This refers to the concentration of activity in those lines of production where the individual, firm or country has natural or acquired an advantage. Adam Smith drew attention to the importance of division of labour in his book, the wealth of nations. He was fundamentally concerned with division of labour of a particular industry where the manufacture of products was broken down into many specialized activities. Adam Smith observed that the making of pins required 18 distinct operations, estimating that the production per day in the factory was about 5,000 pins per person employed. If however the whole operation was undertaken from first to finish each employee, Smith estimated that he would have been able to make only a few dozen pins per day. Apart from specialization in particular industries the following other forms of specialization can be identified:

  1. International specialization – refers to the concentrating of a country of its resources on a specific area of production for example, the concentration Kenya in the production of coffee and tea or the production of copper Zambia.
  2. Regional specialization within a country where factor endowments and economic history have led industries to concentrate in certain areas because it is difficult for competitive plants to be established elsewhere. Thus for example, in Kenya the
    production of tea is concentrated in the highlands.
  3. Specialization between Industries since each economy includes many industries an example; it is possible to speak of the motor manufacturing industry, the steel industry and so on.
  4. Specializations between firms- since industries are composed of firms that can be regarded as units of production. Thus for example different firms can specialize in the manufacture of different components of a product. Thus for example, in the
    car industry certain firms specialize in the provision of spare parts.
  5. Specialization within factories which arises because one firm will often control a number of factories, and these are usually referred to as plants and are units of production. For example, a manufacturer might find it economical to build engines in one plant, axles in another, car bodies in a third and so on, and subsequently transport all the parts of another plant for final assembly.
  6. Specialization within plants can be of two types:
  • A particular plant may produce more than one item and plant may thus be regarded as two working side side.
  • Within every plant there is a considerable specialization of labour. In a typical manufacturing firm, some employees will be receiving and storing raw materials and components whereas the majority will be engaged in the manufacturing process, while others will be checking and packing finished product.

The advantages of specialization
1. The fundamental advantage of division of labour is the increased output arising from division of labour.
2. Specialization may lead to boredom or monotony as some workers perform the same operation hundred of times. This monotonous repetion may lead to a greater incidence of accidents and greater absenteeism as a result of low morale. In addition, labour relations between senior management and production workers may deteriorate as communication becomes more difficult.
3. Specialization may be accompanied decline in craftsmanship as skills are transferred from the hands of the workers to a machine that controls the design, quantity and quality of a given product. It should however be noted that mechanization has produced many craftsmen in occupations that require a high degree of skills.
4. Specialization is associated with an increased risk of unemployment as specialized workers do not have a wide industrial training that would make them adaptable to changes in techniques of production. In the short term such workers are susceptible to unemployment although in the long run the simplification of tasks implied specialization would mean that jobs in different industries are fairly similar and retraining is relatively easily achieved.
5. Specialization is economically limited the extend of the market in that methods of production using expensive capital equipment are only worthwhile if there is a potential demand for the mass produced product that keeps the capital equipment fully employed. This mass market may not always exist because of low income levels in a particular country.
6. Specialization especially in cases involving mass production is inevitably associated with standardization of products. This is because of the heavy development costs incurred in launching mass commodities that leave little possibility for the accommodation of tastes and preferences of individual consumer‟s sovereignty is, to some extend, limited this narrow regard for individual preferences

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