Specialization

Specialization is the concentration of the main activity of the company on the production of a narrow range of products, goods and services. Specialization is a way of improving the efficiency of the goods produced by an enterprise by limiting their quantity. Not all countries are able to provide themselves fully. Many businesses specialize in goods and services depending on the location of the country. Manufactured goods and services are exchanged for other goods and services. This is the basis of global trade.

Understanding Specialization

Enterprise specialization is based on the division of labor and is carried out in order to increase the efficiency of production by increasing labor productivity.

Microeconomic specialization. Specialization can be done at the microeconomic and macroeconomic levels. Labor or career specialization refers to the individual level of specialization. Each employee in a business has a different set of knowledge, skills, interests, and talents, making him or her uniquely capable to complete a specific function and set of tasks. It helps people self-define themselves and improve the economy as a whole.

If one person is good at math and the other is good at writing, it is good for business and economics to have the first one connected with math and the second one with writing. So, for example, factories create different departments aimed at different areas (casting, forging, assembly, etc.).

Macroeconomic specialization. Specialized companies have a comparative advantage in manufacturing goods or services. A comparative advantage is the ability to produce a good or service at a lower cost than another good or service. It allows to get profits from international trade.

For example, a country with a hot climate is able to grow fruit. It is able to grow bananas at a lower cost than oranges. Then, a company could specialize in bananas and put all of its resources into growing bananas, and use only a small part of it to trade oranges.

Specialization can be inside one country. In the United States, fruit grows better in the South and West because of the warm climate, grains grow better in the Midwest, and maple trees for making maple syrup grow better in New England. All of these regions are specialized in specific goods, and they trade or buy other goods.