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Capital Intensive Vs. Labour Intensive

A business is capital intensive if it requires heavy capital investment in buying assets relative to the level of sales or profits that those assets can generate.
A capital intensive business will typically have some mixture of the following characteristics:

  • high depreciation costs
  • high barriers to entry
  • large amounts of fixed assets on the balance sheet.

A labour intensive business is one in which the main cost is that of labour, and it is high compared to sales or value added.

Just a capital intensive business may attempt to reduce operational gearing by, for example, leasing or renting assets, a labour intensive one may try to reduce operational gearing by outsourcing or automation.



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