Capital intensive

• Capital-intensive business

  Uses more machinery and relatively few workers
• Larger firms tend to be more capital-intensive than smaller firms
• A rise in the cost of labour


  Can cause firms to switch to a capital-intensive method of production
• Advnatages Capital-Intensive Production

  • Despite the high initial investment, in the long term machines can be cheaper than using lots of manual labour
  • Machinery is often more precise than human workers, which might lead to more consistent quality levels
  • Machinery is able to work 24/7 and is easier to manage than people
• Disadvantages of Capital-Intensive Production

  • Machinery can be very expensive to buy and maintain, meaning it can be difficult for small or start-up firms to be very capital-intensive
  • Machines are usually only suited to one task, which makes them inflexible
  • If machinery breaks down, it can lead to long delays in production, which could mean the firm misses out on sales and risks its reputation being damaged
  • The fear of being replaced by a machine can cause workers' motivation to ductivity of the workforce