Industrial Location

1. Industrial Location

2. Industrial Location • Factors of Industrial Location • Theories of Industrial Location • Industrial linkages and the multiplier • Industry in economically less developed countries

3. Factors of Industrial Location • Raw materials • Power supplies • Transportation • Markets • Labor supply • Capital • Government policies • Land • Environment

4. Raw materials • Industries that still need to be located near to raw materials are those using materials which are heavy, bulky or perishable. • Material index= total weight of raw materials total weight of finished product

5. MI> 1 = weight loss in manufacture will be located near to the raw materials. It is a weight-loose industry. Exp: food processing, smelting of ores, forestry, etc. • MI < 1 = a gain in weight during manufacture, it will be located near to the market. It is a weight- gained industry. Exp: brewing and cement, electrical goods, etc. • MI = 1, it could be located at any intermediate point. It is a foot-loose industry.

6. Power supplies • It becomes less important because now we have the newer forms of power which easier and cheaper to transport. • Geographical inertia

7. Transport There are two types of transport cost from an economic point of view: • Terminal costs is the time and equipment needed to handle and store goods and the costs of providing the transport system. • Long haul costs is the costs of actually moving the goods.

8. Markets Industries will locate near to market if: • The products become more bulky with manufacture or there are many linkage industries involved (assembling of motor vehicles). • The products becomes more perishable after processing. • The market is very large. • The market is wealthy. • Prestige is important.

9. Capital There are three kinds of capital: • Working capital (money), mobile and can be used within and exchanged between countries. • Physical of fixed capital, exp: land, factory, machines, etc. • Social capital and cultural amenities (work force out of work).

10. Other factors • Labor supplies It varies spatially in its cost, availability, and quality. • Government policies • Land • Environment

11. Weber theory of industrial location • Alfred Weber formulated a theory of industrial location in which an industry is located where the transportation costs of raw materials and final product is a minimum. • Weber found through his examination of industrial activity that similar industries located in the area where he found it the least cost to produce.

12. Weber's theory rest primarily on four such sites, what he calls industrial orientations: • Material orientation • Labor orientation • Transport orientation • Market orientation

13. Material oriented industries • These industries are called "weight-losing" or bulk industries, and it would be very expensive to haul raw materials to the market for processing, so that manufacturing occurs near the raw materials. • Examples: mining, timber mills, furniture manufacture, and most agricultural activities.

14. Labor Oriented industries • UNSKILLED LABOR (ubiquitous means unskilled labor is found everywhere). Exp: retail (malls, theaters), communications and even in high tech industry. The characteristics of unskilled labor:    * low wages   * little unionization      * young employees (few healthcare costs)  * female employees (they have babies which allows you to keep wages low, and they tend not to be as demanding)

15. SKILLED LABOR - industries founded on the use of skilled labor faced an opposite dilemma, skilled labor is very scarce and often difficult to find. • Silicon Valley is a good example of this. • Other activities which reflect skilled labor industries are corporate headquarters, and research and development centers Skilled labor requires higher education so this allows first world countries to retain jobs in these industries.

16. TRANSPORT ORIENTED INDUSTRIES - these are industries whose primary production cost is transport. Geographers term the location for where these industries locate as "break-in-bulk" locations. This term is used to describe a location where two or more modes of transportation may connect. • MARKET ORIENTED INDUSTRIES - these are industries whose product may be weight-gaining, breakable or perishable. Despite the high costs of land and labor in market regions (large cities), it is to the advantage of such industries to locate as close to the consumer as possible. Exp: Coca-cola or bottling industries, auto assembly plants, dairies, and computers and television assembly (due to break-ability).

17. The conditions of Weber Theory • There was an isolated state with flat relief, a uniform transport system in all directions, a uniform climate and uniform cultural, political, & economic system. • Most of the raw materials were not evenly distributed across the plain. • The size and location of markets were fixed. • Transports cost were a function of the mass of the raw material and the distance it had to be moved. • Labor was found in several fixed locations on the plain. • Markets and raw materials were unlimited and there was no monopoly.

18. Four factors affected production costs (Weber Theory) • The cost of raw materials • The cost of transporting raw materials and the finished product. • Labor costs • Agglomeration/deglomeration economies.

19. Industrial Linkages and Multiplier • Agglomeration is when several firms choose the same area for their location in order to minimize their costs. • The success of one firm may attract a range of associated or similar type industries or several small firms may combine to produce component parts for a larger product.

20. Industrial linkages may be divided into backward linkages and forward linkages. • Backward linkages is needed to firms providing raw materials or component parts. • Forward linkages is needed to firms further processing the product or using it as a component parts. • The more industrially advanced a region or country, the greater is the number of its linkages.

21. Industrial linkages may result in: • Energy savings. • Reduced transport costs. • Waste products from one industry forming a raw material for another. • Energy given off by one process being used elsewhere. • Economies of scale where several firms buy in bulk or share distribution costs.

22. Improved communications, services and financial investment. • Higher levels of skill and further research. • A stronger political bargaining position for government aid. • Exp: Jababeka Industrial Estate ( the electronic companies)

23. Types of industrial linkage • Vertical linkages (a simple chain) is when the raw material goes through several successive process. Exp: mill logging – pulp – newsprint. • Horizontal linkages (multi origin) is when an industry relies on several other industries to provide its component parts. Exp: brakes, gearboxes, electrical equipment, tyres, and radiators with car assembly plant.

24. Diagonal linkages (multi-destination) is when an industry makes a component which can be used subsequently in several industries. Exp: washers, nuts, and bolts with watches and clocks, car industry, domestic appliances, repair workshops/garages. • Technological linkage is a product from one industry is used subsequently as a raw material by other industries. Exp: steel, processed into steel wire and processed into nails, screws, cable, electrical wiring.

25. Industrial inertia is the refusal of a company to leave its original location even when the reasons that made the location suitable or advantageous have disappeared • Industrial estate is a large area of land, usually on the edge of a town, where factories and businesses are concentrated in accordance with local planning regulations.

26. Industrialization due to large-scale manufacturing • Developed countries are the countries which become highly industrialized due to large-scale manufacturing. • Low developed countries are the countries which had not developed large-scale manufacturing and were still dominated by primary industries.

30. Competitive advantages • Competitive advantages is a gain obtained from locating an industry in a new location. • Competitive advantages are needed to maintain low costs in production and maximize profits, companies may relocate their manufacturing activities. The forms of competitive advantages are • Lower costs • Attractive government incentives • A large market

31. Lower costs When costs are low, companies can keep their prices competitive and maximize profits. • Attractive government incentives an example of such incentives is tax exemption. Government may also set aside areas known as Free Trade Zones (FTZs) or Special Economic Zones (SEZs). • Large market

32. Free trade zones is an area in a country where infrastructure is built, government requirements are lowered and incentives such as a tax exemption are given to attract foreign companies to set up their activities. • FTZs may be defined as manufacturing areas that are labor-intensive. • Raw materials are imported while factory products are exported. • Exp: Sijori (Singapura Johor Riau).

33. Special Economic Zones (SEZs) are set up in some countries with tight economic laws. • SEZs include more specific zone types. • The aim of an SEZs is usually to increase foreign investment and certain economic laws are more flexible to attract investors. • Exp: Shenzen and Zhuahai in the Guandong Province, RRC.

34. Space shrinking technology • Space shrinking technology is advanced technology that help to reduce the time taken to travel, transport raw materials and products, and communicate between countries. • Space shrinking technology includes the use of transport technology, containerization, and communications technology.