Final answer:
A business with high productivity is one that creates its product with high efficiency. By focusing on core competencies and optimizing labor and capital, firms can produce goods more effectively and increase their productivity. Strategies such as using more capital and less labor can also improve productivity levels.
Step-by-step explanation:
A business with a high level of productivity is one that creates its product with a high level of efficiency. Efficiency in production means that the firm uses the least amount of inputs to produce the greatest amount of outputs. This includes optimizing labor and capital to produce goods and services effectively.
Individuals and firms specialize in their trade to produce more sophisticated products while increasing productivity and competition. Specialization tends to result in higher productivity as companies can focus on their core competency. Additionally, by combining physical capital with labor in increasingly effective ways, firms can produce more output for the same or lower cost, thus increasing productivity. The use of more capital allows the firm to hire workers without encountering diminishing productivity rapidly.
Furthermore, in response to union demands for higher wages, firms may select production methods that use more physical capital and less labor, enhancing labor productivity. On a strategic level, businesses often find that concentrating on one or a few products can lead to better success than trying to offer a wide variety of items. This narrowed focus allows firms to perfect their production process, often leading to higher productivity within their operations.