What is Specialization?
Definition: Specialization is a concept that many companies and businesses take advantage of so that they can boost efficiency in their operations. Specialization is a scenario where individuals focus on specific tasks and are trained to perform those specific tasks.
Picture a scenario where a vehicle manufacturer creates a production plant. It then hires individuals to perform specific tasks such as engine assembly, bodywork, vehicle electronics, and even paintwork. In the office setting, there are people in the finance department, human resources, procurement, and IT departments among others. In short, specialization is common in the modern-day corporate world and for good reason.
Specialization encourages the development of higher skill levels. People who focus on a particular segment can perform tasks faster and more efficiently than their unskilled or unspecialized counterparts. This approach to specialization creates a concept called division of labor.
Businesses or companies aim to achieve success in every scope of their operations. If one business segment in a firm performs poorly, it might affect the entire production. This is why companies focus heavily on specialization because it allows them to boost their chances of success or rather to optimize the operations of every segment in the business for the highest possible performance.
Specialization also exists outside firms. For example, a farmer may specialize in the production of onions or cabbage rather than focusing on multiple products. This type of specialization allows them to improve their knowledge and techniques so that they can maximize their output. This approach also allows them to secure supply contracts in the market.
Types of Specialization with Examples
Specialization in economics is categorized into Microeconomics and Macroeconomics.
Microeconomic
This is the type of specialization that happens at the lowest or smallest level, which means specialization at the individual level. This is where people choose a specific career path which they feel they are best suited for based on their talents. For example, someone that is good at math might be best suited for a math-related career path. Someone that is at the sciences might take career paths in fields like engineering depending on the particular science where they want to lean towards.
Microeconomic specialization allows individuals to gain a competitive advantage in their respective markets. The Higher one’s level of specialization in a marketable segment; the higher the demand for their skills. That is why highly specialized jobs pay very well.
Macroeconomic
Specialization at the macroeconomic level is largely driven by international trade. In this case, macroeconomic specialization is where countries specialize in specific industry segments. For example, one country might specialize in the production of wines and citrus fruits while another country may focus on semiconductor technology. This type of specialization is quite common. For example, South Korea accounts for a huge percentage of the semiconductors that are sold around the world.
There are numerous reasons why a specialization happens at the macroeconomic scale. It may be fueled by an abundance of specific resources that may not be available in other countries. This need to fulfill a niche presents economic benefits such as an avenue for a company to improve its GDP and at the same time providing locals with jobs and better livelihood.
Macroeconomic specialization facilitates global trade. Countries are able to trade with other countries to sell the things they produce and also purchase the things they do not produce. This improves the global economy and it also helps to improve international relations.
The Advantages of Specialization
Economic Growth
Specialization, especially at the macroeconomic level, lead to healthy economic growth.
Increased Output
It leads to higher production output, especially where there highly specialized individuals in every aspect of the production line.
Lower Production Costs
Specialization also helps companies to lower the cost of production and this allows them to sell their products at cheaper prices.
Competitive Advantages
Countries and even individuals that have specialized in a specific industry enjoy a superior competitive advantage. For countries, it is the advantage of being able to supply its products to other countries that may not produce the same products and for individuals, it is the competitive advantage in the job market.