Business output tend to significantly vary from one business to another. There several reasons that contribute to this variation. Just as Perry (1982) puts across, most firms employ contemporary techniques with the urge of boosting their levels of output. The variation in techniques employed in the production process is what contributes to the different levels of output among businesses.
Difference in the level of technologies among businesses contribute significantly in the variation of outputs. Advanced modern levels of technology tend to be more efficient thereby making production process more efficient a s result contributing to the high output as compared to businesses using low levels of technology.
Apart from technological levels, availability of skilled manpower also contribute to variation of output among businesses. Laborers are among the common determinants of the level of production. Either, a company having a significant number of skilled manpower will ensure will experience high level of output since the skilled manpower contribute significantly to efficiency of production process. Thereby, most businesses will go for individuals with skilled manpower so as boost their output.
Proximity to raw materials also contribute to the variation of level of output among businesses. A company located near a source of raw materials will cut down the transportation costs from the raw materials and capitalizing more in improving the efficiency in production. (Perry 1982). These companies located near raw materials will thus experience high output levels as compared to those far away from raw materials.
Availability of adequate capital to carry out production process will make one company experience high levels of output as compared to other business with limited amount of capital to carry out production processes.
Special cause of variation is the shift in output which is usually caused by a specific factor i.e. environmental factors whereas Common cause of variation are the shifts in output which are caused by unknown factors which result to a steady and random output distribution around the average data. According to Chen, Corr & Durango-Cohen, the common cause of variation can be termed as the remaining variation occurring in a production process after removing the special causes of variation.
Chen, Y., Corr, D. J., & Durango-Cohen, P. L. (2014). Analysis of common-cause and special-cause variation in the deterioration of transportation infrastructure: a field application of statistical process control for structural health monitoring. Transportation Research Part B: Methodological, 59, 96-116.Perry, M. (1982). Oligopoly and Consistent Conjectural Variations. The Bell Journal of Economics,13(1), 197-205. doi:10.2307/3003440
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