Business – 4.1 The nature of operations – Capital and labour intensive operations | e-Consult
4.1 The nature of operations – Capital and labour intensive operations (1 questions)
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Evaluation framework:
| Aspect | Benefit | Limitation |
| Cost efficiency | Lower average cost at high output. | Requires sustained high volumes; risky if demand falls. |
| Innovation speed | State‑of‑the‑art equipment can produce cutting‑edge products. | Equipment may become obsolete quickly, leading to further capital outlays. |
| Market flexibility | High capacity can meet sudden spikes in demand. | Specialised assets limit ability to pivot to new technologies. |
Overall, in a fast‑changing sector the benefits can be decisive if the firm can secure sufficient demand and continually reinvest in newer technology. However, the high fixed costs and risk of rapid obsolescence mean that the limitations often outweigh the advantages for firms lacking strong market positioning or flexible financing.