Labour-Intensive and Capital-Intensive Processes | AQA Q21, Paper 1 2022

Why might a business choose to take a labour-intensive rather than capital-intensive approach to the production process? 9 marks were on offer for responses to this past AQA A-Level Business exam question.

Possible response:

One reason is to meet customer needs. Whilst capital intensity is increasingly common in industries such as car manufacturing where automation is key, in many other markets using labour-intensive processes may be the best way to meet customer needs and expectations. For example, in the personal care and beauty industry, it is mainly the skill and expertise of the people delivering the treatments which adds most value by a business during the transformation process. Although equipment is used, it is the labour element of the process which determines whether customer needs are met. Similarly, a patient paying for expensive private dental treatment may be more likely to buy from a business that employs highly skilled dentists and assistants rather than one which emphasises the role of automation and equipment in the process.