Capital & Labour Intensive Production (Edexcel IGCSE Business)

Revision Note

Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

Capital Intensive & Labour Intensive Production

  • Labour-intensive production predominantly uses physical labour in the production of goods/services

    • The delivery of services is usually more labour-intensive than manufacturing

    • In countries where labour costs are low (e.g. Bangladesh) labour-intensive production is common

    • Small-scale production is likely to be labour-intensive

    • E.g. UK schools are labour-intensive operations as teachers plan and deliver lessons and provide pastoral support
       

  • Capital-intensive production predominately uses machinery and technology in the production of goods/services

    • Large-scale production of standardised products is likely to be capital-intensive

    • Manufacturing in developed countries where labour costs are relatively high is likely to be capital intensive

    • E.g. Automative manufacturers such as Ford use robots and other production technology to manufacture vehicles with supervisors overseeing the quality of output

The Advantages & Disadvantages of Labour Intensive and Capital Intensive Production

Type of Production

Advantages

Disadvantages

Capital Intensive

  • Low-cost production where output is high

  • Machines are usually consistent and precise

  • Machines can run without breaks

  • Significant set-up and maintenance costs

  • Breakdowns can severely delay production

  • May not provide flexibility in production

Labour Intensive

  • Low-cost production where labour costs are low

  • Provides opportunities for workers to be creative

  • Workers are flexible (e.g. they can be retrained)

  • Workers may be unreliable and need regular breaks

  • Incentives may be needed to motivate staff

  • Training costs can be significant

Examiner Tips and Tricks

Make sure that you can define both of these key terms clearly. 'Define' questions are worth 2 marks so make sure that your definitions have two elements.

Example

Capital-intensive production predominately uses machinery and technology [1] rather than labour [1] in the manufacture of products

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Lisa Eades

Author: Lisa Eades

Expertise: Business Content Creator

Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

Steve Vorster

Author: Steve Vorster

Expertise: Economics & Business Subject Lead

Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.