In a business unit, the goal of maximum profit depends on how the resources are allocated among different projects. Economically speaking by Efficient Allocation of resources, we mean the distribution of available resources in such a way that all resources are fully utilized and there are increasing returns to scale.In a business organization allocation of resources comes under the Resource management category.
Everybody knows that the todays world is subject to limited resources while the human wants are unlimited.So the resources must be allocated effectively not only to earn profits but also to save mankind from scarcity.
As we know that there are four factors of production; land, labour, capital and entrepreneur.Hence the resources can also be categorized accordingly:
- Human resources
- Investment resources
- Land resources
Now it depends how resource management strategy is employed to these resources.How the combination of different resources is put in an organization to have a maximum output level.
For the better understanding of efficient allocation of resources, the concept of marginal productivity of the resources must be kept in mind, that is efficient allocation of resources is there when the marginal productivities of all the factors of production are the same in each unit of production at the maximum output level.
Decision making is also important while putting resources in any constructive activity.For instance, if a manager starts a project he has to carefully make the decisions regarding the staff.He must compare the costs of the factors,that which factor of production is relatively cheaper,which factor is more productive to the project and also analyze the availability of the resources.
Time management also plays key role, that what combination of resources would complete the project in lesser time, to achieve goals.
The most important step in resource allocation decision is the resource leveling or rationing to assign available resources in an efficient and economic way.
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