Capital resource

From CEOpedia | Management online

Capital resources are all goods from which other goods are produced or which are necessary to provide consumer services. They have been used since the beginning of humanity existing (our ancestors were already using special tools to hunt animals). With the development of civilization, the production of goods became more mechanized. Moreover, the number of capital resources was still growing up, which led to labor-saving methods and reduction of business costs.

These days capital resources are at the highest level and there is a huge variety of them, that is why the business needs to make clever decisions, which lead to proper capital resources management. A business should take into consideration[1]:

  • using the most cost-effective capital resources,
  • making decisions about the purchase or lease capital resources,
  • costs of maintenance, access to money and current economic situation,
  • access to capital resources at a lower price,

It is also important to remember that countries with a lower level of economic development have poor capital resources, which contributes to inferior results.

Types of capital resources

It is necessary to point out five classes of capital resources[2]:

  1. Natural resources,
  2. Financial resources,
  3. Manufacturing resources,
  4. Social resources,
  5. Human resources,

Natural resources are all living beings as they are on this planet such as plants, animals, minerals, land and natural energy. This also includes all processes related to the operation of climate zones. Natural resources change with technological progress, as well as changes in the environment and climate. Example: Wind, which is used in the production of electricity.

Financial resources usually rely on supply and demand. They are included savings, loans and wealth, which is necessary to conduct business, maintain it at an optimal level, as well as to grow. Example: Entrepreneur takes a loan to buy a machine.

Manufacturing resources are all assets and knowledge which change row materials into finished goods and services. Manufacturing resources include machinery, knowledge of production processes, designing resources and base on science knowledge and technological development. It depends on these resources whether the production process will be effective and not costly. Example: Modern machines, which are used in the production of car bodies.

Social resources are relations with other people or groups of people, which gives lots of opportunities in business development. Example: The manager has friendly relations with employees, thanks to which they work stress-free, which increases their work efficiency.

Human resources are people's skills which they can use at work and private life to being more productive and strong in solving everyday problems. Human resources are made up of intellect, knowledge, ability to deal with adversity, individual character[3]. Example: Assertiveness helps managers achieve a higher level of team management.

Examples of Capital resource

  • Machinery: Machinery is a type of capital resource that is used to produce or provide goods and services. It can range from simple hand tools to complex industrial machines. Examples of machinery include lathes, grinders, power saws, CNC machines, 3D printers, and other specialized equipment.
  • Buildings: Buildings are another type of capital resource used to provide goods and services. Examples include factories, warehouses, stores, offices, and other structures used to produce or store goods and services.
  • Intellectual Property: Intellectual property is a type of capital resource that includes patents, trademarks, copyrights, and other forms of intellectual property. This type of capital resource is used to protect companies' ideas and inventions, giving them a competitive advantage.
  • Natural Resources: Natural resources are capital resources that are used to produce goods and services. Examples include land, minerals, timber, water, and other natural resources used in production.
  • Human Resources: Human resources are another type of capital resource used to produce goods and services. This includes the labor of workers, managers, and other personnel who help produce or provide goods and services.

Advantages of Capital resource

  • Capital resources provide businesses with the means to produce goods and services at a lower cost, allowing them to be more competitive in the marketplace.
  • Capital resources can also increase efficiency by reducing labor costs and increasing production speed.
  • Capital resources can help businesses to expand their operations, allowing them to move into new markets and increase their profits.
  • Capital resources can help businesses to manage risks more effectively by providing a cushion against economic downturns and other unforeseen events.
  • Capital resources can help businesses to increase their financial flexibility and allow them to take advantage of opportunities that arise.
  • Capital resources can help businesses to invest in innovative technologies and processes, leading to increased productivity and profitability.

Limitations of Capital resource

Capital resources have certain limitations that can impede their use in various situations. These limitations include:

  • Availability - Capital resources are not always available when needed, as there may be a lack of supply in the market. For example, a certain type of machinery may be out of stock or too expensive for a business to purchase.
  • Cost - Capital resources can be expensive, especially when they become outdated or are in high demand. This can limit their use by businesses, as the cost of purchasing or replacing them may be too high.
  • Maintenance - Capital resources need to be maintained and serviced regularly, which can incur additional costs. For example, machinery may need to be serviced on a regular basis to ensure its proper functioning.
  • Limitations of usage - Capital resources may have certain limitations on their usage, such as the need for special skills or specific conditions needed for their use. For example, some machinery may require special training for its operation.
  • Depreciation - Capital resources are subject to depreciation over time, which can reduce their value and make them less useful for businesses. For example, a machine may become obsolete over time due to new technology.

Other approaches related to Capital resource

Capital resources can be divided into several approaches, including:

  • Physical capital, which includes all tangible assets used to produce goods and services, such as buildings, machines, equipment, and tools.
  • Human capital, which is the knowledge and skills of workers that can be used to create value.
  • Social capital, which is the collective networks and relationships among people that support productive activities and economic growth.
  • Financial capital, which is money used to finance investments in physical and human capital.

Overall, capital resources are essential for the production of goods and services, and for economic growth. They can come in different forms, such as physical, human, social, and financial capital. All of these resources are necessary for businesses to operate efficiently and create value.


Capital resource — recommended articles
Service economy — Resources and capabilities — Fixed capital — Secondary activities — Factor of production — Economic infrastructure — Gross investment — Availability of resources — Physical asset

References

Footnotes

  1. ↑ Dieterle D.A. (2017), p. 62
  2. ↑ Murray P. (2012), p. 159
  3. ↑ Elfring T., Volberda H.W. (2001), p. 149

Author: Milena Kurczek

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