IGCSE, A Level Business Student Forum

08 Explain the difference between a labour-intensive and a capital-intensive business.[3]
Hint: Labour-intensive relies on people > Example: A restaurant with many waiters and chefs.
Hint: Capital-intensive relies on machinery > Example: A car factory with many robots.

[KN]Labour-intensive businesses rely more on human workers than machines to produce goods or services whereas Capital-intensive businesses depend more on machinery, equipment.
[APP]A clothing factory in Pakistan is labour-intensive because it relies on many workers to sew garments by hand. In contrast, a car manufacturing company like Toyota is capital-intensive since it uses expensive machines and robots to assemble vehicles.
[AN]Labour-intensive businesses often benefit from lower equipment costs and can create more jobs, which helps reduce unemployment and capital-intensive businesses, on the other hand, can produce goods faster and more efficiently, reducing long-term costs.

Kn
A labour intensive business relies mainly on human workers to produce goods or services, while a capital intensive business depends more on machinery and equipment
App
For example, a restaurant may employ many chefs and waiters to prepare and serve food making people the main resource for production whereas a car factory uses robots and automated machines reducing the need for many workers and relying heavily on capital investment instead
An
Therefore, the key difference lies in the main resource used labour intensive businesses focus on manpower, while capital intensive ones focus on machinery to achieve efficiency

(KN)Labor intensive business is one that uses labor for the production of it's products, whereas a capital intensive business is one that relies on machinery for the production of it's products.
(APP)For instance, Ashely Furniture Industries is a furniture manufacturer that produces hand made furniture (labor intensive), whereas Ikea usually uses machinery to produce and package it's products.
(AN)This in turn means that Ikea is able to have increased output as compared to Ashely furniture industries, allowing it to achieve selling economies of scale more easily, which in turn would mean comparatively more sales revenue than a labor intensive furniture manufacturer.

K: A labor intensive business relies more on human workers, while a capital-intensive business depends mainly on machines and equipment.
App: For example, farming in developing countries is often labor intensive, while car manufacturing is capital intensive.
An: Labor intensive firms face higher wage costs, capital-intensive firms face higher machine costs, and both types affect efficiency and profits in different ways.

[KN] A labour-intensive business uses more human workers to produce goods or services, while a capitalintensive business relies mainly on machines and technology.
[APP] For example, a handmade furniture workshop is labour-intensive because skilled carpenters do most of the work by hand. In contrast, a company like Samsung Electronics is capitalintensive since it invests heavily in advanced machines to make phones and chips.
[AN] This shows that labour-intensive firms depend on workers’ skills and have higher wage costs, while capitalintensive firms spend more on machines but can produce faster and in larger amounts.

Labour intensive means the employees handmakimg products
For example a design on a cloth
Capital intensive means products madr through a machine
Foe example pencils are made through a machine mechanism

[kn] A labour-intensive business relies more on human workers than machines for production, while a capital-intensive business depends mainly on machinery and technology.
[app] For example, a tailoring shop is labour-intensive, but a car manufacturing plant is capital-intensive.
[an] This means labour-intensive firms face higher wage costs but more flexibility, while capital-intensive ones need large investments but gain faster and more efficient output.

[KN] A labour-intensive business requires employees to produce goods or services, while a capital-intensive business requires machinery.
[APP] For example, a hand-made jewellery workshop is labour-intensive because most of the work is done by skilled craftsmen, whereas a car manufacturer like Toyota is capital-intensive as production depends heavily on automated assembly lines and robots to do the work for them.
[AN] This means that the jewelery workshop would need to spend on worker motivation in order to retain efficiency while Toyota would require regular maintanence but would be able to achieve greater efficiency as robots can work without taking a break.

[KN] Capital intensive business mainly depends on machinery and technology while labor intensive business mainly depends on human workers/employees.
[APP] For example agriculture is a labor intensive, but airlines and telecommunication are capital intensive.
[AN] Labour-intensive firms have higher labor costs and lower fixed capital costs, whereas capital intensive firms have high fixed capital costs and lower labor costs. Labour intensive firms are more flexible to change output while capital intensive firms achieve lower unit cost.

[KN]Labour-intensive and capital-intensive businesses use different main resources for production.
[APP]For example, a restaurant is labour-intensive because it needs many workers, while a car factory is capital-intensive because it uses expensive machines.
[AN] A labour-intensive business depends more on human workers, so labour costs are high. In contrast, a capital-intensive business relies more on machinery and technology, meaning higher investment in equipment but lower labour costs. This difference affects how each business manages costs and production efficiency.

[KN] Labour intensive is where more labour is required whereas capital intensive is where more machinery is required.
[APP] For example, a construction site, where many workers are needed, is labor-intensive, while a modern printing press, which uses automated machinery, is capital-intensive.
[AN] Labour-intensive businesses are adaptable but have higher labor costs. Capital-intensive businesses require large upfront costs but can achieve higher output and lower long-run costs.

[KN] A labour-intensive business mainly depends on human workers to produce goods or services, while a capital-intensive business relies more on machinery and equipment.
[APP] For example, a restaurant that employs many chefs and waiters that is labour-intensive, whereas a car manufacturing plant uses automated robots/machinery which is capital-intensive.
[AN] This means both have different types of expenses as labour-intensive firms pay more in wages, whereas capital intensive has more capital expenditure so their profit margins may suffer which limits their ability to invest in expansion or innovation hence continuing their business activity.

kn] labor intensive process relies on human workers and a capital intensive relies on machinery and technology
app]A tailor shop is labor intensive, as its value comes from the specific skills of the tailor in cutting and sewing fabric by hand. A modern car factory is capital intensive, uses modern machinery to produce vehicles at a massive scale.
an]hence labor intensive creates jobs in the economy which reduces unemployment, increasing consumer spending, which contributes to the national income while capital intensive promotes skilled labor in the economy who charge higher wages and hence improve the lifestyle of the general public in the economy.

KN: Labour intensive businesses rely mainly on human workers, while capital intensive ones depend on machinery and equipment.
App: A restaurant labour intensive uses many chefs and waiters; a car factory capital intensive uses robots and machines.
An: The difference affects costs and productivity — labour-intensive firms have higher wages, while capital-intensive ones face high setup costs but lower long-term labour expenses.