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Locational Factors for Industries

Locational Factors for Industries. Factors affecting industrial location. Physical Factors Land Raw materials Power / Energy. Human Factors: Labour Transport Market Technology Capital Behavioural factors Government Policy Agglomeration. Locational Factors. Land. Land : Location

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Locational Factors for Industries

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  1. Locational Factorsfor Industries

  2. Factors affecting industrial location

  3. Physical Factors Land Raw materials Power / Energy Human Factors: Labour Transport Market Technology Capital Behavioural factors Government Policy Agglomeration Locational Factors

  4. Land Land: • Location • Size • Landform • Cost Heavy industries: A large area of cheap low flat land. Light industries: Small apartments are also OK.

  5. Raw Materials Raw materials Ubiquitous Water, Air, Soil…… Localized Iron ore, coal, gold, tin, ……

  6. Raw Materials Characteristics of Raw Materials • Weight loss or Weight gain • Degree of perishability • Value per unit of weight • Availability of substitute materials • Number of materials involved in production • Source of supply Raw materials oriented / Market oriented

  7. Raw Materials Decreasing importance of raw materials • Improvement in Transport • Improvement in industrial techniques • Others: • New raw materials / Substitution • Recycling

  8. Power / Energy Type of Power • Water  H.E.P. • Fossil fuel • Coal • Oil • NaturalGases • Nuclear Electricity Aluminum Smelting as a Power Oriented Industry

  9. Labour • Cost of Labour – Wage Level • Skills of Labour • Highly skilled, Semi-skilled, Unskilled • Labour Mobility • Highly skilled (highly mobile) • Semi-skilled (fairly mobile) • Unskilled (least mobile • Reputation

  10. Labour • Declining in importance • Machines / Robots • Still very attractive for labour-intensive industries Labour-oriented Industries

  11. Transport Import raw materials Export finished products • Transport cost was the critical factor affecting industrial location in the past

  12. Transport Transport costs decreasing with increasing distance

  13. Transport Freight Rates

  14. Transport Mode of transport

  15. Transport

  16. Market Markets are where the finished products will be finally go. • Markets attract many industries to locate • Good infrastructure • Transportation, Electricity supply, water supply, drainage system, communication……. • Large population size • Large labour force • Skilled labour • Obtain advanced technology • Industrial agglomeration

  17. Market Some industries are more likely to be located near markets • Perishable products: eg. Bread, cakes…. • Fragile products: eg. Bottled drinks, porcelain….. • Bulky and low value products: eg. Brick-making….. • Labour intensive industries: eg. Toy-making, electrical goods…. • Keep close contact with consumers: eg. Jewellery, printing… • Involve large quanities of raw materials: eg. Electric Appliance.. • Specialized products: eg. Automobile parts manufacturers located near auto making centre

  18. Technology • Technology is very importance • It change the production process completely • It is a localized factor • Ways to obtain technology • From advanced countries (developed world) • Universities • Research Centre

  19. Technology It costs much capital for research Technology-intensive industry = Capital-intensive industry

  20. Behavioural Good decisions • Full knowledge of information • Rational • Objective • Real World • Incomplete information • Irrational • Subjective

  21. Behavioural Entrepreneur is not an Economic man Entrepreneur is a Satisficer

  22. Behavioural Decision Making Process

  23. Behavioural Behavioural Matrix

  24. Behavioural Improvement of entrepreneur skill

  25. Government Policy Cycle of industrial development

  26. Government Policy Rationale of government intervention Strategic reasons: eg. China, USA Economic reasons • Promote overall economic growth • Promote the growth of a particular industry • Diversify the economy • Ensure regional economic balance • Ensure efficient ultilization of resources

  27. Government Policy Indirect role Indirect role of governments

  28. Government Policy Effect of government intervention • Extending Spatial Margins • Regional Multiplier • Cumulative Causation

  29. Government Policy Extending Spatial Margins

  30. Government Policy Regional Multiplier K = 1 / MPS Where K is the multiplier MPS is the marginal propensity to save Example: MPS=0.2; K=1/0.2=5; initial input=$1000 $1000+$800+$640+$512+409.6+……+$m=$5000 $5000 is five times of the initial input $1000

  31. Government Policy Cumulative Causation

  32. Agglomeration Industrial Linkages • Locational choice • Continuing operation of firms at given location • Constraint on movement

  33. Agglomeration Types of Linkage Material Linkages (Tangible) • Process Links • Sub-contract Links • Service Links • Marketing Links Information Linkages (Non-tangible) • Banks, stock-brokers, telephone and face to face contact between firms

  34. Agglomeration Forms of Linkages I

  35. Agglomeration Forms of Linkages II

  36. Agglomeration Complexity of Linkages

  37. Agglomeration Reasons for agglomeration (External Economies of Scale) • Transport savings • Access to skilled labour • Presence of ancillary services. • Possibility of internal economies • Infrastructure savings • Attract investment • Research and development

  38. Agglomeration Industrial Inertia / Geographical Inertia Once a factory has been built on a particular site, it will tend to remain there even though the original factors no longer exist. It is a very important factor for hindering the movement of industries.

  39. Agglomeration • Reasons for industrial inertia • Costs of moving • Presence of a pool of labour • Costly to move a skilled labour • Costly to train unskilled labour • Presence of associated industries • Infrastructure might not be a available in the new area • Reputation

  40. Agglomeration Decentralization (Suburbanization of industries)

  41. Agglomeration Factors affecting decentralization • Expansion of firm • Redevelopment of inner cities • Inner city problems which hinder firms development • Demand for office space in the central city • Suburbanization (population & market) • Nature of industry • Government Encouragement

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