Capital & Labour Intensive Production (Edexcel IGCSE Business)
Exam board Pearson Edexcel · IGCSEUpdated 2025-06-23
Capital Intensive & Labour Intensive Production
Spec point —
5.2.1· labour and capital intensive production
Capital intensive and labour intensive production
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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
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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
Advantages and 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 |
Exam Hint 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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