposed to exploitation of labour.
3. Workers could be facing an increased liability to trade and occupational diseases and other industrial hazards.
4. More the specialisation in work more difficult it is for a worker to move from one job to another.