Differences Between the Sole Proprietor and Spliasationecia
The Sole Proprietor (Sole Trader or One-Man Business)
The main feature of this type of business is that one person owns it although others may be employed in the business. It is the oldest and simplest form of business. From the point of view of numbers, small firms predominate but in terms of their total production capacity, they are far less important than joint-stock companies. The main aim of the sole proprietor like that of other private sector firms is to make profits.
The sole proprietor is common in businesses like retailing, farming, furniture works, and also in professions like medicine, Jaw, and accountancy. The sole proprietor is responsible for the success or failure of his business. He equally gets all the profits or bears all the losses that may accrue from his business. In brief, the sole proprietor has the following advantages and disadvantages.
Advantages of the sole proprietor
* The one-man business is to control because the owner can quickly discover the problems of customers and staff. The business can provide a place. Some very specialised types of capital like a blast furnace may not be occupationally mobile because it may not be used for anything else.
The entrepreneur, just like labour, can be occupationally and geographically mobile. Examp|es abound.
2) Division of Labour or Specialisation:
This is the process whereby labour is allocated to the activity in which it is most productive i.e. in which it can make the best use of its skills. No one man carries out all the tasks in the production of a good. One person specialises in one process and another person in another process etc. Division of labour j, therefore synonymous with the specialisation of labour. The process of car production can be split up and undertaken by specialised workers, some making tyres, others windscreens, etc. The enoimous advantages of division of labour were recognised initially by Adam Smith who illustrated them by what is now possibly the most famous example - pin making. He illustrated how division of labour would lead to increased output. It is not necessary that any new technique be invented. Division of labour itself will result in increases in output. An ultimate extension of this principle of division of labour is the specialisation of nations which is the basis of the theory of international trade, (see topic 15 of Macroeconomic theory by same author). We will not show for now how division of labour and specialisation lead to increased output. We leave that treatment for the Theory of International Trade, and for now we only concentrate on the general advantages and disadvantages of the division of labour.
Advantages of division of labour
* The most obvious and perhaps cherished advantage of division of labour is that it leads to increased output. This is because specialised labour produces more.
* Workers tend to develop more skills in the production process. This is because the practice of a particular piece of job leads to perfection i.e. ^practice makes perfect” There is equally a greater chance that people will be able to concentrate on those things at which they are best.
*Time is saved in the production process because one does not have to move from one job or process to another. Less tune is required to train specialists. This is because it is easier to specialise in one operation than to specialise in many operations if there were no division of labour.
* It is easier to use sophisticated technology and machinery in a single specialised process following the division of labour than when there is no division of labour.
* There are greater employment opportunities following the division of labour since each task requires a specialist. The factory can employ specialised and expensive equipment because it will be fully used.
* There is less fatigue since workers do not have to constantly change from one process of production or occupation to another.
* Some economists hold that division of labour breaks down the production process into separate parts and allows managers or supervisors to monitor workers more closely.
* Division of labour permits the saving of equipment. This is because if workers specialise, they will not need to have a full set of tools or other equipment.
Disadvantages of division of labour:
It should be understood that these are not really arguments against the division of labour but problems associated with it. Economic life without division of labour is inconceivable, to judge from its advantages, especially in terms of increased output.
* The division of labour can easily lead to unemployment. As machines are developed to carry out specialised tasks, some labour may be laid off. Specialisation equally means many people limit their training and experience. If that skill is no longer needed, it becomes difficult for the person to find an alternative job.
* Division of labour leads to increased inter dependence in the production process. If there is a disruption in one part of the production process, the whole production chain is bound to collapse. In the car production process for instance, if tyre producers go on strike, then no cars can be produced.
*Division of labour leads to the loss of craftsmanship. Production is really carried out by machines and not by craftsmen. This means that no single person has the sole pride in creating anything.This may not be very true if we acknowledge that mechanisation itself produces its own types of craftsmen like designers, analysts for computers and even the creators of the machine.
* Division of labour leads to monotony, boredom and perhaps alienation of the workforce. A worker whose job is simply to tighten wheel nuts on a car production line may feel bored and even fall asleep in the process. This may have negative repercussions on labour relations and productivity. The aforementioned weaknesses of specialisation and division of labour have led to some employers trying to halt or reverse the process of specialisation.
Limitations to the division of labour
* The extent of the market: Specialisation encourages mass production since there is increased use of machinery. Such production cannot be undertaken if the market size is small. The size of the market is limited by: Low incomes, small population, poor transport and communication systems etc.
* Indivisibility: It may be difficult to break down some types of work into separate processes e.g. driving. This renders specialisation difficult.
* Limited Capital: Division of labour requires the use of machines. Once the firm is unable to acquire capital needed to buy the machines, division of labour will become impossible.