Production, Productivity And Efficency : Labour And Capital Intensive + First Movers Flashcards
(9 cards)
What is the distinction between labour and capital intensive production?
Capital intensive : business that uses more machinery than people
Labour intensive: business that uses more people than machinery
What are the advantages of capital intensive production ?
More cost effective if large quantities are produced
Machinery is often precise and reliable
Machinery can operate 24/7
Machinery is easier to manage than people
What are the disadvantages of capital intensive production?
Huge set up costs
Huge delays and costs if machinery breaks down
Can be inflexible as they are highly specific
Often poses a threat to the workforce and could reduce motivation
What are the advantages of labour intensive production?
More flexible than capital
Cheaper for small scale production and also cheaper for large scale in countries like china, India
People are creative, solve problems and make improvements
What are the disadvantages of labour intensive production?
People are more difficult to manage than machines. Have feelings, react and can’t work without breaks and holidays
People can be unreliable. May be sick or leave suddenly
Sometimes need to be motivated to improve performance
What factors depend on creating the best mix between labour and capital?
If the product has low/high demand
Is labour less expensive than capital?
Scale of production increases as firm grows
Nature of the product
Relative prices of the 2 factors
Size of the firm
What is the competitive advantage of short product lead in times?
Being the first into the market means they can exploit what may be called ‘first movers’
What are the advantages of first movers?
Can make lasting impression on customers which can result in improved brand recognition and lasting brand loyalty
Charge premium prices by exploring early adopters into the market
More time to develop their production processes to perfect their product / service
Able to control resources in industry
May enjoy a strategic advantage if it’s expensive for customers to switch products at a later date
What is the disadvantage of first movers?
High costs of product development that ‘copy cat rivals are likely to avoid
Followers learn from any mistakes made by first movers and after careful analysis make modifications to products that are superior to those of first movers
Fear of missing out on market opportunities, launch a product before they are completely ready
